Terry,
I did a cut & paste and removed all mentioned good news
and only allowed the doom & gloom gold bug gata nut stuff
that causes me to sleep easy each night dreaming about
all those possible things to help the gold price.
cnn.com
LOU DOBBS MONEYLINE
Warnings Fuel Fears and Stocks Tumble
Aired July 6, 2001 - 18:30 ET
LOU DOBBS, CNN ANCHOR:
Tonight on MONEYLINE:
stock prices hammered... slammed by profit warnings.
... the manufacturing sector sheds jobs at an alarming rate.
... stirs fear of recession.
... It was an ugly day on Wall Street.
... big negatives out there:
weakness in Europe, the strong dollar and...
... could signal a rotten summer for the bulls.
... problems in labor
... another steep decline in manufacturing jobs
... underscores the ongoing weakness in the manufacturing
sector that doesn't appear to be abating.
... deterioration in the service sector.
... people out of work don't spend as much money
... today's numbers may fuel the growing fears
of a recession and speculation of yet another
rate cut by the Federal Reserve.
... tax rebate checks[to take hold.] But is it enough?
... three of those downturns turned into recessions.
And economist Wayne Angell is pessimistic
about the current slide.
WAYNE ANGELL, BEAR STEARNS: I think it is important to note
that we really are in a recession. We are in a goods production
and employment recession.
... is the pessimistic look here. There has never been
three months where job losses were this deep
where a recession did not follow...
RAMIREZ: Well, I was in Europe early part of last week,
and basically, I think the bad news in Europe
is just starting to seep through...
(COMMERCIAL BREAK)
DOBBS: Today's selloff in technology shouldn't come
as a surprise to investors... the price-to-earnings ratios
of these stocks is still higher than the overall market.
Right now, the S&P 500 trading at 23 times earnings.
That is almost double historical valuations.
But technology stocks are trading at 29 times earnings,
even higher for software and semiconductors.
Joining me now, technology analyst Ashok Kumar.
Good to have you with us.
ASHOK KUMAR, U.S. BANCORP PIPER JAFFRAY:
Thank you.
DOBBS:
These valuations -- as we look at them,
before we turn to the market today and going forward
-- these valuations are obviously troubling to investors.
Are you troubled by them still?
KUMAR:
Most definitely.
While the price in the price-earnings ratio has come down,
the earnings have fallen faster, so while the stocks
are retesting their April lows, our devaluations are not.
DOBBS:
Ashok, I hope you can see these numbers...
... Communication equipment sector -- these are the
P-E ratios for these sectors of technology -- 55.
Computer hardware, still 43.
Computer peripherals, still 45.
Software, 43,
against an S&P 500 of 23,
despite what has been a 60 percent rundown
on the broader market and the Nasdaq.
This is astounding, isn't it?
KUMAR:
Most definitely, and, you know, these stocks continue
to trade at inflated earnings valuation multiple
on uncertain calendar '02 estimates, so there is still
downside risk for most of these stocks.
DOBBS:
And in terms of the downside for '02,
while we're living this year for a while,
we keep having greater earnings warnings.
They keep piling up.
Tell us when the light at the end of the tunnel
becomes a bright horizon.
KUMAR:
I think so far we are seeing very few signs
of a real recovery in the domestic market
for technology companies. We continue to see softness
in both Europe and Japan, and compounding the fundamental
weakness is the currency issue, the strength of the dollar
against the euro, the pound and the yen.
So the bottom line is, you know, once we establish
the flow for earnings estimate for this year,
it's likely that we will have to go in
and trim estimates for next year.
And the backdrop being over 20 percent of the IT spending
over the last five years was in excess of demand,
so we would need to go through this structural adjustment
period before we embark upon a secular growth rate.
DOBBS:
Did you say 20 percent?
KUMAR:
Exactly.
About 20 percent, which amounts to about $40 billion.
DOBBS:
Whoo.
That's a lot of work-off.
At this juncture, how long do you think that adjustment
will require?
KUMAR:
Today, if you look at capacity utilization
among the back and infrastructure markets,
such as storage, which was a pre- indication
of the EMC announcement, utilization levels
are as low as 40 percent.
If you look at the inventory position
in the IT infrastructure market,
we have to measure it in quarters, not weeks,
so the burn-off period could last through
the end of this year before we see sell-through
equal to end demand.
DOBBS:
Well, I almost hesitate to ask this question,
but is there anything that you think an investor
should get excited about within the broad technology sector?
KUMAR:
I think the overall IT spending environment remains uncertain,
so we are unlikely to see any recovery in the second half
of this year. So we essentially are looking at calendar '02
in terms of earnings recovery.
And in terms of the subsector, we remain positive
on short term, is the PC market. Given that the PC market
was the leading sector in going into the downturn,
we expect that sector to lead us out of the downturn
as well, followed by wireless and IT infrastructure.
So we remain positive, initially, on the PC sector,
followed by wireless and IT infrastructure companies.
DOBBS:
But I sort of get the idea, Ashok,
you prefer cash at this juncture.
KUMAR:
Most definitely.
DOBBS:
OK, Ashok Kumar, thank you very much for being with us.
KUMAR:
Thank you.
DOBBS:
Still coming up here.....
The WTO is expected to vote on China's entry this November
at a conference in Qatar.
We would love to hear from you.
E-mail us at moneyline@cnn.com
And that is MONEYLINE for this Friday evening and this week.
We thank you for joining us.
Have a very pleasant weekend.
I'm Lou Dobbs.
Good night from New York.
"CROSSFIRE" is coming up next... |
