from the torontostar sunday dec 19/99
Little doubt e-commerce has become the real thing
The time has come for me to cave in and to jump on the e-commerce bandwagon. I am now starting to panic because I am in danger of missing out on the Internet-driven new economy.
The possibility of the new Internet economy driving world growth seems real. Last week we had an upbeat prediction on world growth from Merrill Lynch & Co., reinforced by the news that U.S. retail sales rose more than forecast.
The future for the new economy is so bright we all need sunglasses. From now on I will use 90-degree thinking to block out any negative information about e-commerce.
The first task for me is to get excited about Internet shopping. A recent Angus Reid poll of 2,000 Canadian Internet users showed that software products accounted for 30 per cent of on-line purchases, followed by books and CDs. I wonder if traditional retailers such as Wal-Mart Stores Inc. are going to be upset over the loss of market share in the low-margin software and CD business?
Was mighty Wal-Mart fighting back when they announced a possible marketing pact with America Online Inc.? My new Internet optimism almost caused me to overlook the terms of the deal. Apparently Wal-Mart would demonstrate and sell the AOL products and services in their stores. So much for cyber-sales.
I almost forgot the Linux bandwagon. Linux is the open-source operating system seen as a competitor to Microsoft Corp.'s Windows NT operating system. It must be so because two weeks ago our own Corel Corp. traded at a new record high of $64.55, up from a 12-month low of about $3.
Linux is free for the downloading. I am trying to get excited about it but would I actually install it on my two PCs just to see if it runs okay? My current Windows 95 operating system is bug-free and I think the challenge of unexpected computer bugs and crashes would add some unnecessary excitement to my life.
A Linux bug using 90-degree thinking should never let facts get in the way of an investment decision. The possibility that Linux and the stand-alone PC will soon be displaced by TV sets, pocket pagers, cell phones and palm-sized digital assistants is just a minor glitch.
A few weeks ago, frustrated from missing out on the hot Internet and Linux stocks, I decided to try the 360-degree thinking employed by one of the major fund management companies. All that non-stop 360-degree thinking made me dizzy and so I reverted to 180-degree thinking.
It was 180-degree thinking that inspired me to look the other way and examine the most active advancing stocks on the TSE last Wednesday and Thursday. Guess what? Most of the active advancing stocks were metal, oil and gas issues.
Could it be that some quiet, savvy investors are buying these stocks while the financial press and the investing public are using 90-degree thinking on a handful of technology stocks? Our chart this week is that of the weekly closes of the TSE Mines and Minerals Index. This index has outperformed the TSE, the Dow and Standard and Poor's 500 this year. Perhaps the new economy will need aluminium, copper, nickel and zinc after all.
The bear market in the TSE Mines and Minerals Index began with a trend line violation in mid-1996. The index then declined until mid-1998 in a series of three down legs.
The 1999 advance was interrupted by a short correction and is once again on the move. If the index runs above the 1999 high and the corresponding 1998 high, a huge two-year bottom would now be in place. A move back to and above the old 1997 top is likely.
The new economy will also need energy. The correction in the oil and gas stocks is now a mature 14 weeks old and there is now a buying opportunity for investors who missed the first up leg in the group that began in February, 1999. In this market you have to look behind you to see ahead.
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