As for the valuation issue, Hickey conceded they are "not as insane as in March 2000" but remain outrageous vs. historic levels. The Nasdaq 100 is currently trading at 57.5 times estimated 2002 results vs. its P/E peak of 189 in 2000, according to Baseline. (If those estimates prove overly optimistic, current P/Es are higher still.)
Regarding another argument -- that mutual funds have become underweight tech after disgorging them for much of this year -- Hickey noted tech's weighting in the S&P 500 is 14%, while its contribution to GDP is about 7%, and industry profits are negligible. The notion that fund managers "have to pay tw to three times historical valuations because [they're] underweight tech relative to where [they] used to be" is the lamest of all the rally rationales, he said.
He also dismissed seasonal factors, noting that consumer confidence and spending is starting to roll over. Furthermore, he noted that fourth-quarter comparisons will be tougher for many tech names because of the heavy government IT spending and so-called patriotic buying after 9/11.
"These rallies prove we ain't at a bottom [because] there's more fear of missing rallies" than of additional losses, Hickey continued, recalling the same patterns were evident in the 1930s, when some of history's biggest percentage gains occurred. "These guys will not give up, and it just drags this thing out longer. It just festers and worsens. This is the nature of bear markets."
Hickey's biggest lament is that the latest rally extends the time when he can buy tech names. While recently increasing short positions in Intel, Dell, Applied Materials (AMAT:Nasdaq - news - commentary) and CDW Computer Centers (CDWC:Nasdaq - news - commentary) , Hickey said the vast majority of his personal holdings are in cash and cash equivalents.
He recommends individual investors do the same, noting that short-selling can be hazardous to portfolios, and that its increasing popularity contributes to "stampedes" to cover, as the past two weeks have shown.
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