Hi, Glenn - Interesting articles. 'Triple waterfall', 'capitulation': terms from the past, to fit the present, and the future.
The dizzying heights of the NASDAQ, of telecomms and biotech, the 'net, all that stuff.
How many reports and studies did we read that forecast, in no uncertain terms, the growth of telecomms, of internet usage, or wireless, fiberoptics - there must have been hundreds of them, easily - many by reputable, cautious firms.
Were they wrong? Were we wrong? Was it all just pie in the sky, some pipe-dream fantasy? Was it all fluff, with no foundation in truth?
Not quite.
The lesson that Mr. Greenspan brought home to us is that it's all dependent on liquidity.
The pre-Y2K liquidity that was invested in the economy created an easy-money market that defied the hard-learned principles that every serious student of both the markets and the economy knows. When business can obtain financing for growth, when consumers can afford the things that business produces, when employmemt is full, and capacity utilization is near the upper limit, then many things are possible.
The barriers that have since been raised, both interest rates and tighter money supply, have squeezed the hype out of everything. And make no mistake, the billion-dollar moves of funds like Fidelity out of high-tech have accelerated the process. They have been only too happy to desert a field once described as full of promise, to their eventual profit: they'll be back in many of the same stocks after they have gutted the sector.
Because, if there is any truth to the projections, if there was any insight and knowledge in the studies, then as capital markets improve, the market will again seek out those companies, and those sectors that produce good returns.
It's just a question of time: as long as you don't need your money today, as long as you've picked good stocks with good management and realistic plans, then the individual investor will be okay.
The market can not, and will not, ignore growth. This fall was as engineered as any has ever been: by that I mean that it was created and destroyed, in part, by events external to the market.
Yes, there was hype, and hysteria. But the skyrocketing prices were aided by a confluence of economic and social events.
Y2K has come and gone, as has Internet mania. Liquidity will return. With the dramatic rise in fuel costs, inflation will, too.
And those high-tech stocks that show promise will again see that promise reflected in their prices.
Nothing has changed.
Regards,
Jim |
