*AV*-- I would not surprise me if that happened since the pump was primed with excuses for this to happen. However, my gut feeling is that if it happens, the worst of it will be in the stocks that are extremely overvalued.
The DOW is but 30 stocks. I would guess Wall Street would flock to quality with demonstrated earnings growth. While the Dow is falling due to AXP or others, you could see a collapse in, say AOL, but have a nice pop or holding your own in Home Depot.
when you move over to the Nasdaq, you have the same scenario. This is a market of stocks. When I look at our top tier stocks and see a few of them at P/Es of 100 to 600 and then two with PEs of N/A (returning to positive earnings but barely negative) and 56, I would imagine that the company with a 600 is more susceptible to an implosion than the one at 56. We are also looking at the stocks that are trading very close to book value and to cash value. There should be limited downside if the market collapses.
This is a market of stocks and not a stock market. Unless you are an expert like Patrick, who makes his bucks with futures and such, a crappy market means nothing if you are in quality stocks.
Don't get me wrong, if some of my stocks start to implode, I will head for the door. I just think we are too far into the semiconductor recovery to allow for a total collapse there.
I see the wind being knocked out of the Internet sector and would think the market reversals will really eviscerated those stocks prior to hitting the ones of quality.
Not to long ago, I stated in RadarView, the concept of stock market Fads, like the commercial hula hoop and pet rock fads. I would hope that the market grows tired of the Internet stocks where it is a given (according to the likes of Henry Blodgett, I think, along with others), that a majority of the Internet companies will not be around in 5 years. Either they consolidate or go under. Consolidating would be tough when two overvalued companies merge with overvalued stock certificates. You can only have PEs in the 1000s for so long before the market realizes they have nothing but a balloon.
There are quality stocks to be found everywhere that are fundamentally sound and should perform, stay at current levels, or temporarily reverse but come back quickly. My biggest fear is another round of margin calls on the high flying Internet sector. This time it won't be as bad since there have been raised margin requirements put in place already. However, if AOL, YHOO, ebay, etc. all come back to earth with PEs of just 100, it would make no difference, since all hell breaks loose.
Now, with that said, the Dow collapsed 630 points last week. It is due for another relief rally like Thursday. You know, whatta "relief" the market didn't drop that day<GGG>.
The Nikkei was down close to 2% in the overnight markets but the S&P futures are still positive by a few points (3.20) but the Fair Value was negative, as of 6am EST.
The bleeding has got to stop somewhere. The key is to have the finger on the exit trigger and the other finger on the pulse of the market. And somewhere in between, making sure you are invested in quality. As bad as the Nasdaq and Dow were on Friday, we had a major play on VECO and MIPS. So, we made a decent profit on a down day.
Someone asked if it was possible to make money ion a down market. The answer is yes, and readers of RadarView had a chance to do it on Friday. And as far as the losses were concerned, they were not as bad as the majority of the other stocks that collapsed. Our indicator universe had MIPS (+12.62%) and VECO (+34.01%) while only MOT, AWRE, and MASK were down between 5.1% to 5.8%. The vast majority of the stocks we followed (72%) were in a price change range of -4% to +2% for the day. None of the top 10 stocks were rattled too much on Friday.
Finally, I just blew it off but wasn't last Friday an Options Expiration Friday? Couple this with all of the other wacky news last week, and you have the makings of a nice market manipulation by the big boys.
AV |
