Yep, I agree that there is a lot of risk out there right now.
I think that the fed WILL raise rates by 1/4, but I'm not sure how the markets will take it. Everyone has been holding their breath waiting for inflation to show up, and the rate hike will help relax some of the clenched colons. This would partially offset the initial panic if rates do move up. On the otherhand, I still think we're overdue for a 1000 point drop in the dow.
Greenspan has been taking an increasing amount of international abuse because he has failed to control the US's newly found bubble economy. We've got full employment, skyrocketing real estate prices, historically high PE's, and euphoric consumer confidence. Something has to be done to allow earnings to catch up to current growth stock valuations.
I've trimmed back all my high tech stocks except for ADBE and bought more conservative stocks. I've bought some mining stocks which are doing quite well and I've moved most of my 401K out of mutual funds. I've got quite a wad to spend if the fit hits the shan.
That's my bet.
If you will examine the long intc chart carefully, it becomes evident that intc has always historically had catch up periods, this is one of those, right before the introduction of new chip, much like the period before pentium introduction. As for a nasty fall, we've already had one, thanks, down from 103 and change.
You seem to forget that intel's earnings are going down. Earnings are not catching up to the price of the stock! If you look at analysts projections for the last 9 months, the estimates are down by 50% while the stock is essentially flat. It doesn't take alot of intelligence to see that if earnings don't improve the stock is due for a nasty fall.
I agree with you that there is certainly risk present in this market, esp. with the May 19 fomc meeting looming over the
market. The market should become increasingly nervous, i.e. volatile, as we draw closer to this meeting. Given the status of the
asian markets, and given the mixed to higher economic numbers coming in now, I do not believe the fed will hike here. If you look
at the status of stocks like intel, it has gone nowhere since october, it's earnings are catching up to the present stock price
and it's run will probably be later in the year, rather than now like adbe and msft,etc. The scenario of higher rates has loomed
over the markets since 1995, and outside of many days like monday, the overall performance has been stellar. Hang in there and
good luck, it is still the only game in town.
I am not particularly concerned about money running to 5.5% short rates, but what concerns me is the fed wishing the market would stay flat so as not to stimulate the economy further. What the fed wants they can probably get. My guess is that returns on stocks in this environment will be lucky to make 5.5% with the risk of a downside event obviously present. Any thoughts on this?
Good luck to all investors, traders.
You are right, making money is 50% research and 50% luck, if you have a short market horizon... if you have a longer
horizon, all you have to do is to pick the dominant companies in any industry, buy them and forget you own them, unless you want to
increase your profits by selling and buying back covered calls and so on. Market action like yesterday's debacle makes it imperative
to operate as a contrarian...so what if the fed raises rates by .25% of a point, is all the money going to come screaming out
of the market to get at those great 5.50 bank rates? I don't think so.
I had similiar thoughts with the Adobe PE being at about the same level as the S&P 500 average PE, however, I would like to see a stronger new product line to feel the stock was less risky than the market as as whole. By the way - good post.
I accept the fact that you are operating out of a Economy 101 textbook, but it appears that you are reading the chapter on bonds instead of the chapter on stocks.
Determining the value of a stock is an art, not a science. There are hundreds of measurements that must be considered and weighted according to the situation.
If a simple calculation determined the value, why does everyone put so much effort into the game, and why do extremely educated and experienced investors often make tragic mistakes? Making money is 50% research and 50% luck. Does anyone who's been investing for more than 15 years disagree?
In my opinion, the primary reason ADBE has been doing well is that it is a better value than most of the market. As the bull runs out of steem, money managers will be looking for safer places for thier cash. High book values and low PE's will become increasingly attractive, especially to the rich who don't need to take high risks.
Article in the 4/27/98 issue of IBD pertaining to ADBE, "Adobe Pictures More Sales To Photo Nonprofessionals". States that ADBE plans to announce 4/27 that it is moving more into the consumer market, which will push its short-term growth; long-term growth will be boosted by a move by other company divisions into high-end business markets.
Why dont you guys exchange e-mail addresses, take you childish
exchanges and duke it out in private. I think I speak for a lot of folks when I say you are dragging this board down to the level of the Jerry Springer show. Same goes for anybody else who feels the need to resort to racist comments and base obscenities.