We have a plethora of opposing forces in play now: on the negative side inflation with energy prices, the aftermath of the bubble burst, layoffs, etc. On the positive side, cheap goods, much lower rates to do the same and then tax cuts.
Put it all together and we have a not-so-great slightly inflationary but highly-stimulated situation with techs recovering a bit and retailers going down some. Financials will benefit from rate cuts and suffer from a modest drop in consumer spending.
Greenspan knows what he's doing IMHO though it's not a perfect science. He knew that bubble in net stocks was outrageous and he popped it with 3 rate hikes. The effect came fully 9 months later. Now he's cutting rates 4-5 times to stabilize as the dot-com crash hit the wealth factor too hard. Used to be only rich folks had stocks. Now everyone does so that's Greenspan's concern with the market. He cannot risk a total economic crash and has already taken the steps to avoid it.
An LA Times article 3 weeks ago specifically said that Greenspan had finally decided to protect the market against irrational exhuberance to the downside (shorts). He was right. When we had major US corporations rumored to be going bankrupt (however false the rumors) something had to be done. It has been done now and will continue.
My bullishness on techs is only from the low point last month. I've said all tech stocks will double this year from their lows and micro dogs will triple or quadruple. It's already happened in some cases and is getting close in many others. CMGI has quadrupled from $1. JNIC has doubled. EMC came close to doubling from $25. I leave stocks like IBM and VZ out of this because they were never hit much by the sell-offs in the first place.
As you can see my targets are fairly modest. CSCO need only tack on 7 points to double from its bottom. AAPL (a stock I much prefer due to all its cash) needs only 9 points. Both will get them sometime this year. Of course they will bounce around a bit inbetween but mainly up this coming 9 days until the rate cut. This is one best time to be long.
What stocks haven't participated in the rally yet? Very few but Baby Bells and WCOM, HWP, UIS are some I bought the other day for precisely that reason. Still oversold and under-valued IMHO. WCOM the one most like to pop 20% in a day one of these days with the safety of value behind it (I believe $18 area is its bottom). I would include NT as well but it doesn't have the clear value aspects I like. Still eventually NT will also double. They have so much going for them around the world. Probably by 4th quarter. NT might be a stock I'd buy late in the summer for that run.
VZ I'd hold until their massive wireless IPO in the fall when the the stock could hit $80 or more.
I may soon be out of any sharply-recovered techs as I'm traveling but will keep my VZ, SBC and oil stock as safer defensive value picks for sure, and may also keep UIS, WCOM and LOR as takeover/recovery plays. AAPL and HWP may also be keepers. We'll see. |
