Hi all,
Now we all know that the long-term prospects are bright for this industry, but looking out at the next couple of years:
About the cycle, outlook and business prospects (as well as talk that we've finally escaped the cyclic nature of the semi-industry) are always the brightest at the peak of the cycle. Certainly that's when the stock price peaks: when investors start looking beyond the current business condition, and when no amount of good news about the "now" can lift the stock. Now this sounds like the situation these days. :(
And with a slowing economy, that could easily kill a further upswing in business. I don't care if you're talking 300mm or cell phones or Sony Playstations.
So I agree that we are in a bear market. But how far do we fall and how long? In terms of valuations, keep in mind that the average TRAILING PE for decades before 1995 was around 15 (just before the 1987 crash, PE was at 22 and that was considered stratospheric in those days). Since 1995, we've seen an a "secular" change in the way stocks are valued. We've had an inflation of PE ratios, and investors started looking at FORWARD PEs. Of course I think part of that is justified given the "New Economy" and the fast growth rates some of these high-tech companies enjoy. But of course, the question is How much of an inflation is justified? Certainly not what we've been seeing earlier this year & late last year, and hence the relentless declines in stock price. The "re-adjustment", so to speak.
So what I'm wondering is whether we're again in one of those "secular" shifts in valuation metric--this time to the downside. Can we be partially returning to the pre-1995 way of valuing stocks. If so, then yes, we do have a while more to fall...and man, we could easily lose 50% or more from the peak in March. Just as the climb of stock prices in the last few years have been unusually impressive, the ensuing decline over this bear market can be equally "unusual".
Cary, are you doing any selling even as the market declines, or are you sticking with the +/- 25% rule you set forth after the April 14 decline?
Wes |
