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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank -- Ignore unavailable to you. Want to Upgrade?

To: Dave Gore who wrote (118273)	12/6/2000 11:55:49 AM
From: Lane Hall-Witt	Read Replies (2) \| Respond to of 120523

Dave -- Agreed, although don't underestimate the impact of the Greenspan factor. As we saw yesterday, the market will price in a friendly Fed much more quickly than it priced in the unfriendly Fed of the past year. We do still have the reality of the earnings situation to face up to, however. Earnings estimates have already been cut massively -- projections for year-over-year earnings growth have already been halved -- and we still have the warnings season in front of us. (Companies like AAPL, LSI, and XLNX have warned well ahead of the traditional warning season.) The shortfalls at GTW and AAPL are so dramatic that it's hard to imagine the damage isn't more widespread than we currently think. I've been resisting the idea that MSFT will miss -- and in my gut I still think they'll find a way to make their numbers -- but what if they come up short, along with likely misses from INTC and DELL? Also, a friendly Fed isn't necessarily going to be the magic bullet some analysts assume, I'm afraid. The problem is the massive amount of outstanding debt there already is. Lower rates from the Fed will reduce the cost of carrying existing debt, which obviously is good for corporations. But there's still a huge amount of debt out there, which makes me wonder how much more companies will try to borrow -- or even, given the amount of bad debt on the books, how much more companies will be able to borrow. Lower Fed funds won't really get us around the fact that corporate credit ratings are virtually in free-fall right now. Who's going to lend more to T so it can continue upgrading its infrastructure? Or any of those other overleveraged telcos? In other words, who's going to be able to buy all that wonderful gear from CSCO, CIEN, GLW, JDSU, and the other fibers and networkers that are running today? But, like you've said, you can't fight the mo-mo. The bulls like what Greenspan said and are enjoying the moment. Let's go along for the ride!