I am a little confused over the stock market. DJIA is going up. NASDAQ is tanking. I wonder if many people felt that Y2K would cause alot more problems and the Tech heavy NASDAQ companies would make a butt load of money. When Y2K (at this point) has been more than a burp in the road, the NASDAQ is being hit hard. Any comments or snide remarks would be appreciated.

Thank you for your support.

-- New Guy (Newbie@begentle.com), January 06, 2000

Answers

$26 Billion UK Pounds Wiped Off Shares As Market Bloodbath Continues http://www.excite.co.uk/news/news_story/news/news4.txt 1-5-2000 LONDON - More than #26 billion has beenwiped off the paper value of companies in the FTSE-100 Index as the markets suffer their second bloodbath in as many days.

After Tuesday's biggest one-day slide in the Footsie's 16-year history, it has now lost a further 130 points to close at 6535.9.

Investors sold off shares in technology and telecoms companies, locking in some of the enormous gains made last year. And falls on the technology-dominated US Nasdaq exchange were spurred by disappointing trading figures at online bookstore Amazon.com and caused much of the despondency.

Only last week, the Footsie finished 1999 on record highs of 6930.2.

Fears of interest rate rises in the UK and US alarmed investors, but analysts said the sell-off did not represent a bursting of the recent stock market bubble.

"It may do us a bit of good to clear the air for the New Year and get off the recent very high levels," said Simon Fine, head of pan- European trading at investment bank Dresdner Kleinwort Benson.

"We saw a lot of froth at the end of December and now people are starting to consolidate their positions."

Trading remained cautious with many of the large institutional investors still sitting on their hands until the full effects of the millennium bug have been seen.

Some of the biggest fallers included high street names such as media group Granada down 34p at 596p and giant mobile phones group Vodafone AirTouch 1414p lighter at 280p.

But the bulk of the losses was felt by technology companies such as CMG, down a thumping 471p at #38.50, microchip designer ARM Holdings 340p weaker at #36.69 and telecoms group Energis down 243p at #26.92.

-- (keep@watchin.closely), January 06, 2000.

http://www.pathfinder.com/money/depts/investing/sivy/archive/000105.ht ml    
Wednesday, January 5, 2000
Greenspan's reappointment spells trouble for tech stocks--and big opportunities for financials
Freed from political pressures, the Fed likely will push up short- term interest rates over the next six months. Tech stocks and financials will suffer, but by years end, the leading bank stocks will recover. Start rebalancing now.

By Michael Sivy

Alan Greenspans nomination to a fourth term as Federal Reserve chairman was applauded from Washington to Wall Street (Mondays selloff notwithstanding). And with prominent Senators seconding the emotion, reappointment looks like a done deal. The funny thing is, none of those cheering for four more years of Greenspan seems to realize that the short-term outlook for many stocks just got a lot more negative.

Theres no question that Greenspan is brilliant--probably the best chairman in the Feds history, and theres no potential candidate that Id rather see running U.S. monetary policy. But Greenspan will likely push up interest rates sharply over the next six to nine months (in fact, Greenspans early nomination--it hadnt been expected until spring--frees him from political pressures to keep rates low). Wall Street economists who know Greenspan best predict a rise in short-term interest rates of anywhere from three- quarters of a percentage point to a full point (quite a bit when you consider that short-term rates already are at 52-week highs), landing them near 6.5%. The long bond yield could climb to 7%.

If that plays out, hot growth stocks certainly would get clobbered-- and for once, they might not bounce right back. The prices investors pay for tech stocks depend (to a great extent) on returns available from safer investments. If you can get fat yields on bonds with little risk, the potential growth from tech stocks becomes less attractive.

As rates rise, bonds and interest-rate-sensitive stocks (such as financials) also will sell off. But there is good news in the long run. High rates would almost certainly cool down the economy from its blistering 5%-plus pace, probably by the second half of this year. Once investors see signs of a slowdown, and reduce their expectations of future inflation, long- term rates will begin to come back down.

Watch for either of two signals that interest rates are near a peak: If the Fed raises short-term rates and bond yields fall, the rate rise is probably close to an end. And if T-bill yields actually go above T-bond yields, a reversal wont be far off.

In that climate, its an excellent idea to rebalance your portfolio by moving some money into bonds or interest-rate sensitive stocks as those groups pull back. The easiest choice is to move a chunk of money into long-term Treasuries if bond yields reach 7%.

