Grief has limits, whereas apprehension has none. For we grieve only for what we know has happened, but we fear all that possibly may happen. -- Pliny the Younger
Now they're scared.
After months of explaining away the
Nasdaq Composite Index's selloff as a necessary correction, the tone has changed abruptly in the last couple of months, and has become even more pessimistic in the last few days. The Comp is down 42% on the year, and observers are no longer assuming a quick rebound.
To some investors, it smells like an exceptionally unique buying opportunity. Investors interviewed during the market's decline Wednesday noted that, finally, a sense of panic is emerging, and that pessimism is cutting across all sectors of the market.
Worry is on the minds of most market watchers.
Those worries show themselves in conversations about the economy, where there's worry about the possibility of a recession, to the
Federal Reserve, seen as not responding to a presumed crisis. It extends to technical analysis, where some believe the Nasdaq could fall to 1800, and it includes the analysts at big brokerages, who were once trying to reassure clients about the fortunes of specific companies, but who are now downgrading companies pell-mell.
"There's blood in the street and people panicking all over the place, especially from the retail customers," said Eugene Profit, chief investment officer of
Profit Investment Management
in Silver Spring, Md. "We're in buying; we're seeing opportunities we find very compelling, although we might be down
for the rest of the year with tax-loss selling."
Profit's resilience is in short supply in the market right now, although when he was asked about technology shares, he wasn't so optimistic. He said he thinks technology shares' decline may have a way to go, both because of tax-loss related issues, where investors sell dogs from their portfolio at the end of the year for tax-related purposes, and because of expectations for more warnings and continued panic on the Street.
He and others noted the downgrade of networking giant
after a related networking company,
, issued an earnings warnings Tuesday. This, despite the fact that Cisco hasn't explicitly said it was going to miss on earnings this quarter and hasn't revised expectations recently.
It's a stark contrast to a few months back, when analysts were almost unanimous in insisting that there wasn't marked deterioration within various technology sectors, such as semiconductors or PC makers. The Cisco downgrade, and subsequent downgrades of
, has investors chomping at the bit, even if they don't want to act on their desires.
"You get Foundry
warning, and they just beat on the large-caps
like Cisco," said Brian Gilmartin, portfolio manager at
Trinity Asset Management
. "It's like, Where the hell were you guys? Well, they're giving me a golden opportunity to buy IBM. But I'm overweighted in tech, feeling the pain, and can't see sitting down with a client in January and them saying, 'Why did you buy IBM on Dec. 20?' "
With tax-loss issues likely to plague the market through the end of the year, Gilmartin isn't alone. However, the New Year doesn't necessarily mean a clean slate. The Fed isn't expected to act until its Jan. 30 meeting at the earliest, and even then, it's questionable how aggressive the committee will be when unemployment is 4.0%. The sheer magnitude of the selloff has given investors an opportunity, but until some economic news shows a stabilization in demand or companies' prospects improve, only the bravest want to act on it.
"Shoot, you go and buy something and two hours later you're underwater," said Allan Meyers, portfolio manager at
in Grand Rapids, Mich. "There's got to be some kind of catalyst, some kind of positive news that says the world isn't coming to an end. I've been through this before. The tech sector, there's no support in it. It's going to keep going down; there's got to be buyers long term."
Gilmartin's one of them. But he remains wary.
"I really want to buy some of this, but when you're dealing with individuals, you really have to hesitate. You don't want to be second-guessed in a client meeting," he said. "I guess I just don't have the guts."