Hi Greg: Have not been posting very much at all these days. It's pretty rare for me nowadays but it's nice talking to an old cyber-buddy. To answer your questions, I'll give it a stab FWIW.
1)The selling came as no surprise today - it was sell on the election news no matter who won. If either guy doesn't concede after the recount and sh*t happens such as potential lawsuits that take additional days or weeks to resolve this thing, this market can tank big time. BTW, the Naz failed again approaching 3500.
2)I believe we will get a year end rally but the timing is the thing. We've got a Fed meeting coming up. Now we all know the Fed is going to do nothing but have you noticed recently that each time the meeting nears, the market sells off dramatically and sort of defers to the "power of the Fed."
3)I believe the rally will come towards the middle/end of November-December, be short-lived (maybe a couple of weeks), the Naz could run several hundred points from this correction, and then more tax loss selling from individuals will spoil the rally once again. The problem is still valuations and PE's. I'm not so confident of a rally past 3700-3800 because we will once again go back to questioning valuations and PE's. If the rally happens, this will present another tremendous shorting opportunity or another opportunity for those to get out even who are underwater. That's the major problem for the Naz and will continue to be so for the foreseeable future. So if you're not nimble as a trader, forget about it.
4)I can't see how either Bush or Gore are bad for tech but their policies that will supposedly shrink the budget surplus is making the Fed nervous and you don't want to do that. That creates more pressure on the Euro which could really sink further and seriously affect earnings for many multinational companies such as the IBM's, Dell's, GLW's of the tech world. The defense of the Euro by intervention is failing and Europe could slide quickly into a recession. BTW, intervention has rarely ever worked.
5)I agree with you on storage stocks. There are only 3 to play IMO: EMC, NTAP, BRCD but their PE's and valuations are stretched like everything else in tech land. NTAP is my favorite and I'm invested in it although I got hit today on it. They are growing 3 times faster than EMC currently. BRCD is growing like a weed also and they dominate the fiber channel switch market, but I can't seem to justify their market cap with their revenues and net income. But the Street loves them.
6)My favorite tech sector of all is software right now but not the large caps (exception is MSFT -maybe 10-15% lower than where it closed today). I love B2B. I think it is the killer app. I'm heavily invested (let's say a pretty huge position) in CMRC but got hit today in it as well. Their growth is absolutely phenomenal. From $1M in revenues 2 years ago in the December, 1998 quarter to an expected $175M in revenues in the upcoming December, 2000 quarter and I think they can beat that. And only less than half of their B2B exchanges are up and running. The huge Covisant exchange (GM, F, DMX, Nissan, Renault) should up and running in about 3 weeks. Revenue wise, they could become one of the biggest software companies in the world over the next few years but patience is a must for this volatile stock. Trillions of dollars will be done on the net by businesses, no doubt and CMRC, ARBA, & ITWO are the clear leaders. CMRC's current market cap is reasonable compared to the other 2. They also moved up by 2 quarters their profitability. They have alliances with SAP, MSFT, INTC, SUNW, GM, etc., etc., etc., etc. Will CMRC get hit during this correction. Sure. But they've come down hard from their highs when they ran to $1000/share after their IPO debuted. After a couple of splits and base pattern building now underway, the trend appears up - still holding above their 100 & 200 DMA's. I'm very high on them. In the software sector, I also like ITWO, ADBE, MUSE, MERQ, SEBL. None of these guys have "telecom spending concerns" like the optic guys or networkers, but they are all volatile and being tech, you've got to carefully pick your entry points.
7)I'm not so high on optical that much. Too much in the news everyday as being the "sector to be in." The technology for optics keeps changing on a daily basis and it's hard for me to pick which company is going to win out. For example: you've got NT, CSCO, SCMR, CIEN, CORV, etc. competing against each other, each with different approaches and technologies with a telecom sector in trouble. It reminds me of owning a computer. What are you going to do with it without software. So when the networks are built, what applications will be used by businesses to reduce their costs, increase their productivity, and boost their bottom lines. That's where the money is IMO. Now there are many on this thread and other optic threads that will state that the demand for broadband is insatiable. I beg to differ with that. I believe that next year sometime the broadband capacity will far outstrip the demand for that capacity and over the next few years will exponentially continue to outstrip the demand for that capacity. I feel very confident about businesses adopting and paying whatever the cost for that broadband. That's where the money is. I'm NOT so concerned about my next door neighbor paying for broadband services to be able to download a music file. That's not where the money is. IMO, the charts are telling me this. Just look at the breakdowns in any of the optic charts. Even in this last rally, the optic stocks failed to breach their huge gap downs. The smart money has already left in droves and the broad distribution tops that have been put in place tells you that. Essentially, the big money has been made already in these stocks. I'm sure the pundits here will tell me I'm wacky in my opinion of their cherished sector, but the charts tell me otherwise. I see no base building yet in these stocks and unless miraculously they can stage a huge rally and repair the chart damage, which I doubt greatly, they will be tradable and range-bound stocks for a long time to come.
Anyway, I've rambled on long enough. Whether I'm correct in any of the above remains to be seen. This is a very difficult environment and I've taken my lumps like everyone else. I wish you well.
jmanvegas |
