>> Every conference call of a semi company I've listened to, for the last 2 quarters, has said, "the bottom is in, we are now seeing steadily improving sales, profits, and margins." <<
Actually, they have been saying that for the last 10 quarters and every quarter's earnings is lower than the one before it. That is like saying Abbey Joseph Cohen said to buy so we must buy yet the market has dropped within three days of her appearance on CNBC every time. The conference calls and earnings headlines say one thing while the numbers in the actual 10K and 10Qs have been singing a different tune. Business is horrible and still dropping yet prices for these stocks is like they will return to 1999 output and pricing power. It ain't going to happen.
Valuations are still obscene, there is still no pricing power. Businesses are still not investing or borrowing money according to Fed data, Insiders are still breaking records for insider selling vs little to no buying of their own stock and on and on and on.
The new St Louis Fed report was released last night for June and it shows that the near record low inventory levels were finally partially repleneshed. That means that they actually had to have called back some workers, fire up the factories and produce some products yet there s no signs in the report that any of that was actually sold so they are now clear to fire everyone again and sell off the shelves of the warehouse for another few months which should tick data down in the next few quarters until inventory levels drop back down.
In actuality, I think the economy is fine and bottoming. Anyone with a brain cell in their head however, to include Greenspan has said that the bounce won't be big, nor anywhere near the types of recoveries we had coming out of past recessions since there was never a slow down in consumer spending.
So all in all, yes, the eocnomy could bottom and we could get back to more normal GDP if the inventory build up is met with some demand. However, stock prices are pricing in unrealistic growth and until that is corrected, I wouldn't be looking for too much in price appreciation.
The small and mid caps in brick and mortar companies was a neglected area during the bubble and there were tons of values to be had. Those stocks were finally "discovered" once the tech bust was clearly in progress. However now even those stocks have been brought up to fair value so there are very few bargains left.
Personally I am looking at UTEs and foreign markets BWDIK.
The .net Fed Report. ( warning if you don't have broadband, this is a 3.6 Meg PDF file and it even takes a while on Cable/DSL )
stls.frb.org
Good Luck,
Lee |
