-- RPT-INTERVIEW-Market bear sees new lows in coming months --
(Repeating story that ran on Jan. 23)
By Haitham Haddadin
NEW YORK, Jan 23 (Reuters) - Stocks are likely to undercut
their October lows in coming months and investors should brace
for a rare Wall Street phenomenon: a fourth down year in a row,
says one of the market's grizzliest stock bears.
Fred Hickey, who publishes the highly regarded investment
newsletter "The High-Tech Strategist," said the market advance
from five- or six-year lows hit in October 2002 will go the way
of several similar runs since early 2000.
"It's the usual bear market rally," Hickey, whose forecasts
have proven prescient in recent years, said in a telephone
interview from his home office in Nashua, New Hampshire.
"The market will go below the October lows, the suckers'
rally is in the process of falling apart."
Hickey said valuations are still too high, meaning
corporate earnings don't justify these levels. A blizzard of
negative corporate news in early 2003, already under way, will
bury the market bulls, argues Hickey, who specializes in
technology issues and is seen as an analyst's analyst.
Hickey spoke emphatically and said the evidence was clear.
In the January issue of his newsletter, he warned readers that
not only is technology spending not accelerating, it is
actually worsening according to the sellers of the products.
What transpired is a blizzard of warnings from Big Tech.
Computing giant International Business Machines Corp.
<IBM.N> and software king Microsoft Corp. <MSFT.O> suggested
they do not have much visibility for the near future.
Struggling business computer maker Sun Microsystems Inc.
<SUNW.O> said it could give no financial outlook for the
current quarter, while chipmakers Intel Corp. <INTC.O> and
Advanced Micro Devices <AMD.N> said they would lower capital
spending for 2003.
"Basically, the whole technology complex has an inventory
problem and that's leading to lower guidance for the first
quarter," Hickey told Reuters. "I think the Nasdaq will be hit
the hardest but they are all going lower."
FOURTH DOWN
Hickey said he disagrees with the notion that stocks likely
would rise in 2003 simply because they have been in a deep funk
for three years in a row since the bubble burst in early 2000.
"The long and dreary winter for tech stock investors is
likely to become even colder and crueler before the sun shines
again," Hickey wrote in the latest issue.
The last time the market dropped for four consecutive years
was in 1929-1932 during the Great Depression. Hickey expects a
repeat.
"It's going to be a fourth down year ... It's horrible,
within the next few weeks you will get a massive amount of
downward revisions for (first- and second-quarter) earnings
estimates," he said.
"There are bombs ready to go off."
While it is possible that 2003 could be an up year within
the secular, or long-term, bear market, a lot of hurdles have
to be cleared first, Hickey noted.
"The first is the probable war with Iraq," he wrote.
"Investors presently assume the war will be over within a
matter of weeks once it starts and with few casualties. Let's
hope so. Nevertheless, the bear market lows in 1990 were
established in the lead-up to the last war with Iraq."
One thing bothering Hickey is what he calls absence of fear
by investors. He cites the Nasdaq 100 volatility index <.QQV>
and the Chicago Board Options Exchange's Market Volatility
Index <.VIX>, which gauge how jittery investors are.
"The fear gauge is so low. The QQV is at 37, which is
ridiculous," Hickey said, "It shows a complete lack of fear and
that means that the stocks will go down."
He said it's hard to give an exact target for the
tech-laden Nasdaq Composite <.IXIC> or the Dow Jones industrial
average <.DJI>, but adds he is sure the market will get hit.
Christmas sales were the worst in more than 30 years, he
said, adding Wal-Mart Stores Inc. <WMT.N>, Target Corp. <TGT.N>
and other retailers had lower-than-expected sales in December.
January was also shaping up to be dismal, he says.
"Inventories of PCs, cell phones, autos, game consoles,
radio-controlled cars and all the other electronic gadgets that
did not sell in December at Best Buy, Circuit City, Tweeter,
Wal-Mart, Ultimate Electronics and Radio Shack have begun to be
worked down," he wrote.
DOW 5,000
Hickey plays the market's rebound rallys on the long side,
buying up select software companies after they get whacked. Now
he is out of stocks, apart from owning stellar performer
Newmont Mining <NEM.N>, the No. 1 gold producer, which had
soared as safe-haven bullion skyrocketed.
And whatever you do, don't ask Hickey for his long-term
targets for the market. You will not like the answer.
"The Dow is going below 5,000 and the Nasdaq to 600 or 700
or below. But that's a long-term forecast," Hickey said,
referring to the key gauges, which at the very top reached
11,750 and 5,100 in early 2000, respectively. Only at these
drastic levels will he find value, he said.
((-- Reporting by Haitham Haddadin; Editing by Leslie Adler;
Reuters Messaging: haitham.haddadin.reuters.com@reuters.net;
646 223-6114))
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