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Decline in Sales = Bigger Decline in Earnings

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November 13, 2008 – Comments (11)

Did you see Intel's sale's forcast?

Fixed costs means that you can expects declines to actual earning to be significantly larger then sales declines.

I still think it is early to jump in...

11 Comments – Post Your Own

#1) On November 13, 2008 at 5:40 PM, DemonDoug (82.62) wrote:

"I still think it is early to jump in... "

I like to think of myself as a glass half-full realist. Because I agree with this sentiment - jumping in right now is early. However, diversifying away from the dollar by dipping your toes in is not a bad idea on huge pullbacks, and if you are scared of losses, if you get a big surge like you did today you can just sell when you are up 15-20% and book your gains.

As people keep saying this is a trader's market. Buying stocks when the Dow gets to the 8000 level or below seems to be a good short-term strategy. Dividend yields of blue chippers: DD (5.7%), JNJ (3.1%), MMM (3.2%), VZ (6.2%), T (6.9%) - what is your savings account paying you? (p.s. - all 5 aforementioned companies had positive year-over-year quarterly revenue growth.)

Again, I'm not saying if you have 100k in the bank to take 95k and buy stocks. But I would definitely suggest if you are 80-100% in cash to build a position in a blue chipper or resource based company by dipping your toes, and again if you get a huge short-term runup and are scared then just bank your gains again and wait for the market to drop.

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#2) On November 13, 2008 at 5:51 PM, johnw106 (57.80) wrote:

To add to this. Those new net-books will not save sales for Intel and others. They are basicaly e-mail and social web site browsers. They simply dont have the power and memory to be truly useful for buisness applications. I look for sales of the net-books to stay flat or dwindle through 2009. After the economy gets to going again (if it ever does) then kids may have extra cash to splurge on a replacement for the older heavier note books they lug around in school and at home now.

Once things are ok again though Intel will capture a good bit of market share with the new Atom CPU. And the next gen nep CPU is looking sweeetttt. AMD is making some noise on the multi-core front too and there are whispers of 16 and 32 core chips heading our way very soon.

I wouldnt wait too much longer though. I have a feeling consumers are going to look around and realise things are not so bad for those who have a job and no arm mortgages to worry with. Its a wonderful time to have cash in hand and get some very nice deals in the retail world. If a person is in the market for a new home computer this holiday will give bargain hunters orgasmic experieinces when they hit the check out counter.

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#3) On November 13, 2008 at 6:25 PM, lquadland10 (< 20) wrote:

Good Post Dwot.

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#4) On November 13, 2008 at 6:56 PM, Tastylunch (29.26) wrote:

Agreed.we have more than 6-9 more months of downturn ahead, thus too early still.

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#5) On November 13, 2008 at 8:29 PM, gman444 (28.85) wrote:

Dwot,

I've come around to your perspective---to your credit, you have been remarkably consistent throughout this downturn, when so many are hedging or all over the place....we keep getting big bounces, but the overall trend remains to the downside, and it is really hard to see factors which might spark a rally which could be sustained for any length of time---they seem like strictly technical moves.  And there seems to be only certain and/or potential bad news on the near-term horizon.  Nibbling away at selected positions seems like asking for losses, even if they are small ones.  I think it was StatsGeek who said that the market will bottom when people stop looking for it to bottom---I have to (reluctantly) agree.  My RMP positions are now primarily on the short side....

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#6) On November 15, 2008 at 10:25 AM, iamnik77 (95.82) wrote:

Based on your picks, your relative and absolute returns are excellent. But when the market turns if you keep red thumbing stocks your absolute returns are going to be disastrous. Although I believe you are skilled enough that your relative returns will still be good.

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#7) On November 16, 2008 at 5:19 AM, dwot (67.31) wrote:

Thanks gman444.  I was just reading about Japan and I think Japan should be looked at more because their aging population issues is further along.  This is where the fantasy that government can look after all of us in our old age is realised (that it is a fantasy.)

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#8) On November 16, 2008 at 2:43 PM, JackieAss (75.84) wrote:

dwot, do you think deflation will continue in the U.S. (i.e. oil, gold, food prices falling, hence cash is king)  Or, will inflation kick in, and some say hyper-inflation due to all the money we are printing, and cash loses a lot spending power (maybe 30% -50%)?

I am in a cash position, but don't like stocks, and am considering oil and gold, to protect the value of my cash. 

 

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#9) On November 17, 2008 at 2:26 PM, SideShowMel0329 (50.04) wrote:

Do you realize that INTC is the leading chip producer in the industry? Do you realize that with AMD failing and continuing to lose money year over year, INTC is slowly emerging as a monopolist? Do you realize that semiconductors (and even more specific, the chip industry) is THE biggest component in today's technologies?

I don't think you do, or you'd realize that even with the current economic situation we're in, INTC is fundamentally sound and incredibly oversold. Slow growth is to be expected by all companies. Start accumulating now and you won't regret it in 3-5 years.

Your bearish attitude might've made you loads of money over the last couple of months, but it's gotten to your head.

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#10) On November 17, 2008 at 5:02 PM, JackieAss (75.84) wrote:

Sideshow, you sound like you own INTC at much higher prices, and a bit jealous of the current leader.

 

One thing I agree with, is retail space is going to start emptying out, and the commercial real estate foreclosures are going to be huge.  Business people do not put good money in to under water mortgages! 

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#11) On November 17, 2008 at 9:43 PM, gman444 (28.85) wrote:

Re: retirements benefits---obviously there will be cuts, and incentives will be built in for people to work longer.  The interesting thing to me is what the Bush administration has done in allowing millions upon millions of illegal immigrants into the country---I think the neocon thinking is that one way or another, many of these will ultimately become taxpayers paying into the system, and supporting all of us who will be old codgers by then.  I do not agree with this as a solution, or partial solution to the problem, but I have to admit that the neocons are the only ones to have addressed it, albeit in this unconventional way.  And that is about the only thing remotely close to positive I can find to say about this administration....

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