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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: tradermike_1999 who wrote (705)	11/16/2000 11:45:58 AM
From: Warren Gates	Read Replies (1) \| Respond to of 74559

First of all, congratulations to you for having the guts to go against the grain in opening this subject. Disclosure first: I've been a bull throughout this great bull run, but have gone from being 90% tech in late 1999 early 2000 to 15% tech. I've got nothing to back up my performance except for my brokerage statements and am very delighted that I've kept all of my 1999 gains and half of my 2000 gains at this point. This year has been very tough and I could easily have been wiped out like a lot of others. Perhaps what saved me was I've been into tech stocks since 1991, and in those days, tech leaders would be lucky enough if they have PE's of greater than 30. The late nineties huge run was brought about by 3 factors: massive liquidity, price multiple expansion, and perceptions of accelerating earnings brought about by the internet. Of the 3, we could only count on liquidity as a positive factor going forward, and this too is starting to tighten up because of interest rates, and loss of confidence in the market. Going forward next year, it doesn't take much to further compress the price multiple of stocks. Just looking at NTAP earnings this quarter vs last. It didn't take much for the stock price to get cut in half. Just the prospect of decelerating growth among the high fliers and flat quarters among the low PE tech like AMAT has been enough for price multiples to compress. Back in the early nineties, there was no such thing as 2X or 3X premium on earnings growth. We may be headed back there. But I don't think we'll go straight down from here. We may have more of a rolling bear market where money get's parked in the big caps first. A strategy of buying the bigger techs and hedging by buying puts on the smaller, broken down, less liquid ones may be a smart strategy. I see Nasdaq 3000 as just a continuation of the long term bull trend. I would dismiss the 4000-5000 runup as a blowoff top that won't be visited any time soon. The long term growth rate of Nasdaq had been 15-20% a year. We are perhaps trying to go back to that norm as long as we get that soft landing scenario. siliconinvestor.com Have we hit bottom? It's too early to tell. But if you look at the longterm Nasdaq chart, most intermediate bottoms after a crash like in 1998 went back to 2-year old levels. We just went back to Nov 1999. If I were to venture a guess, we would bottom in spring next year at around 2400 and at that time, we would be touching 2-year old levels. Of course, the vicious cycle of bad market, flat economy, flat spending, lower consumer confidence may have already started. That is why the next 2 quarters will be the most important quarters to watch. ALL in my opinion