|
Figuring out when that will happen is tricky. There are three market signals I like to watch to determine a bottom to a market: stock repurchases, merger-and-acquisition activity, and investor sentiment. Unfortunately, all three of those Street signs are blinking red right now, which tells me this bear market is far from over. The first two of my indicators, share repurchases and merger activity, work because they can tell you what's occurring at that moment. A cluster of such activity means a lot of CEOs think their stocks are cheap or that now is the time to buy competitors. The third indicator, investor sentiment, is the hardest to get a handle on, but it's probably the most important factor in calling a market bottom. Share Repurchases When a company's execs have a lot of cash on hand and think their stock is inordinately cheap, buying back stock from the public market and then retiring it is an easy way to lift the price. The numbers, from Thomson Financial Securities Data, paint a bleak picture. From the beginning of 1999 to Feb. 26 of that year, there were 232 buyback announcements, worth a total of $26.9 billion. Over the same period in 2000, the stream of buybacks stayed respectable: 158 announcements, worth a huge $44.6 billion. Now, the flow has all but stopped: During the same period in 2001, only 81 announcements, worth $15.2 billion, have been made. Mergers and Acquisitions M&A activity fills in a missing part of the share-repurchase picture because many companies simply don't have the cash to buy back their own shares. According to MergerStat, there were 1,307 deals announced through the end of February this year, worth $93 billion. Compare that with last year's totals through the end of February: 1,714 deals, worth $399.7 billion. That's more than a 75% decrease in the dollar value of deals. "Everyone's waiting for the market to turn around before they start acquiring again," says Robert Teitelman, editor-in-chief of The Daily Deal, a merger newspaper. Indeed, one thing that might prompt a turnaround is a sudden storm of merger activity, as acquiring companies decide that the price is right. That hasn't happened yet. Investor Sentiment Getting a handle on the psychology of the stock market can be tricky. My favorite measure is the PaineWebber Index of Investor Optimism, which is based on polling data done by UBS Warburg and Gallup. The index, which asks investors of various portfolio levels how positive they feel about the stock market, sits at 126 for February, which is only four points down from its January finish. It's also well above its baseline of 100 in 1996, when the index began - itself a pretty optimistic time. According to UBS, 64% of investors polled consider now a good time to put money into the stock market. So if people feel so good about the market, isn't that a sure sign stocks are on their way back? Actually, the UBS index is a reverse indicator. When people feel confident things are about to turn around, bear markets tend to continue. When all hope is extinguished and stocks are as popular as Saddam Hussein at a VFW meeting, the market starts to go up. One interesting thing the poll doesn't do is gauge sentiment by exchange: A very different mood prevails about the Nasdaq, which is down 61% since March, 2000, than about larger, nontechnology exchanges. "I would say there's a split personality in the US right now," says Michael O'Sullivan, global debt and equity strategist for Commerzbank. "The Dow and the S&P 500 are not too far off their highs, and there's a lot of confidence out there. At the Nasdaq, things are blindly bearish." But that's not to say the Nasdaq is experiencing the darkness before a glorious new dawn. "The days of egregious overvaluation are gone," says Joseph V. Battapaglia, chief market strategist for Gruntal & Co. Nevertheless, he says, the bright side is that "it's fairly clear there's no meaningful valuation issue among the Nasdaq's leadership." In other words, things are cheap. Don't expect to make quick gains again. But if most other investors are thinking the same way as Battapaglia, the Nasdaq's slow and painful turnaround could at least be on the horizon.
'The Nasdaq has become almost four times more important than disposable personal income in explaining swings in consumer spending,' observed ISI Group, a New York economic-consulting firm, recently. The firm added, it's almost six times more significant than the Wilshire index of almost every stock in the country. If so, watch out. The Nasdaq's fall this month to a two-year low suggests that January's respite from slowing economic growth may have been temporary. If nothing else, the Nasdaq, for so long the symbol of America's economic exuberance, is now the symbol of the country's eroding confidence. And confidence, the Federal Reserve has made clear, is the key to whether the current slowdown becomes a recession.
