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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: IQBAL LATIF who wrote (29982)	12/9/1999 4:42:00 AM
From: IQBAL LATIF	Read Replies (1) \| Respond to of 50167

Senior analyst: Adam Lowensteiner (12/9/99) Have Internet stocks gotten you dizzy? Well sit back and enjoy the ride, because it might be a long one according to Jeffrey Applegate, Chief Investment Strategist at Lehman Brothers. 'In a word we are still bullish,' he said. Applegate believes that the markets should continue their trend upward, thanks to technology, and he also believes that the Fed is no longer on its 'warpath' of raising rates like it has in the past. Like this Article? Applegate continues to promote investing in stocks, and has had zero percent of his portfolios in cash for the past five years. 'If there is no recession through February, we could see the largest expansion the United States has ever seen,' noted Applegate. Applegate believes that there has been sustained deflation in our economy, as labor wages have been rising by 3%, but that technological advances, which in some cases have replaced employees with machines, have also lowered total labor costs to the economy. Another catalyst to this bull market is that 60% capital expenditures in the economy are being spent on technology, a huge increase from 30% a few years ago. Yahoo! (NASDAQ: YHOO - Quotes, News, Boards), which soared Tuesday on news of its inclusion into the S&P 500, is also something that intrigues Applegate. With companies like Yahoo! and America Online (NYSE: AOL - Quotes, News, Boards) entering the S&P 500, they will lift the index's price-to-earnings ratio. Applegate adds that by adding these non-dividend paying technology stocks to the index that old valuation methods that looked at dividend growth or book value will become increasingly meaningless. 'Higher growth rates plus higher margins will equal higher price-to-earnings ratios,' says Applegate. At Lehman Brothers, Applegate produces a strategy portfolio, where he is overweighted in technology stocks nearly 2-to-1 in comparison to the S&P 500, pushing stocks like America Online (NYSE: AOL - Quotes, News, Boards), Lucent Technologies (NYSE: LU - Quotes, News, Boards), Siebel Systems (NASDAQ: SEBL - Quotes, News, Boards), and Sun Microsystems (NASDAQ: SUNW - Quotes, News, Boards). Applegate also favors capital goods stocks like General Electric (NYSE: GE - Quotes, News, Boards), and communication services like AT&T (NYSE: T - Quotes, News, Boards) and MCI WorldCom (NASDAQ: WCOM - Quotes, News, Boards). Applegate is underweighted in basic materials, consumer cyclicals, consumer staples, energy, financials, healthcare, transportation, and utilities. 'Virtual Economy Portfolio' Because the Internet has become such a large part of the market, Applegate constructed what he calls the 'Virtual Economy Portfolio.' This portfolio obviously carries more risk, but as more and more Internet stocks get placed into the S&P 500, investors will likely continue chasing these types of stocks. There are not enough Internet stocks in the S&P 500 Index to compare a portfolio weighting to, so Applegate uses the Dow Jones Internet Index. In the virtual portfolio he is overweighted in infrastructure stocks like Cisco Systems (NASDAQ: CSCO - Quotes, News, Boards), JDS Uniphase (NASDAQ: JDSU - Quotes, News, Boards), and application and services stocks like Critical Path (NASDAQ: CPTH - Quotes, News, Boards), Phone.com (NASDAQ: PHCM - Quotes, News, Boards), and RealNetworks (NASDAQ: RNWK - Quotes, News, Boards). On the underweight side, Applegate says intermediary stocks like CMGI (NASDAQ: CMGI - Quotes, News, Boards) and Ariba (NASDAQ: ARBA - Quotes, News, Boards) and e-commerce stocks like Amazon.com (NASDAQ: AMZN - Quotes, News, Boards) and Priceline.com (NASDAQ: PCLN - Quotes, News, Boards) should be less of one's portfolio. Of the 34 stocks in the virtual portfolio, Applegate favors Cisco Systems (NASDAQ: CSCO - Quotes, News, Boards), MCI WorldCom (NASDAQ: WCOM - Quotes, News, Boards), VerticalNet (NASDAQ: VERT - Quotes, News, Boards), and America Online (NYSE: AOL - Quotes, News, Boards). Of the stocks that overlap and appear in the Virtual Economy Portfolio and the Dow Jones Internet Index are: Cisco, MCI WorldCom, America Online, Siebel Systems, EMC (NYSE: EMC - Quotes, News, Boards), Intel (NASDAQ: INTC - Quotes, News, Boards), Lucent, Sun Microsystems, Nextlink (NASDAQ: NXLK - Quotes, News, Boards), Microsoft (NASDAQ: MSFT - Quotes, News, Boards), Qwest Communications (NASDAQ: QWST - Quotes, News, Boards), and Tellabs (NASDAQ: TLAB - Quotes, News, Boards). Bottom Line: So far Applegate has been dead on with his analysis. Another catalyst he highly believes will take some of these stocks even higher is the increase in bandwidth. Applegate doesn?t know which technology will win, but he does believe that infrastructure companies are still the place to be as they will be building the backbone to the Internet. Which are those stocks? The Lucents, Ciscos, AT&Ts, MCI WorldComs, and Sun Micros, as well as the JDS Uniphases, RF Microdevices, and Brocade Communications of the world.

