I'm calling for a bottom in the NDX in the 500-700 range based on my calculations.
Calculating the NDX isn't an exact science. I noticed many conflicting data points such as:
1) NDX is modified cap weighted meaning for some reason QCOM
makes up a bigger percentage than ORCL with half the market
cap. Many other examples of this as well.
2) I used Tuesday's closing prices. When adding up the percentages
I got from nasdaq.com, they only totaled 99.5% and not 100%.
3) Shares outstanding, previous earnings, etc are different
on every website, so I did a best guess.
4) You'll notice I mostly used prices in multiples of $5.
5) Even though the NDX and Naz seem to trade at about the
same levels, I feel the NDX will feel much more pain due to
its concentration in big cap tech.
6) I also believe this is a multi-year process. I don't expect to see these prices anytime soon.
Even some of the bears might find my calculations a bit
crazy. Here are a few quotes from Galbraith which sum
up how I view the current Naz bubble:
A bubble can easily be punctured. But to incise it with a needle so that it subsides gradually is a task of no small
delicacy. Among those who sensed what was happening in early 1929, there was some hope but no confidence that the
boom could be made to subside. The real choice was between an immediate and deliberately engineered collapse
and a more serious disaster later on. Someone would certainly be blamed for the ultimate collapse when it came.
There was no question whatever as to who would be blamed should the boom be deliberately deflated. (For nearly a
decade the Federal Reserve authorities had been denying their responsibility for the deflation of 1920-21.) The
eventual disaster also had the inestimable advantage of allowing a few more days, weeks, or months of life. One
may doubt if at any time in early 1929 the problem was ever framed in terms of quite such stark alternatives. But however
disguised or evaded, these were the choices which haunted every serious conference on what to do about the market.
[geez, what approach is the fed taking?]
As already so often emphasized, the collapse in the stock market in the autumn of 1929 was impliccit in the speculation
that went before. The only question concerning that speculation was how long it would last. Sometime, sooner or later,
confidence in the short-run reality of increasing common stock values would weaken. When this happened, some people
would sell, and this would destroy the reality of increasing values. Holding for an increase would now become
meaningless; the new reality would be falling prices. There would be a rush, pellmell, to unload. This was the way past
speculative orgies had ended. It was the way the end came in 1929. It is the way speculation will end in the future.
The great investment trust boom had ended in a unique manisfestation of Gresham's Law in which the bad stocks
were driving out the good.
These are the big fish of the NDX. They make up over 1/3
of the Index even though they are only 7/100 stocks. These
numbers may look absurd at first, but not one of them is
less than 1 times sales. Keep in mind many of these dead
weight stocks have 5+++ billion shares outstanding. Low
single digits is very possible for all of these given the
deteriorating fundamentals. Many of these stocks are also
big users of the double edged sword known as leverage. To
quote Galbraith again:
The most important corporate weakness was inherent in the vast new structure of holding companies and investment
trusts. The holding companies controlled large segments of the utility, railroad, and entertainment business. Here, as
with the investment trusts, was the constant danger of devastation by reverse leverage.
I don't need to explain how similar this is to most of you.
The situation is a bit different, but many of the big caps
are dependant upon this same type of leverage in order to
make their bottom lines.
[headings are the same for the other groups as well]
Tuesday NDX Current Future Future
Symbol NDX% Close Close NDX pts. Price NDX pts.
CSCO 8.02% $53.69 2786.53 223.48 $5.00 20.81
INTC 5.90% $42.63 2786.53 164.41 $5.00 19.28
JDSU 3.65% $66.38 2786.53 101.71 $10.00 15.32
MSFT 7.22% $67.75 2786.53 201.19 $5.00 14.85
ORCL 3.30% $23.88 2786.53 91.96 $3.00 11.55
SUNW 3.46% $85.12 2786.53 96.41 $20.00 22.65
QCOM 4.63% $87.50 2786.53 129.02 $10.00 14.74
36.18% 1008.17 119.22
These are the medium fish of the NDX. There's gonna be a
lot of tough love for these stocks. I may have been very
generous with some of my guesses.
