We are seeing the pigs getting slaughtered. The last of the "new economy" hype sectors are getting their dose of business and stock market reality. By many measures, the tech market has seen the steepest decline since the 1973-74 period. The majority of the downturn has happened in a few hyper inflated sectors. The downturn in most stocks has not been unusual - only a "typical" seasonal correction from unusally lofty levels and nothing to get upset about.
As much as the market has come down, there is still a huge divergence between the darling sectors, such as fiber-telecoms, and the rest of the market. By almost any measure, the 'rest of the market' is reasonably valued. In fact it can be argued that in the context of a generally favorable economy, there are many tremendous long-term buys. On the other hand, even though many of the pigs have had some of their fat fried recently, they are still pigs none the less. Many investors think will fly, fly, fly as soon as the wind is to their back.
The stocks, such as the BtBs, fiber telecoms, bio-techs, fuel cells, are good for trading. They are prone to violent bounces as well a violent drops. If you are a good technical trader you can make money playing them. Otherwise, these stocks are far from reasonable valuations on an historical basis. Maybe if the market gets back to believing the "earnings don't matter, it's a new economy" hype these stocks will look as if they can fly again.
Meanwhile, many of the semis have found support levels and are trading at levels justified by near term fundamentals. Good buys but still not for the skittish investor.
Wow, what a market this has been so far this year. An irrational, new media-mania driven market. But in the end, the laws of physics have proven to still be valid, even in this new Internet age universe. |
