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To: Sig who wrote (168383)	1/12/2002 4:10:35 PM
From: John Koligman	Read Replies (1) \| Respond to of 176387

Sig, and right on schedule, one man's rebuttal from the yearly roundtable in Barron's <ggg> Best regards, John Q: Marc, you must have something to say about this. MacAllaster: You might even know something about it. Biggs: I think Abby is right. America is perfect. The trouble is that the stock market is priced for perfection, too. Faber: I am not sure the American economy is perfect, and I certainly disagree that the consumer is in great shape. The economy and the financial markets have performed dreadfully considering that you've had 11 interest rate cuts in the past 12 months. If you are optimistic and expect 3%-5% real growth toward the end of 2002, then you must also accept the investment implications in terms of commodity prices and interest rates. Conversely, if you're looking for only a mild recovery, then maybe you ought to be in bonds and not equities. Q: Well, what are you looking for? Faber: The American economy is a disaster waiting to happen. Greenspan's interest-rate cuts have supported consumption artificially and borrowed from the future. The so-called booms in car sales and housing will come to a very bitter end. Greenspan basically moved the bubble from Nasdaq into other sectors of the economy, and these bubbles also will burst. Whether they burst right away or in 2004 is immaterial. Now, consider the huge money flows from foreign countries into the U.S. If this money hadn't come in, how much lower would the stock and bond markets be? I think the American consumer is brain-damaged. He should be pulling back and increasing his savings rate dramatically. But, no. He's pushed by CNBC and the authorities who always talk nicely about the future into consuming more. Samberg: You would have said the same thing four years ago. Faber: Four years ago I was very negative about the Asian economies because at that time they depended heavily on foreign capital. And courtesy of Mr. Greenspan and the U.S. Treasury, which had bailed out Mexico in 1994, we prolonged the Asian bubble. Had Mexico not been bailed out, we would have had less or no capital flowing into the emerging markets post-'94. We would have had a recession in Asia sometime in 1995-96. All I'm suggesting is that monetary policy can have a very negative impact in the long run, but cushion the financial markets or an asset class in the short run. I think the years 2001 to 2003 will go into financial history as the awakening of academics to the fact that you cannot solve every problem with monetary measures. Thereafter whole economic policies will be very different than they were between 1945 and 2000. Cohen: I'm puzzled by a few of Marc's conclusions. I hear that poor U.S. policy has been responsible for a great deal of damage. Yet the World Bank, in its post-mortem on the Asian crisis of 1997, concluded that Japanese banks had made 50% of the bad loans. European banks had made 35%, and U.S. banks had made fewer than 10% in emerging Asia. Marc also complains about the Fed lowering interest rates dramatically in 2001, without a huge impact on the U.S. economy. Keep in mind that the U.S. central bank has been acting almost alone during this time. Japanese policy has been stuck. European policy has been lethargic in the run-up to the introduction of the euro in terms of actual notes. U.S. central bank stimulus has been the only game in town. Q: Marc, you get five seconds for a rebuttal. Faber: The Japanese can't stimulate as much as the U.S. can because their interest rates are already at zero. The Japanese were heavy lenders in Asia because of geographical proximity and the lower returns available elsewhere. But the big buyers of Asian assets -- emerging-market equities and bonds -- in 1990 through 1997 were Americans and Europeans. I'm not blaming the U.S. for all the ills of the world. We in Asia account for some of these ills. But I am suggesting that monetary policies in the U.S. in 2001 have borrowed from future demand. : We've got the great Art Samberg here to tell us about technology. It has had a tremendous revival. So I would like to know what Art thinks. Q: Why don't you tell him, Art? Samberg: I think we are midway through the realization that growth will not be anywhere near as fast in the future as it has been in the past 10 years. Companies are still cutting their capex [capital expenditure] plans for 2002 and 2003. As you look at the content of electronics products, for the first time you are starting to see a leveling-off of electronic components. Studies by Applied Materials and others suggest they won't grow much beyond the 20%-25% level. The cycle we've just gone through is the first in which total DRAM revenues were below the peak levels of the prior cycle, which I find staggering. From trough to trough, semiconductor revenues in the last cycle grew at about half of the rate of the two previous cycles. Yet capital spending was 200%-250% higher than in the other cycles. Personal computers are a maturing business. You don't read anything about Microsoft's XP. It had an okay launch, but when they have a hot operating system it is all over the press. So it is not going to drive things. The venture capital business is broken and will stay broken for another three to five years. I remember a couple of Roundtables back saying 90% of the companies that were started eventually would go out of business. Only 10% went out of business last year. There are a lot more of the old companies that have to go. There is way too much money around. Neff: When are those guys going to start marking their holdings to market? Samberg: They started last year. Twenty-something venture capital funds raised over a billion dollars each, and they will never be able to spend the money. And the [investment] plan sponsors are not too happy. There is enormous pressure to cut VC fees, and when you are in a business where you don't know if your fee structure is going to be maintained, you're not thinking clearly about making investments. Neff: It sounds like the extinction of the IPO market. Samberg: Yeah. Some corporate venture capital portfolios are being shopped all over the Street, because they want out also. So there is a lot of supply, no demand. In addition to the IPO market, you used to be able to sell [venture investments] to operating companies. Well, Cisco last year bought one company, and the year before it bought 24. Broadcom bought one in January, and the year before it bought one a month. There are no buyers for a lot of these companies. At the end of every cycle, whether it was in '83 at the end of the mainframe cycle, or now, at the end of the client-server and networking cycle, only a few good companies are created. In technology, the only reason you invest is to hopefully get a Microsoft, or an Intel, or a Sun or a Cisco. The rest is all noise. We don't know who the next great winners are going to be. But there is a lot of noise because there are more people employed following companies than is economical. Q: Is there any good news? Samberg: There will be opportunities to buy some stocks. There will be reflex moves up like the one we've had. If the earnings come through a bit better and there is a little more inventory restocking, it could go on another 3-6 months. But it's a flawed move. When I, as a growth-stock investor, look around for alternatives, it is hard to find that many really neat ones. Home Depot is no longer going to grow the way it did. Wal-Mart is gobbling up everything and causing distress for other retailers. They are now the Internet. They are the creative destruction of the consumer side of the equation. Bed Bath & Beyond looks like a nice little growth company. Kohl's is a nice little growth company. But there are very few things you can really play with great conviction.

To: Sig who wrote (168383)	1/12/2002 6:29:27 PM
From: Robert Scott	Respond to of 176387

I'm only talking 2600 or so on the Naz Q1 2003 - not so huge really and not straight up. I do think it will take years - perhaps 2007 - to see old highs - maybe not until we go through a period of inflation like the 70's so could be a while longer. Tech isn't dead just like it wasn't after the mid-80's debachle. The other side of the deflationary story is that over the next 25 years, 2.5B people will become normal consumers with a decent standard of living - that's really good news for America. The bad news is that the balance of power will start slipping from the US in this century. Every great civilization lasts between 300-500 years but the trend is on the shorter side. The golden age of the American Civilization is now - you're living in it - it started after the 2nd WW and should last a while longer. We're very fortunate.