Jess, Good note. Let me get to your points one by one. 1. Somebody does have a model for valuing internet stocks. I am one of several who do. They are not metaphysical creations but real cos. with stock who have to try to earn money some day. Some will. Most never will, as the net is too price competitive. Of course, the fact that they are overpriced has not been demonstrated with certainty at a manic top. But it will be. Just as it has with every other mania in history. Nobody ever believes the tulips will crash until they do, but you can still build a model that gives you a ballpark figure of where tulips should be priced.
2. Yes, the start of a secular decline in profits at semiconductor cos. has been mistaken for a cyclical downturn by many who do not follow the chip cos. and chip equipment cos. by reading all the news. For example, many are calling this minor blip in book to bill to a level that is still a disaster, as a great turn instead of a seasonal blip caused by the greatest overbuild of pcs we have ever seen. This will become clear to all sometime in the first quarter. It should be clear to all after the Ingram, Inacom and MUEI reports, or even after the Dell report, but so far the bulls refuse to let reality interfere with their fantasy that the worst is over. We are about half way through the cyclical downturn and have barely started the secular downturn. The pc related area, which is pretty much everything in technology other than biotech or instruments, is going into another one of its many swoons since the 1950s due to the fact that the new stuff isn't very new or very interesting.
3. If you play trading sardines like tech stocks, please think about playing options and using a money management system like 90/10. See my article, "Tech Stock Speculating While Wearing a Belt and Suspenders," techstocks.com. Remember the old saying that all tech stocks eventually go to $4 a share. Not all of them do, of course. Many disappear completely and many go to a bottom a bit above $4. And a handful make it until the next upswing. The problem is, the majority of them going to $4 is a good way to place your bets. You can make huge money on the upside, but a good options program keeps you from losing it on the downside.
Best Wishes,
MB |
