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MSFT breakdown

Day 1 of capitulation says Cramer "I haven't seen this level of fear in over a year" (with respect to the entire market, not merely MSFT).  The precipitous event seems to have been GE floating 188 millions new shares into a market perfectly ripe for tipping over.  BOOM!

MSFT broke down through $26, a key support which was the bottom of its previously upward trading channel.  Where does it stop?  Worst case is $22 where MSFT put in a long term double-bottom (12/01, 7/02).  There is significant technical support @ $24, and I'm guessing it likely will rebound from there - but not with certainty.

On fundamentals, the analysts are having a field day:
"But Microsoft investors don't value the software company like a staid fund manager. The company is trading at a respectable 32 times trailing earnings and 20 times forecast earnings. That's impressive, considering how anemic the company's growth has been.

You have to go back to the late 1990s to find Microsoft growing on par with its current price-to-earnings ratio -- that is, at more than 20% per year. And you have to go all the way back to the mid-1990s to find the company growing at more than 30% per year. In other words, Microsoft is not a growth company and hasn't been for some time."

-- Paul Kedrowsky @ RealMoney.com

As the market is a predictor of things to come, are investors abandoning the notion that Microsoft is the dominant player of the future?  Could there ever be a proxy battle the like the one going on at Disney over Eisner?  Demands for Ballmer's resignation?

One one other note, SCOX is testing support at $9-$10 and IMO will be headed for $4 very soon.  Good ridance.

hoser
Thursday, March 11, 2004

Nah, MSFT is just changing from a growth company to a value company as was bound to happen sometime anyway.  Not a good short-term bet, but will probably be a good long-term investment.  Also see: http://management.itmanagersjournal.com/article.pl?sid=04/03/10/2127249&mode=thread

BC
Thursday, March 11, 2004

Investment advice?? Now where did I put that baseball bat?

Seriously though, you could discuss this ad nauseum, but you still could not tell me definitively tell me what the stock is trading for in 6 month's time!

Makes for good bar banter though.

Tapiwa
Thursday, March 11, 2004

Of course not, that's why I put away some of my savings every month into index funds. There is a difference between investment advice and speculation though (you are describing the latter).

BC
Thursday, March 11, 2004

As someone who works in investments, may I say that when I read anything containing the phrase "x dollars, a key support level", I immediately tune out. What crap. The jerk who wrote that can't tell you if the S&P 500 will be up or down on the year. Do you think he knows where Microsoft shares have "good support"? Whatever that means.

Rob VH
Thursday, March 11, 2004

The entire stock market will be in decline for the next few decades as our economy restructures itself.  It may stay there if nothing arises to replace "knowledge work" and everything is done in India et al.  As we notice that foreign investors are wary of investing in the US because of our debt, we need to be aware that we may wind up worse than Japan and the market may never recover.


Thursday, March 11, 2004

I'm glad I sold the remainder of my ESPP I had been holding onto...  As others have pointed out, there is just no way Microsoft can sustain the growth they've had in the past.  There won't be new employees becoming Microsoft Millionaires due to stock options anymore (in fact MS doesn't offer stock options anymore).

chris
Thursday, March 11, 2004

"The entire stock market will be in decline for the next few decades as our economy restructures itself"

NOT

Krag
Thursday, March 11, 2004

If Warren Buffett says stocks are overvalued, I say stocks are overvalued.


Thursday, March 11, 2004

I also agree with W.B., it is difficult to find good under-valued stocks right now (so keep some cash ready for when things go 'on sale', which *might* be starting to happen right now). 
However, there are still some speculative things out there that have some strong upside in them.  Also, there are things out there that have a very nice dividend yeild where depending on your goals you might not care too much about the capital gains that you don't get...

I have to agree with Krag though.  These nay-sayers talking about a Japan-like situation developing and a potential depression coming are pretty far out on a limb.  The election this year is really distorting things in the short term (i.e. before November) but I don't think that everything is going to suddenly fall apart after that.

Ray
Thursday, March 11, 2004

While some of it may seem to be "out there", W.B. himself has actually been investing in foreign currency because of the state of our union.  Take that for what it's worth.

Dan Brown
Thursday, March 11, 2004

I think most of you are missing the point of the original post.  The question is "is the stock market saying that Microsoft's dominant (monopoly?) position and power is a thing of the past".  The high valuations of microsoft in the past were because of high earnings.  Microsoft had incredible earnings for the level of revenue (in the 1990s) and the stock price reflected this and the expectation that this could continue.  These earnings were based on their near-term ability to charge "monopoly rents" on their products.  The stock market is saying that people don't think they can do that for much longer.

As for the dope who thinks that the stock market won't be higher a few decades from now, other than the idea that anything is possible, would you care to offer some evidence?

As for the person who believes whatever Warren Buffet says, beware the overrated expert; past performance is no guarantee of...

