Mary:
As much as I love tech companies, and revel in the tech world, I'm still a fundamentalist. In a mania, that is truly a negative for a while, as you miss the steepest part of the parabolic rise (the last part) out of fear and respect for the mirror image that must follow.
Markets usually discount the future. This one ceased doing that many moons ago. Under this scenario, good research that provides some useful understanding of what may happen over the following year or so becomes totally irrelevant, as the market is driven by momentum players and gamblers.
For me, one fact is certain and that is the continuing deterioration of virtually all the numbers, both here and abroad. If I noted even some elements of this hodge-podge improving, it might be cause for a revision of opinion, but the slide just appears to be steepening.
There comes a point I think, where a complete wipe-out becomes inevitable,...a sort of point of no return. I think of it in terms of a car approaching a tight turn,....there is a point beyond which even a skilled driver has run out of room and he becomes a projectile obeying irrefutable laws of physics.
If the deflationary wave could have somehow been arrested at an earlier point, perhaps we might have been able to avoid its impact. Now, it appears to me to be too late.
In normal markets, shorting is an appropriate response to a belief that a company or industry is commencing harder times, but not in a mania. The use of put options, especially deep-out-of-the-money puts makes good sense to me.
Intel's stock is currently priced for perfection. If less than that occurs, the stock price ought to fall. Intel's problems (new competition, no longer a monopoly, excess product in the spot markets, slowing end product demand, Rambus, etc.) are not shrinking, they are growing. To me, it's simple arithmetic. Say 90.0 million computers are sold in 1999 (which I believe will prove high, given the deflationary wave). AMD is now producing over 5.0 million micros per quarter,and growing, so figure they sell into 20 million boxes this year. The other micro producers will also sneak into 3-5 million boxes, leaving Intel with at best, 65 million slots. Intel produced close to half that requirement in Q4 alone, so something has got to give. I think it is margins, as Intel is being forced to fight on price. Yes, there will be improvements based on yield, but the other guys are no slouches. Unfortunately, micros are a commodity now, and there is a potent over-supply that will just get worse. At current stock prices, INTC cannot afford any problems at all without seeing a big sell-off. The problems are emerging.
Best, Earlie |
