An addendum to the previous post...
Good evening, all - Like many of us, I got caught in the bubble, and have experienced some heavy (paper) losses recently.
To be honest, I badly underestimated the severity of the downturn. But Infowave is such a compelling "buy" that I was reluctant to let my shares go - and it's only when you step outside the bubble that you see the greater picture.
I'm no different than any other investor here: I don't know what will happen. But I do know what did happen. Behind the scenes, prior to Y2K, the Fed was pumping money into the economy, fairly quickly, in order to forestall a liquidity problem if a Y2K crisis developed.
In the spring, that excess liquidity began to be withdrawn: to put it plainly, money is now being taken out of the economy. Concurrently, the Fed is raising short-term interest rates. So, there's less money in the till, and if you need to borrow some for a short term need, you'll pay more.
However, the insertion of that extra liquidity was like pouring gasoline on the fire of an already
overheated economy. My own view is that it had the effect of invalidating the 1/4% rate hikes that accompanied it.
The markets shot up. It was a calculated risk, designed to avert disaster, but it had a price.
Finally, the rise in the markets was accompanied by an annual spring phenomenon - the river of investment money that flows into the markets as people make their last-minute tax-deductible retirement contributions.
But that's only half the story: the other half is that rise in tech stock prices was predicated on some assumptions. Chief among these was the belief that the real pearls among these stocks represented areas of tremendous growth potential, and therefore commanded premium prices. Those among us who have long been high-tech investors know why we're here, and the last 10 years have demonstrated the truth of these assumptions.
As I write this, the steps taken by the Fed are cooling the economy, and the markets. What will not change is the underlying reasons for being in high-tech, and in the wireless sector, in particular. The underlying assumptions are true. They are demonstrably true. Certainly, some stocks are overvalued, certainly some will fail.
So, I expect the NASDAQ to stabilize around 3600 - about where it was last fall. Am I certain of that? No. You can read about Fib levels, retracements, "old economy" stocks vs. "new economy" stocks, NYSE vs NASDAQ, until you're blue in the face - but nobody will ever convince me that investing in well-managed companies, with tremendous growth potential, is a bad move. It flies in the face of reason. Infowave is such a company - and every market study, every research report, every analysis that I have read confirms without exception that wireless growth will be explosive in the next 5 years. |
