CBSI, CMND, COGIF, MAST seem to have recovered the recent Monica effect.
Basically, the whole market is ruled by two sentiments: fear and greed (aka bears and bulls). Is the glass half-full or half-empty? That is the question for every stock, every minute of a trading day.
No fundamentals, no technical analysis. These are just excuses or explanations for the "half-full" or half-empty" views - after the fact. When one's own money is at stake, we react emotionally, not logically. Fear rules the y2k sector.
"Revenues for all y2k companies will cease as of 12/31/1999" is an emotion. Will a solid business with growing earnings cease to exist after 12/31/1999? We lived through the "Arab oil embargo" and other oil crisis in the seventies. The experts told us that a gallon of gasoline would cost upwards of $5. That was about 25 years ago. Some even predicted that the world oil reserves would last 20 years at best. According to them, we should be out of oil in 1994. Did it happen? Instead of the predicted $60/barrel, the crude oil sells at less than $15/bbl, hurting many oil companies' and many countires' earnings. Iraq is not selling at its full production rate. Investment in synthetic fuels was dropped!
When greed was high, y2k stocks reached their highs (with wild expectations of "getting rich quick") without earnings but purely based on "announced contracts". Trouble around the world, even though their effect is small, raised the fear. When the fear is reinforced by uncertainties (impeachment, Russia, Japan Bank crisis, Mexico, Latin America, etc.) and announcements of decreased earnings by multi-nationals, the market tries to find a comfort level, say p/e of 20 instead of 25, and in the big name stocks. Hundreds of small cap stocks are selling at cash value. But mutual fund managers won't touch them! COGIF is growing at an impressive rate and has a tremendous future beyond year 2000 but its price does not reflect its future potential. The local government even subsidizes COGIF payroll for a few years! CMND is selling at cash value. The glass is "half-empty" - bear sentiment is high. Even when companies like IMRS, CBSI, SYNT, COGIF, etc. beat earnings estimates, it falls on deaf ears. When fear rules, even if companies announce their life-after y2k plans, it may not have an effect. It is a chicken-and-egg game with these fund managers who rely on analysts' reports or computer generated stock screens rather than their own analysis.
Fear has driven some people into cash or bonds. There are problems with this too. The ever-increasing number of mutual funds thrived on 401K and IRA contributions. The baby-boomers are at their high salary levels as they are close to retirement and are increasing savings for retirement as they are almost done with educating their kids. Credit card debt seems to be coming down, banks have restricted issuing cards and personal bankruptcies seems to be coming down. In the meanwhile, companies like GM are repurchasing their stock, retiring DOW stocks from the market. Furthermore, mega mergers of 30-50 billion like Chrysler-Benz, Travelers-Citicorp, Amoco-BP, Sun insurance, Compaq-DEC, etc. are taking stocks (equity) out of the market. What is left? What do these mutual funds do with their cash? Invest in money market at 3%? Is this the best option? For capital protection, it is. Why pay the mutual fund managers to invest in the money market? The hedge funds already devastated due to problems in foreign markets (Russia, China, India, Malaysia, Japan, Indonesia, etc.) Are we going to see an exodus from mutual funds? Will we see mutual funds start buying each other out? At a time of low interest rates, where all the cash will go? There are many small caps selling at cash value, thriving in their business, unaffected by the Asian or Russian flu. Just some opinions. Ram |
