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To: schrodingers_cat who wrote (128626)	7/19/2001 7:39:05 PM
From: craig crawford	Respond to of 164684

>> To some extent they already have. For instance the Nasdaq is well off its lows << well the average may be off the lows, but that doesn't mean the average tech stock is doing well. other components away from tech are propping up the average, aside from a few biggies like msft. look at all the crowd favorites. jdsu, cien, itwo, yhoo, arba, cmrc, pmcs, amcc, brcd, brcm, etc. let's not play games and try to say the nasdaq is well off and people are all doing well making money. maybe if you are in biotech or ebay or msft you are doing well, or if you have perfect timing and bought on april 4th you are ok. but essentially the bulls are not in control. >> I think that many people are alarmed by the earnings warnings and want to see earnings recover before they invest more << i thought the bulls always claim that markets are a discounting mechanism and will rise months before we actually see better news. >> Others are becoming excessively pessimistic, as is common at bottoms, and are claiming that the economy will never recover and that this is like Japan all over again. << on balance i think you find more people complacently expecting a turn-around in 6 months than you do expecting apocalypse. sentiment is in no way overly pessimistic right now. it's far too bullish and that's why we have not seen the ultimate bottom yet. we only saw a short-term bottom in april. >> As far as tech goes, I think fast growth will always get people excited, but many of the fast growing companies of the 90s will not grow fast in the future ( and some will disappear). << so if this is the case how do you reconcile this with your bullishness? how can you be bullish knowing that valuations are still high and growth is not going to return to the hey days? >> However, if the US economy continues down from here, then pretty much everything, including"hard assets" like commodities and real estate, will be in for big falls. I think its a mistake to be bullish on commodities if you think the economy is in trouble. << obviously i haven't made myself clear enough. i am bullish on commodities over the coming decade, i never claimed they couldn't slide for several more months or even a couple more years. i have said before that if you know nothing about investing in commodities, it's time to start learning about them now. i never said rush out and buy every commodity in sight this week. now is a perfect time to start shifting your focus away from learning about tech stocks and more towards raw materials. tech stocks are just slowly bleeding to death and i bet a few people on this board had wished they had stopped trying to bottom fish tech stocks and spent more time learning about commodities over the past several months. obviously if world economies continue to collapse commodities will suffer along with stocks. but don't lose sight of the bigger picture here. all the major commodities indexes bottomed around Q1 of 1999 at the height of the asian crisis, even though our economy kept chugging along. now we have a couple of the largest economies in the world (u.s./japan) in recession, europe looking to follow suit, and latin america and places like taiwan and singapore showing that asia is probably not far behind. yet the commodity indexes still haven't made new lows even in this wordwide malaise. this should be a signal to sit up and pay attention, there is a shift taking place. obviously it is in the early stages right now so people aren't paying much attention to it. a few years from now it will be much more evident that commodities are outperforming stocks. the best two broadest measures of the u.s. market, the wilshire 5000 and the s&p 500 are both down since the start of 1999. the crb and other commoditiy indexes are up since the start of 1999, so you have already seen some relative outperformance. my opinion is that in the coming years, that outperformance will widen. now if stocks continue to slide commodities can slide as well, but i believe it will be to a lessor extent. so when i say stocks are a waste of time and i'm bullish on commodities, that doesn't mean commodity prices can't fall. in fact the more they fall the better if you ask me. that gives me more time to learn about them and prepare, and also the more they slide the cheaper they become and the greater the move will be to correct the imbalance. commodities aren't like stocks. you want to hold stocks in companies that consistently outperform and show relative strength. you don't want them to act weak, that shows there are problems with the business or management. with commodities you have to accept that the lower they go the more bullish you should become, because the incentive to produce them diminishes as prices fall. look at oil. what happened to oil just before it shot to $38/bbl? it tanked to $10-11 first. exploration had been trending down for quite some time, but really fell off when oil prices made exploration uneconomical. what happened to coal stocks a couple of years ago right before they exploded? they sold off hard to multi-year lows. the main point i'm trying to make is, when stocks finally do bottom out they will not come back quickly. they might not make new lows, and they may slowly work their way higher, but the gains will be nominal and after adjusting for inflation they could even be negative. there is a simple reason for this. valuations went so high and remained there for so long that it will take a while to work off the oversupply and return to the kind of earnings growth that investors will give a premium multiple. so stocks will be stagnant, even after they bottom. (who knows, maybe they already bottomed in april, yet they aren't exactly coming back now are they?). now commodities on the other hand, they are a different ballgame. they have been working off their oversupply for the last decade or so. they are towards the end of their inventory correction and are at historic lows, not at the beginning of the supply correction and at near historic high valuations like stocks. you see the difference? that is why after world economies bottom out stocks will be stagnant and commodities will outperform. there are also other reasons why commodities are favorable to stocks here. most people on s.i. invest the bulk of their money in u.s. companies. i know it is hard for most arrogant americans to accept, but there is a possibility that the rest of the world can do better than the united states. everyone just assumes that if japan gets their act together that the u.s. markets will automatically benefit. maybe asia starts to separate itself from the fortunes of the u.s. and we stagnate for a decade while japan gets on it's feet and china continues to grow like a weed. u.s. stocks might not benefit under those conditions, but commodities don't care who is consuming them. the bulk of the world population is in asia and they are going to be increasingly more important to the demand of commodities than the u.s.