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Burk....
No, I did not want to live there, just wanted to ship my house out there to sell, then move back here. Too many people and too many wild-hair liberals and goof balls out there for me (especially in the LA area). I like it here in "bubba land" just fine. I live just outside of a small town in Middle Tennessee with cotton fields on one side of me and a nice small lake on the other side. There is plenty of hunting and fishing available here with 7 large lakes within a few hours drive and traffic is not much of a problem, so I think I will pass on California - not to mention the fact that my ex lives out there.
Take care...
mlsoft
marginnayan.....
No, TXN reported ok today, and I see nothing to pick at. Like they said, they are picking up market share in some areas - that comes at the expense of their competitors and does not indicate a strengthening of their markets or demand. I believe that margins did suffer, but from what I am hearing around the sector, margins and ASP's are under heavy pressure everywhere except in those areas where a company has little competition, which are few and far between in this environment.
The competition for business is very intense for both the chips and chip equipment companies, and a good example of that has been KLIC, which has a technically superior bonder that is both faster and supports a lower pitch but no one is willing to pay the price for it. ASMI is hurting them badly because their product can be sold for less, not because it is superior. The Japanese are also being very aggressive on price and hurting both chip and equipment companies.
Good luck to you.
mlsoft
"that seems pretty cheap for a 4/2 on a court in Pleasanton. They're selling significantly higher for the same in some parts of Pleasant Hill." -- jpgill
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"pretty cheap" for Pleasanton, maybe, but for a small town in Tennessee it is astronomical - the housing bubble has yet to make it to my neck of the woods. I would like to ship my house out there and sell it so I could retire.
mlsoft
jdaasoc.....
In this type of market my experience has been that the decline is less apt to end on a day when the markets start off the day with a rally, and the usual outcome of that type opening is a G&C like today. What I am looking for is a hard down opening, which would bring me in on the long side. I will admit that "da boyz" are doing a job on the $USD and Nikkei while pounding gold, though. You don't suppose that they whupped up on the gold stocks today knowing what was in the works for tonight do you??? Naaaaah....
It looks like my prediction a week ago that the markets would tank off of tech earnings ended up correct, but a couple of days early. For now, the 1400 NAZ range is still my target for the next rally, with 1450 the outside max. Perhaps I need to borrow Zeev's bull horns to get a bit more bullish.
mlsoft
NVLS meets estimates, but warns for Q3 on both earnings (.10 vs .15) and revenues ($250mm vs 257mm). Put back on convertibles will cause additionsl $17mm charge to earnings.
NOVELLUS SEES Q3 EARNS 2C INCLUDING $17M CHARGE
NOVELLUS SEES Q3 EARNS 10C EXCLUDING CHARGE
NOVELLUS SEES Q3 REV $250M
NOVELLUS SEES Q3 NON-CASH CHARGE $17M FROM CONVERTIBLE
NVLS has lost $2.20 from today's closing price and drawing the rest of the sector down.
mlsoft
George....
I would be very careful putting much stock in the Fed model. It is no better than the input that goes into it, and right now with all the "pro-forma" fictions, EBITA, and outright fraud in earnings reports I think the Fed model is completely distorted and unusable.
Just my opinion, though.
mlsoft
marginnayan.....
I guess I am a little old fashioned - in my early years at this I was what was called a tape trader and old habits die hard. No tape as such any more but my primary market minder screen has all the stocks that I would watch if there was one. Watching the "tape" this morning we had some agressive block selling into the market, especially in the DJ types, but agressive is all I could say for it - all the blocks were handled easily and in an orderly manner. It never reached the point that I would call "get me out NOW", which was what I was hoping to see. In the NAZ, there were a few stocks that were being hit with agressive selling, but most were holding up well with good block buys coming in also - INTC and many of Zeev's "Q" being good examples.
