George,
Lissa made a good point, " But for biotech stocks, it's about the market. I've contended for months that biotech is the strongest sector of the Nasdaq and rightfully so, not a "bubble" as it was in 1992. I agree. As much as we all want to see biotechs decouple from the market, to date, we have only been teased. I find it hard to believe that the market has truly bottomed until we see light at the end of the tunnel. Right now I see only glimmers of possibility. The recent rally is a result of reports not being as bad as many had feared and Greenspan's unexpected timing of a rate cut.
1. On a macro scale, I do not see Europe or Asia as an engine of economic expansion in the next 6 months.
2. The TSC telecom infrastructure article posted by Peter was very insightful. This sector had truly fueled much of this economy's growth, and wealth creation. Is this telecom infrastructure sector rebounding in the next two quarters?-- I'm not betting on it. It could well be a protracted recovery.
3. In late 1999 and most 2000 this economy faced increasing interest rates, and rapidly increasing energy costs. The interest rates are coming down, natural gas prices have decreased some, oil prices are close to their high.
4. Most companies are cutting back on all discretionary spending, business travel (note the airline reports), capital expenditures inclusive of all technology and obviously any expansion plans. Layoffs usually a lagging indicator, are mounting in much of the tech sector. Recently I have noticed the business lunchtime crowds are dramatically smaller, and I am no longer seeing the signs in the windows for waitstaff that were so prevalent a year ago.
5. We need stimuli, tax cuts, further interest rate cuts, and it would be nice to see the price of oil retrace short term.
6. During the next 6 months I will carefully watch for companies rehiring and restart spending.
Like Lissa and most here, I am comfortable with the longterm aspect of the biotech sector, however, I do not want to see short term losses in my portfolio from a renewed market retrenchment. I am structuring my defensive posture now. It will probably consist of taking some recent gains, covered calls, puts, and maybe a couple of non sector shorts. Any of this boards short term defensive thoughts will be appreciated.
J.D. |
