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Technology Stocks : Apple Inc.

AAPL 273.05

-0.2%

3:59 PM EST

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To: Marc Newman who wrote (17398)	8/29/1998 4:39:00 PM
From: Richard Habib	Read Replies (1) of 213173

Marc, I did catch Jerry Favors but I got a different vibe off that last remark. I think he wanted to explain that that was not the most likely scenario but he was pressed and out of time. I got the impression he was not comfortable with that kind of prediction, without a chance to explain in this volatile environment. Doesn't he have an oscillator based on astrology also??? Sure your right that we get the benefit of cheaper components and materials. The other side of the coin is our exports become too expensive to sell overseas because they have much less buying power and their exports to us displace some of our goods. We're seeing that now. Of course a wild card is the pain that those cheap commodities prices cause overseas and how the people react. I think there are some macro questions here. Some are overarching questions of capitalism, haves and have nots, Americas role in a world where we garner most of the benefit of the world economy, etc. But right now the central question for us is - is this a correction which would mean Apple is now undervalued or is this a loss in positive sentiment for the market as a whole which would drive PEs down to more reasonable levels which means Apple as well as all the other stocks driven down are fully valued at the price they end up at. That means Dell and the other high flyers have to come way down. I don't have the answer obviously. For me it was obvious the market was on the verge of a serious decline and I've been mostly cash since Jan and since the last couple of weeks I've been buying protective puts. Unfortunately, I also bought Apple calls at 39 because while I was sure of a market decline - who knew the timing. I sold my puts on Thursday at the close so I felt some pain on Friday. Also my neighbor is a Mac consultant and he asked me to invest money for him which I did on Thursday PM - oops. I feel worse about that. The market is driven by demand for stocks so the question is what would cause the baby boomers and my generation to decide stocks were no longer safe. Previously, people invested in savings bonds and the like not stocks. Is it possible we could go back there? That would be the worst scenario. Retail investors discovered stocks really just a little while ago in the scheme of things. What if retail investors now discover the bond market. There are some indications that that is happening. That would create much less demand for stocks hence low PEs. Second scenario is people just become afraid and keep their money out for a year or two and we get a much weaker market trading sideways for a while. Third is just the typical correction we have had and this sharp downturn is followed by a sharp rally that takes us to new highs. The sentiment among a lot of tech investors seems to be the latter and that of course worries a contrarian like me. The market tends to fool you and it's lulled us into thinking we have a buy opportunity once again - maybe not this time. Rich

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