Trindy, Although you cannot tell it from recent issues, Fred Hickey is one of the all-time tech bulls. He, and me, too, like to buy them when they are dirt cheap. However, the differences between his concepts and a dipsters are many: 1. Fred's dip will be much greater. He is looking for a disaster with most tech stocks down from 70-100%.
2. What he is not mentioning because it is way too early to know specific names, is that he will probably be buying few of the existing tech stocks at a bottom. New technologies and new cos. come along all the time and at the bottom, you can get in cheap. Remember, when people lie about the huge amount of money they made in MSFT or Dell, they are not talking about from the previous tech stock peak (1982), because those cos. didn't exist at that time. Most of the cos. that peaked and then crashed are no longer in business. The same thing will happen this time. The next rally will not be pc driven, as this long bull has been. That game is mature. HWP and TXN were powerhouses before PCs and they adapted. I doubt if many of the PC-dependent cos. of today can really adapt to the next wave.
Fred was the only tech bull in print in 1990-1991. Though he turned generally bearish, correctly, in 1996, until very recently, he has always had a number of long holdings, and those have done very well. Also, his put recommendations have made huge profits even during this euphoria. Remember, most tech stocks have not gone up more than the market during this period. He has been nearly perfect calling Micron and Compaq and scores of other scamsters. He has been wrong about the dozen or so big tech stocks (not the cos., where he has been right on) that move the indices. But, unless you are an index player or unless you have bet all of your money at one particularly bad period, you've made money following Fred's advice. In fact, more than Fred has, as he was into short selling instead of put buying until the past 18 months or so. And with short selling, you lose more when you are wrong than you can possibly make when you are right.
If we only get a quarter's worth of bad sales, you are right and the market would be right to look beyond it. However, we have had lousy sales for some time now. Last year was the first time, EVER, that pc sales were down for a full year. This will be the second year ever. Thanks to creative accounting and the rising stock market, many firms have been able to mask this gloomy performance. But even those who have been the best in the Phi Scamma Jamma fraternity, Dell and Cisco, for example, are starting to note weaker growth in revenues. And when they catch colds, the other cos. get pneumonia.
The market may very well look beyond the eps and sales disasters as long as Greenspan pumps dollars into the pockets of speculators. My guess is that he cannot continue to do so for much longer. The dollar and the long bond have been weak and will continue to weaken. For Greenspan's flim flam to work, the consumer has to not only continue his pattern of negative savings, but continue to GROW his net indebtedness at an ever expanding rate. Yes, some folks are foolish and will continue to borrow money they cannot repay, but there comes a level when smarter consumers back off a bit and when smarter banks tell others, "aren't you a bit overextended." When that happens, the Emperor will suddenly be seen to be naked as a jaybird. I think we are getting close to that time.
Still, that being said, I recommend using a conservative speculative method, such as 90/10, where you put 90% of your money into cash equivalents and only 10% into markets. We never know how stupid investors can get.
Yes, there will be a few dozen of the current tech cos. that survive the crash. And there will be a handful that actually prosper. For example, Hewlett-Packard and Texas Instruments have been through several crashes and prospered during the next upturn. But the next tech up wave will not be |
