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Yeah, I know...it's ridiculous. We currently estimate what the rev's from royalties will be, then adjust that number the following quarter. So now that it's getting harder to estimate due to more CDMA growth (W-CDMA etc)...we're saying we may stop with the estimates, therefore the FIRST AND ONLY QUARTER we make this change, that rev won't be there, and from then on, we'll report acutal royalty revs. It has no impact on past or future yearly numbers, just the one quarter the change is made.
Ridiculous, but the street wants it lower anyway I'm sure.
QUALCOMM Increases Financial Guidance for Fourth Quarter and Fiscal 2004
Friday September 17, 9:01 am ET
Company Reviewing Ongoing Accounting Method for Royalties
SAN DIEGO, Sept. 17 /PRNewswire-FirstCall/ -- QUALCOMM Incorporated (Nasdaq: QCOM - News) today updated its financial guidance for the fourth fiscal quarter and the fiscal year ending September 26, 2004.
The following statements are forward looking and actual results may differ materially. Please see the description of certain risk factors in this release and QUALCOMM's reports on file with the Securities and Exchange Commission (SEC) for a more complete description of risks.
All of the share and per share amounts in this release have been adjusted to reflect the two-for-one stock split in the form of a stock dividend that was paid on August 13, 2004 to QUALCOMM stockholders of record on July 23, 2004.
Fourth Quarter Fiscal 2004
Based on the current business outlook, we now anticipate fourth fiscal quarter revenues excluding the QUALCOMM Strategic Initiatives (QSI) segment will increase 60-62 percent year-over-year and increase approximately 4-5 percent sequentially. We anticipate diluted earnings per share excluding the QSI segment of approximately $0.28-$0.30 in the fourth fiscal quarter, compared to our prior estimate of $0.27-$0.29 and to $0.14 in the year ago quarter. We also anticipate that total QUALCOMM revenues in the fourth fiscal quarter will increase by 60-62 percent year over year and increase approximately 4-5 percent sequentially. We anticipate total QUALCOMM diluted earnings per share of approximately $0.28-$0.30 in the fourth fiscal quarter, compared to our prior estimate of $0.26-$0.28, including an estimated $0.01 loss per share attributable to the QSI segment.
These estimates assume shipments of approximately 38-39 million Mobile Station Modem(TM) (MSM(TM)) phone chips during the quarter compared to our prior estimate of 36-38 million units. We anticipate approximately 46 million CDMA phone shipments during the quarter at an average selling price of approximately $210, compared to our prior estimate of 44 million phones and a $206 average selling price.
Fiscal 2004
Based on the current business outlook, we anticipate that revenues excluding the QSI segment will grow by approximately 33-34 percent year-over- year. We anticipate diluted earnings per share excluding the QSI segment of approximately $1.09-$1.10 for fiscal 2004, compared to our prior estimate of $1.08-$1.09 and to $0.71 in fiscal 2003. We also anticipate that total QUALCOMM revenues will grow by approximately 33-34 percent year-over-year. We anticipate total QUALCOMM diluted earnings per share of approximately $1.08-$1.09, including an estimated $0.01 loss per share attributed to the QSI segment for fiscal 2004, compared to our prior estimate of $1.06-$1.07, including an estimated $0.02 loss per share attributed to the QSI segment. We anticipate the CDMA phone market will be approximately 170-176 million units in calendar 2004, as compared to our prior estimate of approximately 161-168 million units. Our forecast of average selling prices for calendar 2004 remains at approximately $209.
http://biz.yahoo.com/prnews/040917/laf024_1.html
edit: Apparently the accounting thing is bad news...it's selling off. lol
TI Increases Return to Shareholders with $1 Billion Stock Buyback and More Than 17% Raise in Dividend
Thursday September 16, 4:30 pm ET
DALLAS, Sept. 16 /PRNewswire-FirstCall/ -- Texas Instruments Incorporated (NYSE: TXN - News; TI) today announced that its Board of Directors has authorized the company to repurchase $1 billion of its common stock.
Additionally, the company plans to increase its quarterly cash dividend by more than 17 percent. TI's new quarterly dividend rate will be $0.025 per quarter, resulting in annual dividend payments of $0.10 per share. TI has paid dividends to its shareholders on an uninterrupted basis since June 1, 1962.
"TI has built leading positions in the industry's fastest growing markets. As a result, we have excellent growth opportunity, a healthy long-term financial outlook and a balance sheet that is the strongest in our history. This success enables us to increase the return we deliver our shareholders with a large stock buyback and a higher dividend," said Rich Templeton, TI's president and chief executive officer.
TI plans to repurchase shares at times and prices considered appropriate by the company. The share repurchase program announced today is in addition to the company's existing plan to repurchase 21 million shares authorized in February 2004.
