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Technology Stocks : Semi Equipment Analysis

SOXX 301.15

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4:00 PM EST

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To: cluka who wrote (48253)	6/16/2010 2:58:07 AM
From: marc ultra	2 Recommendations Read Replies (1) of 95656

< Do you understand that cars are selling at 10-11 mil unit pace when they were at 15 mil. Do you understand that home stats are at 500K when they were at 2.3 mil peak.> So I guess the Nasdaq is a "new normal" because it was 5000 a decade ago and it's still sitting only a bit over 2000 a decade later. That's not a new normal, it's what happens every time a bubble bursts. I haven't been in a flower shop lately but I kind of doubt they talk about a new normal in tulip bulbs. Bubbles burst, whatever the bubble was in crashes and you get a reversion to some mean over time that may be a little different than what is was before the bubble and crash. When car sales were pushing into the high teens it was unusually high and wasn't sustainable so with the recession and recovery we're running at a somewhat lower level. But the predictions a year or so ago were for people not to buy cars and for home prices to continue to tumble. As to the economy we had people like Nouriel Roubini talking about a multi-year nuclear winter. Auto sales are at a healthy pace again, the housing market has bottomed or is bottoming in many of the hardest hit areas and mortgage rates under 5% with home prices down a lot are going to spur demand because the affordability is somewhere near an all time high. Many governments including the US have high debts and deficits and monetary and fiscal stimulus are going to be slowly withdrawn. So trend growth will probably be a bit lower going forward then it otherwise would have been. Also the next downturn may come a little sooner than would otherwise be the case as fiscal and monetary stimulus gets removed and changes from a tailwind to a headwind. It's not some historic permanent paradigm change that I need to give a fancy name to. I think I had this figured better than most as I wrote in the following post on the Investor Village ISIS board where I mainly posted and said the week after the March '09 bottom when everyone was putting up charts showing how it was going to be like another great depression and I posted the following: Msg 12821 of 17839 at 3/18/2009 2:47:08 PM by marcpw OT: brief market comment. 1. The closing low was set on 3/9 at S&P 676. The intraday was the day before at a memorable 666. 2. I expect the total gain from the new cyclical bull off this bottom to be 50% or greater in the S&P before it's over and could potentially reach a triple digit gain as the 2002-2007 bull did particularly if you include dividends. 3. Of EXTREME IMPORTANCE is to realize it is likely but certainly not definite that this new low will again end up being tested. If that should happen that will likely be the buying opportunity of the century. While there may be a pullback here at some point since we're way over-bought already, I continue to stress the surprises will mostly be to the upside and most will be left well behind before they try to jump on board at higher levels. 4. The Fed move today makes it even more undesirable to have your money in cash and cash equivalents. Institutions and retail alike are going to feel foolish holding their money at a zero or below real rate of return. After feeling so relieved and smart that they may have had some of their money in cash during the bear, that will quickly turn to disgust and feelings of stupidity as the market moves up quickly. They will be sitting in cash at a time when the Fed and most other forces make sure it's a totally unrewarding place to be. 5. It is crucial not to be fooled by those blabbing about how valuations are still high because earnings are plunging. These trough earnings we're going to be seeing will prove a meaningless artifact as the economy begins to stabilize and improve as we move into the second half and beyond and the market starts to continuously discount that recovery.

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