So let us examine the events of the past couple of weeks.
1. Everyone in the stock market is happy making money. The economy is great. No inflation, national deficite is declining at the speed of light, Productivity is increasing (thanks to the technology) and a saving/investing mentality seems to rule among the employed population (which is about 96% of the employable force. The highest employment rate in many years).
2. Suddenly half way around the world an insignificant economy (in size compare to the US economy) namely Hong Kong starts to decline at the speed of light! As a result all of a sudden everything stated earlier above becomes absolutely wrong! The economy no longer seems to be doing so great, fear of inflation rises, productivity goes down, and the saving/investment mentality among the employed population suddenly is replaced by a spend, spend, and spend till drop dead mentality! As a result the stock market declines by as much as 13-14% from its highs and on the way down the entire tech sector is beaten badly as if we are going back to the stone age! In short a mini-market crash takes place! Suddenly all the jack-ass analysts such as Jimmy Rogers, and Michael Metz who have been saying the sky would be falling on the US markets since the DOW of 3500 get a huge smile on their face!
3. The tech sector continues to decline dramatically. Networking companies that prior to the Hong Kong situation were viewed to be the force behind the new revolution in technology resulting in unimaginable productivity, all of a sudden become the worst things that could have ever happened to the man kind! It seems as if US tech companies only sell to the Hong Kong market! First Ascend is taken down and practically executed and shot in the head over and over and over and over and over with absolutely no mercy in sight! And then 3COM is taken out and shot in the head over and over (and we are about to see if there is any mercy for 3COM yet)! In addition to netwworking companies, practically every single high tech company is executed over and over and over! The so called analysts (or the talking heads) who only 2 weeks earlier were advocating their extreme exuberance over the market and the US economy (and the tech sector) all of a sudden change their mind and re-define the word pessimism!
4. The market however gains all it had lost in a manner of 3 days before another decline in the insignificant Hong Kong market causes another sell off. On top of that the unemployment report comes out and indicates that people are now more prosperous than they have ever been in almost 29 years! And yet, the market collapses (especially the high tech sector, and especially the networking companies - and especially ASND, and COMS)!!!! It is as if the more prosperous Americans become the likely hood of companies such as 3COM and Ascend going out of business become stronger and stronger!
So what can possibly be concluded from the above set of facts/events/illusions, etc.?! the answer is absolutely nothing but the fact that fear and greed are 2 fundamental emotions that drive the markets, and logical thinking does not seem to exist! And between fear and greed, fear is the strongest emotion eventhough it is short lived, while greed lasts much much longer despite the fact that it is wekaer than fear! Logical thinking on the other hand, if one can truly possess (like Mr. Spock does), can gain one many many many financial gains!
In the final analysis it is always the underlying earnings and revenue growth of a company that will drive the stock price. Logical thinking dictates that nothing, absolutely nothing has changed with the fundamentals. Let the idiotic sell off of companies such as COMS, ASND, SUNW, LSI, INTC, etc. take place. Logical thinking says: take advantage of market's fears in order to gain from its greed later!
Regards,
Addi Jamshidi |
