Watching/Playing ERTS /NVDA both at times but still they are getting leaned on and not getting much traction ....
NEWP SNDK ...oh my ! !
When A Bear Becomes A Bull
By Gerald Burstyn
December 11, 2000
NEW YORK (Dow Jones)--What do you call a bear who turns into a bull?
Barton Biggs.
On Monday, only two weeks after the chief global strategist at Morgan
Stanley Dean Witter hinted at the possibility of an impending recession and
predicted the Nasdaq would fall further from its lows, he changed his tune.
"I think we could be poised for a 10% or so rally in the Dow and the S&P and
an even more powerful surge in technology that could elevate [the] Nasdaq
back toward 3500," wrote Biggs, a SmartMoney.com pundit, in a research note
released Monday morning. Biggs gave no time frame for the rally, but
appearing on CNBC later in the day the analyst said he expects stocks to
rise in the next four to six weeks.
So what's made this traditional bear into a sanguine bull? The bloodbath in
technology stocks. Biggs says the tech sector is "deeply, deeply oversold"
and the potential for a snapback is "substantial." Biggs is also encouraged
by the narrowing yield spreads of government bonds and was heartened when
the markets shrugged off downward earnings revisions from some tech
bellwethers last week. Both Intel (INTC) and Motorola (MOT) rallied
recently, despite reporting disappointing earnings estimates.
Not that Biggs has become a heedless tech bull. "I view this as a
countertrend rally, but one that will last long enough and be sufficiently
big to be playable," Biggs wrote. "During this rally phase, I expect
Treasury bonds to take a 'time out' in the bull market, and the defensive
groups that have performed well during the down phase, such as health care,
utilities, consumer staples and REITs, will likely underperform." Biggs also
recommended that investors increase their positions in the technology, media
and telecom sectors and begin "lightening up" on Treasurys.
That's quite a shift for this notorious bear. Through the latter half of the
1990s, Biggs was infamous as the stock prognosticator who missed the bull
market. In 1997, Biggs told Fortune magazine that we were at the "tag end"
of a market rally. "That means the prudent person who's thinking ahead
towards retirement should assume that over the next five to 10 years the
total return from his equity portfolio is going to be in the 5%-to-6%-a-year
range." The bull, as it turned out, had three more years to run. More
recently, Biggs argued that valuations of Internet companies were exorbitant
and that the Internet bubble would burst with a bang. He turned out to be
right - eventually.
Meanwhile, Byron Wien, Biggs's colleague at Morgan Stanley, has stuck to his
bearish guns. In a note released today, Wien acknowledged the oversold
markets were poised for a rally, but added that it wouldn't be long term. "I
am skeptical of the argument that enough factors have fallen into place that
we can expect a sustainable uptrend," he said. Even if the Federal Reserve
decides to lower interest rates, Wien added, "I think the market could go
down."
Edward Kerschner, the chief market strategist at UBS Warburg, has a more
optimistic view. In a research note detailing his outlook for 2001,
Kerschner says today's depressed market represents one of the five most
attractive opportunities of the past 20 years. He predicts the S&P 500 will
reach the 1715 mark by year-end 2001 (about a 19% gain over present levels)
and that average earnings per share on the index will rise 7% to 8%.
Standard & Poor's estimates the average EPS for S&P 500 companies will rise
8.7% in 2000.
Still, Kerschner says market volatility will remain high and investors
should approach New Economy stocks cautiously. "The stock-price correction
among the once e-metric driven 'new new industrials' has removed much of
their excess," he wrote, "if the fundamentals today were as sound as their
advocates had hoped just nine months earlier. But clearly the overall
environment for these businesses has deteriorated markedly, with some
companies essentially failing. There is not much of a case for a wholesale
re-embracing of these stocks."
Thomas Galvin, chief equity strategist at Credit Suisse First Boston,
released a research note Monday entitled "Darkest Before Dawn." Galvin, a
noted market bull, said investors expecting a hard landing should think
again. "Policy directives are shifting toward a monetary easing," Galvin
wrote. "The probabilities of rate cuts and an orchestrated soft landing have
risen decidedly."
Galvin cites several reasons for his predicted soft landing. First, after
the Fed cut interest rates in 1990, 1995 and 1998, the S&P 500 rallied 23%
on average over the next 12 months. Second, the result of a Credit Suisse
investor survey indicate that more than 40% of respondents are carrying more
than 10% in cash - dollars waiting to be invested. "It is the largest pile
of cash that I can recall," he said. Third, the average S&P 500 multiple is
approaching a four-year low, while the typical price-to-earnings ratio on
the Nasdaq has dropped by 40% to 50%. At the same time,
price-to-earnings-growth ratios in the tech sector are now at a discount to
the broader market.
For more information and analysis of companies and mutual funds, visit
SmartMoney.com at smartmoney.com
(END) DOW JONES NEWS 12-11-00
08:26 PM
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