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Technology Stocks : Veeco Instruments-Who? -- Ignore unavailable to you. Want to Upgrade?

To: Alan Hume who wrote (1428)	8/22/1998 7:36:00 AM
From: Stitch	Respond to of 3069

Alan, <<So where does his money go, more than likely direct into stocks or an investment fund. What I am saying is that so long interest rates remain low, there will be enough fuel for the fire.>> To be sure liquidity has been the reason the market has shrugged off the Asian contagion, deteriorating earnings, and a host of other signals. But toss Clinton shenanigans, embassy bombings, the U.S. response, Russia tanking, hedge fund raids on the HK$ and the response with intervention, a growing awareness of U.S. bank exposure to derivatives, and tech downgrades into the mix in the space of two weeks and pretty soon liquidity drys up. Stuffed into mattresses even. It will be back though. I personally think we may be in for a healthy correction. I am not a perma bear. Just a rather exhausted Bull that needs a break. Best, Stitch Best, Stitch

To: Alan Hume who wrote (1428)	8/22/1998 8:44:00 AM
From: Zeev Hed	Read Replies (1) \| Respond to of 3069

Alan: historically the DOW has never moved to a lower plateau. It has periods of growth, From the first peak of 1000 in the Dow in 1966, the dow traded in a range bound by about 582 to 1000 between 1966 to 1983. This is a very long time. We could easily go into a broad trading range of 5000 to 10,000 on the dow for 10 years. Until very recently, I believed that Japan will step away from the abyss and thus will not plunge the growth engine of the world (Asia) in a deep recession and possibly a depression, I no longer think this is the case. Under a scenario of continuous growth in the consumer society, yes high valuations are possible (S&P selling at 27 times earning) if interest rates are low, because of competing returns and the assumption that stock's returns grow while bond return stay constant. Now, there is a possibility that corporate earnings will actually decline and thus you could see PE trending to the lower part of the range (I am guessing 10 to 13 times earning) at through in the market. It is all a question of confidence, the break of 5.5% in the long bond indicates to me that confidence in equities is declining and thus a lot of money is going into the bond. Of course, once the interest rate on the long bond becomes very low, rallies will occur to readjust the relative rates of return. But one thing must be taken into account, once the momentum going for stock has been broken, the justification for extremely optimistic valuation of stocks disappear. What the market seems to be saying is that we have an actual recession in our future (within a year). Note that the transportation average has broken the January lows and are within 100 points of the low set last October, this while oil is a good 40% lower than what it was at those October lows. That is typically a sign that investor believe that the transportation's earning are going to come down despite the much lower costs, namely, less goods and people moving, a recession. A recession means lower earnings and failures of some weak companies. In other words, a real bear market. My current target is 7200 on the Dow, for technical reasons, and this would be a "mild" bear market. The reason for only a "mild" bear market is the fact that interest rates are low, if interest rates were now going to go up with a potential decline in earning, I would have had my sights on 5000 on the Dow. Mind you, a decline of 25% on the Dow would mean that some high fliers like YHOO and AMZN might (and I say might) end up at 1/5 of their current prices. As for VECO, it could go down to 1 to 1.5 times book and 10 times earnings. Zeev

To: Alan Hume who wrote (1428)	8/22/1998 12:22:00 PM
From: Carl R.	Read Replies (2) \| Respond to of 3069

Some of your statements are very telling. In one statement you say that: "Due to very low inflation in most industrial countries, Joe average is looking for more profitable returns on his money than maybe th 3% fixed interest rate the banks will offer him. So where does his money go, more than likely direct into stocks or an investment fund." Indeed this is a good explanation for how we got where we are. But does it tell the future? You neglect the fear vs. greed aspect of the stock market which is ever present. The last 10 years has clearly been dominated by the greed factor, which you clearly state. But if the stock market actually begins a bear cycle, then how long will investors tolerate negative returns? After all, the only reason they are in equities is because they expect greater returns. Once that expectation ceases to exist or the risk becomes apparent (i.e. fear), will they remain? In the last several years we have seen dips followed by the return of small investors who have driven the stock market to new highs. Clearly those highs are out of line with historical valuations even accounting for the lower inflation and interest rates. This is only natural, so long as the confidence exists in rising earnings, growth, and new highs. Dips are bargains. But eventually we will have a recession. And eventually we will have declining corporate earnings. On individual issues when earnings have declined we have seen precipitous declines. In a recession we would see declines in earnings that affect many of the larger companies. If you are suggesting that in the face of declining earnings investors will continue to drive up PE multiples so as to keep stock prices rising, I have no doubt you are mistaken. My question to you is, if the stock market starts down, how long until the small investors stop allocating all their 401K money to equities? I have no doubt that the small investors will probably end up holding the bag, as they usually do. This could happen in the following way: First the smart money withdraws, leading to a first dip. This bring back life to the big time shorters, which makes subsequent rises difficult. Sequential down quarters cause small investors to begin putting their money elsewhere, the decline gets worse, and then the decline accelerates. Finally the bottom would be marked by the absence of the small investor. I am not forecasting this right now, but I do believe it will happen some day, and it could happen now - in fact I believe it will happen at the beginning of the next recession, whenever that is. I remember the cycles between 600 and 1000 during the 60's very well. During that period the best way of determining tops and bottoms was odd-lot activity. In other words, if small investors were active, it was a top. If they were gone, it was a bottom. Indeed low interest rates are conducive to rising stocks, but real interest rates (interest rates minus inflation) are still extremely high. Thus interest rates do provide a good investment alternative even at the current time, and I believe that given fear, investors may well prefer less return (but one still greater than inflation) to an investment that is yielding negative returns. Good luck, Carl