QwikSand. Thanks for defending me, but it is not necessary ... especially between JC and me ... we have a good relationship.
As a further note, the purpose of the bearish stuff I have been posting since the 1st of the year is to provide other points of view (especially different views than are usually considered here that are logical to me). Until the beginning of this year, my beliefs had been buy and hold only, which worked very well for me from 1997-1999. Now, I think differently because conditions have changed.
In early 1997, SUNW's P/E was around 20, so it was easy to throw a bunch of money at it and hold it and wait. The WSJ, today, says that SUNW's trailing 12 month P/E is 94. For it to maintain that level, never mind grow the P/E even higher, SUNW is going to have to continue to produce revenues and income at higher and higher levels - which they might just do. But what if they slip just a little.?
Holding large blocks of SUNW, Cisco Systems etc (and other really grand technology companies) without giving it much thought is dangerous (in my opinion). I did not care that I had paid only $10 per share (adjusted), I am interested in growing my capital, but I am just as interested in preserving it - I sold all of my SUNW in January, and although I have bought and sold some since then, I can not in good conscience hold any of it with the macro economic and general stock market risks that exist. This is not 1998 or 1999, but a year of change for equities. I believe that not giving any thought to the large risks that high P/E tech stocks carry with them is asking for trouble.
Investors who do not consider the negative possibilities have their fear-filled heads stuffed in the sand, in my opinion. Those who will not consider at least a somewhat more cautious and conservative approach may loose large portions of their gains in a short period.
I believe there is a fair chance that all stocks will decline another 30% plus in the next 6 to 9 months. If that happens, the high P/E stocks will probably be punished even more (again, my opinion).
How do I know my analysis is correct? I do not know that and I never could. Sometimes, caution is the right course.
I strongly believe that is best for me (and many others who have not previously considered it).
I have just started taking a course in how to effectively trade options so I can more easily go both short and long in what I perceive could be a lengthy bear market.
My goal is not to tell any of you that I am right and you are wrong ... nor is it to try to impress you in any way. It is purely to tell you what I have learned and what I think is likely to happen and why.
Over the last three years, I have grown to know and like many of you - even at great distance. My wish is to share with you and receive your knowledge in return. As you may not know, I post only here ... and once in a while on the Market Direction Discussion thread.
I wish you all the very best.
Ken Wilson |
