Tito and thread, some bear and bull arguments:
Bear argument from guest on WSW show last night, technology strategist, Steven M, (for those that missed it, this is my attempt to summarize it):
He says three things combined to make a once in a lifetime event in the market for tech stocks: Y2K, the mad rush to the internet, and the Euro. Says Capex will be down for about two more years, and would underweight technology now as a result, also given the run we had off the bottom. He said he would leery of semiconductors, many trade at 40-50 times next years earnings and have had big runs already. He thinks communications is the big area in technology now, but will take about 2 years for that to take off. Likes BEAS, but not now it seems, later on some time. Had some favorable comments about CHKP, SFA, and QCOM, but I think he means to consider these later on. Does not think technology will lead the the market out of this. Thinks wireless will be big eventually, but is still immature at this time.
Some comments, mostly bullish:
This is interesting, too bad, however, that none of these experts (it seems) could understand this "once in a lifetime" thing 18 months ago. All I recall hearing back then was calls for Nasdaq 6,000, the argument that techs are not affected by interest rates, the "new economy" vs old economy, the demographics argument, etc. And before that we were told the world was going to end because of a Y2K meltdown. One thing I think we all need to remember is that hardly anyone has a decent track record at predicting the market. I think there are a mix of bullish/bearish factors right now, and I don't see how it is so cut and dried that one can predict how long capex will be down. Last September most analysts thought fiber optic stocks were going to the moon, they were dead wrong.
Hindsight is 20/20, and I wonder what they will be writing about this period, looking back in a couple of years. No question that Sept 11 has changed things for tech stocks. I see it mostly as bullish. Again, maybe I am missing something, but it seems like technology can address a lot of the problems we have now, and should benefit overall. For one example, consider the proposed idea of a government intranet. One problem is trying to forecast what the government is going to do, and whether or not they do what is smart. The war against terrorism will be a big factor. We are in uncharted territory. The USA does not have much experience at fighting this kind of war, plus at this moment there is evidence that it is not going well for us, that we have been making some errors in judgement. Also, since religion is involved, this whole thing may be harder to address than we realize. The Gulf war was a totally different situation. I remain bullish, but could switch sides sometime soon. I am still trying to sort this out, and compare it with previous difficulties the USA has faced. I remain somewhat hopeful that the good people of this world are drawn together as a result of this, people of all races and religions. Difficulties often set the stage for a new period of prosperity, once they are addressed properly. I am thinking the way we handle this is tremendously important. So far I think our government is doing a good job overall, but it is still early in the game of course.
There are some good bear and bull arguments in todays's Barrons, worth taking a look at, in my opinion.
Back in 98 buying the dip in technology was certainly the thing to do. I hope this applies here, but I do agree with the above argument that those three factors (Y2K, internet, and Euro) make this situation a bit different than we had in 98. Also, of course, Sept 11 makes it different. However the huge decline in prices certainly makes this situation interesting (e.g. JNPR was a "strong buy" at 240, but it should be sold here at 25 because of the recent sharp rebound? - I am wondering about this one right now, will probably hold, added to it at about 15 a few weeks ago). That then leads to the valuation argument for tech stocks in general, which I can see both ways (historically expensive now, or cheap based on a robust recovery next year and future earnings).
Short term trading: I sold some NEWP yesterday and bought TLAB with the proceeds.
John |
