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Technology Stocks : Jabil Circuit (JBL) -- Ignore unavailable to you. Want to Upgrade?

To: Asymmetric who wrote (4596)	10/9/1998 3:53:00 AM
From: kolo55	Read Replies (2) \| Respond to of 6317

Interesting time on the Cramer piece. He posted just after noon today ET, very close to today's lows, and before a significant rebound in the market. I don't think anyone can really time the market well. My strategy is somewhat simpler. For the accounts I invest in, I have tried to select stocks that carry less than the usual market risk. The major factors influencing these stocks should be sector performance or individual company performance. For example, the ECM sector has gotten hammered far worse than the overall market since last fall. As a sector, it has already had the exuberance pounded out of it. And within the ECM sector, I find that Jabil has built a very compelling visible growth case for the next 12-18 months. It is possible that an overall market collapse will drive JBL down in spite of higher revenues and earnings, but this isn't a high probability case. I also have sought out stocks that have very little market risk. They will go up, or down, based on whether the company executes their business plan. This is generally because they are trying to introduce a new product or service. Oddly enough, many people consider these stocks speculative, and this is true. But if one can choose a number of these stocks wisely, then the resulting performance will be due to good selection of companies, and not due to stock market trends. Finally, a few words on 1987. Most people don't understand what caused 1987 crash. The Dow dropped 27% in two days, after having already declined 20% in the two months preceding the crash. No other drop this century is close to this. And there are good reasons. The drop was artificially created by unregulated new derivative markets. Most people don't know that Wells Fargo sold net over $10B worth of stock equivalents that Black Monday, and Fidelity sold over $2B. In those days, this was a ton of money. The rest of the financial community were big buyers net. So why did Wells Fargo sell so much? Two words "portfolio insurance". This created a death spiral case for stocks that Monday. Now I know that in December that year, the market tested the lows again. But the sharpness and severity of the October crash was due to poorly regulated markets that were subjected to new instruments. This may not be politically correct ideas to some of the right wing extremists, but in my opinion, only a fool invests in free markets. Totally free markets tend to be highly unstable, and subject to misuse and manipulation. Instead, we need well regulated markets. In a way, the Asian crisis is an example of this. Many countries in the region dropped much of their regulatory controls, and at the same time were being subjected to the influence of new instruments for which no regulations had existed before. For small emerging markets, this was like playing with fire in lake of gasoline, with kegs of gunpowder floating on the surface. As soon as the gasoline vapors catch fire, its only a matter of moments before the really big explosion. If derivatives could cause our markets to become so unstable, imagine the impact new financial instruments have had on smaller markets. In our country's markets, since the 1987 crash, we have instituted quite a few types of controls to prevent the death spiral we saw then. Furthermore, we don't have rising interest rates like we saw then, exasperated by Reagan's enormous deficit spending (about 5% of GNP). Today interest rates are going down, although real interest rates are still high historically. The federal and state governments are exerting a significant fiscal drag that could be reversed at any time, if necessary. In short, the US has never been so prepared to avoid an economic slowdown, or a financial panic, since the early 60s. I think Cramer's comments are way off base, and particularly childish, and so far, very poorly timed. Of course, he's not a long term thinker; he can and could change his mind tomorrow at the slightest tide change. Paul