BTW yes stocks are very high proced relative to past PE ratios but the question one needs to ask is never "are stocks overvalued" or even "how overvalued are stocks?" . It is "how far in the future are stocks valued?"

name withheld out of cowardice
Thursday, March 11, 2004

MSFT isn't suffering because MS's position of dominance is in the past.  MS is dominant in the present and future, it's just that they can't sustain the growth rates they had in the past.  People will continue to use windows and office, but since everybody already is using that software there isn't a lot of growth in those markets.  I haven't seen anything come out of Redmond for market sizes near those products.

chris
Thursday, March 11, 2004

People seem to believe prima facie that "past performance is no gaurantee of future performance", yet then claim that the stock market will eventually recover because over the previous 90 year period it has gone up.

Unbelievable.

Dan Brown
Thursday, March 11, 2004

Dan:

I think you are missing a subtlety here.  The "past performance" saw is with respect to individual stock pickers and short periods of time and usually has to do with showing performance not with respect to the market (e.g. S&P 500 index).  For the stock market as a whole, long term, past performance has been a pretty good indicator of future performance for at least a century.  Can things change?  Of course they can.  If you were to place bets on whether the stock market will have at least average gains over the next twenty years you would have a 90% of being right.  Not so for a particular mutual fund beating the market averages over that period (the chance is less than a third).

BTW, if the stock market is down in twenty years, we will be in the midst of a huge economic problem and, I dare say, it won't matter where you had placed your money over the previous twenty years.

name withheld out of cowardice
Thursday, March 11, 2004

To some degree the stock market has to keep going up in the long term, because otherwise it ceases to be a product that anyone would be interested in.  It would be like trying to sell a bond with a negative interest rate, at par.  If the stock market stops having any prospect of going up, it will collapse in on itself.  Then again, it does just that from time to time, doesn't it?

Keith Wright
Thursday, March 11, 2004

Rob VH - who works in "investments", eh?  Yet another CFP who claims "you can't time the market", purchasing 4%+ loaded mututal funds for the clueless.

So, I can't tell where SPX will be with certainty?  SPX will be up for the year 2004 merely because there is so much money waiting to get in.  I looks likely that SPX will hold support 1125.  It holds both 2 month and 1 year support levels (3/10/03, 11/21/04).

But, then again I thought MSFT would easily hold support at 26, and I was wong on that one.  Old support becomes new resistance and the stock behavior has now changed - a new, lower trading channel will have to be defined.

Want one word of investment advice, which you CAN take to the bank? Stay away from fund sellers, period.  2nd bit: stay away from loaded funds period.  Investigate the funds you own and find out of they were scamming you by selling gains to special hedge groups/investors "after hours".  Bastards.

Bar room banter?  What else were you looking for here?

hoser
Thursday, March 11, 2004

"past performance" actually refers to both individual stocks as well as the entire stock market. 

ppl in japan have been thinking that things will get better in a few years for 2 decades now.

not Elephant
Thursday, March 11, 2004

Microsoft is a little different than your "average" company in that they are sitting on PILES of cash...At the drop of a hat they could buy nearly any other growth company they want.

This is why I enjoy watching their behavior as the industry changes - will they pull an IBM and piss away a huge advantage, or will they continue to change their organization so that they're in a continuing leadership position?  I'm betting on the latter, personally.

The fact that they might not be as aggressive a growth company as they once were is just one aquisition away from being false.

Disclaimer:  I reserve the right to be wrong at any time without any prior notice.

JeffMac

JeffMac
Thursday, March 11, 2004

Sorry hoser, you missed your mark. I'm not a financial planner, and I don't sell mutual funds, especially not the ones that charge 3%. I agree that there are many many fund managers who take large fees for little to no value added.

I didn't mean to sound so nasty in my earlier post. I'm just extremely sceptical about technical trading systems. I have seen no evidence to lead me to believe that looking at "channels" or moving averages, or whatever is currently in fashion, is a sensible way to construct a portfolio.

Rob VH
Thursday, March 11, 2004

I agree its not, and I don't.  But it does give insight into panic sells and sell-offs and is a decent way of getting your best price.

Fundamentals for stock choice, some T/A for getting my best price.

Sorry for nasty-ing back.  Bicker, bicker...

hoser
Thursday, March 11, 2004

Past performance may be no guarantee of future perfection, but it's also no guarantee that a person who has spent several decades being a reliable expert will turn into a gibbering idiot 5 minutes after I click the "Post Message" button here.

Occasionally people are called an "expert" in a particular field because, um, er, they know a little bit about that field? Nah, that doesn't sound right at all.


Thursday, March 11, 2004

---" Occasionally people are called an "expert" in a particular field because, um, er, they know a little bit about that field? Nah, that doesn't sound right at all. "----

Sounds fine to me, just as long as you don't miss out the "Occasionally".

Stephen Jones
Friday, March 12, 2004

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