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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: michael97123 who wrote (44743)	5/12/2000 4:48:00 PM
From: Jacob Snyder	Respond to of 74651

OT: re June 2000 end to rate hikes: 1. That is only a realistic scenario if the Fed raises by 1/2% at each of the next two meetings and we see definite slowing in the economy by July. The Fed's track record is incrementalism. They do 1/4% at a time, over and over, rather than big abrupt moves. But past patterns don't always predict future events. 2. If the above happens, market sentiment will crater this summer. The momentum guessers will stampede to cash, all at once. 20% (from current levels) further down on the Nasdaq, at a bare minimum. An aggressively raising Fed, combined with a slowing economy, and inflation red flags, will be death for high-PE stocks (where investors are paying a lot for future earnings). Anyone who thinks growth stocks are immune to interest rate changes, is in for a nasty surprise. Again: they'll rebound the most after the bottom, but participate fully in the downmove. 3. If that happens, I'll be aggressively buying out-of-the-money 2003 LEAPs in the highest-quality big-cap techs, when they are 40-60% off their highs. The companies that are certain to be survivors. AMAT, INTC, TXN, MSFT, SAP, ORCL, WCOM, EMC, CSCO is my shopping list. With the furthest expiration date, I'll be safe, even if the Fed screws up, and we get a recession in 2001. 4. Remember what I said about the difficulty of controlling a negative-response loop with a long delay? Any abrupt action by the Fed now almost guarantees a severe oscillation in the response, 6 to 12 months later. A spike in interest rates this summer (sharply inverted yield curve, 2-year Treasuries at 7-7 1/2%), makes a recession in 2001 likely, and a soft landing unlikely. Greenspan knows this, which is why I don't think he'll do it. BWTFDIK, he isn't whispering in my ear. 5. In spite of the above guessing, I don't think I'm smart enough to know if a recession will happen, so I'll just buy low, and assume that eventually (maybe after the 2001 recession), I'll be able to sell high. We're close enough to a bottom now, that I can find some good stocks at good prices to buy, but I'm holding a lot back, in case we get better (lower) prices.