To: IQBAL LATIF who wrote (29982)	12/9/1999 5:35:00 AM
From: IQBAL LATIF	Respond to of 50167

Microsoft's alliance with Ericsson provides one of the first snapshots of how the wireless Internet industry will develop, but the partnerships in this malleable market are far from set in stone. In the not-so-distant future, cell phone users will access the Internet, corporate databases, e-commerce sites and email accounts from their smart phones. And if these new phones really do turn out to be the true convergence devices the computing industry has been breathlessly predicting for the last few years, huge opportunities will emerge. Not only are consumers going to need fancier phones, gadgets and portable operating systems, but corporations and e-commerce Web sites will likely have to beef up their computing operations to serve them. Software and hardware makers will profit, but so will content providers, telecommunications carriers and IT (information technology) consultants. So for the first snap shots alliances and relationships to create products has been completed, leaving a landscape that looks remarkably familiar: Palm Computing and its allies vs. Microsoft and its camp. Unlike the handheld computers wars that preceded it, though, this period will likely be marked by fuzzier and more complex relationships, as the players will grapple with a broader array of concerns and partners. Microsoft's first competitive product in this arena is Mobile Explorer, announced today. Designed as a bundle of services, applications and back-end software that will enable cell phone manufacturers and service providers to offer a number of wireless Internet options, Mobile Explorer will be used by Ericsson in upcoming cell phones. It could be the start of something big, analysts said. "Microsoft wants to continue to control your environment, the way they always have done," said Joe Ferlazzo, an analyst with Technology Business Research. "If [Mobile Explorer] really isn't OS agnostic--and to get the full functionality you have to get the full Windows CE of the Mobile Explorer--we're right back to Microsoft trying to capture the entire value proposition from one end to the other." Licensees can pick and choose which products they will use from the bundle, which includes Microsoft Exchange Server, the Back Office applications and MSN Mobile services, as well as Windows CE as the underlying operating system. "I think it's early to understand how things are moving forward," said Phil Holden, a product manager at Microsoft, adding that Microsoft's advantage over potential competitors is that its offerings include compatibility and access to corporate information stored using Microsoft software. "Clearly, there's an opportunity there in terms of volume, if you look at the number of cell phones being purchased," Holden said. "And we see the general trend of having the ability to access Internet content on the cell phone." Palm, for its part, is licensing its operating system and application environment to companies such as Nokia and Sony for use in all manner of wireless and wired devices. Although Palm has been lauded for its simple user interface, the company has some ground to make up in offering comparable enterprise software options, analysts say. "Palm's strategy is to engage in alliance partners, of which we have a list longer than your arm, to provide solutions and data access that go beyond Exchange and with third parties that provide back-end connections with Exchange and Palm in the mobile market place," said David Weilmuenster, director platform strategy and planning for Palm. "Our partners, such as Nokia and Sony, will be able to exploit all of these solutions, because they will based on the open platform, the Palm platform, so the solutions will be available on Nokia branded products, Sony-branded products, Palm-branded products, etc.," Weilmuenster added. Part of the rush to these deals comes from a fear that the handheld market is morphing into a segment of the cell phone industry. "They see that there is a terminus point for the PDA market," said Will Nelson, editor of smaller.com, an online resource and e-commerce site for gadgets and devices. "They're obviously looking to see who the next buyer is. Well, it's the person who has a cell phone." Which companies will become the dominant players in this market remains unresolved. On one hand, cell phone customers have historically been less focused on operating-system benefits and have instead concentrated on pricing plans and service range, giving the edge to the cell phone makers and carriers. "Most people who use a phone want to just use the phone and don't want to poke around a graphical user interface," Nelson said. But on the other hand, adding data access to the mix means a segment of customers will likely begin to think of the overall computing picture. "People will pay more attention, when buying phones, to the Internet access," said Elliot Hamilton an analyst with the Strategis Group, a market researcher covering the wireless market. "I think there is going to be much more awareness about how one system operates than another does. It's a little too early to announce a victor, and there may never be one." Adoption of this technology is expected to occur fairly rapidly, although the actual predictions vary. Users of browser-enabled mobile phones will soar from 1.1 million this year to 79.4 million in 2003, while Internet-capable PDA users are expected to increase from 5.2 million to 12 million in the same period of time, according to Jupiter Communications. Meanwhile, In-Stat Group adds that enterprise wireless data users--that is, people who use cellular technology for getting data rather than for talking--will reach 9 million in 2003. Nokia earlier this week said cell phone users will hit one billion by the end of 2002. The picture gets even more complex when changes to back-end systems are considered. IBM is already rushing forward to incorporate wireless technology into its "pervasive computing" strategy, an all-encompassing strategy to provide corporate users with any sort of technology they might need. IBM earlier announced that it will begin to work with Nokia and application developers. Wireless developers will also be encouraged to port products to Monterrey, an upcoming operating system for servers based around Intel's Merced chip. Big Blue struck a deal with Sprint for wireless service earlier this month. IBM's plan isn't to profit from cell phones, but rather from the servers and services that will go into filling phones with data. "You need to make sure you have the infrastructure. You need to build that larger piece that does the smart connection between devices," said Jon Prial, director of marketing for IBM's pervasive computing unit. Compaq is engaged in similar plans. In fact, so is Microsoft. Executives have said that the company's plans for handheld devices largely exist to drive demand for Windows 2000.

