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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets!
LRCX 160.52-4.9%Dec 12 9:30 AM EST
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To: Jerome who wrote (9321)1/18/2001 9:22:30 PM
From: WTSherman  Read Replies (1) of 10921
 
<Any good theories to explain this phenomenon?
<

Excessive crack use on Wall Street??

My take on the rally under way is:

1)Right now its in a momentum stage whereby the market going up inspires confidence that the market will continue to go up. This is especially true with tech, particularly semi's.

2)The market is assuming that rate cuts will rapidly reverse any negative economic trends. This ain't always so, just ask the Japanese.

3)That when the economy reverses growth rates will resume at levels something like what was seen in the late '90's. This seems very unlikely to me. Unless there is a severe recession and consequent much higher unemployment, there is no way the economy can grow for several years at +4-5% rates with unemployment in the 4% area.

4)I don't think the rally can sustain itself without good economic news. The next rate cut is already factored in, what keeps it going up? Momentum? I think that goes away if/when more bad economic news hits.

5)The market reacted very positively to bad earnings reports, vague future outlooks from company's and the worst manufacturing data in a decade. That is not the kind of information that leads to sustained upward movement in stocks.

I think people will look back and say this was a "bear rally". As for all the "cap-ex" discussion, I think that these plans can/will be quickly revised if the PC/wireless phone markets don't stabilize soon.
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