This is Michael Murphy with a special Technology Investing Hotline after the close on Thursday, September 23, 1999.
The Dow Jones Average fell more than 200 points today, tumbling below some very significant support at 10,466. I think this marks the beginning of the last leg down in the slump I've been expecting. Again, long-term investors do not need to disturb anything. Those of you who have been waiting to buy stocks or raise cash are going to get a chance here probably in the next 10 to 15 days.
You will certainly hear two things. First of all, you will hear people start to say that we have entered a bear market, and that they are expecting it to take the DOW down 25% from its high. That would be down to about 8,500 or even down around 7,800 if it is a 30% decline. You will hear a lot of talk like that. I would not listen to that at this point. I do not think we have entered a bear market.
You will also hear people talk about how technology stocks are overvalued, how they needed to get adjusted, and that this is the reason for this decline (which is partly true). The precipitating event that caused this was that Steve Ballmer, the President of Microsoft, said that he thought tech stocks were overvalued. He even said he thinks his own stock was overvalued and that it was ridiculous. The last time I heard a CEO say something like this was in 1966 when David Packard said he did not understand why Hewlett Packard stock was as high as it was. That clobbered Hewlett, the next day it clobbered the rest of the market, and really pretty much set the 1966 high, which lasted, unfortunately, for many years. It was rather interesting that today it was kind of a bookend-one of the worst performing stocks was Hewlett Packard in today's decline. But I do not think we are in that same situation at the moment for the simple reason that personal computer sales are quite strong.
I spent all day yesterday at Interactive Data Corporation, the market research firm, and we are in for very good PC sales in the fourth quarter and next year. Internet- and communications-related hardware remains very strong, as shown by 3Com, which they had their annual meeting today. They were very positive. The semiconductor business is very strong. The earthquake in Taiwan (I sent out a Flash Bulletin yesterday telling you to buy TSM under $30 as soon as they reopen the Taiwan stock market on Monday. If you did not receive that Bulletin, please sign up to receive future ones by sending an email to murphybulletin@phillips.com.) helped semiconductor prices. So, everything is pretty much in line for a superb fourth quarter. However, we are going to see a decline here. It could feel brutal but at least it will be short. For those of you who are fully invested, do not lose hope. For the rest of us, I think we are going to get some wonderful opportunities to buy some of our stocks.
Michael Murphy |