Let this lesson apply to that ten-trillion-ton anthroposofous, the US economy. As blind men all, we need to grope the great beast in every possible way to find out just what form it's currently assuming. The welcome shakeout of the high-tech sector needn't bring down the whole economy. Those young-punk paper millionaires suddenly rendered jobless can surely find other lines of work, maybe after doing a stint in bartender school. If business invests less in information technology, that will free up funds to invest in bricks and mortar. And if consumers pull back on their purchase of PCs, they'll have more cash to buy low-tech items like couches. But if the dot.com depressives are blindly groping the animal's tail, even those who focus on consumer confidence are making the same mistake. To begin with, let the truth be baldly stated: Whenever the University of Michigan index of consumer sentiment falls as much as it has, a recession has always struck. Scarily enough, the index plunged to 87.8 as of early February, a tad below its 88.2 reading in July 1990, the month before the economic downturn of '90-'91. But this time around, if consumers are feeling bad, they don't seem to be acting that way. For sure, last week came close to witnessing a bone fide bear market, with the S&P 500 down nearly 18% from its March 24th 2000 high. But most of the carnage got concentrated in New Economy stocks. I asked S&P analyst Roger Bos to parse the 500 issues in the index between 425 old-guard and the 75 in the new (62 in the tech sector plus 13 telecoms), and to track the performance of each. As of Friday's close, the avant-garde portfolio crashed 52.1% from the March 24th high, with 69 of the 75 down and 6 up. In contrast, the other 425 rose 6.7% over this period, with 288 up, 129 down, and 8 basically flat. In keeping with the grope approach to tracking the economy, Jason Benderly of the Vail, Colorado-based Benderly Economics, tracks nine variables that help shed light on the state of consumer well-being, one of which is the expectations component of the U. Michigan sentiment index. Accordingly, he finds that just before each of the past six recessions-beginning in 1960, '69, '73, '80, '81, and '90-the negatives so outweighed the positives that the total was in solidly negative territory. In July '90, for example, the reading was -0.40. But this months total: +O.35. The punchline: For all that consumers say they're feeling lousy, something else is going on. Put another way, how low can sentiment be, with home sales running so strong and with the MBA index of mortgage applications signalling more to come? (Every recession gets preceded by a crash in home sales.) Or with real wages and salaries rising smartly and with the Fed aggressively cutting rates? All three of these variables-home purchases, real wages and the movement in the Fed funds rate-are part of Benderly's nine. In this regard, there isn't a whole lot of use to be found in that competing series, the Index of Leading Economic Indicators, reported to have jumped 0.8% after a series of down months. The Cleveland Federal Reserve has found that the L.I.E.'s connection to the future considerably weakened since 1994, which happens to be when the Conference Board acquired this ancient index from the Bureau of Economic Analysis and began refurbishing it. Moreover, Benderly found that some of the L.E.I.'s components lag more often than lead. A case in point: initial unemployment insurance claims, which may have risen because the Internet generation is deciding what to do next.
Ira Kay, national director of compensation consulting at Watson Wyatt Worldwide, thinks corporate America's stock-option binge of recent years is a big contributor to the Nasdaq plunge. Kay bases his view on the results of a recent study by Watson Wyatt. It found that, even before the Nasdaq fall, companies making the biggest option grants produced lower total returns to shareholders and higher levels of stock price volatility. The study, which examined option grants and stock price moves at 850 of the nation's largest companies, concluded that the heavy use of stock options had motivated executives to pursue riskier business strategies, like adding debt and making high- priced stock buybacks. These moves produced bigger swings in the share prices, which are not in the best interests of stockholders. The Watson Wyatt study examined the number of option grants made and future ones planned at each company. Then it compared these figures with the number of shares outstanding. Companies with a high percentage of unexercised options have option overhang. The overhang has surged in recent years. The average overhang for the 850 companies surveyed stood at 13% of outstanding shares, according to the latest figures, up from 9.2% in 1995. Volatility among these companies' stocks averaged 17.2%, up from 12.7%. Technology companies have the greatest overhang, devoting an average of 23% of shares outstanding to option grants. That is double the percentage found in sectors like financial institutions and makers of consumer goods. The only sector that approached technology in overhang was health care, with a 17% average. In 1998 and 1999, companies with the highest growth in option overhang produced much lower total returns to shareholders than those with slower option growth. The biggest grantors returned 7.4%, while the smallest returned 14.3%. Companies with medium overhang showed 17.8% gains over the two years.
