Yes, all that scared money on the sidelines is bullish. When it gets less scared (that is, as stocks go up), it will flow into risky speculations like tech stocks today. Given current macro conditions, and the vast uncertainty in any 12M forward EPS estimates, and valuations at Nas 2000, I firmly believe that going long any tech stock is just a Greater Fool game. Any further increase in stock prices puts nothing but more air in it. I'm riding this rally, I haven't sold it as vigorously as I sold the January and April rallies, but I think Nas 2000 is already pricing in the most optimistic possible next-12-months.
In the upturn from recessions, stocks go up before earnings go up. That means, in the early stages of a new Bull Market, stock price increases are done entirely by PE increases. Only later does the EPS catch up. That's what's happened in past recessions, and that pattern makes sense. But, here's the huge caveat: if we've seen the bottom for this recession, then we bottomed at valuations higher than the peaks of the average Bull Market. There really isn't any room for PEs to go up, because they never went down enough. Even if you use PEs based on 2003 earnings guesses, and make the most optimistic assumptions to make those guesses, you still don't come up with reasonable PEs for a market trough now.
No, I didn't mean 50% from today. I meant 50% from the 1387 bottom, which means to 2080 Nasdaq.
I think G. may have something there. When I sold those covered calls yesterday, I was depending on 40 as resistance. I'm less sure of that today. If we hit 38, I may buy back my calls, and wait till the chart pattern looks clearer to me. I haven't decided. My longer-term pessimism doesn't mean AMAT can't zoom to 50 next week, just based on momentum and hope. |