We keep getting close to doing what it takes to make a bottom, but I have yet to smell real FEAR in the air - far too many folks are petrified that they will miss the bottom and the big rally, and not enough are afraid of losing what is left of their money. Admittedly the DJ and NAZ are both oversold and sentiment measures (VIX, VIN, P/C ratio, and BP for NAZ and DJ) are headed in the right direction, but I think they all need to get more extreme readings before a bottom of any significance is put in - and of course for me, the "tape" just does not look right. I did cover my shorts this morning, but did not go long - at the time being either long or short seemed more of a crapshoot than anything else.
Longer term, I look for this to last a long time, and am inclined to think the final bottom will be more like the '73-74 bear, ending more with a whimper than a final crash. It is far too early to make that type of prediction now, though.
Hope that helped, but I understand that the "tape reading" part is very subjective and not much to work with. When I first started doing this (early 70's), you could literally "hear" a rally or selloff starting up by the sound of the tapes running across the wall.
Good luck to you.
mlsoft
augieboo......
I tend to agree with you and Art Cashin on this one. If that was the bottom, I will stick with my call of last night that the rally will be slow getting out of the blocks (hampered by poor earnings and guidance the next few days) and will not get all that far. Right now, I still look for somewhere around 1400 to cap it with an outside max of 1435-1455. I have seen some serious selling but nothing that I would classify as capitulation, with more evidence of "concern" than "fear". That has been especially true in the NAZ, which leads me to expect new lows to come fairly soon.
Just my opinion, though.
mlsoft
An interesting set of charts on some financials from Gold-Eagle.com:
http://www.gold-eagle.com/editorials_02/moy072202.html
mlsoft
augieboo....
I have been making use of Gottfried's charts for a long time (first encountered them on the Yahoo KLIC board) and certainly appreciate all the time and effort he puts into them, not to mention his kindness to make them available to all of us. I agree with what you see and expect them to flatten out at a minimum and more likely to roll over to the downside soon.
Take care.
mlsoft
marginnayan....
I am more sure of my bearish stance on the equipment sector and see no way for them to do well. As for the chips, I base my outlook on my view that the consumer will not only be unable to lift us out of the situation we are in, but will likely drag us back down into recession as he finally succumbs to high debt, unemployment (and underemployment), and eroding confidence.
I also am hearing anecdotal data from within the industry that the spurt of improvement in the past few quarters was primarily due to inventory rebuilding and hope that the economic turn was upon us, and now that hope is fading quickly. Some chipmakers, as you noted, will fare better than others, but I fear that none will do well and some will face a second period where inventory oversupply is once again a problem, although probably not as bad as before.
Just my opinion, though, and probably worth no more than you paid for it. Take care and good luck to you.
mlsoft
"Da boyz" are at it early tonight, having already stepped in to rally the Nikkei, intervene in the dollar, and rally the futures. In my personal opinion, by continuously stepping in to prop up the markets they are only prolonging the agony and making things worse. Should they be able to pull off a rally tomorrow or Tuesday without any sort of selling climax, I would look for an even shorter, and weaker rally that would turn back down to new lows in the familiar pattern fairly quickly.
Just my opinion, though.
mlsoft
shtirlitz...
I agree with your thoughts on the market leaders such as INTC, CSCO, MSFT, and IBM. I believe that those stocks were the prime targets for "da boyz" in their efforts to prevent a meltdown in the markets, and offer as exibit "A" their overall performance during periods of intense selling last week. I keep those four stocks in a separate block on my primary market minder page to guage the actions of "da boyz" and invariably at the first sign of any letup in selling pressure (and often during the heavy selling) very large block bids "at the market" appeared in each of them simultaneously to drive them up and support the market. These are the stocks that most influence all the indexes and they consequently are the most important to drive the markets. It was obvious that the buying in those stocks was not the buying patterns indicative of someone merely wanting to own them - if that were the case, a buyer in a severely tanking market would buy slowly, letting the stock come down to him to get the lowest price possible. Instead, this was buying clearly with the intent of keeping the price high.
