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To: Softechie who wrote (4149)	12/18/2002 1:21:26 AM
From: Softechie	Respond to of 29597

Growth Won't Be the Byword of 2003, Part 2 By James J. Cramer 12/17/2002 17:59 Editor's note: Click here to catch up with part 1 of Cramer's sector-by-sector outlook for 2003. Telecommunications: This sector has shown no turn whatsoever outside of wireless. And I am beginning to believe that wireless is simply a winners-losers game, with no real growth. We are in a perilous moment for telecommunications, one that is short-term good for the consumer and long-term terrible. I look at this whole industry as keying off WorldCom WCOEQ . If WorldCom comes out of bankruptcy with very little debt, the other players are going to have to cut capital spending again to be able to maintain their dividends and show some sort of profit growth. A reconstituted WorldCom will be great for consumers short-term because it will undercut all pricing, but a non-indebted WorldCom will be strictly a predator that will make the whole industry simply uninvestable in my opinion. Energy: I don't know what will move energy if it didn't move this year. Oil spiked and nobody cared. Oil went down and nobody cared. My hope for the industry is its bountiful dividend potential, and I am going hold on to the two oil companies I own because I think that they can raise their payouts. And that's important in a world in which having a big dividend will be regarded as extremely bullish. Otherwise, there's no reason to invest in the segment. Consumer staples: I like this group because of its dividend potential and its consistency. It also benefits from a weak dollar. But it is not cheap and people have shown an astonishing aversion to paying up for anything other than tech (more on that later). So, the group is a trade. To visualize, think Procter & Gamble PG as a buy at $81 and a sale at $88, endlessly. It won't be able to break out until the earnings advance more, and that can't happen until time has passed. No engine, but no failure. Information technology: This is the group that my partner Larry Kudlow keeps keying off, believing it has to lead us out of this morass. I find that fanciful, frankly. I think this group is still overvalued and overowned, and it constantly is being taken to value extremes by the people who don't seem to mind high multiples, the survivors of the '90s who are still in business. The idea that this group, which trades at about four times the multiple of the rest of the market, can be the leader, defies any wisdom I know of. But it remains the fiction that most of investing is based on. This is painful to me, just painful. What makes it worse, of course, is that every six or eight weeks, the group erupts and gets to be the focus of outsized advances that makes it the envy of the rest of the market, which can't sustain any advance. It then gives it all up again faster than it got there. Retail and autos: These stocks cause hope to spring eternal. If we win a decisive war against Iraq, we will see a nice snapback in retail. Of course, we have to win before that can happen, and I can't for the life of me figure out the time frame for that. Autos are just plain in trouble. You have Toyota and Honda HMC still overproducing, General Motors GM still financing cheaply, and Ford F and DaimlerChrysler DCX just getting slaughtered. Meanwhile, we are producing at maximum levels and the cars seem to be lasting forever. The dividends also are unsafe. Ugh. Homebuilding: Stocks here are cheap. That's never been a reason to buy a homebuilder that stayed cheap through much of the 1980s, but at least the valuation bogey doesn't impact them. Unfortunately, the intelligentsia-bear funds have deemed this group to be in bubble formation so it seems fairly unlikely that it can pick up any new adherents. These companies have to start paying out bigger dividends and buying back shares more aggressively if they are going to break out. And if rates go up, you can forget that happening. Utilities: These stocks are actually of interest. They pay out hefty amounts and the survivors certainly seem to be Enron -proof. But there is no real growth so, in a market still obsessed with growth -- even as it appears to seek value -- they can't lead. Aerospace and defense: These two sectors offset each other. Defense earnings are going to begin to be robust but the airlines can't provide much growth because they are still very much in retrenchment mode. So it's a push for 2003. When I look at all of these, I come back to a dictum that I carry out in my Action Alerts PLUS portfolio. Within each group is a share-taker, a company that is doing better than the others, one that can grow by feasting on the other companies in its sector. Within each group is a winner that can prey on the losers. But there are far more losers than there are winners. Fortunately, the winners aren't needles in a haystack; they stand out and they can be identified. Unfortunately, there are not enough of them in the averages to propel the averages. So why play at all? As always, with me it's an obsession with the lack of alternatives. If I can build a portfolio of winners that pay good dividends or sell cheaper than the market, why not go for it? It certainly beats cash -- and will for some time.