Sabre, I don't think we had a recession, nor will we in the next few quarters. The feds, IMHO, has become a slave to the market and politicians and may reawaken inflation. That is going to be quite a feat in a world awash in oversupply of productive capacity. To avoid that inflationary bolus from growing into a spiral, next year, they will have to go to the other side again and tighten. Unlike the last tightening, the market may pay attention at once then. The funny thing is that the market may start its next tail spin, just as companies are reporting "good sequential news" (the reporting period starting in April next year?), and the question then will be as it was in April 2000, "do you see any slackening in the economy and corporate profit growth?". That is kind of a round about way to attempt a response to your question "Can anyone actually state that they see stronger growth, better earnings and a REVERSAL ". No, I do not see this now, but look at some numbers, this year chips shipments are going to be down to around $186 B from above $200 B last year, in 2002, it may go back to $215 B, that will "look" like quite acceptable growth relative to $186, particularly since by then every chip forecasters will talk about "when" not "if" the industry will cross the $300 B mark. If you look at the BTB of the chip equip companies, it has gone down to .63, and who knows, by the end of this week we may get a new BTB even a little lower than that (the behavior of the chip sector tells me we may have a surprise, and the BTB may have turned the corner). Once the BTB turns, the rise in earnings of these companies is not far behind. These are all "justifications for the market to turn well in advance of actual improvements, and historically, it has always happened that way.
Like you, I am wary of the very extreme valuations in the market right now, a lot of dreams are being sold to J6P, but the Feds supplied so much liquidity, it is busting to find a home, and any spark of hope is used to ignite the liquidity fires. We'll very soon see if the market participants will remember the lesson of last year or not, but right now, it still seems that the path of least resistance is up. If the Naz can go above 2250 by the middle of next week, it will make this rally even more believable. Tomorrow will be an interesting expiry, the futures are already priced down a little, but my bet it that after a short down opening, money will come flowing back in later in the day.
Zeev |
