If it weren't for the semiconductors, I tend to think that this market might be up impressively today. But those semis just can't find any meaningful bid, so they remain mired in red on the day.
I keep getting asked if I think the inventory-glut problem might already be baked into the semis' prices. They're still down significantly from earlier highs this year, and most trade with forward-looking price-to-earnings ratios in the teens or low 20s. Certainly, there's going to be some big upside in most of these names if the gluts work themselves out.
But buying most semi names (there are always exceptions, except in bubbles and depressions, such as we had in the late 1990s and from 2000 to 2002, respectively) is a bet on those inventory gluts working out.
As I implied in the interview I did on TheStreet.com TV today, I'd rather stick with software names such as Microsoft (MSFT - commentary - Cramer's Take) and Adobe (ADBE - commentary - Cramer's Take), which won't ever have inventory problems, as their inventory is just code and CDs/DVDs that cost 10 cents each and store the code forever for free.
Why fight inventory gluts?
At the time of publication, the firm in which Willard is a partner was net long Microsoft and Adobe, although positions can change at any time and without notice.
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