TI expects the first quarterly distribution of the new dividend will be payable November 22, 2004, to stockholders of record on November 1, 2004, contingent upon formal declaration by the Board of Directors at its regular meeting in October. TI currently pays a quarterly cash dividend of $0.02125, or $0.085 annually.
The company had 1,731,077,633 shares outstanding at the end of the quarter, June 30, 2004.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This release includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by phrases such as TI or its management "believes," "expects," "anticipates," "foresees," "forecasts," "estimates" or other words or phrases of similar import. Similarly, statements in this release that describe the company's business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. All such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those in forward-looking statements.
We urge you to carefully consider the following important factors that could cause actual results to differ materially from the expectations of the company or its management:
-- Market demand for semiconductors, particularly for analog chips and
digital signal processors in key markets, such as telecommunications
and computers;
-- TI's ability to maintain or improve profit margins, including its
ability to utilize its manufacturing facilities at sufficient levels
to cover its fixed operating costs, in an intensely competitive and
cyclical industry;
-- TI's ability to develop, manufacture and market innovative products
in a rapidly changing technological environment;
-- TI's ability to compete in products and prices in an intensely
competitive industry;
-- The timing of customer inventory adjustments;
-- Losses or curtailments of purchases from key customers;
-- TI's ability to maintain and enforce a strong intellectual property
portfolio and obtain needed licenses from third parties;
-- Consolidation of TI's patent licensees and market conditions reducing
royalty payments to TI;
-- Economic, social and political conditions in the countries in which
TI, its customers or its suppliers operate, including security risks,
health conditions, possible disruptions in transportation networks
and fluctuations in foreign currency exchange rates;
-- Availability of raw materials and critical manufacturing equipment;
-- TI's ability to recruit and retain skilled personnel;
-- Fluctuations in the market value of TI's investments and in interest
rates; and
-- Timely implementation of new manufacturing technologies, installation
of manufacturing equipment, and the ability to obtain needed third-
party foundry and assembly/test subcontract services.
For a more detailed discussion of these factors, see the text under the heading "Cautionary Statements Regarding Future Results of Operations" in Item 1 of the company's most recent Form 10-K. The forward-looking statements included in this release are made only as of the date of publication, and the company undertakes no obligation to update the forward-looking statements to reflect subsequent events or circumstances.
Texas Instruments Incorporated provides innovative DSP and analog technologies to meet our customers' real world signal processing requirements. In addition to Semiconductor, the company's businesses include Sensors & Controls and Educational & Productivity Solutions. TI is headquartered in Dallas, Texas, and has manufacturing, design or sales operations in more than 25 countries.
Texas Instruments is traded on the New York Stock Exchange under the symbol TXN. More information is located on the World Wide Web at http://www.ti.com .
http://biz.yahoo.com/prnews/040916/dath026_1.html
Ok but "tossing this super bull scenario around three months ago" makes it sound like I didn't expect more weakness in the summer, and that I expected it to happen right then...I've stated over and over that we could have multiple tests of the may lows through the summer, and perhaps a last (higher) low in early fall, before launching into early '05...the goal was always an early '05 high...and that's 2350-2400 in Jan, perhaps early Feb.
So what's changed to make me believe it won't happen...a drop to 1750?...that was something that in sept '03 I thought could happen after a big rise, but I forgot about it. And when I mentioned that then, it had the look of some past patterns that did exactly that...leave behind an area that I see as significant, rally huge, only to retrace the entire move sometimes up to a year later. It's happened many times in the past, and from there we restarted the bull. So this time, by forgetting about it, I f'ed up the call for the comp rising support at 1870 to hold in July, but it doesn't do anything to the overall bullish scenario. We're still well within what's happened in past cyclical bulls, so I don't expect this one to be any different. We've corrected 18.7% on the nas and 37.4% on the sox...in 96, the nas corrected 18.9% and 35.7% on the sox...the market did ok after that 96 bottom...I think it will this time as well. We all get on streaks sometimes when every call seems to go right for a period of time, but we also all end up missing from time to time to keep our heads in check.
I think we've already discussed our reasons for thinking what we do, and I respect your views, there's obviously a 50% chance you're right and we'll see new lows before we see the jan highs again. So now we just wait and see.
Actually 3 months ago I wasn't super bullish...I think you may be thinking of AJ and Z...that was the middle of June when we were at 1970, I said we'd rise to 2050-60 just prior to the fed meeting, we got 2055, then we'd fall through July towards 1900, which I revised down to 1880 or so, actually the comp rising support from 2 years back which was at 1870...we bounced from that 1870 to 1930 before plunging. That was the part I didn't expect...the breaking of 1870 after that...I completely ignored something I had seen a year before that...see my post below from '03...completely forgot about it and screwed up thinking 1870 would be the launch point...I've already said that. But I've stated since May that I thought we could retest the May lows multiple times during the summer...and that the ultimate peak of this rally would be reached in Jan...not like Z who in June didn't think we'd break 2000, and thought we'd get 2400 in Sept (now). So I missed the downside because of my own f up, but I won't beat myself up over 120 points and a few weeks in time....now we'll see what happens by Jan...my "superbull" strategy as you call it <g>, needs to be given the full time to play out. And yes, this did change my call that the Jan highs would be reached sometime in Oct, I already told you that...I now think that 2153 will be taken in late Nov, early Dec. I've been playing this all along for a Jan peak.