I am thinking that the PPT (along with all the federal pension funds) are now sitting on very large positions in those stocks (and many others, including large futures positions) which will need to be sold once a rally gets firmly established, and as a consequence are stocks to be avoided except at the very start of the rally - this is one reason I think the initial rally off of the bottom may run out of gas sooner than many expect.
Just my opinion, though.
mlsoft
"What do you think of this? Too small a data set to be significant, or is the SEMI industry FACKED yet again?" - augieboo
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augie.....
It is a small data base, but nonetheless I believe the latter is a true statement. I see little or no improvement for most of the chip companies, and until that changes for the better I fail to see how the equipment companies can prosper. The chips had a nice bounce in orders due to inventory replenishment, and the equipment companies got a number of orders that were based on the hope that the surge in chip orders signalled a return to a strong economy, but that was not the case. I think that bounce is now over, and there will be some cancellations and push-outs for the equipment companies, in addition to a slowing of new orders.
Just my opinion, though.
mlsoft
"too many people are predicting Monday and Tuesday as major down days, and the set up during the last few days of the week is similar to previous such occurrences, but somehow, I don't buy it. My reasoning is that many call options expired worthless, causing those writing covered calls to sell the underlying issues (undoing the hedges) and it is quite normal for these hedges to be reset causing some upside pressure on those stocks that were sold for that reason." - Zeev
======================
Zeev....
Writing covered options is, of course, an imperfect hedge especially since by far most are written using out of the money calls. That suggests to me that rather than selling the underlying security after the calls expire worthless, they will simply write another set of calls either now or wait for a rally to do so.
Like you, the contrarian streak in me tends to twitch violently when the whole world is expecting a massive selloff Monday and Tuesday to form a solid bottom for either a new bull market or at least a strong bear rally. Your scenario is one possibility, but currently I am leaning toward another - the next rally will be short with some trouble getting out of the gate due to more poor earnings and guidance next week (NVLS and TXN could be particular problems). Once underway (Thursday or Friday) I look for much more limited gains than those you forsee before turning back down for a test of the lows or, more likely, to new lows. Right now, I see a cap for the rally in the 1450 area, and really tend to doubt it will get that high with a logical target in the 1400 range +/- 15 points.
As always, one should keep in mind that I am no virgin when it comes to being wrong. The only thing I am really confident in is that this is not the end of the bear and there is more pain ahead. The double dip is a very high probability and it could take much longer than folks are now expecting before we get a sustained recovery underway.
Take care and good luck...
mlsoft
Zeev...
Good call on the btb - I was not sure if the things I have been hearing would be in this month's report or not. As for myself, I am confident from my sources that the fundamentals of the equipment sector are once again beginning to deteriorate, and thus will be likely to look elsewhere for rally candidates. That certainly does not mean they cannot be winners in a rally since all are high beta stocks that have been stronger than the rest of the market so far. What worries me most is that some of the biggest names (like AMAT) report next month and a warning or two could come at any time, which would hurt the entire group.
Even though I have not shared this board very long, I would like to thank you (and the other members) for a quality thread and for sharing your trading expertise. The overall level of the board is far superior to any others I have found.
mlsoft
"As far as I read the Taiwaneese fabs are quite busy and their high quality fabs are humming close to capacity, typically, new capacity will be added when they get to 80% utilization rate. It is the older equipment that is mostly idle."
==========================
Zeev...
What you say is true of TSM and UMC (although their claims have proven suspect in the past) and some of the assembly houses (like CHPC), but that is more of a result of a change in the industry where more production and assembly is being given over to fabs by chip companies which are trending to go partially or completely fabless. That trend has enabled the Taiwan fabs to do well the past few months as orders came in to rebuild inventories, which spurred the fabs to order more equipment in anticipation of a strong recovery.
