Thread---Ignore the Fed, Look for the Buys in Tech
by Charley Blaine
LAS VEGAS ? The Federal Reserve raised rates again Tuesday, and the mood at the annual Las Vegas Money Show was "Okay, fine. Now declare victory over inflation and go home."
Moreover, many money managers speaking at the show believe the Fed won?t raise rates much more this year ? if at all. And that?s why the stock market has been rallying strongly in the last five days. The Fed raised its discount and federal funds rate a half percentage point each Tuesday, the sixth time it?s raised rates in a year. Major banks will certainly raise their prime rates in response, and other rates will rise as well.
But Wall Street ignored what would normally be viewed as bad news. The Dow Jones Industrials closed up 127 points at 10,934.57. The NASDAQ composite jumped 3 percent or 110 points to 3,717.57.
The Fed won?t raise rates much more because it faces other problems besides inflation in the United States, said Garrett Van Wagoner, president of Van Wagoner Funds, a San Francisco mutual fund company.
Problems cited by Van Wagoner and others include:
A declining Euro. The European super-currency has been sinking since the Fed began to push rates higher, putting pressure on European companies struggling with high unemployment.
Weaker than expected economies in Asia.
A Presidential election. The Fed doesn?t want to appear as if it favors any candidate.
The effect technology has on business. It forces companies to be more cost- and price-conscious, which bodes well for low inflation, said Michael Murphy, editor of the California Technology Stock Letter.
So, if the Fed isn?t going to ? and can?t ? raise rates much more, what does that mean for stocks? Mostly good things, especially for technology stocks.
Indeed, if there was a common theme wandering through the show, which has attracted about 14,000 paying attendees, it was to look at the buying opportunity created by the big technology sell-off since March. Many tech stocks are down 40 percent or more since March.
Even Microsoft (MSFT, $69.50), embattled by its antitrust fight with the government, was rated a buy by many. "It?s the cheapest tech stock out there," said Frank Capiello, chairman of Capiello-Rushmore Mutual Funds in Bethesda, Maryland, and a frequent guest on Wall Street Week with Louis Rukeyser. If George Bush wins the election, Microsoft should jump rapidly. Bush has not said he favors breaking the company up, as the Justice Department is arguing. Another big tech stock Capiello favored is Sun Microsystems (SUN, $33.13).
The investing climate for tech stocks has changed in just the past few weeks, experts said Tuesday. Investors are now more interested in stocks of technology companies that produce profits or whose paths to profitability is clear.
That doesn?t bode well for some tech stocks, Van Wagoner said. Among them are companies operating advertiser-driven Internet sites. "Those stocks are down, and they?re going to stay down."
But the Internet isn?t going away. In fact, net applications are just beginning to burrow through the economy. When the Net really takes off in commerce, Murphy said, "it will rip companies asunder."
A big favorite at a luncheon panel on tech stocks was Ariba, Inc. (ARBA, $71.44), which dominates the market for software that automates transactions over the Net. Another was Persistence Software (PRSW, $18), which allows businesses to adjust computer servers without having to take systems down. A third was Corning (GLW, $193.75), whose fiberoptic cable business is growing rapidly. "Forget that they?re a glassmaker," said Kevin Landis, a portfolio manager with Firsthand Funds in San Jose, California.
In the biotechnology world, the name that came up repeatedly was Celera Genomics Corporation (CRA, $84), which is one of the leaders in mapping the human gene. Essentially, when Celera finishes its research, "it will own the operating system for the human body," said Ken Kam, president of Marketocracy, Inc., a money management firm that specializes in technology and biotechnology investments. "They?re going to be the Microsoft of biotechnology."
Kam also owns Affymetrix, Inc. (AFFX, $155.13), which is building software systems that can organize genetic information. In time, Kam says, your doctor might use the company?s software to tailor a course of treatment specific to your genetic makeup.
The show is one of three put on yearly by InterShow, Inc. of Orlando, Florida. It attracts investors from across the country with an average net worth of several hundred thousand dollars. Investor and personal finance shows are growing rapidly around the country. Many are put on by local newspapers.
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