Jason Kelly

Well, all those good feelings on Wall Street may have proven a bit premature after all. How uncharacteristic for the analysts to have gotten a little ahead of themselves, inflated a few earnings projections, dramatically called for the end of the bear market. In my years of watching this game, I've hardly ever known the analysts to be wrong.

Why just last week we were told that it was time to pile into stocks again. Never mind that the rally was rather well along its path and that a few cracks were showing in the earnings reports. Never mind that the great spending uptick everybody said would have begun to materialize by now has not or that the companies whom the spending was supposed to benefit said they don't see it happening. And please ignore the increasing unemployment rate.

As of April, May, and June, the arrows had turned nowhere but up in the land of technology, which is where I ply most of my investment dollars. I was called a fool to have sold my shares of Intel and Sun into the strength of this rising. That they had both reached P/E ratios greater than 50 was not relevant. The war was over, the second half was around the corner, and if we could get through summer without hitting that summer slump, fall would be gravy.

That has turned out to be a classic big IF. Stocks are going the other way. Intel is below $25 and Sun is around $4.50. The emotions now seem primed to switch from "I'd better get into this rally and make up for lost time" to "I'd better get out of this rally while the gettin's good".

The latter was my thought about a month ago.

I never get it perfectly right, but I generally get close. I bought Intel at $14.50 and Sun at several prices averaging to $2.90. I sold them both a little too soon at $21.50 and $5.10 respectively, and am keeping an eye on lower prices. I will buy both again, probably when the news is lamenting that technology just can't seem to get its traction. "Things looked good back in May, June, and early July," they'll write. "Intel even doubled its second quarter profits. Unfortunately, it wouldn't say that the economy was better. Then IBM refused to say that the economy was getting better. Now it looks to us that the economy isn't better."

It's not a bad idea to listen to the companies you intend to buy. When they say that the economy is not improving quickly and that spending is not picking up, they probably mean it.

All this madness is par for the course and a blessing, actually. It enables smart folks like you to chuckle and sell when the headlines are good, then chuckle and buy when the headlines are bad. When I bought Intel at $14.50, it was the end of the chip era -- according to the news. When I bought Sun at $2.90, it was the end of the workstation. When I sold each, it was the beginning of an Intel chip upgrade cycle and a Sun Linux revolution.

I think soon we'll be back to a hopeless future and tantalizing prices. And then we'll buy.

Posted by Jason Kelly at 11:36 AM Japan time
email this | permanent link | archives | label directory