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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: COMMON_SENSE who wrote (143133)	9/8/2001 4:41:18 PM
From: Jim McMannis	Read Replies (2) \| Respond to of 186894

I agree with everything you say... OTOH, I will likely be the only one here who replies to you post... Jim

To: COMMON_SENSE who wrote (143133)	9/9/2001 5:13:39 AM
From: Amy J	Read Replies (2) \| Respond to of 186894

Hi Common_Sense & Jim, RE: "The problem, Jim, will be the pe ratios" Not necessarily. Study what happened to Intel after previous downturns. They got rid of the expenses, which improves profit. Intel is incredibly good at cutting costs. Imagine the following scenario: - Revenue was R (1) and Earnings were E (1) - But Revenue dropped - A company responds to this, and Expenses are cut in order to bring P/E back up - At some future point, Revenue expands to R (1), meanwhile Expenses are held. That's a formula for an improved PE, which is different than what you are describing. I think you are assuming that a company doesn't cut costs in a contraction and hold them. But they do. And once the contraction is done, the expenses are held low as revenue recovers. This has a powerfully good impact on PE. (I'm assuming Intel will repeat this formula, which they may or may not, but I believe they will.) Of course, that doesn't happen until the Revenue growth returns. So, the issue boils down to: when will the revenue return and what will the future growth be like? RE: "Can you imagine the fear when people open their brokerage or 401 statements this week and see that their portfolios have shrunk another 20% this month." Maybe our society is a bit more educated on financial matters than in 1929? Greenspan made an assumption that there was a chance people would make a run on the bank prior to Y2k, so he injected billions of dollars into the system. This was really the only real concern for Y2k: people's behavior. RE: "That is on top of the 60% or more they shrunk up till now. If that money is their only retirement fund, it will absolutely devastate a person's confidence in investing in stocks." In the scenario you describe (which is not average), they may (as you described) wait for a return and then pull some money out. That could slow down the recovery. However, that's a short-term issue. RE: "I think the year on year stock performance comparison is important, but I also think the pe rations, public expectations, and their fear of an uncertain future will keep this whole market depressed for a longer time than we now think. It could take at least 30 months to turn around." I believe 2.5 years is the longest that a recession has lasted, so your comment has potential. Short-term it could be very bumpy. But I believe in the long-term picture, and feel the short-term may last say 1.5 years (from the start of the decline) for INTC, because of the following: a) XP will create pull that will be felt next year b) Intel tends to cut costs, then hold them as revenue returns, which improves Profits c) I believe in Intel's story: they dominate the processor business, have moved ahead of the competition, are well-positioned in the server market, and are positioning themselves in the high-volume wireless market, and all of these things (even wireless) will grow over time, not contract. But by the way, if we do have another 1929, why not just write covered calls and generate cash that may either be used for purchasing more stock or for building up cash? I studied the period after 1929 and discovered that investors did very, very good if they invested money into the markets during the 1930's. Instead of running, a person could embrace it and do quite well for themself. Regards, Amy J