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Politics : Idea Of The Day
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To: IQBAL LATIF who wrote (15944)12/27/1997 2:37:00 PM
From: Judy  Read Replies (1) of 50167
 
Ike, the issue is not whether one should ditch the semis but at which point should one go long again. The Forbes article presents information already known but which the market took time to come to grips with. Two salient points to keep in mind relative to this sector and this market.

First the Asian currency crisis should stablize in a couple of months unless these countries totally disregard the advice offerred by the IMF. Then businesses will try to plan for recovery after currency stability has been achieved ... but they cannot commit funds for growth and purchases until their own internal picture clears. Just as contingency planning now is taking multiple iterations and each plan gloomier than the previous, I'd expect recovery plans to evolve thru multiple iterations and each succeeding plan being more optimistic than the preceeding one. And until the series of recovery plans show sequential levels of increasing optimism, tech stocks will be in the doldrums.

Second, the semis and semi equipment makers are cyclic industries that started their up cycle last summer. These stocks move in legs and completed two of three legs prior to being derailed by the Asian situation ... the third leg would have had a 4-6 month run. Given that order may not be restored to the Asian economies for many months, it is possible that the up part of this cycle may be over and this sector could enter the down/dormant part of the cycle. Cycle length for the sector is about 3 1/2 to 4 years. There is no new paradigm.
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