Jacob, One thing that is interesting to me is the effect of personality on investment style and success. A person who tends to be optimistic by nature will tend to do better in bull markets than bear markets, and of course the opposite would be true for those who tend to be pessimistic by nature. According to this theory, the best investors would be more neutral in their level of optimism, making it easier to switch sides more often and more easily.
Regarding the question of whether techs are ahead of themselves, and whether or not we will soon be coming out of this recession, I think it is really impossible to know. Many argue that tech stocks are way ahead of themselves here. You have made some very intelligent arguments I recall that support this idea. However, I believe the market has a better track record than anyone at forecasting the end of recessions. Therefore, instead of trying to figure out why the market is wrong, maybe a better approach is to try to figure out why it might be right. Also, the more people question the tech advance, the more likely it is for real, since the markets tend to prove the majority wrong over time.
From my recollection of some posts you have made, it seems that your performance has been outstanding overall for many years. So, whatever arguments you make on this thread should be taken very seriously, and with a lot of respect. My approach has not worked well since Sept. of 2000, but I did well since the recent bottom in late September (portfolio was up 100% since then a few days ago, despite having sold most of my QLGC after it doubled (went on to almost double again from there). I don't put a lot of time into investing now since I have a day job plus working some overtime as well.
In the two prior tech downturns my approach was to ignore most of the news, and just go with my gut feeling about the importance of technology and the likelihood that many tech stocks would recover quite well going forward. I figured that if America is going to move forward, technology is going to be a major driver of that, so I want to be onboard. If that does not happen, well then there are larger issues than just my market losses, so I could focus on these larger issues that face the country, and psychologically at least, distance myself from my own financial underperformance. That is sort of my strategy this time as well. I have new money to invest each week, and I am buying tech stocks, particularly ones that have recently been beaten down a lot, that also seem to have good prospects going forward. One difference between now and those last two downturns is that I am buying more smaller cap stocks this time.
The reason for the small cap stock purchases this time is that I think history has shown that small caps tend to outperform the economy emerges from a recession. Going into a downturn of course it is the opposite - small caps are more risky then. Also, large cap techs have outperformed for a long time now, and every so often the tide changes, and I am thinking this may happen as we go forward from here.
One other reason for my optimism, besides my personality type, is that if you add up all the plusses and minuses right now, it sure looks like the stage is set for an economic rebound. I have no credentials to back up any such call on an economic turn in the economy, however I also know that the ones with all the credentials - the economists, are not much good at it either. Positives I see include: the USA doing extremely well in Afghanistan, the length of the downturn so far (has to end some day), the percentage decline from the highs (even though that was a bubble, prices can't go down forever), the fed cuts, the proposed economic stimulus plan, the effect of pent up demand, the 2.2 trillion on the sidelines in low interest bearing accounts, the fact that about 95% of Americans are employed (glass half full approach) vs. about 35% unemployment I believe 70 years ago when there was a similar market crash, the demographic argument, the efficiency enhancing effect of technolgoy, the extra tech spending in areas such as surveillance and storage since Sept. 11, the fact that tech stocks are viewed as risky investments at this point, and lastly - the fact that techs are considered expensive here (buy when they are expensive and sell when they are cheap). I won't bother to list the negatives, because I think others here can do a much better job of that than I can.
This post is just right off the top of my head, consider it as conversation. One question before I take off for work here today, aside from the strong technical resistance at about 27 for JNPR, why do you feel it is worth shorting? The claims that CSCO is taking market share I think are just coming from Cisco. Cisco projected earnings this year (July 02) will be down about 50% from last year to .22/share, vs JNPR earnings are holding up, about the same as last year at .53/share (Dec 01) (all numbers from Yahoo research). Also, Cisco was the last I think to come out with a new router, and I think JNPR's next router will surpass that in performance and will help them gain share. If there was a time for Cisco to crush JNPR, I think it would have during this downturn (e.g. a price war), but they did not, so how are they going to do so as we emerge from the downturn? You may be right about JNPR, but right now at least I am long the stock. The market recently has agreed with me, JNPR has outperformed Cisco quite a bit since the recent bottom in September.
Regards,
John |