Posted by: mjk
In reply to: wahz who wrote msg# 4804
Date:9/6/2003 7:53:43 PM
Post #of 19360
Ok, thanks...see how in July of 84 (or so) you come all the way back and retrace the entire rally started in about March of 83, that's what I feel would end up happening if we don't get 1700-1720 now. I feel like we're in the upchannel consolidation period after the first big rise...and we're about to start the next big up move, but we should test each of those "significant" areas, 1700-20 being a big one. I feel like if we took off without testing it first, we'd finish the next big "straight up" type of move, then retrace the whole thing right back to 1720. Obviously I think it's possible, cuz I've seen more than one instance of this, I just don't want to see that this time. So obviously 1760 will have to be watched carefully.
Yep nice call. But this is where the two paths should start to diverge. Within the next several days, if we take out the week's highs and 1450 (by about tues-weds we'd be peaking between 1475-1500), the pullback will be relatively shallow...actually I'm expecting about 1975->1875 (ignoring slight overshoots) on the Nas, so whatever the equivalent in ndx points is. So shallow in the sense that we'll go higher, and pullback less...and take about 3 weeks to complete.
So it's decision time right here IMO...I'm still betting this is the start of the next bull phase that takes us to 2350-2400 in Jan-Feb.
Any chance your COTH can hit today...even if it just gets back near the high of day so far at 1914 (1429)?
edit: just saw it hit...thanks.
Nice work lately BTW.
If it sticks, how about the look of the last 3 candles on the sox daily.
Looks like the market's taking it in stride so far...perhaps the drop from 40+ to 25 was pricing in this "drop" to 50% rev growth.
http://yahoo.reuters.com/financeQuoteCompanyNewsArticle.jhtml?duid=mtfh60111_2004-09-09_21-20-28_n09...
Intel sees Web buckling, invests in new systems
Thu Sep 9, 2004 05:20 PM ET
SAN FRANCISCO, Sept 9 (Reuters) - Intel Corp. (INTC.O: Quote, Profile, Research) on Thursday outlined its vision of the Internet of the future, one in which millions of computer servers would analyze and direct network traffic to make the Web safer and more efficient.
Intel plans to play a major part in developing a new Web infrastructure based on computer servers running on its chips.
The current Internet, based on technology developed in the 1970s, will begin to buckle under the weight of millions of new computer users from developing nations, Chief Technology Officer Patrick Gelsinger said at a company-sponsored technical conference.
"We're running up on some architectural limitations," Gelsinger said.
Rather than replace the existing infrastructure of hardware and software code, Gelsinger called for an entirely new network to sit atop the existing Internet, one that could support new Web services, adapt to security threats, and work around sudden bursts of traffic to particular Web servers.
The new second layer would act as a monitoring and directing force that would make better use of the current technology which sends packets of information around the Web.
A model of such a network already exists in the form of PlanetLab, a collection of 429 computer "nodes" in 181 sites around the world. PlanetLab, which is funded by Intel, has won support from 150 universities and corporate research labs, including Princeton, Cambridge, Hewlett-Packard Co. (HPQ.N: Quote, Profile, Research) and AT&T Corp. (T.N: Quote, Profile, Research) .
Such a vision of a new network that relies on Intel-based servers is admittedly self-serving for Intel and not necessarily the same notion held by companies like Cisco Systems Inc. (CSCO.O: Quote, Profile, Research) , whose routers and switches form the backbone of the current Web.
Cisco, for instance, is introducing more intelligent features into its current infrastructure products.
"If the Net grows to 100 billion devices connected to it, our goal is to have a piece of Intel inside in every one of those hundred billion," Gelsinger said, when asked about Intel's business interests in the PlanetLab initiative.
"Plus," he added, "the billions of computers and routers, etcetera, that need to service those hundred billion connections. To us, the continued vital growth of the Internet is our business."
Let's see where this goes now.
They're coming at us from everywhere now, and the market seems to be absorbing them...is that a good sign? <g>
Good to get these forecasts nice and low going forward IMO.
Nope, but I grew up in CA right where the Cowboys did their preseason practicing back in the 70's...cal lutheran college. So we'd go watch practices, get autographs, etc...that was back in the Robert Newhouse, Drew Pearson days...loved 'em ever since. Suffered through some bad times, but there's been some great years too...the early 90's Aikman years were the best.
edit: biggest mistake Jones made IMO was getting rid of Jimmy Johnson...they should have won more Super Bowls with that team. Now at least Jones has realized he isn't the best at analyzing football talent (I think he has <g>)...so he hired someone who is, Parcells.
