Heading for the precipice. Or: the lemmings will win: -
Never have i seen such a truncated market. Value stocks, the banks, airlines, retail, basic industry, etc are being dumped big time. In fact, we have a self-fulfilling cycle> value stocks are not doing well. mutual funds that invest in them are being sold in favor of tech and nets. as the funds are liquidated, they need to sell shares of stock to provide cash for the liquidations, thereby depressing further the share prices of these stocks. Catch-22?
In the meantime, biotech, small internets, and chip stocks are rocketing. small caps and mid-caps are rocketing. Granted, this sector, small and midcaps, are making up for the underperformance of the past few years.
So what will happen?
Will CSCO go to 300 while Sears goes to 10? Will FNM(pe= 14) go to 35 while AMAT (pe = 92) goes to 250?
The traditional tech leaders have faltered: IBM, MSFT, AOL, YHOO while an even narrower group of techies and netties are leading this latest charge?
We are already at over-valuation for many of these techies and severe undervaluation for many of the basic industry, value, and financials. This trend will only continue, until there is some precipitating event that will jolt the techies and lead money back into the values.
such an event, most likely, will be a severe market correction, not a 10%'er, not a 3 day and then buy the dips and reverse. but a real gut wrenching, nail biting, whacko.
or will it? larry |
