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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Ian@SI who wrote (46760)	5/15/2001 2:29:10 PM
From: michael97123	Respond to of 70976

Schitzoid market doesnt know which way to go. Medicine is strong but illness seems worse than expected and recovery time seems longer as well according to the fed. The money on the sidelines will be on the buy side, if and its a big if, they get off the sidelines. mike

To: Ian@SI who wrote (46760)	5/15/2001 2:48:42 PM
From: michael97123	Respond to of 70976

from the motley fool Home Today's Headlines News & Commentary Breakfast With the Fool Fool Plate Special Fool On the Hill InDepth News Dueling Fools Feature Archive Earnings Calendar Investing Strategies Personal Finance Retirement Fool's School Special Features Fun & Folly Radio / Audio Newspapers Help Archives Fool UK Weighing the Fed Against AMAT Applied Materials is the ultimate in capital equipment manufacturers: It produces the fabrication equipment semiconductor companies use to make their products. With interest rates coming down, the Fed is trying to goose companies into more capital spending. Applied's results for the next few quarters may tell us how they're doing. By Bill Mann (TMF Otter) May 15, 2001 What's more important today: This afternoon's meeting of the Federal Reserve Board, or Applied Materials' (Nasdaq: AMAT) earnings report, due out after today's market close? You said the Fed meeting, right? WRONG!!!! OK, I'm just kidding, you're right. But not by as much as you think. While the world frets about whether the Fed will cut interest rates by 25 or 50 basis points, consider this: At the market close today Applied Materials, a capital goods supplier if there ever was one, will report fiscal second-quarter earnings. So far the pundits are not hopeful. Applied has warned that its earnings would be perhaps 40% lower than they were a year before, a full 50% below last quarter's earnings of $0.66. This is reflective of the screeching halt Applied Material's customers put on capital spending as the economy hit the skids. Interest rate cuts are supposed to encourage both consumers and businesses to open up the pipeline and spend by making leverage -- in other words, debt -- cheaper. Great. But consumers are already leveraged to the hilt, with $5,700 in credit card debt for every man, woman, and child in the U.S. Businesses, meanwhile, are either in the same debt boat or still trying to figure out how to gain a return on their capital expenditures from the late 1990s. Borrow? For what? Now back to Applied Materials, whose quarter ended April 30. Applied Materials is the dominant producer of semiconductor fabrication equipment, tools used by Intel (Nasdaq: INTC), AMD (NYSE: AMD), Texas Instruments (NYSE: TXN) Taiwan Semiconductor (NYSE: TSM) and hundreds of other companies in the manufacturing of chips. (For more on this business, visit our InDepth: Computer Hardware page.) Applied Materials goes through violent cyclical rotations every few years or so, and this year has been no different -- except, perhaps, in the sharpness of the drop. However, investors should watch this earnings report (as well as the next two) from Applied to get a sense of whether some high-tech bellwethers are increasing spending. An increase in revenues by Applied over this time could be a leading indicator that some pretty crucial sectors of the economy are on the mend. So watch the Fed, but also recognize this: Until it makes sense for companies to invest money in themselves, they will not. Decreasing the interest rate to zero won't change that. When it does make sense to spend companies will do so, and one of the first beneficiaries will be Applied Materials. Bill Mann's columns are proudly sponsored by Fred's Croissants & Filldirt Co. At time of publishing, Bill held beneficial interest in Applied Materials. His stock holdings can be viewed online, as can the Motley Fool's disclosure policy.

To: Ian@SI who wrote (46760)	5/15/2001 4:43:37 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 70976

re: "inflation is expected to remain contained", and "underlying rate of increase (in productivity) appears to be largely intact" Anyone long capital equipment companies (semi or otherwise) today, better hope and pray the Fed is right. Recent data on the above two statements is not encouraging. If the Fed is wrong, and the last productivity numbers (negative) are the start of a trend, then the Fed will be raising interest rates by year-end (as inflation goes on the wrong side of 4%), and the bottom in semi-equip bookings won't happen till mid-2002. But, for the moment, I think the Fed has put a floor under stock prices. I sold most of my puts earlier this month, and I will probably sell the remaining ones (in JNPR and TXN) soon. I'll take small losses. For the remainder of this year, I will probably just play short-term long trades. Valuations and the threat of inflation and/or recession scare me away from any new long-term buys. The Fed scares me out of short positions. That doesn't leave much except cash and short-term games, for me at the moment. I have a lot of cap gains that will become longterm in the June to August 2001 time-frame, and I'll be selling them into continued strength. I could end 2001 exactly as I began 2000 (70% cash).