To: sea_biscuit who wrote (25147 ) 8/16/2002 3:57:48 PM From: Andy M. Respond to Since the intra-day reversal on Wednesday, there's been significant follow-through on this LSI rally--far more than I expected. And I think it's not as simple as technical v. fundamental factors. When dowplaying the movement based on non-fundamental factors, don't forget that moves to the downside happen because of technical factors, too, and that market psychology can create a feedback loop with fundamentals. So: the market falls because it's way overvalued and then it falls because it's been falling, businesses spooked by falling stock prices slow down their investments, which further slows profits which causes further selling. This is what we've had since late 2000. Throw in the corporate accounting scandals and seasonal factors (sell in May and go away) and you have a mix of fundamental and psychological and technical factors driving the market down this summer. But: the relatively low levels of the market, the ability to absorb bad news like yesterday's Philly index, passing the big-cap SEC reporting deadline without major blow-ups, the fact that the market is forward, not backward, looking; and that stablization in stock prices themselves might actually give corporations the confidence to go ahead with investments that might start a virtuous circle--all of this can be the stuff of a meaningful reversal in the market. In the case of LSI, I think people are finally getting that LSI is not Intel, that LSI is in the growing part of semis, while Intel is in the flattening part of semis, so Intel can get an eps cut today and LSI, with plenty of short term profits to be taken, still manages a significant gain. LSI is finally getting some credit for their relative strength of execution and for their relatively low valuation metrics (book value and p/s etc.).