Now, investors aren't so sure. The Nasdaq is down 1.8% for the year. The Dow is flat. A steady drumbeat of dreary earnings reports from technology stocks have investors concerned that the hangover from the bull-market party may last much longer than they previously thought. That is a reasonable view, said James Paulsen, chief investment officer at Wells Capital Management. He compared the economy today to that of 1990, the last time the US endured a recession. That downturn ended quickly, in 1991. But while the Fed chopped the federal funds rate from 9% in 1990 to 3% by 1993, it wasn't until 1994 that the economy got out of a sluggish growth mood. What worries Mr. Paulsen today is the possibility that the Fed's rate cuts may not be able to rouse technology spending. "If the tech sector is driven more by new-product introductions, whether the Fed lowers or raises interest rates may have no impact," he said. "That was O.K. when tech was contributing 5 percent or less to economic growth. Now it's one-third of the growth rate and it becomes critically important." Indeed, Mr. Paulsen thinks the US has avoided two recessions in recent years solely because of the economic growth provided by new technologies that won the hearts of corporations and consumers. One near miss occurred in 1995 after the Mexican peso devaluation; then, sales of personal computers bailed out the country. Later, in 1998, when the rest of the world was in turmoil, buying into the Internet boom helped the nation avert the crisis. "Even though we think the Asian crisis ended in 1999," Mr. Paulsen said, "signs that we hadn't really exited the crisis remained." Among them are excessive stock market volatility; depressed commodity prices, other than those that are energy-related; continued corporate layoffs; and persistently wide corporate bond spreads. "Maybe all those things indicated that most of the world didn't get out of economic crisis, but it was masked by the boom in technology," Mr. Paulsen said. This picture has troubling implications for corporate earnings in 2001. "Normally, we go into a recession after a period where pricing power has been strong," Mr. Paulsen said. Not this time. On Friday, the report on producer prices showed that raw goods, excluding food and energy, actually fell in price by 7.4%, year over year. While energy prices have spiked, companies cannot pass along the price increases. "This will put a unique pressure on profits," Mr. Paulsen said. "It's a tough place to be." Related: Forecasts WSJ 2-12 Just 5% of forecasters surveyed by Blue Chip Economic Indicators say that the U.S. has slipped into a recession. That is in spite of a consensus forecast of just 2.1% growth in inflation-adjusted gross domestic product this year, which would be the slowest since 1991, when the economy shrank 0.2%. The consensus growth forecast has fallen sharply from 3.5% in October, and even from 2.6% in January. Ominously, the last time the consensus forecast fell so sharply in four months was in the summer and early fall of 1990, which is also the last time the US fell into a recession. Growth in Operating Earnings* Tom Petruno, LA Times 2-18-2001
Source: First Call/Thomson Financial
I do not recommend making margin a part of your long-term approach because the successful use of margin depends on an almost inhuman level of discipline not to deviate from the strategy. If you stray, all bets are off. The first factor that often causes margined investors to stray is margin calls. These occur when your stocks decline by so much that your portfolio's net worth shrinks to less than 30% of your stocks' total market value. The risk of a margin call is greater than you may think. Assuming that the future will be like the last century, your chance of getting a margin call is as high as one in eight during your first year. (I calculated these odds using the Dow from May 1896 to the present, assuming that $1 is borrowed on margin for every $1 in a portfolio, and that the broker loan rate is two percentage points higher than the 90-day Treasury bill rate.) The percentage of five-year holding periods since 1871 in which stocks did not perform as well as the broker loan rate was nearly 31%. The comparable number for 10-year holding periods is 25%. To gauge the meaning of those figures, ask this question: How would you feel if, at the end of five years, the stocks you have bought on margin have not performed well enough even to pay back the interest charged by your broker? There is nearly a one-in-three chance of that happening. Now ask the same question, assuming that 10 years have passed - and there is still a one- in-four chance of a shortfall. If you are like the majority of investors, you won't have the patience and will instead throw in the towel early. But by doing so, you will realize none of margin's long-term potential and suffer the brunt of its downside risk. To stand out from the crowd, you have to be willing to give more weight to an abstract intellectual notion - stocks' long-term historical return - than to the very real losses you feel in your pocketbook. If you are the rare investor who does not let emotions trump the intellect, then more power to you. But forgive me for not believing you.