It is my understanding that many orders from the chip companies are being put on hold now because there has been no increase of consumer demand, and that in turn is causing the fabs (and the chip companies that make their own chips) to push out or cancel recent orders with the equipment companies. This showed up first with the back end companies (TER, KLIC) but I believe it is also true with the front end companies and support companies as well. Logic dictates that the equipment companies cannot recover until there is a sustained recovery in the chip companies which in turn cannot happen without a strong increase in consumer demand for the end products. I personally do not believe that the consumer will be able to do that any time soon, and demand is more likely to slow down.
A great deal of excess capacity was created during the boom and that has been added to during the downturn with the recent additions of 300mm and other technology. There is some old capacity, but in reality until the chip companies can recover from recent losses, they have neither the capital nor the incentive to order new equipment.
Just my opinion, though, and I have been known to be wrong. <gg
mlsoft
Zeev...
I saw your comments on the btb earlier and wondered what you saw for that sector in the months ahead. I am not sure about this month's numbers (suspect it will be down) but starting with next month I look for steady declines in the number as cancellations, pushouts, and slowing new orders take hold.
The equipment sector cannot do well until the chip sector begins a sustained recovery and I do not see that happening any time soon. Actually, I look for the chip sector to fall back into another period of slowing growth, with a lot of pressure on ASP's and margins. That would translate into another leg down for the equipment sector, where I look for consolidation and some attrition. Many of the recent spurt of orders for the equipment companies were placed not based on demand, but on the hope that the demand was coming due to the economic recovery. The recovery is not in the cards for now, so I expect many of those orders will end up as push-outs or cancellations.
Your opinion would be appreciated.
mlsoft
I agree also on the VIX/VXN. This decline is like no other I have been through (started as a broker with Merrill in 1973) and one thing that has helped me a lot is to throw out of a lot of trading "rules" that were solely based on history - such as "don't fight the Fed". The VIX can go much higher in this post bubble decline, and probably will. The market will also be able to get more oversold than previous norms, and stay that way longer. What we are seeing is the mirror image of the bubble market mania.
mlsoft
yankee...
Unable to reply with "PM" since I have not decided to become premium member yet, but I am in agreement with you that the Fed has been and still does see a high risk of serious recession in our future. I firmly believe that they have been giving us the "pro-forma" version of their reports - consistantly overstating the numbers knowing that they can revise them down later with little fanfare and a lot less reaction. The intent of doing this is a return to the idea of "jawboning" the economy up by making folks think things are better than they really are - pumping up consumer sentiment. Again, the objectives are noble, but like in the past I doubt it will work. The annual revision numbers due out the 31st will be interesting, to say the least, and I suspect they will be ugly reading.
Take care.
mlsoft
ajtj99...
Unlike past one day reversals of late, there is no power behind this bounce which makes me think there is more selling coming. Hard to tell anything on expiration day though, so we shall see what happens.
mlsoft
Watching "da boyz" defend INTC, IBM, MSFT, and CSCO during these selloffs has been a learning experience. It is like fighting a foe with a bottomless cash pit for ammunition, and so far they are determined to use whatever resources it takes to prevent a major selloff event. In theory, it is hard to argue with their desire to keep orderly markets, but my problem with it is that in doing so they are preventing us from making a solid capitulatory bottom from which to mount a sustainable rally of more than 2-3 days. I think they are prolonging the agony and would rather get it over with - we could already be into Zeev's rally now had they left things alone.
Just my opinion, though.
mlsoft
Yankee.....
Scary, but I agree with Cramer's premise. The pundits were wrong when they ascribed the market drops recently to disappointment that Bush and others were not being strong enough on corporate deceit - the real problem was that the market was looking ahead to see what the net result of all the new rules and penalties would bring. There will be some "fessing up", and that could bring about some management changes - but the most frequent change will be that there should be less trick accounting next quarter. Frankly, I have been surprised in the number of companies still reporting "pro-forma" fictions this quarter, with kitchen sink charge-offs, and especially with the rather brazen accounting "magic" proffered by IBM to be able to meet full year guidance. In itself, more honest reports will be a longer term benefit for the market, but there will be a fair amount of pain involved in getting there in the form of lowered earnings and guidance this quarter and next for a market that is still overpriced by historical norms.
