Nasdaq 5000 -- twice in 2000
"You ain't seen nothing yet!"
By Dr. Paul B. Farrell, CBS MarketWatch
Last Update: 12:14 PM ET Jun 23, 2000 More Dr.Paul's columns
Mutual Fund Center
LOS ANGELES (CBS.MW) -- Regis asks: "So, the Nasdaq is doomed to bump along sideways around 4000 through the rest of the year -- that dangerous fault line created earlier when the Nasdaq crashed, collapsing from 5000 into a bear market?" Regis stares out into a vast audience of 80 million investors: "Is that your final answer?" Well, is it America?
"You ain't seen nothing yet. The next 18 months will be more exciting than the last five decades put together."
Are we in a bear trap, a sucker's rally to end the 2nd quarter and wipe out the remaining believers in the Great Internet IPO Bubble?
Is the new economy stalled, and the old one too?
Was the promise of the Brave New World Wide Web little more than a Star Trek fantasy of distant galaxies, centuries in a distant future, of fictional voyagers lost on a survival mission?
Is the so-called technology revolution now marooned on a small island, like the new "Survivors" TV show, struggling to stay alive in a primitive game where only one in twenty (5%) will ever win the big prize, while the rest get cast adrift?
Is that your final answer America? You don't think the Nasdaq will make it back to 5000 this year? And maybe not in 2001 either? Like the "Survivors" and Star Trek Voyager, Nasdaq is doomed to drift through an endless series of challenges and struggles, but not return home to the magical 5000 record?
Survivors -- a killer-millionaire spirit
Turns out that most investors are as fickle as America's television audience, aimlessly searching for "The Latest Fad." So along comes a new reality adventure, "Survivors," and not only does it beat Regis' "Millionaire," it also out-scores the first game of the NBA finals and a Britney Spears concert. Nasdaq got trashed. And now Regis' "Millionaire." Survivors win.
Great symbolism for a volatile market and uncertain economy. Indeed, the "Survivors" have a spirit that propels the technology revolution forward into reality. Everyone else, the masses, are voyeurs watching this game from the sidelines, on television. Mere spectators of life and investing. Fickle. Lacking conviction. Isolated from the "extreme sport" that challenges the "Survivors."
Tech's next 18 months beats last 50 years
Until early this year the American press corps was feeding us an endless stream of stories about how Internet technology was the single most revolutionary event in Western history in the last 500 years, as revolutionary as the Guttenberg printing press.
Well, nothing's changed on this wide-screen drama: You are in the center of the hurricane, trapped in a global paradigm shift changing history. Forget the mini-crash. Think bigger. Most are judging the future using past rules, confused, worried, following the latest fads. Oh ye of little faith and short memories, remember what technology guru Michael Murphy said about the technology revolution just a few months ago, speaking from the darkest hours of the crash:
It's Over! Not just the Second Millennium Not just the Bull Market But technology as we know it And a whole way of profiting from technology has vanished with it If you thought the last 50 years yielded some mighty rewarding technology breakthroughs -- you ain't seen nothing yet
The next 18 months will be more exciting than the last five decades put together.
Get it? You American investors, everyone, are in the center of a historic intergalactic storm. That silly slogan -- past performance can not predict future results -- is meaningless in this brave new world. Yes, I know, earnings do count, high multiples are suspect, and astronomic valuations make no sense without the prospect of future earnings. Fortunately, awakening up to that old economy reality helped clean out the absurdities of the dot.com IPO mania.
The 6 technology breakthroughs for investors
But you don't throw out the baby with the bathwater, folks. We just needed to toss out those too-hot Internet B2C IPOs. Besides, they were only a small fraction of the new technology paradigm. So think big. Think outside the box. No more voyeurism. Get into action. Think!
Remember the principle of exponential growth in technology? Computer speed doubles every 18 months, says Moore's Law. Today that same principle applies to everything in technology and the new economy, "changing virtually every aspect of life on this planet. That's because of a once-in-a-lifetime convergence of six shattering breakthroughs" by the end of 2001, asserts Murphy. Get ready for quantum leaps in these areas:
the world wide web is linking everybody, everywhere
fiber-optics will accelerate a communications revolution
wireless technologies connect everything to everything
video conferencing gets cheap, saving travel time
voice-activated software empowers everyone
business-to-business websites make revenues soar
Individual investors must grasp this historic shift, not stand on the sidelines. And do it immediately. Why? Because it is becoming increasingly more difficult to pick the right technology stocks in this rapidly changing and near-hostile market. Educate yourself, or be unprepared for the rapidly changing opportunities in the historic marketplace.