To: IQBAL LATIF who wrote (29982)	12/9/1999 9:22:00 AM
From: IQBAL LATIF	Read Replies (2) \| Respond to of 50167

If 1409 is taken out we move on to 1418 and will try to take out 1428 but if we fail at 1408 we will test 1400 cash on SPX... if we break it we can see selling multiplying.. for me stocks to watch is brkb and its support at 1800 I think htis should hold for a move to 1428,...

To: IQBAL LATIF who wrote (29982)	12/9/1999 4:36:00 PM
From: IQBAL LATIF	Respond to of 50167

finance.yahoo.com In my opinion the chart of this brkb looks bad below 1785 I don't know why I have this feeling that today's break below 1800 may be a false break,,, I think the valuation sector of economy cannot be disregarded completely in face of strong economic performance, I would assume that this divergence between brkb proxy and NDX has to reduce otherwise falling vlauation sector will bring htis whole thing down, as a trader I am more inlcined to think that it will be more of a steady climb for brkb and some rotation from Techs.. todays action is osmewhat inline with my oft repeated theory, I would tend to think that Buffet approach will not be proven wrong and we are testing 1785 300 points from lows made in Oct 97, so at htese levels as if last tow years have been long sleeper for this sector, I think if we don't break this 1400 on SPX and continue to hit this support on SPZ 1408 area we will certainly see movement in new sectors otherwise it all looks that momentum is fading in some sectors and we need these broad market stocks to pick.. I repeat for my friends some of the issues that Buffet rasied last month although I have my own opinions but this is worth a study.. -- Warren Buffett, the chairman of Boring Port top holding Berkshire Hathaway (NYSE: BRK.B), has been featured in an important article in this week's Fortune. I urge you to read it in its entirety. (I have also written a summary that you can read by clicking here.) By Whitney Tilson NEW YORK, NY (Nov. 8, 1999) -- Warren Buffett, the chairman of Boring Port top holding Berkshire Hathaway (NYSE: BRK.B), has been featured in an important article in this week's Fortune. I urge you to read it in its entirety. (I have also written a summary that you can read by clicking here.) I am in wholehearted agreement with Buffett's main points: Those who are expecting annual market returns over the next 10 years of 12.9% -- the minimum level surveys show most Americans expect -- are virtually certain to be sorely disappointed; High "frictional costs" will have a significant negative impact on the returns of most investors; and In aggregate, investors in the companies that are leading the "information revolution" (read: Internet stocks) will fare badly (though I believe certain stocks will do very well). I suspect Buffett's article will be characterized as very negative, but he is actually not as bearish as one might think. His projection of 4% real returns after frictional costs translates into 5-6% real returns before these "horrendous" costs, which he estimates at $130 billion per year, an amount equal to more than a third of the Fortune 500's total profits in 1998. (Buffett's diatribe about these costs are well summarized in last Thursday's Fool on the Hill.) Five to six percent real returns are only slightly below the remarkably stable 6.6-7.5% real returns that the stock market has delivered in every major 50-plus-year period since 1802, according to Jeremy Siegel's analysis in his outstanding book, Stocks for the Long Run. Thus, for those investors who are able to minimize frictional costs and at least match the overall market's rate of return, Buffett's projected returns will be disappointing only to those who irrationally expect a continuation of the unprecedented returns of the past 17 years. Buffett's Assumptions Let's examine the assumptions underlying Buffett's projections. He argues that the return on stocks in the future will likely mirror the growth of profitability of American businesses plus dividends. He writes, "The Tinker Bell approach -- clap if you believe -- just won't cut it.... Investors as a whole cannot get anything out of their businesses except what the businesses earn." He assumes 3% real GDP growth, implies 4-5% growth in corporate profitability, adds 2% for inflation, and subtracts 1-2% for frictional costs, which yields approximately 6% nominal returns or 4% real returns, assuming investors continue to value earnings at the same levels that they do today. Could stocks do better? Yes, Buffett says, citing two possibilities: corporate profitability in relation to GDP continues to rise and/or interest rates fall even further, thereby increasing the amount that investors would be willing to pay for each dollar of earnings. However, given that these factors are already at historical extremes, it is clear that Buffett expects these trends to halt and even regress toward the mean. I agree with Buffett regarding the importance of these two factors and the implicit assumption