Friday, November 7, 2008

The Abyss

A little unauthorized quote from a Wall Street Tech Research Sales desk this morning:

"One thing that is painfully clear now -- upcoming December quarter results for Tech companies will be frightening. Most had assumed this, but the magnitude of the guide downs from bellwethers CSCO and from QCOM last night (each of whom had October vs. September quarter ends, therefore provided one more month of data) showed massive deceleration in the month of October. While the current month of November could easily get worse, the sobering forecasts we have just heard are actually GOOD things, and hopefully investors can use these opportunities to model out recession-like scenarios for all of their Tech coverage universe. Resetting the bar is a critical first step to establishing a floor in these stocks."

This is a big concept. Cisco and Qualcomm are very important companies. October was much worse than expected. November could be worse than October. Stocks can't bottom until buyers are focused on something other than trough earnings. In my opinion investors don't look past the trough until they understand how deep the trough is.

Down is bad but part of the process.

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