With last night’s announcement from Dell, the streak remains alive. Intel, Microsoft, eBay, AOL, and EMC – big cap tech has not been the place to make money for some time now.
Despite the naked evidence before your eyes, too many traders indulge their rosy memories of days gone by. How many times have we heard over the past 5 years that this will be year for the large cap tech stocks? Sounding like the Verizon commercial – yet another large cap stock to be avoided – more market watchers and stock analysts continue to incorrectly ask: Can we buy them now? How about now? Now?
Alas, it is still not meant to be.
We could merely guess –and all these calls for buying big cap tech stocks in the face of declining stock prices, decreasing P/E multiples, and rapid commoditization of their products have been nothing more than blind guesses. However, we find it is much more advantageous to wait until a given stock, sector, index or market proves itself before leaping into the fray.
This is an admittedly humble approach (surprised?). We acknowledge that the future is unknown, that us Humans are particularly bad at conjecturing what lies ahead, and that most people on Wall Street refuse to acknowledge this.
We confess to having no idea what the hell is going to happen even next year. Will the GOP lose control of Congress? Will bird flu kill millions? Will Iraq get even worse? And what about Katharine McPhee – can she win it all on American Idol? We own up to having no clue about any of these burning issues.
And neither, we must tell you, does anyone else.
So rather than merely speculate, we would rather allow a given sector to develop on its own. When we got bullish on Oil in December 2003, crude had broken out over $30, and was heading higher. Similarly, our calls on US Equities post Tax cut in 2003 wasn’t until the technical picture improved. We got bullish on Japan in 2004 when it was apparent that it had started to work; Those who were merely “guessers” had 15 years to get it wrong. Our bullishness on Gold was for similar technical reasons – after a long period of under performance it was starting to work also.
Regular readers are all too familiar with our expectations for how this bull market ends – an ugly and violent death – but as long as the trend remains up, we are loathe to fight the tape and get short. Indeed, we still are not short any US equities, although we have some in the money VIX options and a few Q puts – as hedges.
While we may wax eloquent and muse about what may come eventually, our investments stay on the same side of the market as the overall trend – or at worst, in cash. Once we see proof positive that a stock, sector or market has shifted direction, then we can jump in.
Until then, big cap tech is best avoided . . .