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Technology Stocks : Creative Labs (CREAF) -- Ignore unavailable to you. Want to Upgrade?

To: Curbstone who wrote (8403)	1/18/1998 3:42:00 AM
From: Douglas V. Fant	Respond to of 13925

Mike, I do not follow the Yahoo Threads, but I disagree at least as to the stock itself being manipulated- the daily volume is too high. And the caution because of events in Asia I also believe to be valid. If we write off a little debt in Indonesia or Korea, no big deal in the grand scope of the World economy. That's because the big issues in Asia are either a continuing failure to clean up the Japanese banking system; or a devaluation of the PRC's currency, the Yuan I believe. Japan is the second largest economy in the world, so we need a financially healthy Japan to "lead the pack" in Asia. As I noted a couple of weeks ago, one solution is to use the pension funds to recapitalize the banks- I do believe that the MOF in Japan spoke recently ( I posted the note) of selling preferred stock in banks and allowing pension funds to buy this preferred stock. That's good. Now a PRC Yuan devaluation would impact Hong Kong and probably send Hong Kong's market south, with the attendant risk that other Asian markets would follow- so that's more of a financial risk than a true economic risk but would still result in down markets. If neither happens over the next six months, then we're in good shape. If either happens over the next six months, then we'll take 18 months to dig ourselves out of the hole. So CREAF reflects this risk premium, and the perpetual fears that their products will be designed out of PC architecture.... But still you need to look at the truths of the market. Right now almost all tech/telecommunications stocks have been slaughtered. Yes the world economy will slow down a bit, but does that justify a 50% correction in most tech stocks? I think not. One look at growth rates vs PE's suggests that small/mid cap stocks are the place to be. Go over and check out the small/mid cap stocks that Joe Dancy and I list on our site called the Lonestar Growth Investor. Even if you half some of their projected earnings, the stocks are still cheap! So I'm betting mainly on tech stocks right now like CREAF and like those listed at LSI. Now my guess is that these stocks will not stampede forward until the full picture of Asia's impacts on earnings vecomes better known. That will take a few months. But toward the end of summer I would not be surprised to see techs stocks stage a strong rally. Even if Asia womps earnings down a bit- there is not a whole lot of downside left in tech stocks versus the potential upside if the Asian issue turn out not to be "life threateing" to the world economy. If you have time go read today's issue of The Electronic Times, and open the article about SEMI and equipments sales in 1998. Even the area which should be most affected by the Asian downturn, semiconductor equipment sales- well even the most pessimistic prognosticator suggests that 1998 sales worldwide will exceed 1997 sales. Some say by 15%- some say not by much only 2-3%, butnoone is talking a contraction. As to large caps, I bet that they move sideways to down this year since they do not offer equivalent value.... Sincerely, Doug F.