Productivity, the goods and services produced from each hour of work, is the magic elixir of economic progress. The faster productivity grows, the faster wages climb. A half-percentage-point rise in productivity growth cuts the price tag for the 50-year fix to Social Security in half. A half-percentage-point rise in productivity growth adds $1.2 trillion to the federal budget surplus over 10 years. [WSJ 2-27: Every 0.1 percentage-point increase in the budget office's projected growth rate adds about $250 billion in government revenue.] The big issue isn't what computers have done so far. It's how much more existing technology - not counting the stuff still to be invented - can do if businesses, workers and consumers are willing to change their ways. The answer: A lot. In surveys of purchasing managers, half of them say their companies have as much still to gain from using computer networks to manage the supply chain as they've saved already. Treasury Secretary Paul O'Neill says, "The potential for productivity gains in the US economy is higher than we realize. If you look at the penetration of good ideas, ... we're still at the 20% to 30% level of what's possible."
"An extended period of flat-to-down stock prices would turn this trend around," said Arnold Kaufman, editor of the Outlook newsletter published by Standard & Poor's. "Shareholders would then seek some tangible reward for share ownership." Just 74% of the companies in the S&P 500 paid dividends last year, a new low. Changes in the makeup of the index itself have been a large contributor to the decline in dividend yield. Last year, a record 58 changes were made in the composition of the index. Many of the additions were technology companies that pay no dividends. But the S&P 500 stocks that paid dividends did much better in 2000 than those that did not. On average, stocks paying dividends gained 15.7%, while those that did not fell 2.2%. S&P estimates that only about 30% of earnings were paid out as dividends last year, another new low. Through the 1990's, the average dividend payout was 50%. And last year, fewer than 1,500 companies raised their dividends, the lowest number since 1992. Investors should not regard dividends as a guarantee of stability. "We have tracked the volatility of our returns over time, and found the standard deviation is similar to the market," said Stephen Peterson, who has managed the Fidelity Equity-Income fund since 1993. In the last 20 years, the volatility of stock income funds has risen sharply as dividend yields have fallen, a study by Lipper Inc. concluded. "These funds are positioned as more conservative, but the numbers don't make them out that way," said Donald L. Cassidy, a research analyst at Lipper. "Unless they are really close to this stuff, Mr. and Mrs. Investor may not be getting what they think they are getting." Just the Facts The ICI Tuesday reported that stock funds received $24.58 billion in new money in January, up from $11.64 billion in December 2000, but well below the $44.46 billion going into stock funds in January 2000. Money flowing into money-market funds in January ballooned to $102.78 billion (80% of that total was from corporations); in December, investors put $16.41 billion into money-market funds, and in January 2000, $41.75 billion went into money funds. Fidelity in January had total inflows of $12.9 billion spread across its asset classes. Of that, $9 billion was in money-market funds, $2.5 billion in stock funds and $1.4 billion in bond funds. At Vanguard Group, inflows for February are expected to be $1.4 billion for stock funds, $1.4 billion for bond funds and $1.1 billion for money-market funds. That is quite different from the year earlier, when $3.1 billion flowed into stock, and $350 million flowed out of bonds. (WSJ 2-28) "The market is as cheap as it has been in the last 20 years," says Tracy Eichler, investment strategist at PaineWebber. Historically, it has taken an average of four and a quarter months for a bear market to bottom, which would mean this bear, which began to prowl in December, should bottom in mid-April, according to Eichler. (Business Week 2-28) "We're probably going to have four or five more months of weak economic data and weak earnings for at least that long," says Ethan Harris, chief U.S. economist at Lehman Brothers. "In the short term, we're not expecting a V [a sharp recovery once the market bottoms], it'll be more like a W. You'll see a lot of choppiness." That's because the market will rally on additional Fed action, according to Harris. (Business Week 2-28) Barron's asked Morningstar to put together a list of funds that have raised their fees by at least a quarter of a percentage point in the past three years, while