re: "old econonomy" companies:
I've always been sceptical about the old-new economy split. Compare, say, Ford and Applied Materials. Demand for semiconductor equipment is dependant on demand for chips. And where are those chips going? 10 years ago, it was simple: they went into PCs. However, every year, the new model cars have more and more chips in them. Same with kitchen appliances and children's toys, etc. The "old economy" products are full of chips now. So, if Ford is really worth only a single-digit PE, then a semi-equipment maker can't be worth a triple-digit PE. That is, if the Fed is going to raise rates till the economy slows, and Ford stock sells off in anticipation of people buying fewer cars, then that means demand for chips, and chip equipment, must fall off as well.
And the Fed will continue raising, until the economy slows, no matter what the market does. They've said so, many times. We are still (far) above the level Greenspan said was "irrationally exuberant". |
