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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: SI User who wrote (40550)	10/4/2008 1:45:33 PM
From: Jacob Snyder	2 Recommendations Read Replies (2) \| Respond to of 95639

<Exhaustion?> There is an immense amount of cash on the sidelines. I am 100% convinced this cash will come back into stocks. I am very uncertain when that happens, or how low stocks go in the meantime. My guess about what will put a floor under stocks: 1. Non-financial corporations are sitting on lots of cash. Their balance sheets are quite good (government, financial corporations, and consumers have terrible balance sheets). As economic conditions get worse, strong corporations will start buying their weak competitors, or distressed assets in new niches. Strong = lots of cash and no debt, and/or a secure cash flow with access to credit at reasonable terms. When stock prices get low enough, buyers will emerge to take companies private. The expectation that somebody might take a company private will prop up stock prices. I think we will be seeing a wave of consolidation in biotech, tech, and in all commodity and cyclical industries. 2. Dividends. All the sidelines cash would like to earn something. At some point, people will start to say: "I can earn a 7% dividend on Pfizer, 5% on Merck, 5% on GE. Those corporations have better balance sheets and better cash flows than the US Government, and their dividend is higher than Treasuries will pay me." This will, sooner or later, become a positive reinforcement loop: as more people buy these high-quality high-dividend stocks, the stocks will stop going down on market dips, and more people will become willing to buy them. 3. Valuation. At some point, value investors with cash (that is, people who though asset prices were too high last month) will say: These companies are not going bankrupt. They are now available at a PE (or P/S, or dividend yield, or price/cash flow) not seen since 2002 (or 1998, or 1980). If you are fully invested today, the important things are: don't get overleveraged, don't get impatient, and don't get discouraged. Just sit tight and do nothing. At the bottom, there will be discouraged people selling out, scared people (who will put their money into gold as gold peaks) and people having margin calls. If you still have some cash, or are willing to use a small amount of margin (key word: small), you'll make money eventually by buying quality companies at current prices.