Michael, thank you for the reply. Let me begin by asking you the question, why should the year 2K problem affect current PC sales? No PC currently on the shelves has any Y2K hangups. The only real problem seems to be with older computers that haven't been updated to correct the problem. I fail to see how the problem will have any impact on current PC sales, either for home or commercial use.
Let me also say that I have a different view about what Chairman Greenspan and the Fed are trying to accomplish. The current monetary policy is not being pursued to manipulate the level of asset prices. I do not think that the Fed and Greenspan in particular care at all about the level of asset prices. The Fed does care somewhat about the level of volatility in financial markets, but not I think about whether stocks are overvalued or undervalued. Now the level of growth in the economy is another matter, and the Fed is very concerned about that. Indeed, I think the current loose monetary policy is concerned with keeping positive levels of economic growth, and the Fed has done what it has with rates in an effort to (1) offset some of the damage to American companies as a result of the contractions in overseas economies, and also to (2) loosen up the banks a little and avoid what was a tightening credit situation. By the way, this will have the added benefit of lowering the cost of credit overseas (since so many foreign interest rates are tied to American rates, particularly in Asia) and that will help launch the recovery in those economies.
The reason that the Fed is currently able to increase reserves (lowering rates) without damaging the economy is that the markets truly believe that inflation is dead. This is reinforced by the world being awash in oil, and by all accounts energy pries are the truest barometer of inflation. The glut shows no sign if ending soon, and so inflation will remain dormant. Under this scenario (of no foreseeable inflation) the current monetary policy is in no way detrimental.
For this reason, in fact, I think on any pullback in good semiconductor companies, the astute investor should consider getting in. That is, I see in the next couple of quarters the possibility of an exciting sector rotation out of over-valued blue-chip consumer companies and into tech companies with truly exciting growth potential on a 3-5 year time horizon.
Michael, again, I think that timing is the key issue, and I admit to not fully understanding timing and share price dynamics. One cannot always be a contrarian, however, because if one is, the only stocks you ever own are the ones nobody wants, and you cannot make money that way. You do have to get into stocks with beaten down prices, but you also have to hold them while they become market darlings. If one has no idea of the market's current fickle persuasions, then one should stay out, as I am doing with the internet stocks. However, a lot of good tech companies were savagely beaten down in the last year, and while i think some of their current levels are a bit ahead of their fundamentals, the course of those fundamentals is improving and will continue to do so.
jess. |
