JungleInvestor, jim_p, and dabum - let me toss my thoughts into the tech long/short discussion.
I've got a great belief in the "things are going to get worse" side of things. For three months now we've been tossing around the recession word, but it seems that only of late have the companies themselves been issuing the mea culpas. It's a combination of denial and spin doctoring in my opinion.
The situation now is quite bad for makers of electronic gadgets, and given the collapse of easy (read brainless) capital it isn't going to turn around on a dime. There's an incredible debt load in the telecom sector that's got to be dealt with. As recently as the last few weeks I've seen more stories about humongous bond sales by already debt strapped telcos. Deutch Telecom & BT come to mind, but they are all playing the same game. I suspect better than 50% of the capacity out there is going to have to go bankrupt before that bubble is worked off. In the mean time that doesn't bode well for NT, LU, or CSCO much less the little guys.
I think we're going to have to see normal indicators that the recession is over before tech capex has the chance to go crazy again. In other words I think there's a good chance tech won't lead the way out - that duty may fall to brick & mortar cos & traditional things like the housing market, which has yet to even tank much less start to recover.
In the meantime I expect that we'll see these slowing growth estimates actually turn into negative growth - and that's going to hit home like a ton of bricks. Sky high PE's will go to infinity and then flip negative. The standard of the last few years - 100% y over y growth rates will go negative, for many companies for the first time ever in their short lives. Big companies out there like CSCO, NT, INTC, MU, and LU will get really nasty with cut throat prices and wipe out those that are less well capitalized.
Having said all that, I should clarify that I suspect the above will take at least 6 to 9 months to develop. In the mean time I think we'll have at least one, and probably two or three vicious bear market rallies - of the scale of what happened in January. I think we're getting primed for one of those soon - possibly very very soon as Jim_p believes. Just look at the VIX, it's telling an interesting tale just like late December. For that reason I've closed out almost all of my put positions. I don't have the guts to play long, I'm content to sit on my cash and wait for another no-brainer short opportunity.
As you can see I'm sitting on a fence and more than a little unclear on short term direction. I do think though that if we don't get the very short term rally that we'll likely get another plunge. The order of the day is volatility - I sure don't think we're going to stay where we're at.
Dabum, not sure about the timing but for short ops I like ONIS and JNPR. I played BRCD for a great ride down, but that one may be out of steam for now. I've also done well with puts on IBM and MU, which just really broke in the last few days. I also think KREM is a bit of a pie in the sky valuation (sorry cheap pun), but it hasn't cracked big time yet. For now I'm out, except for tiny ONIS and JNPR put positions - waiting as I said for better prices but with a small part of a toe in the water just in case.
Good luck sailing these stormy seas.
Sharp |
