SO- I posed this question to Paul Shread earlier this week:
Could dot.bomb's relationship to "solid, big-name, cap" gorilla-tech (last year) be the same as the current Naz relationship to the Dow?
Clarification: When dot.bombs started falling apart last spring (and never recovered), a good amount of people assumed that "gorilla-tech" (EMC, CSCO, QCOM, NTAP, etc) would be spared...since dot.bomb only made up a small% of their sales....I see a (somewhat analogous) situation with many Dow stocks....it is assumed that they have little exposure to the troubles effecting tech, but I keep thinking about that 3 trillion (and growing) figure of market wealth loss....how can such happen (especially, the velocity of such- within a year), and there NOT be a profound impact on EVERYTHING...I am thinking abpit the potential chain-reaction for banks to "mark-to-market" credit lines to their best "old industry" customers (to make up for lost business in other divisions, some defaults)...I think about the average stock holder, who opens up his February statement, and says, "Yikes, we're keeping our 4 year old car another year"....I think about solid, American manufacturers/exporter/consumer goods companies...with a significant/large % of overseas sales....who sales are likely to take a hit once recession spread to Europe, and other parts of world in the coming months....(the coming weakness in the dollar to help later/much later)....etc...
How can the absolute implosion in tech be "walled" off from the old economy?
Additionally, after dot.com's blew up....last summer, I think we saw some "safety flight" (new and old money) from the dot.com's....and going into the STALWART techs.....now that NO TECH is considered STALWART anymore (maybe MSFT be the one which will suffer the least?)...the Dow has taken on the function that STALWART tech had last summer/early fall....and that means, by analogy, it is overvalued for 2 reasons: (1) Stock prices don't reflect the slowdown to come and (2) even if these companies maintain current sales/growth, some of the money parked there will leave once other alternatives become more attractive/recover...and like STALWART tech, we'll see these puppies fall at some point..
Of course, breakdown in GEs chart (look at a 10 year chart..wow!) gives one courage <G> to make such an argument
Thoughts?? |