underlying them: that the market's valuation level in the future will continue to be a function of two factors, corporate earnings and the P/E investors are willing to assign to those earnings. However, I think there are a number of other possibilities that Buffett does not address that could either cause corporate profits to rise more quickly than he projects or valuation ratios to rise even further -- or both. Corporate Profits Rising Faster Than Expected Regarding corporate profits, I believe it is quite possible (though I won't go so far as to say likely) that many factors, especially businesses' adoption of the enormous advances in technology over the past couple of decades, are just beginning to trigger a boom in growth and productivity. The data is starting to show this. According to recently revised historical GDP data released by the Commerce Department's Bureau of Economic Analysis on October 28, and Business Week's analysis of it, U.S. economic and productivity growth has been significantly higher than earlier data showed, and is accelerating. That there would be a substantial lag time between the investments in technology and the results is not surprising. A century or so ago, it took decades for the advances made possible by electricity and the electric motor to affect national productivity levels. When I look at how some companies today -- still remarkably few -- have adopted technology, especially the Internet, to streamline operations and communications, I can't help but be bullish on the impact of more and more companies doing the same. Other factors could also contribute to higher-than-expected growth of corporate profits, such as improved corporate governance, more insider ownership (a topic covered in one of my previous Boring Port columns), greater focus by managers on improving returns on capital rather than expanding empires, an increase in the value of companies' brands, and research and other intellectual property that aren't always reflected in GAAP earnings. Expanding Valuation Multiples Regarding the multiples that investors place on corporate earnings, I believe it is possible that, even if Buffett's assumption of steady interest rates is correct, average P/Es and other valuation metrics could be higher many years from now than they are today, for three reasons. First, Stocks for the Long Run shows conclusively that, for the long-term investor, stocks have always been undervalued. For example, even if you had been unfortunate enough to invest $100 in the market just before the 1929 crash, 30 years later you would have had $565 after inflation, versus $141 and $79 had you invested in bonds and T-bills, respectively. Similar results are true of every other market crash this century. Also, stock returns, unlike those of other asset classes, have been remarkably stable over time. Over rolling 20-year periods back to 1802, stocks have never failed to beat inflation by less than 1% annually, whereas bonds and T-bills have declined in value by more than 3% annually over their worst 20-year periods. As Siegel's data and other data like it become more widely known, the risk premium investors assign to stocks could decline, resulting in an increase in their valuation. (This argument is the thesis of the new book, Dow 36,000, which has merit, but I think takes the argument to an extreme; click here to read a summary of the book that appeared in Atlantic Monthly.) Second, the environment for investors could continue to improve. A high degree of corporate disclosure, transparent, real-time capital markets, and easy access to information on the Internet all increase the accessibility of stocks and reduce the risks of owning them. Third, the economic characteristics of American businesses could continue to improve. I believe today's leading American businesses have superior economic characteristics to similar businesses in earlier periods, and that this trend could continue. For example, let's compare a group of leading companies in 1972, known as the Nifty Fifty, with a similar group of today's stocks. (Click here to see a list of the stocks and the data about them that I have compiled.) You can see that the average return on equity of the 20 companies that are in both Nifty Fifties is 18.7% in 1972 versus 28.7% today. While return on equity is not a perfect measure by any means, this data provides evidence that the same companies are generating higher returns on equity today than they were during a bull market period of an earlier era. Conclusion I agree with Buffett's main points, but am slightly more optimistic than he is. While I believe that most of the bullish theories I've noted above will turn out to be wishful thinking and self-delusion (after all, five centuries before Christ, Demosthenes noted that "What a man wishes, he will believe"), I think that at least one or two of these scenarios are likely to materialize, resulting in annual stock market returns that will be slightly (say, 1-3%) better than Buffett projects.