Targeting the top tech funds
If you want to stay ahead of the technology revolution in the next crucial eighteen months, there's one new magazine, Technology Investor, that's a "must buy!" We like it because many of the funds they suggest reflect the winners appearing on our directories of technology funds with solid track records in recent years, for example:
***snip chart - see at link**
Like the print version, Technology Investing's website is new and constantly being improved. Both have a good feel about them. And over a quarter million subscribers agree. So pick up a copy of their print version the next time you're at the newsstand, especially if you're investing 15-25% of your portfolio in technology, which is practically unavoidable today given the market caps of tech leaders.
Successful tech investing headed for 5000
Do you want to successfully build a portfolio in this rapid-fire "you ain't seen nothing yet" technology world coming at you in the next 18 months? Of course you do. Well, here's a recap of Technology Investing's thirteen key rules for successful investing:
1. Don't overreact. The worse thing you can do is dump when down. While the smart money's buying on the dip.
2.Don't jump out of technology. Where you going? Buffet and Robertson found out the old economy's not the answer.
3.Be diversified within technology. Don't lump them all together. There's core tech stocks. Then there's speculative technology.
4. Get in the right industry sectors. Hey, "not rocket science. Ask yourself, will I buy this company's products? Does it make a difference?"
5.Ride the momentum. But protect yourself, keep adjusting your stop-loss orders to 15% below market on the way up.
6. Watch the volume. Track volume, buy when it's down.
7. Reality check: Logic counts. Check fundamentals. High multiples, big losses and first product 3 years out, that's trouble.
8. Disappointments are death. Miss earnings by a penny. Sales by a fraction. The selling will be merciless. No loyalty. Get out fast.
9. Watch for early sector death. Like 'business-to-consumer.' Anyone can sell vitamins, books, CDs, computers on the Net.
10. Think long-term tech investing. This new magazine is all about long-term technology picks. Plus, you'll also find some 'screaming shorts' to help you protect your downside.
11. Don't buy tech stocks on margin. Listen very closely: Never buy tech stocks on margin. Never, never, never.
Watch out for the lockup period. If you're going to play the IPO game, pay special attention to when the insiders lockup is over.
12. Don't watch TV. High stress! Besides, "TV reporters have no idea what's going on, nor why. No one really does. Their job is not to explain, or to reassure. Their job is to keep you watching. They do this by boiling your emotions. Disasters are great for TV. Viewership goes up. They sell more ads." Bottom line: Never watch financial news on television.
Great wisdom, learned specifically in the school of hard-knocks during this last correction hitting technology, dot.coms and the Nasdaq markets. And there's as much, or more, solid wisdom here for long-term buy'n'hold mutual fund investors than shoot-from-the-hip day traders.
Extra! Extra! Read all about tech!
For the tech-hungry investor, this new magazine is a must have. Each month you'll find some unique editorial features in Technology Investor, especially their portfolios of top tech mutual funds:
Core tech portfolio. The twelve tech stocks in this core portfolio are: Amgen (AMGN: news, msgs), Applied Materials (MAAT: news, msgs), Cisco (CSCO: news, msgs), Hewlett-Packard (HWP: news, msgs), IBM (IBM: news, msgs), Intel (INTC: news, msgs), Lucent (LU: news, msgs), Nortel (NT: news, msgs), Oracle (ORCL: news, msgs), Qualcomm (QCOM: news, msgs), Sun Microsystems (SUNW: news, msgs), and Texas Instruments (TXN: news, msgs).
Aggressive investors should also be reviewing the other seven portfolios for some more aggressive buy tips. Their Aggressive Portfolio has the best record year-to-date. The others include these six: Biotech, Speculative, Ultra-Speculative, Global Telecommunications, Turnaround Candidates, and Takeover Candidates. You can find a performance update of these eight portfolios on their website. A great tip sheet.
Get ready -- "you ain't seen nothing yet!"
If you believe that you "ain't seen nothing yet" when it comes to the technology revolution and the new economy. If you're convinced that "the next 18 months will be more exciting than the last 5 decades put together," then you owe it to yourself to get this new magazine.
But even more important, you owe it to yourself to yourself as an intelligent investor to educate yourself about the historic new technological changes that will dramatically change the market in the next 18 short months, whether investing in stocks or just funds.
Be a survivor, yes, and be an explorer, and adventurer in this new world of technology. For together we are all boldly going where no one has gone before -- whether you are ready or not!
Nasdaq 5000 in 2000? Why not, lightning's been known to strike twice before!
Paul B. Farrell is the author of "The Winning Portfolio" and three books on online investing. Dr. Farrell was executive vice president of the Financial News Network and an investment banker with Morgan Stanley. He has a Ph.D. in psychology and a Juris Doctor. Dr. Paul's prior columns
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