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

To: Donald Wennerstrom who wrote (53284)	8/17/2011 3:03:55 PM
From: Jacob Snyder	3 Recommendations Read Replies (2) \| Respond to of 95601

Sorry, Don, but I find a lot to disagree with, in that Big Picture: 1. <debt ceiling deal was reached> No, they actually agreed to nothing specific. Nothing is fixed. Until they agree to specific tax increases, and specific spending cuts, that take effect now, it's all smoke and noise. The "cuts" they talk about, are actually just smaller increases in spending, and only for the vague and distant future. The culture of fiscal irresponsibility in Washington, is still firmly entrenched. 2. Overall, the last 2 years has been a weak recovery, for employment and wages. There is nothing to indicate this is getting any better. 3. <the strongest argument for a likely second recessionary dip seems to be that the stock market has dropped> No. There is very clear data, indicating economic growth is slowing, in the U.S., Europe, China, and credit conditions are now tightening. And the Keynesian "fix" done during the last recession, isn't an option now,so there will be nothing to cushion the downside in the next recession. 4. lower oil prices since April, is a continuation of the pattern we saw in 2008. Gasoline over $4/g causes demand destruction, which lowers prices. And 109$/b brent crude is only a "low price", in comparison to recent even higher prices. 5. <Johnson & Johnson...can issue 10-year debt for under 3%. Those proceeds could then be used to buy back stock that sports a dividend yield of 3.6%.> Dividends and stock buybacks should come out of cash flow; any other source is unsustainable, and evidence of poor management. Certainly, JNJ should lock in current low interest rates, for their LT bonds. But using borrowed money to do stock buybacks is a really goofy idea. And the point he's making, about the relative yield of stocks and bonds, is only true for AAA-rated companies (all 3 of them). The spread between junk bonds and U.S. government bonds is widening. 6. He is saying: stock prices in April were fairly valued, and the decline since then is due to irrational fear. He, and eventually most investors, are going to have to reframe. April stock prices were artificially high, caused by QE2. We should be measuring stock prices using PE10, and using the 2009-2011 range.