have the recent low prices on tech stocks lured you back into the market
Sarmad - about three weeks ago, I went from 100% cash to 100% stock (actually about 120% stock as I bought some stock on margin) - stocks I bought included: MSFT, INTC, AMD, JDSU, NT, AOL and SUNW. Within a few days, I saw my portfolio rise some 15% - that's when the Nasdaq went back up to 3500. However, with the election, the HP results and the Fed's maintaining a tightening stance last week, all my profits evaporated - and I sustained a slight loss. On Thursday morning of this past week, I reverted back to 100% cash.
I thought 3 weeks ago when the Nasdaq started going back up that we had, perhaps, seen the worse. Now, I am not so sure. 3 weeks ago, I thought that Nasdaq 2500 was out of the question - now I think it's a possibility. Here are the main things that I am concerned about at the moment:
1. The election saga and it's aftermath: I think it will be at least two weeks more before we know the name of the next president - and perhaps, it will be even longer. I also believe that no matter who wins, this whole election will greatly diminish the perceived power of the next president - half the country will think that the president was elected unfairly (if Bush wins, many democrats will site the fact that Gore won the popular vote - yet if Gore wins, many republicans will claim that the victory arose out of legal maneuvering).
2. The economy and the Fed: the fact that the Fed maintained it's tightening bias this past week was surprising to me. We're in a situation where corporate profits are currently on the decline, yet there appears to still be strong evidence of inflation. Of course, the Fed could come in at any time and lower rates - but I would not bet on that happening any time soon.
3. The corporate bond market: Morgenson's NY Times article of this morning was a wake up call. We've already seen some major corporate bond defaults, but we have to wonder if there are more to come.
4. Middle-East instability: In my view the Israeli-Palestinian situation gets worse every day. Of course, we may be past the threat of escalating oil prices. But it seems that both sides consider themselves at war - and if things become more unstable, there is a risk that the conflict will broaden.
With all of the above, I see no compelling reason to invest in equities at the moment. It's true that once a president is chosen that the market might spike - but then again, it might not. I have better places to put my money at the moment - even with the slowing economy, my own business (Softagon) is doing very well. I do software consulting, where I effectively compete against the big consulting firms - Ernst & Young, Anderson, etc. - however, I do essentially the same work at a fraction of the cost. So big companies that are looking to reduce their spending while continuing to build their IT infrastructure realize benefit in contracting with companies like mine. Of course, I'm always on edge with my own business - as an overall downturn could certainly have a negative impact.
How about you - what's your outlook on the market at the moment?
-Eric |
