Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Proud_Infidel who wrote (33913)	1/29/2000 6:24:00 PM
From: Proud_Infidel	Respond to of 70976

dailynews.yahoo.com Saturday January 29 12:24 AM ET Tech Stocks Rule; Growth Nears Record Run By Pierre Belec NEW YORK (Reuters) - As the world marvels at the incredible length of the U.S. economy's expansion and the soaring stock market, experts say: Hold on to your hats. There's still a lot of fuel in this rocket ship. The economy's expansion, which started in March 1991, will have set a record of 107 consecutive months in February in an environment where inflation rarely raised its head. So, where is the credit due for nine years of growth? One word: Technology. It has made Corporate America much more productive and this has allowed inflation to steadily ratchet down to levels last seen in the 1960s. ``U.S. companies are doing a terrific job of keeping costs in check and exploiting business opportunities for revenue growth, pretty much throughout the business world,' said Greg Smith, chief investment strategist for Prudential Securities. One way the companies have done it is through the Internet to reach suppliers worldwide. ``Traditionally, big companies have tended to use a limited number of suppliers with which they maintain relationships and with which they interact in a very manual, hands-on way,' he said. Now, thousands of global suppliers are replacing dozens of local suppliers. ``Now companies can use technology to expand their circles of potential suppliers to literally all the world has to offer and use it to be perpetually hunting down the lowest price,' Smith said. ``Companies are moving ahead aggressively and using Internet technologies to try to make the next big hit in cost reduction.' Smith said that companies that tap into the cheaper labor markets outside their geographic borders can also save themselves lots of money in today's tight U.S. labor market. The jobless rate is the lowest in 30 years. ``Companies operating with high costs and tight labor markets may be at a chronic competitive disadvantage to companies operating in regions of the world with better labor markets or labor conditions,' he said. ``Looking at these dynamics, it becomes clear that technology has the ability to bring far-flung companies of the world into close relationships so that supply/demand chains can be served from many parts of the world business community,' he said. John Challenger, chief executive officer of the international outplacement firm Challenger, Gray & Christmas Inc., said the technology-driven global economy is tearing down traditional concepts of time and space. ``The Internet permits a person to conduct business anytime day or night with a company that might be 10 time zones away. ``The global network allows people to instantly see what everybody is charging for commodities and this competition will bring conformity of costs for products,' Challenger said. There is another good side to the tech industry. ``Technology-led growth is inherently disinflationary,' said Edward Yardeni, chief economist for Deutsche Banc Alex. Brown. ``High-tech prices are always falling. The Internet has become the killer application and it is killing inflation.' Technology has also made old inflation measures obsolete. And, those who hold to traditional economic mantras, such as the belief that a jobless rate below 6.0 percent and an extended business cycle eventually breed inflation, have made false calls for years. Yes, even Federal Reserve Chairman Alan Greenspan. ``This will make the traditional late-business-cycle phenomenon of tight supply in the U.S. product or labor markets unlikely to bring inflation problems the way it historically has done at such points in the business cycle,' Smith said. What does all this mean for the stock market? ``These trends mean that a competitive -- maybe even brutally competitive -- economic climate will have an effect on stock valuations,' Smith said. ``The stock of companies that can continue to produce good profit growth under these conditions may be awarded even higher valuations than now.' Smith said the trick is to pinpoint the companies that fit the ``New World' Economy. Technology shares, particularly the Internet stocks, have made investors rich beyond all expectations. Despite the extraordinarily high price/earnings ratios of those stocks, Wall Street still does not want to be left out of the bonanza because the technology sector is the fastest growing part of the economy and it is expected to generate more rapid growth in coming years. ``The only way to make sense of the tech stocks' prices is to view them as a lottery with a huge payoff,' Yardeni said. ``We know that there is a lot of money to be made in technology but we don't know which companies will be the big winners. ``Investors have concluded that they have got to buy a lot of tickets in this lottery and even pay scalpers' prices for them to be in it to win,' Yardeni added. Over the years, companies that seemed to be the hot new technology innovators have turned out to be false alarms. ``But what's different this time is that the secular outlook for technology is probably the brightest it has ever been,' Yardeni said. ``And, we can bet that lots of money will be made there, although people can still lose if they invest in a few of the wrong stocks.' Next week, the Federal Reserve's policy-setters, who have said that strong growth and the tightest job market in a generation could fan inflation, meet to look at interest rates. Wall Street expects the Fed to raise the key overnight federal funds lending rate by a quarter percentage point to 5.75 percent at the two-day meeting on Feb. 1-2. Will the Fed miss out on the tremendous change in the way the economy works? For the week, the Dow Jones industrial average was off 512.84 points at 10,738.87. The Standard & Poor's 500 index fell 81.21 to 1,360.15 and the Nasdaq Composite index slumped 348.38 to 3,887.02.