Saturday, July 18, 2009

Barron's Bulls vs. Barron's Tech Realist

Today's Barron's has two articles worth comparing. Streetwise says to Expect a Rally as Waders Dive In;
Wary investors may be goaded into taking the plunge

In recent client visits, for example, John Roque, a managing director and chief technical guru at WJB Capital Group, says customers "are pretty bearish and skeptical of the rally." They point to the still-poor economic fundamentals, like unemployment levels, and increased taxes and regulations, among other worries, that led to the March low. . .

It's bullish when bearish sentiment meets with improving market internal indicators, Roque adds. In this most recent mini-pullback since June 11, indicators such as the 10-day moving average of NYSE new highs and the percentage of NYSE stocks above their 200-day moving averages "broke out" to new highs, even as the S&P 500 failed to surpass the June 11 high. Additionally, the NYSE cumulative breadth made a new 2009 high.

And Doug Kass, who has had a hot hand over the past year, says:

In coming months, Kass says the fear of being out will overcome fear of being in.

OK. The message is that people should buy Monday morning to get in ahead of the crowd. Then there's a data-driven column, You Call This a Recovery? Not So Fast, about the hot tech sector:

Not to be a killjoy, but the thinking three months ago was that this was the part of the year in which we would start seeing signs of improvement in the economy, particularly in sales of technology goods. Based on the first batch of June-quarter earnings reports, I'm not encouraged. . .

But I'm not convinced the recovery is upon us.

For starters, there is simply no evidence yet that enterprise tech spending is picking up. Intel, as noted, indicated that there has been no rebound yet in corporate PC buying. . .

The author, Eric Savitz, quotes the CEO of a small tech company:

"During the June quarter, we saw spending restrictions across many segments of our business as a result of the economic downturn, reflected as sluggishness to place new orders. This phenomenon increased in intensity toward the end of our first quarter, [in a way] similar to the turbulence we experienced at the end of our fiscal 2009 third quarter , as there was a renewed reluctance among prospective and existing customers to commit to major capital expenditure." . . .

More disturbing, Nokia 's (NOK) revenue slid 25%, year over year, while profits tumbled 65.5%. . .

This far into an economic banana, it's disconcerting to find the strongest sector, the stocks of which bottomed 8 months ago, surging with such poor fundamentals.

Forgetting all the guessing about whether investors/speculators will bid up the available shares of stocks, one has to wonder whether all the models that led the Administration's "dream team" to predict a peak unemployment rate of 8% are inadequate to the current economy.

Copyright (C) Long Lake LLC 2009

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