Best part of this season (for me) will be a trip up to Seattle for the mon night game between dallas and seattle in dec. I'm a lifelong dallas fan, and my childhood friend is a lifelong seattle fan. Him and a bunch of our friends used to come to san diego (I live in sd) every year for the seattle/charger game. Now seattle is out of the chargers division so we can't do that...but this year, we finally got a dallas seattle game, and on mon night! So of course, we've got a whole weekend planned in seattle...12 of us. Which team's tickets are you talking about?
Yep, that's something to look forward to...and every sunday now through Jan...though my wife isn't too excited <g>.
So what's your team? I'm a Dallas fan, though I don't expect them to repeat last years playoff year...tough schedule this year. But they're just a couple more players away IMO...quarterback being the big one. NE should be awesome again.
Thanks again for your post yesterday.
delete
I was reviewing things again this weekend and looked back at this from last sept...I should have remembered it. We never fell below 1783 from that point, finished the huge up, and sure enough, we ended up back at 1750. I'm still unsure if we need one last low back near 1700...but regardless, I'm now extremely bullish looking into Jan. I think after rallying back to the comp 300 day, we either fall back for one last low, probably an Oct low...or we blow right thru it and we don't get anything worse than 3-6% pullbacks until Jan. Both should get 2400 and peak in Jan. And wahz and I have been discussing the sox...I too think its next move up will be nothing short of unbelieveable to most people...I'm thinking if the comp gets 2400, the sox will get something over 600. IMO, the worst case from here would be we go no where for another 4-6 months, then take off, reaching the next peak around Jan 06, but that peak would be closer to 2900. I'd much prefer getting 2400 in Jan, pulling back about 13-14% into late spring to early summer, then taking off again into late '05...gives many more trading opp's.
edit: some of the extremes we've seen develop the past couple months make me really doubt we could drift for another 4-6 months, but I've seen it happen and so have to keep that option open...I'm leaning much more towards that peak in Jan.
Posted by: mjk
In reply to: wahz who wrote msg# 4804
Date:9/6/2003 7:53:43 PM
Post #of 19058
Ok, thanks...see how in July of 84 (or so) you come all the way back and retrace the entire rally started in about March of 83, that's what I feel would end up happening if we don't get 1700-1720 now. I feel like we're in the upchannel consolidation period after the first big rise...and we're about to start the next big up move, but we should test each of those "significant" areas, 1700-20 being a big one. I feel like if we took off without testing it first, we'd finish the next big "straight up" type of move, then retrace the whole thing right back to 1720. Obviously I think it's possible, cuz I've seen more than one instance of this, I just don't want to see that this time. So obviously 1760 will have to be watched carefully.
You have a good weekend too. eom
I think it's just a matter of preference. I guess the key is to know what else to look for when we're bumping up against any of those lines. But I've used log charts on the comp and ndx for some time and they work just fine...kind of like in those 92 and 96 periods. I actually think you could use a combination of both for the best results.
edit: you said lines aren't accurate in log, don't they look ok on the 92 and 96 charts I posted?
Yeah, I know we broke the Nas uptrend on the log chart. Look back at my post, I edited it with two log charts I consider to be from similar periods. The uptrend line provided the bounce and start of the next huge up move, even in log.
Can't we bounce here? I completely f'ed up thinking the comp rising support from '02 would hold...I knew the ndx would be no where near its '02 rising support, but I mistakenly thought the comp would be the dominant index, and we'd rally from its support...obviously I was wrong...I ignored too many other things that should have suggested we had further to go. So now here we are at the ndx support, so will it work this time? I'd like to think so, but we still don't have wahz's 10% on the dow...perhaps we're close enough.
http://stockcharts.com/def/servlet/SC.web?c=$NDX,uu[g,a]daclyyay[d20020902,20040813][pb100!b50!b200!....
IBM Boosts Hiring Forecast, Sees Growth
Thursday August 12, 7:22 pm ET
By Rajiv Vyas
NEW YORK (Reuters) - International Business Machines Corp. (NYSE:IBM - News) will hire 8,800 more people this year than it had previously expected, due in part to growth in its worldwide services business, the company said on Thursday.
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IBM said it would take on 18,800 new employees globally in 2004, up from its previous forecast of 10,000 for this year. The company had later indicated to Reuters that its hiring could be as high as 15,000.
"We do see growth, unlike some of our competition," IBM spokesman John Bukovinsky said.
IBM now expects to end the year with more than 330,000 employees worldwide, up almost 3.5 percent from last year.
