PART I OF A THREE PART POST (Interpretation Dec. 18-19, 1999)
David K's Interpretation of Moneytalk, Educational Links and Other Financial Information
for December 18-19, 1999
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Preliminary Disclaimer: This e-mail is not a substitute for listening to Moneytalk. It is only my interpretation and commentary of some of what is discussed on Moneytalk, along with additional educational information that I include, editorial comments about the market, helpful financial links, guest contributors and even humorous remarks. I also provide special alerts from time to time. If you want to know what was actually said verbatim on Moneytalk, listen to the show live. You can even listen to a re-broadcast of past Moneytalk shows on the Internet via the archives. The web site www.bobbrinker.com has all the links to the ABC Radio Network Stations that broadcast the show live and via the Internet. There are even free summaries of the Moneytalk shows on that web site. There is an additional disclaimer at the end of this e-mail.
Market Numbers and Key Economic Data as of the Close of the Market on Friday, DECEMBER 10, 1999
Dow: 11257.43
Nasdaq: 3753.06
S&P500: 1421.03
30-Yr Bond: 6.377%
U.S. M-1 money supply in week of December 6th: up $2.8 billion
U.S. M-2 money supply in week if December 6th: fell $15.1 billion
U.S. M-3 money supply in week of December 6th: fell $11.0 billion
Opening Monologue: Bob was nostalgic as he opened the last Moneytalk show for the decade of the 1990s -- a decade during which investors rode the greatest mother of all bull markets. Bob provided some market history. During the decade of the 70s (starting with 1971), the Nasdaq returned 51%, easily beating the Dow's return for that decade. It starts getting interesting in the 80s (EC: especially the clothes!), during which the Nasdaq rose 201%, but the Dow beat that, returning 228%. During the 90s, the Dow is up 307%, whereas the Nasdaq is up a measly, little itty-bitty 700%!!!
Next, Bob borrowed from an article found in the December 13th Wall Street Journal (and also discussed in a David K EC from last week) that reported how certain individual stocks performed during the 1990s.
Best Performance of the largest members of the S&P500 during the 1990s:
1. General Electric (GE) up 814%
2. Microsoft (MSFT) up 7699%
3. Cisco Systems (CSCO) up 64,498%
3. Wal-Mart Stores (WMT) up 1,028%
4. Lucent Technologies (LU) up 951%
Biggest Total Stock Price Gainers of the 1990s:
1. America Online (AOL): up 79,629%
2. Dell Computer Corp (Dell): up 72,445%
3. EMC Corp (EMC): up 68,638%
4. Cisco Systems (CSCO): up 64,498%
5. CMGI Inc. (CMGI): up 61,189%
Editorial Comment ("EC"): As a wanna-be great stock picker (aren't we all), I always wonder if I should just pick the stock that has done the greatest in the prior year and just ride it for a little longer. The problem with that strategy of course, is you are usually too late to the ball game. I have read studies that show people who chase the latest greatest mutual fund based on recent performance are usually disappointed. But mutual funds are not individual companies. The journal article that Bob was discussing, also pointed out that four stocks gained at least 1,000% in both the 1980s and 1990s, including Wal-Mart, the Gap, Home Depot and Computer Associates International. Moreover, GE made it into the large stock winning category for both decades. You can't tell me that the largest price gainers of this decade (AOL, Dell, EMC, CSCO and CMGI) aren't on everyone's Christmas list for next year -- because they are! Only one thing to do, revisit this topic once again in 365 days. By the way, the entire article is reprinted on Suite101 at the following link and is well worth reading:
suite101.com
Caller: This caller wanted to know how far he should stretch the 25% weighting in technology that Bob has previously recommended. (Bob has frequently recommended investors limit their technology weighting to 25% which is the weighting of technology stocks in the S&P500 index. Bob disclosed that he predominantly invests in technology stocks so he stretches the 25% very far. Bob added that he can't tell people to do it on the air because of the risks associated with investing in those companies. Jack wanted to know if he should go to 37% weighting in technology, to which Bob responded by noting it is a personal decision and that he is way way way way over that!
