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To: IceShark who wrote (27932)	10/13/2000 11:59:13 AM
From: JHP	Read Replies (1) \| Respond to of 436258

just back from fido where i showed some buddys this article,they laughed and asked me did i hear what the pontiff abby j said this morning?<G> :BOSTON CAPITAL Heads up: Bust may be as wild as boom By Steven Syre and Charles Stein, Globe Staff, 10/13/2000 hen the book landed on our desk, we weren't impressed. The title, ''The Coming Internet Depression,'' made it sound like the work of a kook, one of those guys who predicts the Earth is going to be struck by a comet in 2008. But Michael Mandel, the economics editor of Business Week, is anything but a kook. Along with his colleagues at the magazine, he has been a champion of the new economy. He has been right on the mark the past few years in predicting that the economy could grow faster than anyone imagined without triggering inflation. He also has a doctorate in economics from Harvard. So if Mandel is nervous, attention must be paid. Mandel's basic argument is not hard to follow. He believes that because we have had a different kind of boom, we are headed for a different kind of bust. The boom, according to Mandel, was the result of two forces coming together: technology and money. ''Technology was the engine, finance was the fuel,'' he writes. Entrepreneurs developed the technology, and venture capitalists funded them. When the businesses progressed a little further, the companies went public, tapping into a new set of investors. As stock prices rose, still more money became available for start-ups. The new companies, in turn, attacked entrenched businesses, setting up a competitive dynamic that has made it difficult for anyone to raise prices. So what could go wrong? In Mandel's view, the whole process could shift into reverse, triggered by a slowdown in the economy or a slide in the stock market. (Would a 300-point drop in the Dow Jones average qualify?) Both developments would hurt the start-ups, the lifeblood of the new economy. Venture capitalists, who have poured billions of dollars into fledgling firms, would react by turning off the money spigot. The pace of innovation would slow, and we could even wind up with more inflation, because American companies would have more power to raise prices in a less competitive environment. ''When the virtuous circle finally goes in reverse,'' Mandel writes, ''all the factors that sustained the economy will head in the other direction.'' But the unraveling of the boom only gets you to a recession. A depression - essentially a long recession - would require a screw-up by the Federal Reserve. Mandel thinks that could happen. He worries that if prices rise in the earlier stages of the slowdown, the Fed could be tempted to raise interest rates. Such a move would be a disaster, Mandel says, because the new economy is like an airplane: It needs to maintain a decent rate of speed or it will fall out of the sky. In a telephone interview, Mandel was not any cheerier. He said that if we do have a recession, it will be a ''Palm Pilot'' recession that will hit hardest in the innovation industries. ''These are people who never imagined they could be out of work,'' he said. He also predicted that a recession could make life difficult for the next president. ''I think the biggest problem the next president will face will not be what to do with the surplus, but what to do when the economy turns down in a way people have never seen before,'' Mandel said. Is Mandel overly gloomy? From where we sit, it looks that way. While it is certainly possible that the current expansion could give way to a recession, it is hard to see why the downturn would be any worse than any past recession. Nor does it seem likely that the Fed would make the wrong move. No one has worked harder to understand the new economy than chairman Alan Greenspan. If the economy started to sink, you have to believe that Greenspan would throw it a lifeline. But Mandel is onto something when he talks about the key role the financial markets have played in this expansion. The rising stock market has boosted consumer confidence, made it possible for new companies to pay workers with stock options, and channeled billions into businesses hoping to come up with the new, new thing. It is not hard to see how a downturn in the stock market could set off a chain reaction of unpleasant events that could wind up in a recession. We are not suggesting you should head for the hills. Neither is Mandel, who is optimistic that things will work out OK eventually. But his parting words to us were not exactly confidence-boosters. ''People should be prepared,'' he warned. ''Things could get much worse than they think.'' Steven Syre (617-929-2918) and Charles Stein (617-929-2922) are also at boscap@globe.com. This story ran on page E1 of the Boston Globe on 10/13/2000. © Copyright 2000 Globe Newspaper Company. [ Send this story to a friend

To: IceShark who wrote (27932)	10/13/2000 12:04:22 PM
From: Ilaine	Read Replies (2) \| Respond to of 436258

Poor Joseph G., I am starting to wonder if maybe I did kill him. I really liked him, too. Still got him bookmarked. Last night Business week online interviewed Sam Stovall , sector strategist for S&P, I would call this endorsement of EMC faint praise - its price is holding up because investors still believe in it. "Q: Data storage has been hot in recent history -- what do you think of EMC? A: EMC is ranked 5-STAR. This is one of the few big-name stocks that has held up fairly well, mainly because investors continue to believe that (despite the Storage Technology [STK] revenue shortfall) additional storage capacity will remain in demand, because of the growth of the Internet and intranets...." businessweek.com