Don, I found these notes interesting from RobBlack.com. First on the low VIX. Something that Gottfried has been correctly and patiently been trying to point out to me with his charts:
The impact of interest rates on equities has not been lost this year. Indeed, the bulk of the year-to-date returns in the S&P 500 occurred while long-term rates were declining during April through the first half of June. That said, there have been a few cases where the S&P 500 has advanced in the face of rising interest rates. Outside the bubble year of 1999, however, we cannot think of an episode in recent years where equities rose significantly at a time when interest rates were rising. Bottom line: rising rates limit the market’s potential. One interesting development during the past week was the seven-year low in the VIX index. Is this meaningful? Well, yes and no! It does warn that there is a great deal of complacency on the part of market participants at this time. However, the VIX has declined without consequence in the second and third years of a recovery before. In other words, it loses a little of its usefulness at this stage of the economic cycle. That is not to say that we do not heed the contrarian call coming from the VIX; rather, admit that its timing ability is somewhat diminished at this time. Look for a confirmation from the put-to-call ratio.Until then, be bullish, but less enthusiastic.
And of course some notes on the semiconductor stocks:
Semiconductors . . . Semiconductors sales are expected to increase 15.8 percent to $163 billion in 2003 and rise 19.4 percent in 2004 to $194.6 billion, trade group Semiconductor Industry Association (SIA) said. Beyond 2004, global chip sales are forecasted to rise 5.8 percent to $206.0 billion in 2005, and 6.6 percent to $219.6 billion in 2006. In the volatile memory chip DRAM market, the SIA is forecasting market growth of 7.9 percent to $16.5 billion in 2003 and 35.0 percent to $22.2 billion in 2004. In 2005, DRAMs are expected to decrease 20.0 percent to $17.8 billion. In 2006, this market will rebound 30.0 percent to $23.1 billion in sales.
ATI Tech and Samsung collaborate on next-gen digital TV products. This new generation of Samsung digital TV's are to be powered by ATI's XILLEON and NXTWAVE chips.
Expect Analog Devices to report solid results for its October-ending 4th quarter for 2003 with revenues at the high end of the guidance range of 3-5% sequential growth. Analysts are now expecting $547 million in revenues and EPS of $0.24 for the October Quarter. Bookings for Analog Devices were strong during the quarter driven by broad-based demand from nearly all vertical markets for both its DSP and analog products. estimate that the company’s book-to-bill ratio is likely to be above parity and guidance likely to call for revenues to grow another 5% sequentially in the January Quarter, which is stronger than consensus as well as the typical January Quarter for the company. Analysts are raising estimates. 2004 estimate is now $1.23 up from $1.08, and introducing 2005 of $1.50. The stock is likely to act well near term due to strong bookings momentum. However, the stock is already trading at 31x 2005 EPS estimate, which could limit upside longer term. Analysts are bullish on prospects for a cyclical expansion in the semiconductor industry. However, stocks of companies with more commodity exposure—which could see price firming in addition to margin expansion from increased manufacturing volumes—are likely to outperform the proprietary analog stocks.
robblack.com |
