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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: lurqer who wrote (9756)	11/23/2002 2:26:02 AM
From: techguerrilla	Read Replies (2) \| Respond to of 89467

On euphoria . . . . . . . . The "Naz" is celebrating an early Christmas season much like 1999. The only question is whether to sell any holdings before or after the January 1st toasts. If only we didn't have this "war" in Iraq hanging over our heads. /john

To: lurqer who wrote (9756)	11/23/2002 4:45:43 PM
From: stockman_scott	Respond to of 89467

When the Market Talks, It Pays to Listen 22-Nov-02 10:08 ET [BRIEFING.COM - Robert Walberg] The business of analyzing the markets doesn't have to be as difficult as we some times make it. Instead of breaking down each economic report or sifting through the 10Qs, investors can learn plenty about the market, or a given sector/stock, simply by observing its movement and listening for clues. Take the housing sector for example. An investor who did nothing but go by the numbers would be in love with the housing stocks at the moment. Earnings momentum has been incredible, recent guidance has been generally bullish, interest rates continue to decline and valuations remain historically low. But despite these positives, the sector has underperformed over the past couple of months, with most of the component issues having peaked in either March or May. Why didn't the stocks rise in accordance with their steadily improving bottom-line numbers, and what, if anything, did the divergence mean? The first thing to remember in answering that question is that the market is a forward looking entity. What the market was telling us in July and August when the sector really began breaking down was that the group's best days were behind it. Rates were very low (though they went a bit lower), employment levels were high, the stock market had suffered through three miserable years (consequently, stocks as an asset class were likely to bounce back), sales/earnings comparisons were going to be increasingly difficult and valuations, while low by market standards, were near the upper-end of group's historic ranges. Consequently, the good earnings news in quarters two and three had little impact on the stocks, as the marketplace was already looking to early next year and what it saw was difficult comparisons and slower growth. Whether that assumption proves true or not is still to be determined, but as an investor failure to listen to the market's message would have been costly. The same holds true in the Defense group. One could argue that conditions are about as good as they're going to get. The Republican Party (generally seen as more hawkish) just swept the November elections and will now control both chambers of Congress; reversing the trend of the last decade, defense spending is on the rise; earnings growth in the sector has been impressive; and the US is on the verge of war with Iraq. But much like the housing sector, the defense group peaked in late spring and has been trending steadily lower ever since. Again, what the market was telling investors when the stocks were falling while the fundamentals were improving was that the good news was already factored into the price. The stocks rallied in anticipation of the good news, and were selling off on the fact -- in part because it would be harder to match growth rates going forward. Our third and final example is the tech sector. Since the market bottomed in early October, the tech sector has outperformed the overall market by leaps and bounds. The Wireless Telecom index is up more than 84%, while the influential Philadelphia Semiconductor (SOX) index is ahead by 75%. Rest of the sector is posting similarly impressive gains. Now anybody paying attention to the recent earnings reports knows that Q3 may have been slightly better than feared going in, but the overall sales and earnings numbers were generally underwhelming. Also interesting to note is that most companies suggested that visibility remained limited, and that IT (information technology) spending would remain sluggish into the second half of next year. In other words, the stocks have soared while the underlying fundamentals have remained much the same. As always there are two ways of looking at the move. First, the market has temporarily lost its mind and the stocks will come tumbling back to earth in the weeks and months to come. This is a relatively popular view, especially with regard to the tech sector where every rally over the past couple of years has given way to renewed selling. However, it's also possible that the sharp, broad-based gains indicate that the market is anticipating a favorable change to the sector's fundamentals. Contrary to the thinking surrounding the housing and defense sectors, the marketplace seems to be telling anyone who will listen that the worst is over for techs, and that end user demand will continue to slowly improve in the quarters to come. While Briefing.com admits to having its doubts about the sustainability of the rally in techs given soft industry conditions, we also know its futile to fight the tape. And right now the market is sending a very loud message that tech is back