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To: Terry Maloney who wrote (223390)	2/23/2003 8:16:04 AM
From: MythMan	Respond to of 436258

>>The Big Disconnect By ERIC J. SAVITZ FOR REASONS THAT AREN'T ENTIRELY CLEAR, tech stocks have been dramatically outperforming the broad market in recent weeks. From the beginning of the year through Thursday's close, the Dow Jones Technology Stock index gained about 2%, versus a roughly 5% loss for the S&P 500. The sector's resiliency surprises some observers, who figured that tech shares would lag the market in times of geopolitical uncertainty. It's far from certain, however, that tech's strength can be sustained in the face of still-weak fundamentals. Goldman Sachs warned Thursday that there's been a "serious disconnect" between tech shares and the threat of war. In a research note, technology analyst Laura Conigliaro offered three possible explanations: Tech investors are insufficiently worried about a war; broad market investors are overly worried; or investors are buying tech shares now to position for a war rally later. No matter which theory is right, she warns, "this gap cannot last for long." Steve Milunovich, tech strategist at Merrill Lynch, observed in a research note Friday that the stocks in the MLO, the Merrill Lynch tech index, trade at 27 times estimated 2003 earnings, near the top of the pre-bubble range of 10-30 times. Retail investors have jumped on the bandwagon -- tech mutual funds last week had their biggest weekly net inflow since April 2002, according to U.S. Bancorp Piper Jaffray. Conigliaro points out that that the median large-cap and multi-cap growth mutual funds have outperformed the S&P 500 this year. The robust performance suggests that growth managers have returned to at least a market weighting in tech, she says. That could pose a new problem, Congiliaro contends, "as investors may be less inclined to increase tech weightings in portfolios which are already flush." According to Montreal-based BCA Research, meanwhile, the ratio of tech insider stock sales to buys has been rising. "Ominously, purchases have evaporated, implying that executives are not upbeat about profit prospects, at least relative to underlying valuations," BCA said in a Thursday research note. "The implication is that tech stocks could be in for another shakeout in the near run.<< someone needs to tell him about max pain -g-