When people say "tech" on TV, it is almost always followed with "cheap," or "low valuation." To which I say, "So what?" AMD
(AMD)
looked cheap until last night. Motorola
(MOT)
looked cheap and there turned out to be no there there. Cisco
(CSCO)
looks cheap but all I hear are earnings cuts. Dell
(DELL)
looks cheap, but who cares?
Lots of cheap out there.
Here's my question: Where's the catalyst?
Shorts? Stronger growth in the second half? No, the only catalysts I look for in tech are product cycles, and other than Salesforce.com
(CRM)
(nice move there), Research In Motion
(RIMM)
and maybeApple
(AAPL)
, because we need a new phone there already, there are no new product cycles to speak of.
Layer on the fact that RIMM has a product cycle and had a great quarter and is below where it traded at its high after the quarter -- can you imagine where that would be if the market were to turn down? -- and you can see that tech may be cheap for nobody knows how long.
When that happens, you get a chain reaction when the market turns bad. Suddenly you have Microsoft
(MSFT)
thinking about overpaying, at least that will be the scuttlebutt. You have Hewlett-Packard
(HPQ)
going down because AMD says things are weaker. You have Intel
(INTC)
going down because AMD's not going bankrupt. You have Freescale on the cover of Business Week making it clear that there won't be any deals from this sector any time soon. Next you will have Google
(GOOG)
head down on a slowing ad story from some other company.
That's what happens when you are in it only for valuation and there aren't any product cycles to stem the tide.
I have heard tech praised endlessly this year, and yet it has done nothing. I think it is about to do less than nothing right now. I think it is going down.
Sure, IBM
(IBM)
will keep hyping its stock, and I don't think HPQ is doing badly. How low can Texas Instruments
(TXN)
go? It is so long-term cheap. Nokia's
(NOK)
having a decent quarter. EMC's
(EMC)
quarter is OK, but it does have VMware
(VMW)
, which, unfortunately, is not doing that well despite the hype.
But they can't exist in a vacuum. There's not enough here to warrant further rallying.
I want to be careful of this group. The negative pin action could be swift and there is no great secular trend, like food shortage or oil or ethanol or Chinese building to keep things rolling along.
Random musings: If Kerry Killinger stays on when TPG does the recap of Washington Mutual
(WM)
, I would short the stock.
At the time of publication, Cramer was long EMC.Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. Watch Cramer on "Mad Money" weeknights on CNBC.
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