The second factor bringing the markets down is the belated realization that the recovery has been a myth, built upon a spurt from inventory rebuilding which is now ending. Many orders reported for the chip equipment group lately have been based not on need, but on hope that the recovery was real and the need was coming but consumer demand is not, and cannot, pick up enough to create the need for new equipment in an industry running at somewhere around 50-60% of capacity. We will be once again hearing the dreaded words "push-out" and "cancellations" as many of those orders are eliminated. There will be no recovery, in my opinion, and instead I look for the consumer to lead us back into recession.
The lack of new consumer demand and a little more honesty is why I have been convinced that earnings reports and especially guidance in the chip and equipment sectors would be poor, and based on that I have been expecting renewed weakness in the NAZ and SOX to join with that of the DJ to lead us to new lows shortly. I had felt that there was a decent chance of a meltdown, but so far it looks like I missed on that one.
Good luck to all.
mlsoft
longdong...
I agree with you on the precious metals, and am well equipped in them myself. If I am correct in my market outlook, they will be the only safe haven other than cash, treasuries, and shorter term bonds. I have severe doubts about some of the forecasts of the gold bugs, but I think Gold and Silver will steadily rise over the next year, perhaps longer, as the dollar continues to decline and world financial markets remain troubled.
Good luck to you....
mlsoft
Despite what CNBC wants us to believe tech earnings have been quite poor with even worse guidance. I still look for the combined weight of all of the poor reports with lower guidance to begin to pull the market down, led by renewed weakness in the NAZ/SOX. The earnings being reported are still mostly of the "pro-forma" fiction variety with plenty of tap-dancing type accounting, but even given that results and guidance are worse than expected - there is only so much lipstick you can put on this pig.
IBM was a good example - their accounting moves were remniscent of WCOM, magically erasing losses from Q1 and Q2 so that they can claim to remain on target for the full year. IBM is probably going to end up in the 40's before this is all over.
I still look for chip and chip equipment earnings to continue to disappoint, with lower guidance being the rule. Software is also going to continue a problem area, and it will become apparent that IT spending remains dead, and consumer spending and demand is beginning to slip. New lows should be upon us soon.
Just my opinion, though.
mlsoft
Just got off the INTC conference call, and remain somewhat baffled by the market reaction. As suspected, their forward guidance of higher revenues and margin was solely based on "normal seasonality", but they at least held it to the lower end of "normal". In other words they expect the second half to be better because that is the way it usually goes, even though it did not work well for this quarter. They said several times that they see no signs of a recovery or improvement in their business, which declined more than expected for this quarter.
A good note for the chip equipment sector, the cut in capex is expected to come from expenses other than fabs, so there will be little effect there.
Inventories are higher than they would like, but they hope to pare them down with a pick up in business in the second half without having to do a writedown. There has been a lot of pressure on ASP's and margins, but assuming business does pick up, they expect an improvement in margins. They are looking for the hoped for increase in demand to come from the business side, as the consumer has held up pretty well.
Personally, I think their forcast is at risk - I see no pickup in business spending any time soon, and expect consumer spending to slow down as the economy begins to slow. Moreover, I do not expect AMD to lie down and die for them and look for ASP's for both proccessors and flash to remain under severe pressure, preventing any improvement in margins. It would not surprise me at all for them to have to warn again at their mid-quarter analyst update.
But, as always, it is not what I think, but what the market thinks that matters, and we will know more about that tomorrow.
mlsoft
INTC made low end of revenues, but missed earnings by 2 cents. Additionally, they lowered capex to between $5 and 5.2 billion and plans to cut their workforce by 4000 workers, both actions not normally associated with a company expecting things to get better any time soon. What is interesting is that guidance remained pretty much the same, meaning that revenues will be coming back up with higher margins for the rest of the year, a relatively rosy outlook.