AMAT 1.04% $42.31 2786.53 28.98 $24.00 16.44
AMCC 1.08% $54.19 2786.53 30.09 $10.00 5.55
ARBA 0.98% $72.25 2786.53 27.31 $10.00 3.78
BRCM 1.03% $126.25 2786.53 28.70 $30.00 6.82
CIEN 1.91% $96.25 2786.53 53.22 $10.00 5.53
DELL 1.32% $23.63 2786.53 36.78 $5.00 7.78
ITWO 1.45% $116.19 2786.53 40.40 $10.00 3.48
JNPR 1.38% $113.56 2786.53 38.45 $10.00 3.39
NTAP 1.18% $61.00 2786.53 32.88 $15.00 8.09
PALM 1.46% $46.31 2786.53 40.68 $10.00 8.79
PMCS 1.16% $113.56 2786.53 32.32 $10.00 2.85
SDLI 1.22% $232.06 2786.53 34.00 $40.00 5.86
SEBL 2.45% $85.44 2786.53 68.27 $10.00 7.99
VRTS 2.35% $97.31 2786.53 65.48 $10.00 6.73
VTSS 0.69% $60.31 2786.53 19.23 $10.00 3.19
XLNX 1.41% $55.00 2786.53 39.29 $10.00 7.14
YHOO 0.65% $41.69 2786.53 18.11 $2.00 0.87
ALTR 0.93% $28.38 2786.53 25.91 $10.00 9.13
ADBE 1.11% $80.00 2786.53 30.93 $15.00 5.80
AAPL 0.50% $18.81 2786.53 13.93 $15.00 11.11
BVSN 0.53% $31.19 2786.53 14.77 $5.00 2.37
EBAY 0.37% $31.56 2786.53 10.31 $5.00 1.63
KLAC 0.37% $28.44 2786.53 10.31 $10.00 3.63
LLTC 1.33% $54.25 2786.53 37.06 $10.00 6.83
ERICY 0.70% $11.25 2786.53 19.51 $5.00 8.67
NXTL 1.84% $33.56 2786.53 51.27 $10.00 15.28
PSFT 0.90% $39.00 2786.53 25.08 $5.00 3.22
QLGC 0.55% $102.88 2786.53 15.33 $20.00 2.98
SANM 0.85% $90.25 2786.53 23.69 $20.00 5.25
WCOM 0.91% $15.06 2786.53 25.36 $10.00 16.84
XOXO 0.31% $18.56 2786.53 8.64 $5.00 2.33
VSTR 1.63% $114.06 2786.53 45.42 $20.00 7.96
VRSN 1.01% $4.06 2786.53 28.14 $10.00 69.32
USAI 0.36% $17.56 2786.53 10.03 $10.00 5.71
SBUX 0.72% $47.44 2786.53 20.06 $25.00 10.57
ADCT 1.18% $20.75 2786.53 32.88 $10.00 15.85
AMZN 0.33% $24.25 2786.53 9.20 $1.00 0.38
APCC 0.19% $12.88 2786.53 5.29 $15.00 6.17
BBBY 0.47% $21.06 2786.53 13.10 $15.00 9.33
CHIR 0.60% $40.25 2786.53 16.72 $25.00 10.38
CTAS 0.59% $49.63 2786.53 16.44 $30.00 9.94
CTXS 0.36% $28.00 2786.53 10.03 $10.00 3.58
CMCSK 0.90% $36.00 2786.53 25.08 $25.00 17.42
CMVT 0.95% $95.00 2786.53 26.47 $30.00 8.36
CEFT 0.61% $43.06 2786.53 17.00 $10.00 3.95
CNXT 0.39% $26.88 2786.53 10.87 $10.00 4.04
COST 0.50% $36.06 2786.53 13.93 $20.00 7.73
DISH 0.45% $31.94 2786.53 12.54 $10.00 3.93
ERTS 0.32% $41.94 2786.53 8.92 $20.00 4.25
FISV 0.45% $49.94 2786.53 12.54 $25.00 6.28
GMST 1.12% $44.69 2786.53 31.21 $10.00 6.98
INTU 0.72% $48.19 2786.53 20.06 $20.00 8.33
LVLT 0.49% $32.75 2786.53 13.65 $5.00 2.08
MXIM 1.37% $59.06 2786.53 38.18 $15.00 9.70
MCLD 0.35% $12.88 2786.53 9.75 $5.00 3.79
MFNX 0.50% $16.12 2786.53 13.93 $3.00 2.59
MOLX 0.26% $45.75 2786.53 7.24 $15.00 2.38
SPOT 0.43% $36.75 2786.53 11.98 $15.00 4.89
PMTC 0.27% $12.81 2786.53 7.52 $5.00 2.94
PAYX 1.24% $59.69 2786.53 34.55 $10.00 5.79
52.72% 1469.06 453.92
I have no idea what to make of BioTrash valuations. They
look pricey to me, so I'll say they go from 180 NDX points
to 100 points given I don't know much about the group.
AMGN 1.82% $64.63 2786.53 50.71
BGEN 0.58% $55.00 2786.53 16.16
BMET 0.53% $38.12 2786.53 14.77
IMNX 1.65% $38.00 2786.53 45.98
GENZ 0.48% $76.00 2786.53 13.38
MEDI 0.76% $57.69 2786.53 21.18
TLAB 0.77% $56.31 2786.53 21.46
6.59% 183.63
These are the small fish of the NDX. I didn't bother making
guesses on anything below a 0.25% weighting. They total
about 4% of the NDX making up 110 points. My guess is they
get halved or so, I'm going with 50 points.
COMS 0.14% $14.06 2786.53 3.90
ADPT 0.05% $11.94 2786.53 1.39
APOL 0.17% $41.81 2786.53 4.74
ATHM 0.10% $7.31 2786.53 2.79
CPWR 0.11% $8.53 2786.53 3.07
MLHR 0.09% $25.19 2786.53 2.51
LGTO 0.06% $10.75 2786.53 1.67
MCHP 0.15% $25.50 2786.53 4.18
NETA 0.12% $15.31 2786.53 3.34
NWAC 0.11% $29.00 2786.53 3.07
NOVL 0.17% $7.44 2786.53 4.74
PHSY 0.02% $15.12 2786.53 0.56
QTRN 0.14% $14.94 2786.53 3.90
RNWK 0.13% $15.06 2786.53 3.62
SIAL 0.17% $35.94 2786.53 4.74
SSCC 0.16% $11.94 2786.53 4.46
SNPS 0.15% $35.69 2786.53 4.18
ADLAC 0.21% $25.25 2786.53 5.85
ATML 0.24% $12.00 2786.53 6.69
BMCS 0.21% $19.50 2786.53 5.85
CMGI 0.22% $10.94 2786.53 6.13
CNET 0.18% $19.94 2786.53 5.02
DLTR 0.21% $37.44 2786.53 5.85
PCAR 0.22% $43.69 2786.53 6.13
RFMD 0.24% $22.88 2786.53 6.69
SPLS 0.21% $11.75 2786.53 5.85
3.98% 110.90 |
