Nil, Not Material

Date: Fri Mar 16 2001 - 04:11:53 PST

(don't kill this messenger. note: this article preceded bloody tuesday.)

(way below: look at that market cap!)


from The Street:

Commentary: Wrong! Tactics and Strategies
The Nuclear Winter in Tech Is Not Over Yet
By James J. Cramer

3/12/01 10:01 AM ET

OK, nuclear-winter tech fans, this piece is for you.

Earlier this morning Todd Harrison mapped out three scenarios. I can accept a
combination of scenarios Nos. 1 and 2, a tech correction coupled with a
re-evaluation upward for nontech as part of the Fed's aggressive push. That's
been going on since March of last year and I think it continues.

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The third scenario, the wipeout scenario, just leaves me cold. I think that
the carnage has been contained to tech and will continue to be contained to
tech. That said, I am very bearish on tech, in part because tech was where
the bubble was. And the Fed hates bubbles. Maybe, just maybe, this one is

The Fed hates speculation, whether it is in farmland or oil and gas or
currencies or gold. It hates speculation because speculation destroys the
value of what it touches. It inflates one area and ultimately hurts all of
the other areas. We thought the Fed hated the dot-com bubble, but now I am
thinking that perhaps the Fed hates the tech complex altogether and wants it
to be worth less.

I know that's a frightening concept. But recall this: The Fed battled other
bubbles because it didn't like how the rest of us had to pay more for food,
or for oil and gas or for real estate. What if the Fed is battling the tech
bubble because it doesn't like how much money we had to pay for technology?
Hear me out on this. For the longest time technology was a fabulous
productivity enhancer. You could bet that, when you brought in new
technologies, you saved a lot of money. Tech made things better and cheaper.

The example I always like to use is the one that the late co-founder of Intel
(INTC:Nasdaq) , Robert Noyce, used when he talked about putting all of the
power of a '70s mainframe computer into something the size of a ball-point
pen. The IBM (IBM:NYSE) people were aghast. They wanted to know why anybody
would pay millions of dollars for something the size of a ball-point pen.
Noyce laughed. He said that he expected people wouldn't pay more than a
couple of thousand dollars for that pen-sized power. He was right.

For the longest time, the price of computing and technology just kept going
down and down and down. In the last few years, however, demand for tech
outstripped supply. We began to pay more for power, not less. We began to pay
inflated prices for technology, whether it be for Sun (SUNW:Nasdaq) computers
or Vignette (VIGN:Nasdaq) software or Exodus (EXDS:Nasdaq) hosting. The cost
became too great. To run a Web site for the masses became too expensive
(that's what all the retrenchment in the dot-com world is about, the cost of
production vs. the inability to offset that cost).

Meanwhile, the cost of personal computers stayed high even though the
benefits stayed pretty much the same. With the exception of voice, I think
everything costs much more than it used to because we had a bottleneck --
demand that far exceeded supply. The Fed saw this. The Fed knew that it was
reflected in the high valuations of tech companies with little in revenue.
The Fed recognized the bubble in tech - not the dot-coms -- and has decided
to make sure that bubble vanishes. The only real measure of it is the size of
the market capitalization of the Nasdaq 100. While it is down, and down big,
it is still up from when the bubble began, which was between 1996 and 1998.
When the bubble has vanished, the Fed will be more aggressive in easing. And
not until then.

I know this is a real grim scenario. I don't agree with it, and I am a bear
on tech. But it is an important prism to consider because if this bubble is
to burst like the others, like oil and gas and gold and real estate, we still
have plenty of pain left. Which is why I am on a warpath about the tech
stocks and the mutual funds that buttress those stocks. I want you to get out
before you give back all of your gains.

It is not too late to sell. It is not too late to sell. It is not too late to

Have I made myself clear?

Exchange: Nasdaq NM
Delay: at least 15 minutes
Last Price: 6.5625 at 16:00 EST
Change: Down 0.0625 (-0.94%)
High: 7.00 at 10:45 EST
Low: 6.50 at 15:58 EST
Open: 6.96875
Previous Close: 6.625 on 3/14
Volume: 1,361,500
30-Day Avg. Volume: 4,658,000
Shares Outstanding: 235,737,000
Market Cap.: 1,547,024,062
52-Week High: 100.66
52-Week Low: 5.12
Beta: Not Available
Yield: Nil
P/E Ratio: Not Material
EPS: -2.59
Currency Units: US Dollar

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