Post-Bubble Valuations

One of the lessons learned from the tech crash in 2000 and the emerging market crash in the mid-90s (I learned lots), is that the bubble sector which used to enjoy a premium valuation during the bubble, then suffers a discount afterwards, sometimes for a very long time! One could argue that tech and EM valuations are still quite cheap relative to their growth rates (PEG). The fast money has moved onto their next hot sector and they don't want to be associated with a perceived losing sector.

Over the past decade, we've seen technology become a bigger part of our lives, from cell/smart phones to ipods to GPS to online shopping and high speed wifi. But on the whole, you've lost money holding onto tech stocks like MSFT, INTC, IBM, AMZN, EBAY, CSCO, even though they've produced huge earnings every year. Only a very few names like AAPL and GOOG have made any money for investors.

That's not to say you cannot make money in these sectors, it usually involves trading into bear market rallies (like RIMM :). buy and hold however, doesn't seem to work well. So I would be a seller of SLB and DE into the next rally. That may be weeks or months away, but I believe there will be easier ways to make money in a post-bubble world. I just have to figure out where.