MB and gang:
Have been on the road a great deal this Spring, so have had little opportunity to participate on the thread. What I am seeing is not very healthy,....that being a continuing AND ACCELERATING deterioration in the PC sales environment. To put it in a nutshell, retailers are giving away the store to make a sale, and few are making a decent living from the proceeds. The damage that is just beginning to show up in reported results will continue unabated.
As noted in earlier postings, the Japanese continue to strip savings from their native banks and park far too much of it in American bank branches. Close to half of those funds are quickly dumped into our markets, which is providing an historic "add-on" to an already handsome money flow resulting from AG's manic printing. Be that as it may, the free-fall aspect of semi and PC related earnings is beginning to overwhelm sentiment and this will only get worse. Several of the tech darlings (such as Intel) are going to issue very nasty (and totally unexpected) warnings that will shred the New York-based analysts' predictions of a rebound in the second half. This second half rebound theory is the best fairy tale I've heard in years and is total nonsense. The hope that it has engendered has created a yawning chasm between expectations (as evidenced in this Spring's stock price run-up) and reality (as evidenced increasingly by reported results). The up-coming "warnings" season will be early, and ugly. It will likely end the divergence in spite of the excessive money flows. For this observer, while significant powder will still be maintained in a dry place, it is (finally) time to increase short exposure to the more seriously (mortally) wounded inhabitants of the zoo.
Intel is in serious trouble. P2 inventories continue to rise, the K6 continues to kick Pentium fannies, and the Ceph is a stillborn disaster. No wonder Andy took a well-timed exit, and no wonder insider selling is endemic.
We earlier suggested that MU would experience an historic loss this quarter. This will prove an understatement. The company is going to knock current analysts' loss estimates (last seen at minus $0.38 and falling) into the next galaxy. While I would never have believed it possible, 16 Mbit pricing continues to fall relentlessly (MU is currently asking $1.65 according to an impeccable source) and their cost (all-up) is still more than double that figure. At 64 Mbit, yields are dreadful. Someone had better have a big cheque book and a philanthropic attitude if this company is to avoid chapter 11 within two or three quarters. This one will continue to slide in spite of the big short position.
GTW will miss this quarter, as they've run through most of the benefits provided by the big writedown of Q3. Nice to be able to sell inventory that has a nil value on your balance sheet, but a problem when that inventory is gone and reality intrudes. Gunshot wounds to the chest.
The BMX (box-builders' index) is worth exploring. I like it because it contains all of my favourites, and does NOT include MSFT (which has tons of deferred revenue and profits squirreled away for future rainy days). The premiums are still a bit exorbitant, but the leverage provided is excellent, and the timing of its arrival couldn't be better.
Best, Earlie |