I suspect that this is based on the standard INTC basis for guidance of "normal seasonal patterns", meaning that since sales usually rebound a bit in the 3rd quarter with somewhat better margins, it will do so this year as well. That has be the basis of INTC's guidance for a number of quarters now. My question is that if they really believe that, why are they laying folks off and cutting capex?? Another problem with the guidance is that it agrees with no one else in its sector both as to increasing revenue and rising margins, when every one else is seeing weakening, rather than strengthening demand. Methinks they are counting on a miracle or fibbing, one or the other.
I hope we will find out more details during the conference call, but so far the market seems to be happy with the news which would make my call on it completely wrong. My apologies.
mlsoft
INTC warned a short while back and allowed that they would come in at the low end of previous guidance with margins being squeezed due to product mix factors. Since then, AMD has warned twice citing margin pressures and weak end demand. Dell a few days ago raised revenue, earnings, and margin estimates, but specifically said they see nothing but weakness in the PC sector and while they are looking for some increases, it is due to a pickup in market share - they are looking for overall PC sales to decline by 5%. No company in the PC sector that I am aware of is seeing any increase in demand, and most are reporting a renewed weakness as the consumer begins to weaken here.
They are now pushing out deliveries for their 300mm fab and talk is that Capex will be cut for the year. Moreover, there has been talk the past few days of layoffs, and although that rumor is unverified, it fits the rest of the background picture.
Frankly, I see no way that INTC can have a good report, and look for reduced guidance for both next quarter and the full year. The stock has been one of the better performers over the past few days, so I think that the market is still at least somewhat optimistic for their report and CC this afternoon. For myself, I am short INTC and have some Friday 17.50 puts for a crapshoot just in case it is really bad. The biggest danger (other than my being just plain wrong) is that as a member of all the indexes, INTC is a favorite of the PPT when they want to enter. In spite of that, I have been expecting INTC's earnings and guidance to make it a leader to start the markets back down, with help from the other chip and equipment stocks. The equipment sector will see a return of the dreaded words "push-out" and "cancellation" pop up again in their reports, and I suspect they will guide lower also.
Just my opinion, worth what you paid for it. Good luck to you.
mlsoft
ajtj99....
I agree that the top is in for a while, and think we are headed to new lows. Earnings start in earnest this afternoon and I expect them to be worse than expected, especially the guidance for next quarter and the full year - that should provide the catalyst for the downturn. I believe the chip and equipment sectors will have the worst reports and guidance, and that should take away the recent strength of the NAZ and SOX.
Of course, I am no virgin at being wrong.
mlsoft
XBrit....
Thanks for the kind words - and yes, I post on the Yahoo KLIC and CY boards.
mlsoft
Zeev....
I was referred to the turnip patch by a friend last weekend, who told me you were both nimble and amazingly correct in your market calls. Having established being "nimble" almost immediately by changing from SI to Ihub, I am seeing evidence of your accuracy also with some very nice calls already. Impressive.
I see us as getting oversold and would normally be looking for a tradable rally here, but am concerned by the almost universal expectations of a rally from this immediate vicinity. I also think that earnings expectations may be too high for the tech sector, and look for a lot of "made the lower end of earnings expectations with a miss on revenues" type of reports accompanied by even more lowered guidance for next quarter and the full year - beginning with INTC on Tuesday. With that as background, I think that there is a chance for a meltdown this week as lows are taken out and downward momentum is accelerated by margin selling, fund redemptions, and plain old fear. If so, I think the DJ could drop 1000 or more points with the NAZ decline in the order of 300-400 points (most offenders would be NAZ type stocks).
What are your thoughts on such a possibility? Thanks in advance, and congratulations on a very nice and informative thread.
mlsoft