EC: Bob's comments caused a firestorm of controversy on the message boards. To summarize the comments, many people felt Bob was two-faced given what he preaches on the air. Personally, I didn't find Bob's comments offensive. If he recommended high tech (and high risk) stocks to 5 million listeners and the market sustained a huge correction, it could devastate people who aren't used to taking that risk and the commensurate volatility. I always figured that Bob must invest a lot in technology stocks since they do seem to be his area of interest. Over the last few years, he has disclosed his ownership of stocks like Lucent, Microsoft, Vodafone, Applied Materials, Teradyne, Ultra-Tech Stepper, Novellus, just to name some. Given the run up in many of these stocks, the man must have reached critical mass moons ago.
Caller: Is the next bear market likely to be caused by rising interest rates or a recession? Either. It could be occur if interest rates keep rising as a result of Fed tightening because of inflation or increasing economic growth, or a recession caused by Fed intervention. Bob thought the latter case was the more likely scenario. John also wanted to know what Bob thought of Commerce One (Nasdaq: CMRC), one of the biggest winners in business to business stocks. Bob noted that the stock has had an incredible run up and now trades in the 400s. Bob added that only a few pure play b2b stocks are public.
EC: Steve Harmon is perhaps one of the most respected internet stock analysts and he likes Commerce One! (Or at least he did earlier this year when it was trading at $30 a share, and then even when it was around $300 a share. Now that it is trading at $400 a share, who knows). He wrote an article about Commerce One on November 17th of this year which you should read if you are interested in the stock, or in b2b stocks in general. Go the following link and search for Commerce One by subject. Then click on Commerce One, B2B King the title for November 17, 1999:
archives.listserve.com
Caller: Where is the market going in the next 6-8 weeks? Sorry folks, no answer other than the same forecast that there will no bear market for the rest of the year. Bob added that historically, the market does not collapse in December. Contributing to this is the fact that many people are waiting until next year to do some profit taking.
Caller: What is your opinion on the internet? Bob feels the internet is nothing less than revolutionary. Business to business on the Internet will be enormous. Another caller wanted a simple definition of what business to business means. Basically, it involves businesses doing business with other companies over the internet. Another caller also wanted to know which companies were involved in business to business. Bob referred the caller to bobbrinker.com for more information and avoided discussing individual stocks.
SUPPLEMENTAL EC ADDED 12/15/2001: The B2B discussion thread over at bobbrinker.com was jumping for a while. In recent months, the board became a ghost town. As far as I know, the discussion threads over at bobbrinker.com are offline until future notice.
Brinker Comment: Borrowing from the artist formerly known as Prince, Bob disclosed that being the wild and crazy guy that he is, he is ready to party like it is 1999! As he began the December 19, 1999 broadcast, Bob was giddy with the holiday spirit and rising stock prices. First, Bob reported that General Electric (NYSE: GE), announced a 3-for-1 stock split and increased their quarterly dividend by 17%! These actions appear to indicate that the company views its potential prospects positively (how's that for alliteration!). Bob noted that this is GE's ninth stock split and its first 3-for-1 split since 1954. Bob pointed out that GE is the one stock that he does not limit his 4% rule to since GE is diversified internally, owning many different businesses. GE is also increasing their stock buy-back by 5 billion dollars. It is the second largest company in market value in the world (behind Microsoft -- which, by the way blew through its previous all time highs this week).
Editorial Comment ("EC"): To understand the success of GE, look no further than its CEO Jack Welch. Called the world's greatest CEO who runs business like a zen master, Jack Welch retires in year 2001 much to the chagrin of GE shareholders. How did he become so successful? Start with the six management rules he coined:
1. Face reality as it is, not as it was or as you wish it to be.
2. Be candid with everyone
3. Don't manage, lead
4. Change before you have to.
5. If you don't have a competitive advantage, don't compete.
6. Control your own destiny, or someone else will.
edhoward.com
Jack Welch has written several books. Here is a link to a site that lists all of his books on one page:
datatrendsoftware.com
Brinker Comment: Novellus Systems (Nasdaq: NVLS) reported after the close of the market on Friday that revenues and profits would exceed Wall Street expectations. Novellus also announced a 3-for-1 stock split. Bob disclosed he is a shareholder of Novellus.
EC: Remember last week Bob discussed the fact that if the semi-conductor capital equipment companies starting announcing stock splits, it probably meant that visibility for the near future for the companies was good. Well, KLA Tencore also announced a two-for-one stock split. Many investors are hoping that Applied Materials follows the trend and announces a stock split as well. Applied Materials will announce first quarter financial results on February 15, 2000, after the close of the stock market. Their Annual Meeting of Shareholders is scheduled for March 21, 2000.
READ NEXT POST FOR FOR PART II |
