Fleck talks about AMAT and technology, an area which he is very knowledgable(LOL). Says there is no upside and you should be on the sidelines in cash; hasn't he been saying this for a DECADE now? He also says the downside is pretty high for AMAT; what does he call a drop from 115 to 69 with better than expected results along the way? No matter how foolishly he talks and for how long, the media, still put a microphone in front for him to speak. If a surgeon practiced with his success rate, he'd be banned from medicine!
August 11, 2000
You want to play, you get to pay
Well, Japan did it last night, contrary to what "informed sources" told me yesterday, raising rates 25 basis points. However, in taking a page out of Mr. Magoo's playbook, Japan did promise to ensure that the supply of money would remain plentiful. Apparently, there are no plans to restrict the money supply; they're just going to charge you more for it. Although the news was not disseminated until after the Nikkei closed, the impact around the world was a giant yawn and had virtually no impact on overnight futures trading or any of the European markets that I could discern. It was also a non-event for the foreign exchange market after some initial fireworks.
The big news domestically was the earnings announcement from Dell (DELL). Ex stock-market gains (i.e., wampum), Dell's operating results were about flat with last year. That in and of itself is not a problem. The environment is what it is because of the nature of the business, so flat results year over year is actually a reasonably credible performance. In other words, if Dell's stock was trading at 20 times earnings, it would be reasonable for it to go up on this news. My complaint is that Dell has given us three quarters in a row of flat operating results and this continues not to be reflected in its valuation. It would be a heck of a lot easier to swallow Dell's story if the stock was trading closer to 20 times earnings rather than 50 or 60 (more on that in a moment).
At least they're consistent. . . The slide in Dell initially precipitated a slide in tech stocks in general. Sox stocks were weak once again, with the Sox itself down about 3 percent in the first hour and a half or so. The bulk of the weakness was in wireless-oriented issues, although Intel (INTC) and Micron (MU) came in for some selling, and the equipment stocks were also heavy. The Dow was on another planet, going up about 100 points, and the S&P cash was up even though the futures were down. Nasdaq land was weaker basically across the board. Other than the Dow indices, the other index with some early strength was financials, because -- repeat after me -- "When you sell tech, you buy financials." And vice versa, naturally.
After a pretty big slide in the first half hour, the dipsters showed up and started buying, which brought us back almost to the day's opening levels. We hesitated there for a while, then had a pretty good run to the upside over the next several hours. The rest of the day was spent flopping and chopping near the highs. For all intents and purposes, the markets finished pretty near their best levels, although different indices did slightly different things. All the major indices finished on the plus side. Even the Sox, which had been down 3 percent, managed to close up a percent. The banks stocks were up a percent and some of Internet indices finished on the plus side as well.
But keep away from those cheerleaders. . . Once again, victory was snatched from the jaws of defeat, at least for the day. For the week, however, I think the bulls need to be quite concerned by the fact that they got exactly what they wanted from Cisco (CSCO) and Applied Materials (AMAT) and those stocks went down. Then they got poor results from Dell and of course that stock went down as well. All in all, it appeared that the only reason to buy stocks is to be able to say you're in the game. They're not going up on good news, but they are going down on bad news and the action overall is pretty chaotic. It still seems to me that the best course of action for most people would be either to get on the sidelines or stay on the sidelines if they're already there. It's quite unlikely that anything big and meaningful is going to happen to the upside this year, yet the chance of something happening to the downside seems pretty high.
Away from stocks, the fixed-income market had a bit of a reversal on the day. After having been up, it closed down about 3/8 of a buck. Oil, too, had a bit of a turnaround and the metals had a small move to the upside. Currencies were rather quiet.
The Commitment of Traders Report was released from the CFTC today and once again it showed the commercials to be heavily short S&Ps, so that anomaly continues.
Maybe they'll pull it out in overtime. . . While some dead fish downgraded Dell, others chose to say everything was wonderful. If we are to believe the analysts who say things will get better in the second half (or in this case, the fourth quarter) I would like them first to explain why things are weak now. None of these analysts who've been talking about the proverbial second-half-fourth-quarter recovery have given us any inkling they are capable of explaining the current situation. After all, Windows 2K, which was supposed to be the savior, has been out for seven months and there's still no sign of life.
None of these analysts anticipated any weakness, and yet here it is. All they offer as the reason why things will get better is their expectation of a second-half story. The fact is, we've got saturation at the consumer level and businesses used Y2K as an excuse to beef up their hardware and software. Other than specific Internet-oriented projects, spending will be weak because there is no crying demand to keep it going. Between now and the end of the year, the realization will hit that these problems exist in PCs.
At the same time, we've got the ongoing problem building in wireless, along with the problems in the waning Internet mania. We've been talking about this for some time, but the question at this point is, when will the light bulbs go on? No one knows the answer to that, but it's the only question that matters now. |
