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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club
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To: Justa Werkenstiff who wrote (12274)3/7/2000 12:19:00 PM
From: Sam  Read Replies (1) of 15132
 
The productivity number this morning was pretty amazing. An excerpt from the Reuters article:

<<The broad market opened with a rally after the latest economic numbers confirmed that America's investment in technology has paid off in strong productivity and low inflation.

The fourth-quarter productivity number was revised upward to a 6.4 percent gain, compared with the 5 percent increase reported a month ago. Non-farm labor costs dropped 2.5 percent, compared with the 1 percent decline reported a month ago.

Economists polled by Reuters had expected a productivity increase of 6.3 percent and a drop in labor costs of 2.2 percent.

``If you ask yourself why the technology stocks continue to do so well, the answers are in these numbers," said Hugh Johnson, the chief investment officer at First Albany Corp in Albany, N.Y. "The returns on investment (in technology) are so substantial that rising interest rates or worries about the economy don't matter.">>

The more interest rates rise, the more pressure on companies to cut costs and find innovative ways to use technology. And the more "new economy" companies benefit. And this perception will actually increase the bubble and the stark differential in equity values, not prick the bubble. Technology stocks become the only game in town as "old economy" stocks keep trying to just stay in the game. Whether the reality is different or not, surely that is part of the perception that keeps driving the Naz higher while the Dow sinks, or treads water.
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