While this would ordinarily be an interesting bearish take, it's absolutely mind-boggling when one considers the source:
quote.bloomberg.com
10/20 12:50
Paul Allen's Vulcan Ventures Fund Is Bearish on Tech
(Update1)
By David Ward
Bellevue, Washington, Oct. 20 (Bloomberg) -- Bill Savoy, who runs the fund
created by Microsoft Corp. co-founder Paul G. Allen to invest in a panoply of
innovative technology companies, now says technology stocks are overvalued.
After three years of gains, a ``bubble'' has emerged in U.S. stocks as investors
bid up shares of companies, particularly technology firms, above their true worth,
said Savoy, 35, who manages more than $14 billion in Allen's Vulcan Ventures
Inc.
``We had an unsustainable set of factors that caused the bubble to take place in
the first place,'' Savoy said in an interview. ``The bubble manifested itself in the
highest growth companies in the market, and it turned out that most of the high-
growth opportunities were tech-centric.''
Vulcan Ventures, which has invested billions in computer hardware, software,
Internet content and communications infrastructure companies, has sold its
stake in dozens of investments, and has reduced the pace of new investments,
Savoy said. He predicts the decline in technology shares will continue, with
companies in the wireless communications, optical networking and
business-to-business software sectors falling.
``We are, in my opinion, not anywhere near the bottom yet in that cycle,'' Savoy
said. ``I don't think you can move from extreme overvalue to fair value; I think you
have to go to (being) undervalued first.''
Selling and Buying
Savoy wouldn't say which companies his fund has bought or sold, though records
of Vulcan's sales have been filed with the Securities and Exchange Commission.
Vulcan Ventures does not release records of its returns or the size of its
investments.
Vulcan Ventures in the past two months has filed to sell almost 5.6 million
shares of InterNAP Network Services Corp., a company that helps businesses
transmit data over the Internet, including a filing yesterday to sell 2.14 million
shares, according to regulatory filings. Vulcan Ventures owned about 9.47 million
shares in February, according to the filings.
InterNAP shares are down 78 percent this year.
Vulcan Ventures for the past 10 years has been investing billions of Allen's
fortune in companies that are developing hardware, software and content to bring
information to consumers through the computer, cell phone, television and other
devices.
Allen is also chairman of Charter Communications Inc., which operates cable
systems in the U.S., and Vulcan Ventures owns nearly 30 percent of Metricom
Inc., which designs wireless communications networks.
Vulcan Ventures continues to invest in some technology companies, including a
$190 million investment with AT&T Corp.'s Liberty Media Group in Priceline.com,
a company that lets consumers name their price on goods and services over the
Internet. Priceline shares are down 89 percent this year.
Vulcan Ventures filed in February to sell 1.15 million shares of Beyond.com,
which sells software over the Internet, according to the Washington Service,
which tracks insider stock sales. Before the sale, Allen was the second-largest
shareholder in Beyond.com, with almost 8 percent of outstanding shares. Those
shares are down 89 percent this year.
Vulcan Ventures also filed in May to sell more than 683,000 shares of Liquid
Audio Inc., which allows music to be delivered over the Internet, according to the
Washington Service. Those shares are down 82 percent this year.
Vulcan Ventures originally paid $3.99 million for 999,803 shares, which works out
to about $3.99 a share, according to documents filed with the SEC.
Several of Vulcan's investments have gone out of business, including Value
America Inc., an Internet retailer that filed for bankruptcy in August, and
Pop.com, an Internet entertainment company that planned to produce original
programming that would be delivered over the Internet.
Continued Decline
Savoy said that U.S. stock markets rose faster than they should have because
for the past three years events have kept the U.S. Federal Reserve from raising
interest rates.
First, it was the economic crisis that roiled Asia in 1997, which prevented
inflation from rising in the U.S. Then it was the failure of hedge fund Long Term
Capital Management LLC that led the Fed to keep from raising rates. The third
event was the increased spending by companies on computer systems and
software to prevent the Year 2000 computer glitch, Savoy said.
``In last three years, there's been three specific events that have taken place in
the fall that have caused the Fed to increase the amount of liquidity,'' Savoy said.
None of those factors are at play today, Savoy said. Now, the combination of
rising energy prices and three successive interest rate increases by the Federal
Reserve will drain money available to invest in U.S. stocks, he said.
``Now we're pulling it back, because it created inflationary pressures, and we've
tightened,'' Savoy said. ``It's not surprising to me that after Y2K passed that we
had a natural downward pressure in the equity markets.''
The decline in technology stocks is likely to continue, Savoy said, with mid-size
technology companies with high price-to- earnings ratios being the next group of
stocks to fall, he said.
``Either big-cap technology moves back up, or, probably more likely, the
extremely overvalued companies that trade at huge multiples of revenue, have to
have downward pressure on them,'' Savoy said.
HO HO HO! I wonder if Mr. A knows the lad managing his coin harbors these (obviously insane) bearish views?
Got unemployment benefits?<GGG> |
