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Technology Stocks : John, Mike & Tom's Wild World of Stocks -- Ignore unavailable to you. Want to Upgrade?

To: wlheatmoon who wrote (239)	1/4/2000 11:38:00 AM
From: John Pitera	Read Replies (1) \| Respond to of 2850

...Byron Wein's 10 Surprises for 2000...To Even out the TSCN bull thoughts. -ng- 1/3/00 11:47 AM ET the real author of the 10 surprises is Byron Wien. When it comes to Wall Street lists, he is the originator of the New Year's surprise list. Here are his ground rules: Consensus should assign only a one-in-three probability for each surprise, though Wien believes each surprise has a 50% chance or better of taking place. Usually, he says, more than half of the component elements take place during the year. Here are his 10 surprises for 2000 with some comments. 10 Surprises for Wall Street in 2000: The Surprises 1. Early in the year, the powerful pace of the global and U.S. economies and stock markets creates an enormous demand for capital. Partly because of a weaker dollar, the long U.S. Treasury yield exceeds 7.5%, further straining excessive equity valuations. 2. Starting in the spring, the Federal Reserve commences a monetary tightening that increases short-term interest rates more than 100 basis points by year-end to slow the economy, as inflation begins crawling higher again. This tightening, combined with high valuations, starts a stock market slide that carries the Standard & Poor's 500 down 25%, where it remains for several months. The linkage between stock performance and bond yields becomes evident once again, and pressure increases for strategists to raise the risk premiums in their models. 3. In a national shift of focus toward integrity and character, the Democrats nominate Bill Bradley and the Republicans nominate John McCain for president. Bradley wins, and the Democrats achieve a majority in Congress. 4. The Internet finally meets its Waterloo. A movement gains support in Congress to charge a national sales tax on Internet transactions, which would be allocated to the states. Online users complain about slow speeds and the disappointing performance of some companies. Delivery bottlenecks from e-tailers trigger buyer resistance. There is a graduated carnage in technology. Some Internet content and retailing stocks correct 50%, and access providers come down by one-third. Personal computer and other hardware companies with current earnings only decline 25%. The Internet continues to be viewed as the most powerful business phenomenon in our lifetime, but the stocks were discounting a profitability reality that was unlikely to come true. 5. The price of crude oil moves above $30 and stays there as growth throughout most of the world exceeds expectations and supply remains under control. Israel and Syria sign a peace pact. The political problem in the Middle East becomes the conflict between the deprived Islamic world and the perceived exploitative West. This is the force holding the Organization of Petroleum Exporting Countries together. Oil service stocks rally. Halliburton (HAL:NYSE - news) ($40), Schlumberger (SLB:NYSE - news) ($56) and Smith International (SII:NYSE - news) ($50) have big gains. 6. After a number of dismal years, hospital management companies finally become strong performers. Conflicts with the government are reversed as legislators view these operations as part of the health care solution rather than part of the problem. Columbia HCA (COL:NYSE - news) ($29), Tenet (THC:NYSE - news) ($23) and Health Management Associates (HMA:NYSE - news) ($13) do especially well. 7. Restructuring proves to be the cure for eurosclerosis. The European economy surges 4% in 2000, and the foreign exchange value of the euro soars, hitting 1.25 against the dollar during the summer. 8. In contrast, restructuring backfires in Japan. The economy slips back into recession because of high unemployment, low consumer spending and weak capital outlays. Disenchanted foreign investors sell Japanese stocks, driving the Nikkei back below 15,000. Panicked Japanese repatriate their overseas investments, and the yen/dollar exchange rate goes to 80, helped by Japan's large trade surplus. 9. The Russell 2000 outperforms the S&P 500 by rising more at the beginning of the year and declining less later on. New leadership sectors appear as commodity prices continue to move higher and intermediate-materials stocks deliver better performance than the indices. Active managers beat the market for the second year in a row. 10. Several significant secular trends can now be viewed more positively, providing the basis for new investment themes: (a) the dangers of global warming have been overstated; (b) biotechnology breakthroughs will extend the life expectancy for those under 40 in developed economies by two years; and (c) computers and the Internet begin to revolutionize the classroom at all levels. Also Rans: The world continues to struggle with geopolitical instability. Russia collapses (again) as the general public grows impatient with the pace of reforms and the pervasiveness of corruption. An upheaval in Congo threatens all of Africa below the Sahara. Terrorism fears subside, however, as Osama bin Laden agrees to cease and desist. In spite of all this confusion in the developing world, emerging markets stocks continue to do well and Brazil is an outstanding performer. On the heels of World Trade Organization accession and global economic recovery, China's economy expands by 8%. The pace of Chinese reforms accelerates, driving equity markets in Greater China (including Hong Kong and Taiwan) higher. China supplants Japan as the new economic leader of Asia. And if I had the guts to be bullish in recognition of the profound meaning of the new economy: The market broadens and the Standard & Poor's 500 and Dow Jones [Industrial Average] each rise more than 20% for the sixth straight year, without a major contribution from technology stocks. As a result of the broadening of the market, indexing begins to recede as an asset allocation choice among plan sponsors. Harvard Business School retires existing investment management professors, and a new course on momentum theory is introduced. "Big Mo," as it is instantly named, requires students to show evidence of online trading before enrollment. (With an assist from Mary Meeker, the MSDW Internet guru.) Fueled in part by an acceleration of dot-com usage outside the U.S., the market value of American direct Internet stocks moves to $2 trillion from $1 trillion now as a result of continued initial public offerings and a further rise in already outstanding issues. The IPO market becomes more selective, favoring business to business and infrastructure companies. (With another assist from Mary Meeker) The chief executives of 10 Fortune 250 companies are ousted by their boards for failing to integrate the Internet into their operations with speed and conviction.