John,
Mid to high teens PE in technology means, for one, the internet boom is over. I do not mean the stock boom, I mean the business boom. Imagine, for example, AOL with a PE of 15, which means a equity price < 10. That will drive away every single venture capitalist out of the internet arena. But, at the same time, the business is too lucrative, so somebody is going to step in, if not speculators then owener-managers via LBOs. Mutual funds have to be crazy to force things in this direction.
Next, the non-tech internet: Let's consider the sectors individually. S/W is almost there already. Networking is too closely linked to the internet. Semiconductors just have to have a great future if S.E. is coming back as it is inconceivable that those countries will buy in abundance from CAT and not AMAT given their traditional business strength and focus areas. H/W, well that's a multi tier sector now. If DELL continues to grow in the 40's and 50's and gets cut down to a PE of 15 (price of 12) that's unsutainable unless 5 days have completely changed the market's attitude towards growth stocks in general.
IMO, this is more program driven than anything. Now, the DOW sellers have geared up too (saw that nearly straight line decline around 1 and again later). So where is the money going to go? Bonds are out if inflation's around the corner. Foreign markets are too small to absorb the retirement investment that US produces on a semi-monthly basis. So, what does that leave us?
-BGR. |
