A curious fact...
Virtually everyone agrees that AMAT has been the bellwether stock for the industry for at least a decade. Take a look at the 10+ year price chart from Yahoo finance.yahoo.com (it's log so the performance is correctly proportional). Look at the period from January 1991 (or 1992) through ~October, 1995. As a bellwether, AMAT's performance strongly suggests this sector has indeed seen a 3 1/2 to 4 1/2 year upleg in the cycle. If calculated from the absolute bottom through the absolute top, that cycle lasted over 4 1/2 years.
Now when was the longest pause in that upswing? From January, 1994 to ~August, 1994. Should we be surprised to learn that the Fed was aggressively raising rates during this period to protect against inflation. Should we also be surprised to learn that the Fed indicated it had completed the job in late summer, 1994?
And, since this was the period of humanity when 'life' as we don't know it still existed, very few investors in the sector spent much time writing useless messages on the internet in the spring and summer of 1994 to the effect, 'Why isn't AMAT continuing to rally? For gosh sakes, everyone knows the cycle is far from over.'
This of course was true and the rally resumed...once the Fed accomplished it's goal.
We're 2 years into this upswing and the Fed has been raising rates. We had an historically phenomenal rally from Fall, 1998 through March, 2000 and no we've contracted for 6 ~months.
When one is asked, 'Why should this cycle be any different?', the reply, based on historical fact, should be, 'Indeed. We're half way through.'
(and if someone shows you the SOXX graph never forget it began in Spring, 1994. Not only does it miss the clear pattern from earlier in the decade, but it appears to show a contraction 3 months into its existence. That's what's known in the highest scientific circles as 'unreliable') |
