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Politics : Formerly About Applied Materials

AMAT 225.18

-1.5%

Nov 18 3:59 PM EST

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To: Jacob Snyder who wrote (54327)	10/19/2001 5:54:20 PM
From: Sam Citron	Read Replies (2) of 70976

OT- Market Thoughts We are in the spookiest month when traditionally it has paid to go long the stock market, especially tech stocks. Unless we retest the lows this coming week, it appears likely that the traditional October low was pushed forward into September by the events of 9/11. The queation is: Is it time to climb aboard this rally? I don't think so. The market will have a particularly steep wall of worry to climb this winter. 1 Valuations are still high by historical standards. 2 The war in Afghanistan is progressing to a more dangerous phase as US willingness to incur casualties appears increasingly likely to be tested by Taliban determination to use ugly Somali tactics wrt captured soldiers. 3 Economic news (albeit a lagging indicator) will get gloomier over the winter. 4 Christmas sales will probably be disappointing as sentiment worsens. 5 The macroeconomic risks appear to be mounting to the downside as we must begin to cope with the mounting expenses of this unusual war. 6 To the extent that victory in this war is measured not by the capture of one man, but by an increase in perceived safety, terrorism may have only just scratched the surface of the potential catalog of horrors. The potential threat of bioterrorism has only just been actualized. So far the market has taken it in stride (at least in comparison to the WTC destruction). But if the anthrax threat evolves into something contagious, market sentiment may become truly lethal. With this in mind, I am continuing to shed stocks and raise cash. Today I sold Petsmart (one of my last remaining defensive plays in the pet sector, since Nestle is buying Ralston Purina) and sold short some Best Buy. My cash position is now about 70%. I suspect we are in the fourth inning of a bear market that will last another 2 years at least. I expect trading volume to dry up as the market gradually works lower in a saw tooth pattern and investors gradually lose their taste for stocks. I am not convinced that it is yet time to accumulate good companies on weakness. The pendulum has not yet swung far enough to the fear side to look attractive to me. Sam

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