expanding their asset base significantly. Remarkably, about 260 funds have that distinction. They've raised fees during some of the bull market's most generous years. Of the 260 on our list, most have a decent excuse; their assets under management haven't yet hit $50 million - roughly the breakeven point for the typical fund. (Barrons 2-26) Steve Leuthold, president of Leuthold/ Weeden Capital Management: One of the things that concerns me is that most Wall Street analysts have never dealt with a recession. We just did a study from 1947 to date. During that period there were nine years where earnings on the S&P 500 fell by 5% or more. In each of those nine years, the stock market was up. By contrast, there were nine years when S&P earnings were up 20% or more. Five of those years were up years in the market. Three were down years. One of the things younger people don't realize is that markets turn up in the middle of recessions. They have all become so earnings-momentum oriented they overlook that. You have to remember the market is a discounting mechanism, and you have to look ahead. (Kenneth Gilpin, NY Times 2-25) Steve Leuthold, president of Leuthold/ Weeden Capital Management: Historically, the median p/e ratio for the tech sector, which includes 500 stocks, is 33 times earnings. Right now we are at about 47 times earnings. That is a lot closer to the norm than the 114 times earnings they were at the peak. (Kenneth Gilpin, NY Times 2-25) Although the economy is slowing, unemployment remains low. More significantly, wage increases are spreading in the services industries. Workers no longer can accept the same wage gains as a year ago and still comfortably pay their heating and transportation bills. This is not a favorable environment for stock market values. Moreover, if that increased liquidity pumping into the economy by the Fed is converted to higher prices instead of more economic activity, then stock market conditions will remain troubled. I still believe economic growth will resume in the spring, and stock market values will anticipate that improvement. However, a return to 5,000 on the Nasdaq is not likely in the next few years. (Donald Ratajczak, AJC 2-25) The new V.92 dial-up modem standard promises to maximize the limited potential of analog connections. Once ISP's upgrade their hardware to handle the V.92 standard, the new protocol will shave a few seconds off of logon time, allow free Internet call waiting, and speed data conversion for faster downloads and uploads. Actiontec's Lesley Kirchman notes that, while the future definitely belongs to broadband, the V.92 standard could be the last great leap forward in analog modem technology. Among the new features are "Quick Connect" technology, which helps a modem to learn connection patterns and hook up more quickly, and the new V.44 compression protocol that makes text and Web pages move faster.(Washington Post, 2-23) An SWR Worldwide study, commissioned by Best Buy, found that more than 50% of college freshmen brought a desktop or laptop computer to college in 2000, compared to just 13% in 1990. The study also found that 24% of today's students plan to bring a laptop to class regularly, compared to 4% of students 10 years ago. Meanwhile, 20% of today's students use cell phones, 11% use pagers, and 11% use personal digital assistants. (Knight-Ridder, 2-22) Google has become the first major search engine to index documents in PDF. Google estimated that it has made 13 million PDF documents available through its search engine. Google's David Krane said this represents about 70% of all PDF documents available to the public online. The average HTML file has only one-fifth the number of words as the average PDF file does. and the average PDF file is 100-fold larger than the average HTML file. The resources necessary to index such a large pool of data may prevent other search engines from adding PDF documents, observers speculate. (NY Times, 2-22) In 1970, only the most credit-worthy 15% of Americans had a Visa, MasterCard or other card that could be used almost anywhere. By 1983, 43% did. In 1998, the last time the Fed counted, 68% did. These days, even college kids have credit cards. (WSJ 2-22) More than half of all tax returns now are done by paid preparers. This year, for the first time, tax forms ask whether you want to authorize the IRS to discuss your return directly with your preparer. The question appears on the back page of both Form 1040 and 1040A, in a boldface box. A yes answer authorizes the preparer to answer return-processing queries, including supplying the IRS with missing details. It also allows your preparer to call the IRS on your behalf for information about other processing issues, such as the