I understand and share your bullish position, however let me raise some concerns.
Rate hikes might be over and this is good. However no one is looking at the other side of the coin. The economy IS SLOWING DOWN. So why is it ok to pay huge premiums for stock s once again? We just started seeing the effects of the first few rate hikes. The larger hikes didn't work their way through yet.
Everyone is happy that the economy is slowing down, but its not something to be particulary happy about.
Auto sales are down! Retail sales are down! Hooray!. Not really. Slowdown in sales affects a lot of suppliers, including semiconductors. If the growth is slowing, the premiums for growth should come down.
How are you going to calculate premiums you are willing to pay, if you don't know how strongly the rate hikes have affected the economy?
Lets say that right now you are paying about 50 P/E for 2001 on SOX. There are already a lot of reports out there that indicate market saturation, pricing pressures and top of the semi cycle in around 2002. Is there any particular reason to push these stocks to 100 P/E within the next few weeks of oncoming "summer rally" that everyone knows about?
I don't see any.
Here is something else. This economy is driven mainly by US consumer. And most of this spending is done on credit cards. Per latest data the average consumer carries a debt of approximately $7,000 on credit cards. I think that these credit cards are getting pretty maxed out by now. Don't forget the booming home and auto sales during the past few years. In other words, loans, loans, loans. Consumer has to pay for it at some point. And thats what Alan Greenspan and company are worried about. They want a "soft landing", not another take off. Besides, the skyrocketing stock market will give them more excuses to be aggressive.
This market was never really bearish. Look, 4 day rally and we are back to huge valuations. Everyone is so sure that we will start hitting new highs, that something doesn't feel right.
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