What's going on: -
Here's my take on what is going on.
1. The market, particularly the nas, techs, nets, bios, had an incredible run, + 100% in some cases from October 99 to early 2000. It is only natural that after such an accelerated move, that there be some retracement.
2. Many "old economy" stocks bascially did nothing for part of 1998, and all of 1999. These banks, oils, retail, telcos, manufacturing companies started attracting money as the sell off in the nets, techs, bios picked up speed in march, april,
3. Energy prices are proppeling inflation and is likely to continue to do so. Add this to an excess in liquidity in late 1999, due to Y2K (remember that phrase) which started to be withdrawn in early 2000. A vigilant Fed is raising rates to attempt to contain inflation. It is doing a good job and I think we are close to the end of the tightening phase.
4. The tried and true "buy on dips" has failed for the first time in quite a few years. While this has shaken many, it hasn't broken the spirit of this market. What has been broken is many day traders, brand new ones particularly, who discovered Mr Margin can be a real mean son of a b*tch.
So what's next?
I see a sloppy market for the next few months, no roaring back like we've seen in the past. We are definintely in a bear market right now, but bear markets have been compressed to a few days, weeks, months. So the worst is behind us. We have had great earnings from the tech bellweathers and tech will be the place to make money in the future, but in the short run, the value sector will be the better place for money than the techs. And techs that will win are the good ones. A lot of the huge PE, no revenue, no earnings, pie in the sky models will just disappear.
I think some of the food stocks, particularly BFO and NGH are very attractive, and are involved in takeover battles. JCP - JC Penney has no leadership and will be spinning off Eckerd drugs and selling some assets, plus buying back stock. PS, it has a 6% yield, which appears secure given that they just cut it.
T is a great value here, LMGa - Liberty Media, is a great collection of media assets and trading near its low. The drug and energy sectors seem like attractive areas for money. and small cap value funds too. jmho. larry |
