Intel Corp (INTC): Time for a reality check If Intel is...

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COMMON SENSE

Re: wbmw post# 5916

Thursday, 07/03/2003 12:25:10 PM

Thursday, July 03, 2003 12:25:10 PM

Time for a reality check

If Intel is now at 47 times earnings and this $12.90 stock in February and this $17.00 stock in April and this $22 stock in July 2nd is still in the $0.16 earnings range - how much optimism can the real world stand?

It is one thing to think there will be a penny or two more earnings - but the stock has climbed to the stratosphere and almost doubled from its low this year.

What is really going on is:

1) We are seeing the flight of capital into the stock market because as people's cd's mature and they are offered 1.6% for the next certificate of deposit - they opt to put their money to work. Some in mutual funds and some invested by themselves. Where is there more safeness than in Intel and Microsoft which are blue chip tech stocks?

2) The end of the June period we saw a flight of capital rushing upward to buy their portfolio back. Get in now so that you don't miss the stock market rise.

Theywant to get ahead of a percieved rise of stock prices on the earnings season news. The money managers are invested all the way to the hilt. Mutual funds have only 4% of funds today in cash according to Arther Levittt, ex chief of the NYSE, when the normal number has been as high as 15% cash on the sidelines in times of extreme low interest. Our money managers are chronic gamblers. He says the market has to fall according to historical standards. He claims we are in a bubble according to seven tests and we are at extreme risk.

3) The lottery effect. We as a people have learned to emulate the lottery winners who place bets to get a better life. We are becoming a nation of gamblers.

So when I hear someone say that we are in for a "pleasant surprise" on Intel earnings and that is the reason for investing I reply. They are still at 47 times their past performance in earnings and it would take at least another dime a quarter per share in Intel earnings to justify the high valuation for that stock.