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Politics : Formerly About Applied Materials

AMAT 267.08

-0.4%

Dec 9 3:59 PM EST

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To: semi2000 who wrote (38943)	10/29/2000 10:51:21 AM
From: Sun Tzu	Read Replies (2) of 70976

Are you suggesting we liquidate all positions? Or do you have some other plan for this upcoming flu? First let me say that I don't know if there will be another economic crisis. I am only saying that it is possible and that its possibility is now greater than it was a year ago. In practical terms that means I adjust my investment tactics according to how great I see risk/reward. Many investors tend to have a black and white view of investing; they make up their mind to be a bull or bear on a stock (or the market) and then buy as much as they can or short the stock accordingly. In reality there are many shades of gray in between because 95% of the times there are conflicting information in the market. Here is how I go about these shades: (1) Doom and gloom everywhere, the stock has bottomed for ~3+ weeks. It is trading at historic low valuations and is at least 1/3 of its 52 week high. I expect the stock to double within 18 months: Buy far out of money calls. (2) Stock has been in a strong up trend for at least 6 months. It has a strong institutional and private following. EPS estimates are being raised. I expect the strong trend to continue for another 6 months: Buy on the dips or buy bull spreads. (3) Stock is in an up trend. I expect the up trend to continue but sometimes it gets ahead of itself: Sell covered near calls (1~2 months out and 10% out/in money). (4) The stock has been in an up trend for over a year. It seems extended to me, but I am not sure if this is the end. I should sell, but I am greedy and afraid to miss the coming gains: Sell at or in the money covered calls of 3~4 months out. (5) I can hear the sounds of the waterfall down the river. The stock has made out of character drops that don't bounce back as quickly as before: Close all positions and wait to see if I'm right. Capital preservation is the key. If outlook changes, I'll buy some in the future. (6) We are in intermediate downtrend (say below 35 dma). I have a negative outlook: Buy put spreads 3 months out. (7) I am very bearish on the stock and on the market as a whole:Short everything to the hilt and sell covered puts on slowing downward momentum. NOTE: This is dangerous; thread lightly. Recently I did some analysis on SOX. To bring it into historic norms (baring any economic calamity), it has the upside of 900s and the downside of 400s. Which way it goes depends on how the cycle turns. SOX is currently around 700. . When you say rates going up - in US or in Asia? Not in US per my view. Gone are the days of mostly self-contained economies. Interest trends are now a global trend. When you see one of EU, BoJ, or US raise rates the other two are sure to follow. And the ripples will affect everyone around the world. If you look at the liquidity trends from BoJ, you'll see strong correlation between it and the dramatic rise and fall of NDX. There is a street consensus that the Fed is done raising rates. I tend to agree. Also I think the dot-com fall out in itself has slowed down the economy and will continue to do so in the near term. So once as the market recovers from the shell shock, I expect the up trend to resume around Feb. Of course I may be wrong. BTW, depending on the market and the price, I intend to buy at the money AMAT calls and puts on Nov 14. I hope this helps, Sun Tzu

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