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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Adam Weiner who wrote (46602)	4/16/2000 7:26:00 AM
From: Mike Petriv	Read Replies (2) \| Respond to of 99985

Here's my take on the last two weeks and the future. Two Tuesdays ago when the market tried to crash (the dress rehearsal for last week) daytraders bought the dump, I mean the dip, and margined up in a desperate attempt to recover their losses (this only served to exacerbate what happened in the following week). The next three days the NASDAQ rose (on light volume) encouraging more doubling up; smarter and more desperate longs were selling into the rally. On Monday some longs could see the emperor had no clothes; by Friday even the blind could see. For the week ahead I see further carnage as margin induced selling wipes out more and more longs, leading to distress and complete capitulation; liquidity pumped this market and illiquidity will dump it. Looking ahead, 90% of the dot.com, dot.bom, and dot.con companies will be dots; I see no meaningful rally. The final act will come when someone says growth in the expansion of the internet is beginning to slow; this will take down the mightiest of the mighty. This will be followed by recession and cash will be king. In the end, reason will have triumphed over faith, reality over mysticism, and Rand and Greenspan will have been vindicated.

To: Adam Weiner who wrote (46602)	4/16/2000 12:23:00 PM
From: Michael Watkins	Read Replies (2) \| Respond to of 99985

Adam - I agree with you that tech feeding off of tech has been a significant part of the technology demand cycle, and thus any impact on venture capital, capitalization of startups, etc could have a lasting effect on the growth prospects of many tech companies. But we will still all need toilet paper. Another thought I have is on wage costs, over the past few weeks I detect a sea change in employer/employee negotiations. A couple of head hunters I know personally report that options packages are not carrying the weight they once did, and that was before events of last week. I also noted an article along this theme in my weekend paper. Imagine the increase in real wage growth if employees increasingly demand real cash over "cheap paper". Just some rambling.

To: Adam Weiner who wrote (46602)	4/16/2000 3:42:00 PM
From: KyrosL	Respond to of 99985

Adam, excellent post. I agree with what you are saying and have been saying the same for some time. As IPOs dry up, and as existing internet fledglings run out of cash, expect a rather drastic reduction in the demand of tech infrastructure goods. With regard to your question about a tech driven perpetual productivity increase machine, I too used to think that, but I no longer buy it -- Heinz helped educate me! Sure the internet and technology help productivity, but, IMO, the productivity increases reported by the government are exaggerated. A big chunk of the productivity increases reported is concentrated in ... computer manufacturing. And a large reason for this is because computers are now priced using hedonic pricing methods. In other words, the PC that you are buying today, is considered to be worth much more than the PC you bought last year, because it is much faster and has more memory. Since it probably is cheaper too, the result is a huge productivity increase and, incidentally, a much lower inflation number. Hedonic computer pricing totally disregards the fact that this year's computer does in fact for you exactly the same job as last year's computer. This year the BLS has announced that it will extend hedonic pricing to dvd drives, video recorders, etc. Expect further glowing productivity increase reports, and excellent inflation reports too ... Kyros

To: Adam Weiner who wrote (46602)	4/16/2000 7:06:00 PM
From: Sea Otter	Respond to of 99985

Adam, interesting hypothesis. <p> One historical example might be the car companies. As I recall, 1929 forced major consolidation here, which in turn rippled in the car-company suppliers. The end result was the elimination of most of these suppliers and the aggregation of the rest. It was very sweeping and wiped out the cottage suppliers. Similarly, I think we'll see big-time M&A activity over on the tech side, particularly in the internets. Those left standing will be much stronger (they'll show profits!). If one can discern who they are then one can probably make a very good long investment, even right now. This sector will boom going forward giving it is so core to the economy. But only a few high-quality players will boom along with it. I think the B2B tools space will be strong for this reason, despite the fact it is currently in disfavor. All IMHO.

To: Adam Weiner who wrote (46602)	4/17/2000 1:06:00 AM
From: Carl R.	Respond to of 99985

Adam, I agree that exactly what you described will come to pass some day, but is this that day? When that day comes, many will be surprised to learn for example that CSCO is not a growth stock at all, but just a cyclical that has been experiencing a prolonged growth phase. I personally don't think this is the end of the world. Instead I think this is just the popping of a bubble, but not the final bubble. Just as this bubble has been popped before, I think in the end it will return bigger than ever. There is simply too much money flowing into 401K programs and so forth for the market to pop completely right now. Carl