It marked a rare expansion for a technology company. Job cuts in the computer industry rose 179 percent to 13,465 in the second quarter from 4,828 in the previous quarter, according to staffing consulting firm Challenger, Gray & Christmas, Inc.
IBM will now have more employees at the end of 2004 than any time since 1991 when it finished the year with more than 344,000 workers. In the mid 80s IBM employed more 400,000 people.
But only a third of those workers would be hired in the U.S., with almost half in Asia -- showing the shift of IBM and other tech companies' workforces to low cost centers around the world.
"I don't think you can draw any particular conclusions from today's news," said Porter Bibb, managing partner at Mediatech Capital Partners, a merchant banker. He said there are many highly qualified technical people in the U.S. who are still unemployed. "A lot of it is offshoring."
Bukovinsky said that most of the hiring in Asia and other emerging countries is because those economies are growing faster resulting in higher demand for information technology rather than offshoring activity.
The hiring also does not include layoffs and attrition numbers or addition to staff related to acquisition of companies and projects.
Still, IBM's announcement could calm some concerns raised by cautious comments made by technology companies like Hewlett-Packard Co. (NYSE:HPQ - News), Cisco Systems Inc. (NasdaqNM:CSCO - News) and chipmaker Intel Corp. (NasdaqNM:INTC - News).
Bukovinsky said most of the hiring is a result of growth in global services and business consulting services. Growth areas included Linux services, consulting and development, grid computing and business transformation services, he said.
One-third of the hiring will be from universities while the rest will be experienced professionals, IBM said.
IBM said it hired 10,000 people in the first six months of this year and another 3,000 in July. It expects to add an additional 5,800 people by the end of the year.
First of all, I see the current weakness (in the economy) as a result of high energy prices, summer, etc. In San Diego, I've been paying about twice what I was paying just a few months ago to keep my lawn watered, the AC running, and the pool running longer everyday...and of course, gas prices don't help though they've come down quite a bit. So I really do see this as a "soft spot" in the economy, not a real downturn that leads to recession. I think the economy continues to grow at a decent pace from here.
That being said, I simply think stocks are undervalued right now relative to other investments. I believe in the Fed model, and that tells me the S&P500 is about 30% undervalued right now. I don't see rates rising that fast, and it would take quite a rise to get the valuations back towards even...and I obviously don't think current S&P estimates for '05 are that far off. The article below describes how I see valuations at the moment...interesting though, it came out July 2nd right before this latest fall...these experts really time things well don't they <g>. But now we've become even more undervalued, and we're oversold TA wise, so we can start to make up for the undervaluation IMO. Obviously anyone can argue that rates are rising and estimates will come down, but like I said, IMO rates will take a while to move up from here, and the slower growth in earnings is already factored in, estimates for Q1 '05 are for 7% growth, where we've been at 20+ for several quarters now. So I'm making some assumptions here, as are people who see a weak stock market in the next two years. I also wouldn't be surprised to see '05 revised up at some point.
This would just provide the first step, and get us towards that 2400 target, but I guess I'd just extend the reasoning beyond this, and also assume that before any significant top is put in for this bull, stocks will become overvalued based on the Fed Model, so to pull in the biggest number of bagholders for the next big fall...and we're not even close to that yet, and I don't see a case where we were this undervalued based on this model, and the top was in. But that doesn't mean we can't go lower first, so I'll be watching this next rise and see if it has any legs.
Revisiting the Fed Model
Friday July 2, 10:00 am ET
By Stuart Chaussee, Special to RealMoney
Remember the Fed Model?
If your memory needs refreshing, here's a quick review. For years, there's been a strong correlation between the earnings yield for the S&P 500 (inverse of the forward price-to-earnings ratio) and the yield on the 10-year Treasury note. The implication is that stocks are fairly valued when the two are equal. When the earnings yield for stocks is greater than the Treasury yield, stocks are undervalued. When the Treasury's yield is higher, stocks are overvalued relative to bonds.
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The last time I read a detailed write-up about the Fed Model was in 2001, right after the markets reopened in the wake of the Sept. 11 terrorist attacks. That weekend, Barron's featured a rarely bullish cover headline: "Buy Stocks Now." The article stated that stocks were then undervalued by about 17%.
The piece actually inspired a rush of institutional buying for about three months. The so-called Fed Model reading -- and Barron's subsequent bullishness -- apparently converted many bearish investors who had dumped stocks immediately after the terrorist attacks. The major indices tacked on strong gains before rolling over and falling further in 2002.
Since then, I have read little about the Fed Model in the financial press, and I thought it would be a good time to update readers on the model -- and its current bullish reading.
Dr. Ed Yardeni "discovered" this model buried in a July 1997 Federal Reserve Monetary Policy Report. The Fed has never officially endorsed it, but it's fairly obvious from the report that the Fed regards the model as a good indicator of whether stocks are undervalued or overvalued.
