Mike, Morgan said something to the effect that when orders start to come in, a flood of orders will come in. I bet he will be right. The consumer has been more stable both in terms of purchases of goods/services and in terms of investing in the market. It is mostly the emotional decision makers in corporate America and in the world of Wall Street that have amplified the cycles. I am very critical of guys like Chambers. I think they should have known better. They got way too confident, and collectively they were building a "house of cards" with the way they were running the business in recent years (e.g. lending to dotcoms, agreeing to long term contracts with suppliers, and paying too much for acquistions). Of course Wall Street and investors in general are to blame also, the high valuations fed the overly confident mindset.
Todays Barrons has some interesting articles. One by a TA guy who says we will bottom next year (don't understand his logic at all, but that would not be so bad if we bottom by then in my opinion). The other is about the foundry business, and argues for a chip turnaround soon, especially in the communication chip business.
There is one thing I am pretty sure of. Some of these tech stocks will come roaring back after we hit bottom. Last time, in October of 98, AMAT was one of the big rebound stocks. This time though, AMAT seems to be regarded as more of a blue chip, and has not gone as low in valuation compared to then. Seems to me the rebound in AMAT will not be as good this time because of this, but the probability that AMAT will make a new high at some point in time is almost 100% in my opinion. Not true for many other tech stocks, some of which will be going out of business within a few years.
I am most interested in the question of where the big rebounds will be in tech stocks. It is almost impossible to really figure this out ahead of time, but I am still thinking the beaten down fiber optic and communication chip stocks may be the ones. One of my arguments for this is that there is almost a consensus that these stocks will not rebound for a long time. Also, I think this "last mile" problem will go away sooner than we think. I think the biggest challenge may be educating people on it. If Joe Public realized the countless benefits of high speed internet access, and realized that some local monopolists are basically keeping it from happening, I think the problem would be addressed much faster. The government could really help out here, but I am guessing they will not do much until the public demands it. I think this is an area that Gore would have been better at addressing.
Regarding the fiber optic stocks, I am still keeping my eye on NEWP. They sell equipment to that business much like AMAT does to the chip business. I don't know how far the parallels go, but it interests me because it looks cheap to me here based on valuation and because they have a lot of cash on hand, which is good of course during such a downturn. I am thinking the "pay to play" factor will apply to NEWP as well as to AMAT, but I guess we will just have to wait and see. If anyone has any inputs on this stock, please let me know. My analysis is very simplistic at this point. Maybe there is something big that I am missing on this one.
John |
