Interest rate cuts allow telecoms and others in deep debt to
survive and bail themselves out. They won't be buying any
hoards of new equipment but they won't go under right away
like they were going to before.
Commercial shorts are covering because they feel that the SPX
as a whole, ( not the NDX ), is nearing their computed fair
value. They aren't bullish but they feel the risk is no longer
worth playing the short side heavily, they are basically neutral
and we are seeing them cover hence the bounce. They are
increasing shorts in NDX though since it should be the last to
recover for obvious reasons. FA wise, I have to agree with
them as brick and mortar as a whole is not really that over
priced except for the gorilla retailers, some Banks, GE etc. The
scan I ran last week showed there are plenty of stocks with
PEs in the single digits with earnings and even more with PEs
under 20.
NG prices should recede as inventories are brought back on
line. This will make electrical power cheaper which should
help factories increase profit margin. Also, job cuts and
reduced output enables lower payroll costs ( highest paid
probably got fired first), and less output means fewer factories
running thus lower costs.
Huge inventory write downs and lowered forward guidance
makes it easier to hit future numbers. They also probably low
balled future guidance, why wouldn't they since the stock
prices are already down and the market expects the worst.
Investors have short memories and will celebrate beating
horrible estimates the next couple quarters. A year from now, it
should be easy to beat this quarters numbers since they are so
low. An amazing Kreskin prediction of the headlines from
earnings releases next year, "Profits jump 100% over last year."
"Earnings triple in amazing recovery" etc. and people will buy
it forgetting that last year the earnings were 20 cents, this year
dropped to 2 cents and next year will be 4 cents. All they will
see is that they doubled and they will forget that they are still
down
80% from 2 years ago.
It suddenly occurred to me that AG may be printing money
like it is confetti and dropping rates until we devalue on
purpose. He WANTS the dollar to drop. A weak dollar will
increase exports and let the rest of the world consume and bail
us out for once instead of the other way around like in 97, 98
etc. Of course the Fed and Treasury won't say this but
companies have been complaining the strong dollar has been
hurting them for some time. He doesn't care about inflation
right now. He will deal with that later after he pulls us out of
the dumps, IF, he pulls us out of the dumps.
I am not saying AG will be successful or this can all happen,
but they are very real possibilities. If AG does pull this off,
think about it, he WILL go down in history as a genius. HE
knew we were in an irrational bubble that needed to be
popped. Under the pretense of fighting inflation ( which was
real despite the naysayers ) He dropped the market to where it
was two years ago, got rid of much, not all the excess hype
trash, redistributed the wealth to his buddies, and then MIGHT
be able to get things rolling along and churning smoothly
again. If the market starts climbing too fast as inflation is
running afterwards, he can raise interest rates which will cause
the market to scream bloody murder as they recall January
2000 and stop in it's tracks. It may be wrong, but AG will have
shown that he should and will not be ignored again. The
market will now know that he can stop this nonsense anytime
he wants to with a few rate hikes. Again, it may be wrong, but
even the naysayers now know that he yields that kind of
power and that higher rates do affect techs not just the old
economy stocks and that the DOW does matter and all those
other things they were saying at the top. They all said this time
is different and now they know that it isn't. A small hike in
rates will pack a lot more punch now.
As for survivors and who might lead us out of this. Some
sectors will still be required to keep churning even in tech land.
Storage of data requirement is large. More players entering
arena though so margins may come down and the one I keep
hearing is the best storage device is private, not publicly
traded. Will they knock down EMC and NTAP? Not sure but
they can all stay in business at least.
Oils will continue to do well since they are lean and mean from
the bad years and oil seems to have found a steady 25-28 a
barrel range. This will
shore up the SPX and DOW's earnings numbers as a whole
years worth of earnings filter through. As Terry said, the
inflation will likely help the
stuff like commodities etc too if the higher oils prices don't kill
the providers. The unknown here is the global market
influence. Cheap Canadian grains etc putting pressure on our
farmers products.
AMD and INTC should do OK although again, margins are
going in the toilet. Don't know about other corporations but on
our base, there are more P233 computers than there are PIII
700s or higher. A lot of upgrading will be required over the
next few years. Of course MSFT should benefit as Win2000
will come on each machine. Private sector will also slowly
upgrade if they still have jobs.
Anyone know who makes the most common or best cable
modems? Last mile buildout should continue as cable vs DSL
war continues. With telecoms choking in debt, the cable
companies will try to take advantage of this window of
opportunity. Out here, cable is still moving quickly trying to
beat Direct PC to our doors. Only those within Boise City
limits have broadband. I imagine the race is on anywhere that
isn't hooked up to broadband yet. Most people are too lazy to
switch so once they are hooked up, the one who gets there
second wont get market share. The winners short term will be
the cable modem makers but I haven't researched them yet to
see who they are or what their valuations are like yet. Imagine
all the Dial ups that will be replaced and from what I hear,
cable modems are $300 a pop. This will only be a short term
good play but it could force a temporary run.
T's Media One if they spin it off fast enough, AOL and the
other cable and dish networks will become the Ma Bells of the
future IMO. (Yes, I am
bullish on Cable -g-) Digital Cable coupled with the latest
"smart boxes" ( Made by SFA or MOT depending on where
you live) enable telecom where you no longer require a phone
line, offer Movie Rental/online viewing on command, web
surfing both on PC and through the TV, among other little
gadget type tricks like live TV pause, record, rewind etc.
Phones are dead and will be replaced with these or else the
satellite dish equivalents. JMHO This will be a steady revenue
subscriber type income and recurring, easy to compute etc. and
I imagine the conservative older crowd will move in here to
park money later in their life cycles and these will eventually
pay a dividend once all the buildouts are done and over.
I think QCOM will survive but will come waaaaay down in
price first. It is obvious to everyone except QCOM longs that
CDMA buildouts are going to be delayed for many many years.
Europe has made it clear they are in no rush, Asia has made it
clear that they will delay and our telecoms here are in no
position to be building out new stuff anymore. Only those
blinded by greed still believe that any of this will happen
anytime in the near future. Heck, by then, a new technology
may rise form no where. There is certainly every incentive to
come up with the next standard since the licensing fees are
easy money and you don't even have to make anything
yourself.
Now even with my more bullish outlook, I still think we
double bottom sometime in the next 3 months and still think it
could come in the next few weeks as earnings warnings come
around again. PEs of 30 - 80 on negative growth and
companies admitting that they see no turn for the rest of this
year is not the things that turns are made of. We need to go
back down. I am no e-waver but this one is pretty easy even
for an amateur like me. We have made 3 waves and are now in
the 4th. That means we still have a 5th coming. Bear markets
have 3 phases and from the discussions here, it was pretty plain
we were only in the second phase. We have another one
coming. This is our brains. This is our brains sniffing glue. Any
questions?
Now none of this has anything to do with the short term rally
we are seeing and things will get a lot uglier before they get
better, market looking forward or not. This view is taking the
large job cuts as a positive due to weakening labor costs ( take
a pay cut or take a walk since there are plenty that want your
job now), and ignoring that all those that get laid off aren't
consumers anymore able to buy goods. It also is looking past
this year's record low water problem here in teh west that will
raise energy costs short term and is "assuming" next year will
have normal rainfall and snowpack to get power costs back
down. In other words, this is for next year, not this one.
As mentioned before, double bottoms, which almost always
occur and especially after the size of this selloff, I fully expect,
occur between 6 and 9 weeks apart. That time frame points to
the Fed meeting till mid June. That would be the time I would
be looking hardest for a hard down, 5th wave.
Message 15761162 |