I devoted an entire book to the subject (Stocks, Bonds and Greenspan's Model) in 2002, and I found the model's accuracy in predicting future stock price movements very helpful. In particular, it does a great job of helping investors decide whether they're better off owning bonds or stocks at any given time. I'll show you how you can calculate the reading on your own, and we'll take a look at the model's reading right now.
The Math Behind the Model
Here's how to calculate the Fed Model reading.
*
Divide 1 by the present 10-year Treasury note yield. That's 1 divided by 4.6%, which equals 21.74.
*
Multiply your answer by the 12-month forward earnings estimate for the S&P 500. Right now, the consensus has that number at $67. So you'd multiply 21.74 by 67, which gives you 1456. That product is the fair value for the S&P 500. (Consensus earnings estimates can be found in Chuck Hill's weekly Market Commentary.)
*
Subtract the current value of the S&P 500 (roughly 1140 as of Thursday) from the fair value. That's 1456 minus 1140, or 316.
*
Divide that answer by the fair-value number. So that would be 316 divided by 1456, or 21.7. Therefore, right now, the Fed Model reading states that stocks are undervalued by 21.7% relative to bonds.
I ran a ton of numbers going back to 1979 to gauge the Fed Model's accuracy in predicting future stock price movements. My study covered a period when stocks were undervalued by about 40% in 1979; overvalued by about 40% just before the October 1987 crash; and overvalued by a whopping 70% in January 2000. Near the bottom of the 2000-2002 bear market, the model indicated stocks were undervalued by about 40%.
In particular, I looked at all the weekly data beginning in 1979 to see how good the model was at predicting stock prices in the subsequent 13-, 26- and 52-week periods. I'll share some of the highlights from the 52-week period study:
# When stocks were undervalued by 15% or more, the subsequent 52-week return of the S&P 500 was about 16%. Positive returns were recorded almost 90% of the time.
# When stocks were within a 5% range on either side of undervaluation and overvaluation, the subsequent 52-week return of the S&P 500 was about 12%.
# When stocks were overvalued by 25% or more, the subsequent 52-week return was a negative 6%.
Acting on the Information
From what I learned, and if history is any guide, it generally makes sense to reduce your stock holdings when the reading reaches extreme overvaluation and to increase your holdings when it's at an extreme level of undervaluation. And simply stay invested in stocks, up to whatever your own target allocation may be, during more normal or neutral readings.
The Fed Model is not a short-term, market-timing model, and I certainly wouldn't suggest you use it to help you trade. Furthermore, it's not infallible, and it's only as good as the accuracy of the earnings estimates that are plugged into the formula.
Having said that, the model can give you a pretty good idea of whether you should favor stocks over bonds or vice versa. Today's reading, which shows stocks to be undervalued by almost 22%, could encourage you to stay put in stocks for the time being. Obviously, if interest rates spike up and/or earnings estimates decline substantially, stocks will become much less attractive relative to bonds. But until that happens, stocks may remain much more attractive than bonds.
I doubt this weekend's cover story in Barron's will be titled "Buy Stocks Now, Again," but it should be.
"im curious are you still looking for that monster rally to 2153 by october that you were looking for in july? you called the move down very well but i havent seen you posting the last few weeks since we took out your low targets"
Do I really have to answer that? <g>...obviously not (by Oct I mean)...we overshot my down target in price and time, so time to reanalyze and adjust. I did not expect the plunge through the comp 300 day...I had posted to someone a long time back that I thought the Nas would do better than the dow on this down move, the Nas would make a higher low, 1880, and the dow would make a lower low...well now they've both made lower lows. So I f'ed up...about the only thing I got right was that July would be ugly and worse than anyone thought when we were at 2050+. IMO, this doesn't hurt the longer term bull move though...I also think we're headed toward 2900-3100 on the Nas in '06. So now how do we get there? We could spend another six months under/around the comp 300 day, and possibly end up correcting another 10%, then double in '05. Or we could still rally to 2400 by Jan, correct again into spring, then rally to 3000. I'm still trying to figure it out, but I'd like to see the dow get a full 10% correction then let's see how the 300 day is handled from below. That's weird, you have little to no doubt the highs are in, and I have little to no doubt they're not...as the saying goes, that's what makes a market <g>.
edit: in any case, I also think we're setup for a nice rally any time now. We'll just have to see if it's the real deal and it can make it to Jan, or if it drops right back down and drags on to the end of the year. There are a few indicators I use that suggest we could still have that huge move up right here and continuing into Jan.
