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.

Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: William H Huebl who wrote (50165)	2/13/2001 4:56:26 PM
From: Mark Adams	Read Replies (2) \| Respond to of 94695

Merrill Lynch suggests that the resumption of normalized tech spending following the y2k distortion (front loading of purchases in 99 followed by the nuclear winter of 00) may allow a resumption of growth approaching 10% in the tech arena. They believe a stealth bull in progress since December. Tech sector order patterns and share behavior should normalize in 2001, given that the worst capacity excesses of Y2K were purged by the third quarter of 2000. The upward creep in capacity growth short run suggests to us that the worst is over for tech shares and that the cyclical risks short run are fading fast. If capacity growth resumes a more normal year-over-year growth rate of 10%, then technology shares should experience a cyclical rebound. We expect and hope that the mania of 1999 has been extinguished for the balance of this investment cycle, increasing the prospect of moderate levels of sustainable outperformance by technology shares. This is consistent with our studies of technology share price performance after soft landings and recessions. It appears that investors in 1999 and 2000 misconstrued Y2K-related demand as sustainable, and have more recently misconstrued the contraction as unstoppable. Tech shares and the Nasdaq market are still volatile—we expect that technology will generally outperform during broad market rallies and underperform during consolidations. But in concert with the large correction in multiples, we believe that the normalization of capacity growth for industrial and commercial machinery is establishing the “floor” for the sector. In our view, medium- and long-term investors should use corrections to rebuild positions in enterprise software, semis, semiconductor capital equipment, contract manufacturers, and data storage. Just a contrarian view...