Jacob,
Thanks very much for your thoughtful reply. It is interesting to try to understand some of the big moves in stocks like AMAT. A big part of the explanation is due to a change in fundamentals, but I think part is due to the action of stock-price momentum players and also to a change in the mass psychology of investors (i.e. change from greed to fear or fear to greed). I try to use the fear part to my advantage, but as you point out, it only makes sense to buy companies that are reasonably valued and have good fundamentals.
Thanks also for your comment on what happened in the 70's to the Nifty Fifty. I agree that interest rates were a big factor, and I don't see that as a problem on the horizon now.
One last comment. Have you heard about Harry Dent and his book The Roaring 2000's? In this book he makes the argument that the baby boomer demographics are a big factor for about the next 10 years in driving our economy and the stock market. Also he gives credit to the internet, which he compares to the assembly line in the Roaring 20's. He was on CNBC a couple of weeks ago, and FWIW, he thinks the Nasdaq may go down to around 2300 or so, but sees that as a huge buying opportunity. I don't know how he uses his theories to provide such short term market guidance, but I thought I would pass it on anyway.
FWIW, here is a link to a Business Week article that talks about the prospects of a tech rebound, and also mentions AMAT:
businessweek.com
Regards,
John |