I think it's kind of hard to judge how they might be doing unless you've been following wahz since '02. He called the bottom, said we'd go to 1800 in '03 when everyone thought he was crazy, upped that during '03 to 2150 in Jan '04 (which turned out dead on), and warned people that after the Jan peak we were in for a long correction, anywhere from 3 to possibly over 12 months...with a 20% comp correction a possibility (we're now at 18.2%). I don't really think he could have been any clearer about the general targets. If anyone had bought anything he suggested at the lows, they could have easily sold for hundreds of % in Jan. I'm sure you're right, there are people who held on waiting for wahz to tell them exactly when to sell, I remember telling him at one point he should just ask for their account numbers so he could do all their trading for them, but that's really not his problem. If anyone was following that closely and let go of huge profits, that's really that person's problem. I say the verdict is still out on the highs being in...as of now, the dow is still only down 9%, and the comp 18.2%, both within reason after the bull move we had...in fact, it's hard to find a correction on the dow of less than 10% after a similar bull move. 1984 had a 30% comp correction (over one years time) then it doubled in a year after that...1996 corrected 18.9% then rallied 70% the next year, so we'll see what happens this time.
Posted by: wahz
In reply to: wahz who wrote msg# 10253
Date:1/6/2004 6:48:30 PM
Post #of 18869
i hate to be a bummer but I suspect, strongly, that the feeling of exhuberance that is being felt here is going to be turned upside down within 5 weeks at the most. I seem to recall that I had at one point felt we would put a string of near record down days together in a row when we hit 2150, for example. SOO, lets be aware that the pendulum, the Short trem one, is going to swing back
Yep, I was looking back at that 84 chart a little while ago, and saw that we could probably fall all the way to 1500 or so if we we're going to stay beneath the 300.
I guess I want to see what the rise off this low looks like first...I'm not bearish yet...some major extremes and nice positive divergences still being generated.
I wasn't trying to say anything bad about Z...Alex made a joke about Z needing to turn bearish before the market could turn up.
Yeah we'll see what this means...it's gone way farther than I thought, but we're still only at a 16.7% correction. 1992 had 15.5% and '96 had 18.9%, and both had huge end of year runs after the summer lows. So regardless of what we want to blame this on, it's still well within what's happened in the past...so far.
I don't think we can say the economic recovery is over after this jobs report, and I don't think we have to worry about the Fed being overly agressive with rate hikes (obviously)...in my view, the market is still 25-30% undervalued here. I still see some major extremes building that should lead to a monster rally...actually, after today's low, I think I like Z's original target of about 2390, and we should still get there by early Jan.
You got your wish, Z no longer sounding bullish...
Posted by: Zeev Hed
In reply to: opnion who wrote msg# 280322
Date:8/6/2004 9:03:21 AM
Post #of 280334
Few months back I penned a post elating the job growth to the thesis of continued bull, the assumption was that as long as we do not get three months of less that 200,000 to 250,000 new jobs per month, the economy will continue to expand. That assumption is getting whacked badly, and the assumption that any recession may be delayed till late next year, is off the table.
Zeev
So Alex, do you believe in this guy and his buy signal?
Interesting his statement in the last paragraph:
"Right now, according to my valuation model, stocks are very cheap. Based on earnings and interest rates, the S&P 500 could rally 25% from here just to achieve average valuations that have prevailed over the last twenty years."
I posted that very thing last night...
Posted by: mjk
In reply to: Fletch who wrote msg# 18607
Date:8/4/2004 8:44:05 PM
Post #of 18628
If you believe at all in the fed model, the S&P 500 is actually undervalued by 25-30%.
Even though we're still struggling along here, I like a comp target of 2378 for early Jan '05.
I don't think the top of a bubble burst, a once in who knows how many decades event, and the resulting turn up after the sell-off, is a great example of how well they work. Look past the last 4 years, take the 10 years before that for instance, and see how many crosses up and down there were and how easy they were to trade, or use to say get in or out. How many of those death crosses down were within months of major bull moves starting? End of '90, '94, and '98 are great examples of how "great" they worked. In 90/91, if you got out with the cross down and got in on the cross up, you would have lost 12%.
About 2.2% based on '05 S&P earnings...so I guess about 8-9 quarter point hikes would do it.
edit: didn't see your post first.
I think you're probably right.
If you believe at all in the fed model, the S&P 500 is actually undervalued by 25-30%.
Even though we're still struggling along here, I like a comp target of 2378 for early Jan '05.
And a look at the dow...
Here's another look at where we're at...again.
UPDATE - SMIC posts record profit, sees strength to year end
Thursday July 29, 11:24 pm ET
By Doug Young and Eric Auchard
(Adds details, executive quotes)
HONG KONG/NEW YORK, July 29 (Reuters) - China's Semiconductor Manufacturing International Corp. (SMIC) (HKSE:0981.HK - News) on Thursday posted a record profit in the second quarter and joined rivals in dismissing concerns about a looming chip industry slowdown.
Shanghai-based SMIC (NYSE:SMI - News) said it recently polled many of its top customers, following words of caution from the likes of Intel Corp. (NasdaqNM:INTC - News), the world's biggest chipmaker, that demand was starting to slacken from semiconductor buyers.
