A good summation of the current market, courtesy the txbanker club on Yahoo:
Market situation
strike_de
(50/M/Munich, Germany) 9/9/00 11:11 am
I believe the pessimism is totally unjustified, for the following reasons :
1. The pullback from recent highs has occurred on miserable volume. There is no evidence yet of a major reversal of sentiment. It doesn't mean we definitely cannot go lower, but such an event would represent a historical buying opportunity.
2. The catalyst for the pullback was earnings downgrades. As we all know, pre-announcements are usually negative, especially this year when companies are more afraid than ever of being sued for dramatically missing earnings estimates (viz. HLIT). In Q2 we had the same situation, plenty of scares followed by sensational results in which (eventually) 86 % of Naz stocks either matched or exceeded expectations.
3. Besides earnings, the other main factor cited by Buffett behind stock price appreciation is interest rates. The Fed will NOT raise the discount rate during the next 6 months and may even lower it. Meanwhile, Treasury and Bond yields are at historical lows, even more so in relation to productivity and inflation (i.e., 'real' interest rates are high, which is one reason for the influx of foreign money into U.S. fixed and variable assets).
4. The analysts are playing dirty, especially with Semis. They have used a couple of poor announcements as an excuse to downgrade the entire industry, while conveniently ignoring the great results announced recently by companies such as NSM. This is irresponsible, selective criticism. The SIA (Semiconductor Industry Association), arguably the world's leading authority on semis and the semi cycle, has issued a report forecasting excellent semi growth till AT LEAST the end of 2003. This report was based on exhaustive research and interviews at the producer and retailer level, not on a 'gut reaction' by some yuppie analyst who bases an opinion on announcements relating to one or two stocks !
But the short-term damage has been done : Since it was the Semis that pulled the Naz to its recent high, obviously a sector downgrade will have an effect improportional to the message, and may pull the Naz even lower. Eventually (October ?) I believe the Naz will take out its recent high (and its all-time high by year end).
All JMHO,
Strike |
