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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 665.67

-0.9%

Nov 17 4:00 PM EST

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To: briskit who wrote (71556)	3/9/2001 11:14:19 AM
From: Rob S.	Read Replies (2) of 99985

Blood is running in the streets but like most tech stock sell offs I expect it to continue running for several months. I think the bottom of the curve will be reached by this summer. On the one hand valuations are still high for many of the darling (or former darling) sectors. While valuations have come down, sectors such as telecomm equipment are based on high growth rates and that part of the formula comes under increased pressure. There must be an end to the litany of sales and earnings warnings before light appears at the end of the tunnel. We probably aren't far from that happening, maybe 3-5 months, but who wants to play Russian Roulet with their money? I have not seen any signs of an end to the downturn in semis, semi equipment, fiber telecomms and other key sectors. Semis will continue to come under pressure as prices fall in the face of slowing demand. I think the long term prospects look good but the downside risk is still there. In the Internut and long-line telecomm sectors, business plans were fraudulent - based on generating sales and incomes that were erroneous. That has caused a major drying up in capital spending and stock market paper wealth effect. on the other hand, the long range picture for tech spending is better than the current downturn in demand caused by excess inventory and build-outs reflects. Many segments of technology are delivering real productivity improvements and new ways of doing business. Productivity gains have remained relatively robust compared to past recessionary periods (this is a sector recession, not a full-blown recession). In fact, during past true recession productivity went negative. So far, productivity gains remain strongly positive. That is a significant difference and is the factor that should propel the tech stocks out of this slump by the end of this year (probably much sooner as the market anticipates by 3-6 months).

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