"Very few of our customers told us they have inventory-building-up problems," Chief Executive Richard Chang said on a conference call. "A very high percentage, about 80 percent or more, told us they have no inventory problem."
SMIC, which makes chips for clients including Samsung Electronics Co. Ltd. (KSE:005930.KS - News) and Texas Instruments Inc. (NYSE:TXN - News), is the fifth largest contract chip maker in the world.
Chang said SMIC, China's largest chip maker, expects to be running at close to capacity through the end of the year.
"The year 2005, for the first half, we still see very strong demand," he said.
Chang's comments echoed similar views from the world's two largest contract chip makers, Taiwan Semiconductor Manufacturing Corp. (TSMC) (Taiwan:2330.TW - News) and United Microelectronics Corp. (Taiwan:2303.TW - News). The two Taiwan companies reported strong results this week and gave bullish forecasts on demand.
SMIC shares were up 1.84 percent at HK$1.66 in Hong Kong. TSMC rose 4.88 percent and UMC gained 2.35 percent.
Shares in all three companies have slumped in recent weeks on concerns about an industry slowdown, following a strong 2003 that saw their business and stock prices soar after a two-year slump.
SHIFT TO CHINA
SMIC's strong results and positive outlook reflected a broader movement of companies shifting production to China, as well as growth in demand from the nation's domestic market, said Pranab Sarmah, an analyst at Daiwa Institute of Research.
"It's a marginal surprise to us," he said. "We had never anticipated a third-quarter problem, but they said the fourth quarter also looks good."
SMIC reported a second-quarter net profit of US$34.2 million, or 9 cents per diluted American Depositary Share (ADS), reversing a loss of $30.5 million in the same quarter a year earlier.
A poll of four analysts had forecast second-quarter net income of US$26.7 million.
The profit marked SMIC's third consecutive quarter in the black, following profits of $8.6 million attributable to shareholders in the first quarter and US$8.3 million in the final quarter of last year.
Second-quarter sales nearly tripled to $220.99 million from $75.19 million a year earlier, SMIC said, in line with analyst expectations.
The company said its second-quarter gross profit margin dipped to 27.8 percent of sales from 32.2 percent in the first quarter. It said it expects third-quarter margins to "be slightly better" than the second quarter's level.
SMIC raised US$1.8 billion in an initial public offering this year, but has seen its share price drop steadily amid cooling investor enthusiasm for China stocks and recent concerns that cyclical global semiconductor demand has peaked.
The shares have lost 38 percent of their value from their March initial public offering price of HK$2.69.
The company said it had signed up 15 new customers during the second quarter, including seven Chinese chip firms without manufacturing facilities of their own.
It said wafer shipments should rise by 23 percent to 27 percent during the current quarter compared with the second quarter, while average selling prices should be "flat to marginally up".
delete
Hey I won't disagree with that...I thought after weakness in July we should start the next leg, I just tried to hard with it the last week and a half. These extra few days and 50 points below the 300 day weren't what I expected, but it doesn't hurt anything longer term. We ended up getting and holding the ndx rising support from Mar '03, and I like the nice positive divergence on the nasi here, very similar to the Oct '02 lows. I wouldn't be surprised by a ~35-40% comp rally into Jan.
http://www.thestreet.com/_yahoo/tech/telecom/10175202.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=N....
LOL. Yep, you never know what can happen at this point...I saw GNSS miss estimates and guide lower a few days ago, only to see the stock rally 15% the next day. Today I see UTSI get killed and trade at an 8 PE and a 0.33 PEG...it's crazy right now. But these are the rare opportunities we get every so often to make money...gotta buy when everything looks shitty. I certainly see a lot of people saying the highs are in for good now...we'll see.
edit: Going forward, JDS estimates it will lose 1 cent a share, excluding charges, during its first quarter. The company expects revenue to rise between 8 percent and 13 percent over its fourth-quarter results.
Looks like they're projecting further strong rev growth...could it finally be happening? <g>
JDSU...8% sequential rev growth...nice to see some improvement.
Net revenues for the fourth quarter were $174.5 million, and net loss was $24.3 million, or $(0.02) per diluted share. This compares to revenues of $161.4 million and a net loss of $7.3 million, or $(0.01) per share, reported in the third quarter of fiscal 2004, and to revenues of $160.6 million and a net loss of $61.6 million, or $(0.04) per share, for the fourth quarter ended June 30, 2003.
"We continue to see solid indicators of market recovery across our
business segments, reflected in our third consecutive quarter of revenue
growth, and our strongest bookings performance since early 2001," said
Kevin Kennedy, Chief Executive Officer of JDS Uniphase. "As we enter
fiscal 2005, we remain committed to driving customer-focused operational
improvements throughout the company, and to achieving profitability."