I was referring to the economy in general. My belief is that we've had a brief, nevertheless extreme, near-recession fall-off...most likely the result of two too many rate hikes significantly exacerbated by a reverse wealth effect. With the fed now loosening and the shock of the fall of the NAZ passing into memory, I feel the 6-month 'textbook' recovery scenario makes sense.
I claim there is no 'textbook' downturn or recovery within the SEM sector. If someone would could define 'textbook' in this context, I'm quite confident I could immediately show data to the contrary. And how much data is there anyway...1, 2, maybe 3 cycles? This does earn the label 'statistic'. The 1997-8 crash was certainly not normal (?) - no one expected SEA - and the recovery of 2001 will have its own character too.
At their nadir last year (which was, according to Don Wennerstrom, 30 November), the equipment stocks were down 60-80%. This is as severe a decline that would have occurred if the evidence from the BtB/bookings indicated a severe contraction. That was not the case. Just as we must acknowledge that the equipment sector reacts to forces which completely upset the 'normal' (whatever that is) pattern of cyclicity (the SEA crisis), we must also accept the idea that the stocks can anticipate a severe downturn long before the full evidence is in...and long before the impact on the sector is known. If a market can anticipate 10 out of the last 3 recessions then, by definition, that can occur within individual sectors as well.
I believe the SEM stocks fell in anticipation of an event whose severity and duration will be significantly more moderate than expected. Bookings may go down a bit more but by March or April they'll turn. In any event, the trashing of the stocks is totally disconnected to the decline in bookings. My view is that investors anticipated a level of contraction that just ain't gonna happen. In other words, I don't agree with the view that we should now wait around for bookings to fall to match investors perceptions. We should watch as the stocks climb back to more logical valuations since bookings aren't going to fall much more.
The sector will recover without EVER having more than a ~20% decline in bookings. When the sector recovers from here, it will manifest a typically unique pattern which describes every recovery...which is why textbooks on the sector need to be rewritten every couple of years.
All IMO. |
