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Technology Stocks : Intel Corporation (INTC)

INTC 35.94

-5.1%

3:59 PM EST

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To: TTOSBT who wrote (56277)	5/30/1998 11:17:00 PM
From: Paul Fiondella	Read Replies (3) of 186894

I truly don't know what the Fed will do. Here is my best understanding of the situation. They should have raised rates last year in the Fall to cool the asset inflation that has raised the market to historically unsupportable heights. They didn't do it --- they were too frightened by Asia to withdraw excess liquidity from the financial system. They have now created a situation where when they have to raise rates in the future it will cause a collapse in the stock market. I did not expect them to raise rates in May because they showed previously that they would do nothing to cool asset inflation and there were no other reasons to raise rates then. We have now had a recurrence in the Asian crisis and that precludes their raising rates for the foreseeable future. So all opportunities to raise rates to curb asset inflation relatively painlessly have been missed and no fundamental data points to anything like a traditionally good reason to raise rates now. Under what conditions then could they raise rates? Well first would be if they see any wage inflation. We are in the late stages of an economic expansion, a very weak one by the way, and as the economy slows down overindebted people will be hard pressed to make ends meet on their current salaries. There will be more wage pressure coming from teachers for example and other employees who unlike engineers cannot jump jobs to increase their salaries. It will not take more than one good salary increase from some segment of the work force for the Fed to start getting worried and with it the inflation bugs in the financial press. The second factor is the Trade deficit. As it grows it puts us in the 1987 crash situation where an attack on the currency forces the Fed to defend the currency with rate increases. I don't expect this type of pressure to really become a problem until Fall. The deficits have to mount in an atmosphere of industrial production slowdown. So I do not believe the Fed will tighten until the Fall at the earliest. If the wage pressure doesn't materialize and if profits decline as at Intel etc. then only the currency destabilization could force the Feds hand. ============= Short term I'm in the camp of another move back up in the market. This has been a worse than usual first quarter tech stock cycle but I think Win98 is a bit more of an exciting product than most people have imagined (after all it fixes a lot of bugs in Win95, it even defaults to TCP/IP). As I've said here before, the prudent investor should have bailed out of Intel long ago. The time to invest in Treasuries has passed. A value investor would try gold mutual funds which are incredibly low (but you have to be patient in holding them for a few years). The best bet is cash. Sure it will be hard to resist CPQ if it gets back to 22 or INTC if it dips to 65 or AMAT if it ends up in the mid 20's but the prudent investor should look back at the Intel cycle. I bought INTC early and got out too early. I would venture that the majority of people here got into INTC late (assuming you had to buy the stock i nthe open market unlike Paul who got his shares for pennies on the dollar as options for being a good Intel corporate lackey). It's much safer to buy on the way up and to refrain on the way down. I do not believe in giving in to the pressure out there on the little guy to dump all of his stocks now that they may have gone down. One should have a balanced portfolio. The big guys want a correction so they can buy back in. A person like my buddy Paul, with all of his assets in one stock and apparently nothing in the bank except Intel stock certificates is doing exactly what one shouldn't do. Please understand these are my OPINIONS and are not intended to influence your investment decisions, nor are they offered as investment advice.

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