More fodder for the tomato throwing crowd:
I think what is behind this is a massive allocation shift and huge rally in junk bonds. This is NOT insanity. There is very rational academic debate whether the network is maxed out and whether the telecoms actually MUST buy equipment. It surrounds studies on peak useage. Meanwhile, the telecoms are restructuring at light speed. If they have to buy, they will be able to now. The idea is that they have cut spending much too far, and fostered the idea that it was ok, they didn't need to buy and either did the competition and it may be "the big lie."
I was an early QCOM investor and held thru thick and thin. I am well aware that competing companies can and will lie about there positions. It is indeed possible the telecoms know they have to ramp spending, and are lying about it. Wcom just raised trates by the way, fwiw.
There are very bright people on every side of this so lets say we really can't know. Sure, you can have a hard and fast opinion and it and convince yourself you are right, which by the way is almost always an error if its followed by a huge bet. Junk bonds collapsed in early May, and have now rallied back over their Sept peaks. The next target is the about 5 weeks pre-Wcom level, which was when the nasdaq was around 1800. Bond investors, even junk bond investors, are much more careful than equity investors. The massive rally directed at telecom bonds is VERY meaningful
My point is what I was worried about when I read AJ cut loose Thursday night, saying everyone who is long is an idiot.There is some fundamental reason for this rally. Lets not forget that speculators can get hold of this thing and carry it for months or years on an idea, and this is what makes a market. The shorts feed it by covering into it. So even if you think this is insanity, markets can and will do that too, rally for mechanical reasons for months or years. |
