John, re: the market:
I would agree, this is still a trader's market. But I'm a bit, just a bit, more willing to hold my stock positions longer, compared to my stance 6 or 12 months ago. The reason is: business conditions in tech seem to have hit bottom.
After that statement, however, I have to list a series of caveats:
1. this doesn't apply to all sectors, telecom still hasn't hit bottom
2. another "exogenous shock" could change the picture.
3. valuations are too high, and will put a cap on rallies
4. we haven't seen the "cleansing fire" that happens in most recessions: consumers never slowed spending, housing prices never came down, and, most of all, debt levels haven't come down. So, the Bubble only partially deflated.
My stance, as of today (and I may radically change this position, tomorrow, if conditions warrant it, being nimble is required, if anyone is to PreserveCapital in this market):
I'm expecting the Nas to set another intermediate-term bottom, in the 1600s, sometime in the next 1-2 months.
Then, I'm guessing we get another intermediate-term rally, which peaks sometime this year, somewhere in the 2100-2300 range (between the 1/02 and 5/01 highs). So, we'll get a modestly higher high, and a modestly higher low. And then, we go in an extended volatile sideways pattern. A trader's market. Valuations kill rallies, liquidity and slowly improving fundamentals put a floor under stocks. My guess is, we stay in the 1600-2300 range, through 2003.
I would agree, chasing the "hot sector" being touted by the CNBC gurus, is a losing game. I made a housing stock my largest holding, in the summer of 2000. Sold it all in the second half of 2001, for an 80% gain. I'd be shorting it now, if I could find shares to short. |
