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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets! -- Ignore unavailable to you. Want to Upgrade?

To: Ian@SI who wrote (3028)	10/24/1997 10:50:00 PM
From: Defrocked	Read Replies (4) \| Respond to of 10921

I would like Threaders to consider the following thoughts for the purpose of general discussion. Recent market activity has induced me to buy Jan OEX puts and reexamine my bullish outlook of the last three years. FWIW I have consistently lost money on put protection and, as such, my track record in this regard is dubious. I was, however, very bearish throughout 1987 and have begun to see disturbing similarities. My puts will allow me to remain fully invested on a cash basis with no margin. If the market returns to all-time highs I will be very happy to lose my put premiums and leave money on the table. But I advise caution here and encourage discussion in order to, possibly, return the insights I have received from the many knowledgeable posters on SI. (1) A 1000 point drop in the DJIA is not inconceivable and should be viewed as a possibility. After all, such a decline would only return us to Jan'97 levels and has happened many times in the past on a percentage basis. (2) A 1000 point drop would not have to occur in one day. But let me describe such a scenario. Sunday evening Hong Kong drops another 10% or more followed by same in Europe. A 10% decline in the U.S. is 770 points which would may have to be distributed over two days due to "circuit breakers". The overnight hand wringing could push subsequent selling even further. Alternatively a bearish trading pattern like this last week could continue for several weeks. That either situation is plausible should be cause for concern or prudence. (3) The timing of the Swiss Central Bank study on gold sales was the worst public comment I've seen since James Baker in 1987. Given market nervousness, they showed incredible stupidity releasing a report that further eroded a perceived "safe haven". Traders now are unsure if the $16 drop Friday was due to the study or to the Bank of China selling gold to defend Hong Kong. (4) Few governments have successfully pegged their currency after the market decides otherwise for them. The Hong Kong authorities may introduce further unwanted volatility into the market rather than helping it. (5) A bond market rally has resulted in a rally for stocks almost every time during the last 3 years except for this week. This suggests that profit taking and flight to quality is underway. (6) Credit swap spreads have reportedly expanded by 50 to 75 bps. or more during the last 2 weeks again illustrating a flight to quality. (7) CBOT grain prices followed the stock market on Friday suggesting liquidity concerns by speculators. (Grains ended up before further DJIA erosion at the close.) (8) Nervousness still exists over the Japan banking, insurance and property sectors. This uncertainty would be heightened by further HK declines since 40% of foreign debt in HK is held by Japanese banks. (9) I could be totally wrong and hope I am. But I have traded, observed and studied many markets for many years. I find it troublesome that so many SI Threaders are fully margined and have no cash for further allocation to obvious bargains. I cannot explain today's market activity or such low current values for AMAT,CPQ,INTC other than to stand back, revise my outlook and advise caution to so many posters that I have engaged in dialogue and enjoyed reading. (10) The purpose of these comments is not to provoke fear or panic. I am very long Tech. stocks. I don't want or mean to sound pompous, officious or crazy. And of course I run the risk of sounding like a complete fear-stricken idiot to many serious Bulls. However, my investment strategy is also long term. I bought puts because I hate giving my profits back to potentially stampeding short term investors. I had to get this off my chest tonight. I must retire now and will check replies, if any, tomorrow. Please avoid the SI tendency to shoot the messenger. I'll check back over the weekend when family time permits. P.S. I do not adhere to technical analysis but traders that do have the 200 day M.A. in sight which could be easily broken on Monday or next week. A herd of elephants could happen. P.S.S. For the market to rise I think its essential that AMAT report a great outlook and PPI/CPI are well behaved.

To: Ian@SI who wrote (3028)	10/25/1997 2:38:00 AM
From: Cary Salsberg	Read Replies (4) \| Respond to of 10921

Ian, RE: "...how probable is it that the prices for EGLS, LRCX, SVGI or AMAT will be seen before / after the AMAT call?" AMAT went from 59+ to 22+ to 108+ (pre-split) while its bookings went from 1.3B to .6B to 1.2B. This is tremendous price sensitivity to orders! Orders depend on the customers and they don't coordinate to provide a smooth, increasing order series. Prices have the potential to go anywhere. I think it is more likely that the prices will be reached before the CC than after. There is tremendous downward momentum so a further 10-30% fall before the CC is probably 50%. I believe that AMAT will support its fellow semi-equips and give positive guidance for 98. I think the probability of positive guidance is 65%, so a fall to my prices and possibly significantly below has a probability of 35%. I am positive about the CC because I believe there has been skepticism about the recovery from the very beginning but AMAT's predictions and the group's meeting/beating them have outweighed the doubters. Since the August CC, there has been no guidance and the reasons for concern have lingered and have been exacerbated (DRAM lower, techs missed EPS, SE Asian markets REACT to currency problems). I believe that semi-equip sales will continue to climb the "wall of worry", that AMAT's CC will be positive (65%), and that prices will stabilize and start rising again slowly and gradually. I still want to wait because the 35% scenario could get very ugly. Cary