Hi DE:
Thanks for your appreciation of my previous posts. Let me say that I have admired all your insightful questions posted to this board. ;)
It may be that I have convinced myself, simply because I want it to be true, for I am now fully invested, but that's not really an answer.
September, October, November, December.
postulate 1: I believe that internet stock prices will rise significantly by December.
postulate 2: From now to then we may see 1 or 2 interest rate hikes.
conclusion A: Despite the rate hikes, stocks will be significantly higher in December.
postulate 3: By April 1999 internet stocks were overvalued and were headed for a period of retrenchment.
postulate 4: During the summer of 1999 internet stocks traded within a range, in tandem with wall street fears about rate hikes.
conclusion B: Internet sector's apparent sensitivity to interest rates was greatly magnified because the sector was already undergoing a period of retrenchment.
In layman's terms, I think it's an illusion that net stocks are interest rate sensitive, an illusion which traders will cease to believe starting Monday. Net stocks have cash in their coffers from IPOs, and so interest income will slightly boost their earnings. In anycase, net companies do not assume debt, rather they turn to VC companies, which are flush in cash all being earmarked for net startups, or they sell stock to the public.
I don't have enough experience to comment on how a bond yield >6% will affect stocks in general, but I can see that this might undermine my positive opinion on net stocks, since investors might allocate greater % of their portfolios to bonds.
I would appreciate it, DE, if you gave me specific feedback. As I am quite aware that my reasoning has lead me to take a big risk.
Sanjay |