Stock investors should move money into interest-rate sensitive issues. And there, the big banks, such as Chase and Bank of America, look like the best bets. They offer double-digit projected earnings growth, with P/E ratios of less than 11. And although rising rates might produce earnings disappointments for a couple of quarters, these banks remain fantastic franchises at remarkably cheap prices. Any short-term shocks will only make them more attractive for anyone building a long-term blue-chip portfolio. MS

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Check out Michael's "Forecast 2000".
Profits are strong. Inflation is tame. Are we in a new era? Sure. But you still need a smart strategy to cash in, and Michael Sivy provides one. Also, log on to our interactive poll to share your predictions for the stock market and the economy.

-- Watching At Work (watching@work.com), January 06, 2000.

Did that help?

-- Watching At Work (watching@work.com), January 06, 2000.

Nothing to do with y2k. There was no y2k fear so now has now y2k effect.

After end-of-year amazing run-up on NASD on the back of higher bond yield and the coming earning warnings, traders now are doing sector shifting. Dump NASD and dive into 'higher quality' Dow stocks. Don't be fooled by Dow index. It's nothing impressive on its breadth. (I care more about S&P 500 index). We are going to see more and more this kind of disparity run-up till big guys unload all their shares. Then.....

If you insist to hear something related to y2k, there is a 'nuclear winter' theory tied to computer sector.

My $2c

-- prep (prep@prep.com), January 06, 2000.

You are dealing with some difficult issues. About the nasdaq, people have been in a feeding frenzy over tech issues. They are buying on speculation because they have heard that small start up tech companies have made tons of money. They are usually referring to Dell, Microsoft,Lucent, yahoo ect. To get startups, they have been buying companies which only promise that they will make money some time in the future. The best case is Amazon. They have a big brand name and a market cap that was as big as Budwiser(Anheuser Busch). They also managed to sell $2.6 billion(yes "Billion") of stuff in 1999. Their profit is still non existant. They have been growing sales for several years however they have never made a profit. But someday they could by selling books at a price over what it costs to buy them. Many other technology companies have yet to make a profit, however those who have made a ton of money on this promise are inspiring others to take that same bet. Now they are growing that bubble which will someday either come down or the companies will turn a huge profit.

Profit taking is also going on right now at the Nasdaq. Last years Tech index rose 87%. That is the time to lock in profits and they are doing it right now. So if the market goes down 5% and you sell, you still have 82% of the profit left. Not bad for a year of just owning pieces of paper.

Oh yes, for your information. I am not invested in this current tech bubble.

-- ned (ned@nednet.com), January 06, 2000.

Another factor is the fed/inflation. There is an expectation that the fed has to brake hard to prevent or limit inlfation (remembering all that no problem flood of liquidity). Higher rates spell bad news to techs because they frequently bleed money until they are established (burn rate). The fed stamping hard means a likely slowdown in the economy down the road (one way or the other). A slowdown means slowdown on purchases and capital spending, this is also bad news for techs. But, this is not the end of the world. Money is cycling out of techs and into the Dow biggies. Now if the money starts exiting the dow biggies that could spell trouble for the market.

-- Squid (ItsDark@down.here), January 06, 2000.

Try a little bit of math:

Pick any currently high-flying tech stock. Assume that it will at some point this year establish a price/earnings ratio of, say, 50, or even 60. What would its price be?

If you own Qualcomm, perhaps you shouldn't try this exercise. It's too awful. You might get scared and, well, sell it.

Re this week's carnage in the Nasdaq:

From TheStreet.com:

Margin Sellers Push Latest Decline, By James J. Cramer

1/6/00 3:59 PM ET

Remember the other day when I said that if you were on margin, get off it? Looks like those that didn't have a chance to do so are having it done for them.

This most recent break in the market is reminiscent of other spectacular declines in Red Hot stocks, typically magnified by people who have to sell because they don't have the money to own stocks overnight.

Last April, and again last summer, we saw this peculiar pattern where people come in and pile on the most vicious of the declines. Often these are sales mandated by the margin rules.

I wish I could tell you that this just ends on a dime. But it hasn't historically. Usually it is compounded by false rumors about stocks that were hanging in there to complete the rout.

We are using EXTREMELY wide scales to buy stocks we love, as we want to deploy our cash into weakness. No, it's not fun. No, it's not conducive to laughter and guffaws and attaboys.

It's just the way it is...

The pros will now be tested and the real talent will come to the top. The amateurs will face trials as well, though far too many of them have never faced a market in real flux. Consider: investors who are now 30 years old were only 14 when the bull market started.

It may get very ugly indeed...

-- DeeEmBee (macbeth1@pacbell.net), January 06, 2000.

Look, it slumps at this time every year. And even the tech companies - including Microsoft - have been publically saying that they're way overvalued.

I don't see what's confusing about that.

-- Servant (public_service@yahoo.com), January 07, 2000.