Jtech/all,
Here's a radical theory for you.
Wall Street is getting it wrong again. In '96 they had everyone to bail the heck out... disaster was pending in the semi-equips, only to be laughed at by the market, because out of the blue (no, it was really out of Taiwan) came... Orders. So, in large part, Taiwan saved the day in 96/97, and made Wall Street look silly for having everyone out of the stocks.
Now, they (WS) are determined to not make this mistake again. They are saying, "we will not be tricked this time... Clients, hang in there." In my view, this is similar to: the Fed fighting the last war and a phenomenon with all human beings. We are constantly on the look-out for the last problem, even if the current problem is entirely different.
Here's where I get to the radical part... this is the big one... the very one they expected in '96, but didn't get.
Reasons why this is the "big one": (1) Overcapacity is much more severe this round and has found its way into all chip categories. In '96, it was only a DRAM problem... not so, this time, it's in microprocessors, the foundry arena, memory... if there's an area that seems to be showing slight strength, it's SRAM; they'll still losing money (mostly) and I have no plans to buy SRAMers, at least no immediate plans. (2) The recession in Japan is oozing its way into other places. Yardeni has upped his probability of a severe global recession in '99 (including the U.S.) from 60% to 70%. This prognostication was in Barron's, dated 06 Jul 98 and his basis for this is not Y2K problems alone. (3) There is a lull in the PC upgrade cycle... the PCs out there right now will do what almost anyone cares to do. A large percentage of the people who already own PC(s) may feel no compelling need to upgrade, until the next killer app comes along... and I haven't seen it yet.
Now, here's the $1M question... Will this downturn drag on long enough (and painful enough) to ultimately root out the WS hangers-ons? And will we be waiting so long this time that the opportunity costs could get extremely high?
For the record, my own personal biases are (a) I believe in "history", and that it tends to repeat itself (b) that the PE on the S&P 500 being 30.01 (from Barron's, 20 Jul 98) is high and those market "strategists" who have recently upped their percentage allocation to stocks, e.g. Lehman's Applegate, are getting caught up in the mania and IMO, that's not smart and more importantly not likely to be a money-making move. (c) Somebody help me out with this one, please. What I see in today's market is: Valuations don't matter, buy "great" companies... who cares about the price tag/valuation? I'm as much for buying "great companies" as the next person, but tossing valuations out the window seems wreckless, strange and inappropriate for people who are supposed to be trained in finance. A person hasn't needed any valuation skills in the US market in the past 6 months (at least). In fact, if you had valuation skills and used them at all, they held you back. Something seems to be wrong with this picture; does anyone else see it this way?
Re: Concessions to the bulls on the semi-equips, mostly to Jtechkid, as he has presented the best bull argument I've heard to date.
I agree fully with your comment that money is made in the surprises area, and that much gloom has been priced into the semi-equips, especially the less "famous" ones (ones other than AMAT and NVLS). I think the cheap PCs will have a great Christmas, but I have a hard time translating this to a meaningful upturn in orders for the semi-equips. Jtech or anyone: Here's a question for you: how do you explain the action in SLB today? Okay, we've had gloom and doom in the oil services stocks for at least 6-8 months. $58/sh stocks (in '97) are now selling for $14/sh in the oil services group. But after leveling out for awhile, they appear to be moving down AGAIN. Why can't this same thing happen in the semi-equips? Lastly, do you need to be a totally insane person to make money in this market? Is there a book that explains this insanity? I thought I'd read nearly all the books ever written on the markets, and I don't get it. Please send help <g>.
Regards and this is just a theory, (we know there are no definite answers, at least, not until it's history and therefore, too late)
Teri
PS. I am not trying to scare anyone with these comments and am posting them here for the sake of discussion and feedback. |