status of payments or refunds. Just remember a yes check mark "only authorizes the individual who actually signed your return, not that person's firm," says Martin Nissenbaum of Ernst & Young. (WSJ 2-21) In a poll by Peter Hart Research Associates for the AFL-CIO, 51% of 462 potential union members said they definitely or probably would vote against a union if an election was held tomorrow. But of workers under 35 years old, 53% would vote for a union. The result matches a similar poll from two years ago. (WSJ 2-20) About 18% of 632 workers surveyed on behalf of Oxford Health Plans say they don't use all their vacation days because they are too busy at work. (WSJ 2-20) Stock-index funds may get all the attention, but bond-index funds are the real champions. Consider, Vanguard Total Bond Market Index Fund, which mimics the Lehman Brothers Aggregate Bond Index. Over the past five calendar years, the fund has outpaced an astonishing 91% of all high-quality taxable U.S. bond funds, according to Morningstar. With results like that, it's tough to justify buying actively managed bond funds. Even if you hit the jackpot with a managed bond fund, the jackpot is pretty small. (Jonathan Clements, WSJ 2-18) Morningstar's performance tally of 28 stock fund categories shows that just 10 are posting gains year-to-date. Amid continuing investor worries over the economy and corporate earnings, the average stock fund is down 1.9% for the year. That also was the average percentage loss for 2000 as a whole. (Tom Petruno, LA Times 2-18) Economist Edward Yardeni of Deutsche Bank Securities last week described what he heard from investors: 'No one wants to take big bets on technology, on growth, on value, on energy, or anything. No one wants to bet against the Fed, of course. Yet there is a great deal of anxiety that consumer and business spending might not respond as quickly as in the past to easier credit conditions.' (Tom Petruno, LA Times 2-18) I'm struck by the extent to which the "buy and sell" philosophy has taken root as a part of our culture, pushing "buy and hold" into oblivion. For a while I thought this was a temporary phenomenon accompanying the novelty of the Internet and the great bull market of the '90s. I thought people would learn something from the collapse. They learned, all right. But the lesson many individual investors took away from that period was that frequent trading was good for their health, not bad. Who were the tech investors with the greatest chance of getting burned? It was the buy-and-hold folks, not the in-and-out folks. I do know that there's only one guaranteed beneficiary from frequent trading: the companies that handle the trades. (Fred Barbash, Washpost.com 2-18) The Investment Company Institute just started tracking ETFs in the same way it tracks the flow of money into and out of mutual funds. Its latest report shows that the combined assets of exchange-traded funds were $65.6 billion at the end of 2000. That's a fraction of the $6.9 trillion in mutual funds, but not bad considering the youth of the species. (Fred Barbash, Washpost.com 2-18) At Schwab, they are callled "expense guarantees." Fidelity describes them as "voluntary expense caps." Neuberger Berman refers to them as "capped expense ratios." Whatever they are called, they boil down to a surprising fact: Many investors are getting a break on the fees they pay on their mutual funds because of subsidies provided by their fund companies. According to Lipper, 40% of stock funds and 52% of bond funds had some sort of fee waiver in effect in last year's third quarter, the latest period for which figures are available. In percentage terms, that is up slightly from 37% of stock funds and 51% of bond funds that offered fee breaks in 1998. But there are an additional 2,500 funds in business today than in 1998, so subsidies are becoming increasingly common. (WSJ 2-16) The Internet Engineering Task Force (IETF) is nearing completion of the Message Tracking Query Protocol (MTQP), which will allow the senders of e-mail messages to make sure their messages are delivered. (VNUNet.com, 2-15) Last year, the nation's 10 major airlines filled 72.8% of their seats, a post-World War II record. (WSJ 2-14) Farmers, food and lodging managers, and lawyers and judges are the workers who marry within their group the most, says the Employment Policy Foundation. (WSJ 2-13) 'Between 1989 and 1998, median incomes rose appreciably only for families headed by college graduates,' according to the Survey of Consumer Finances and the Distribution of Wealth, a study compiled every three years by Arthur Kennickell, senior economist of the Federal Reserve Board. Not surprisingly, in a decade of rising stock markets, wealth rose particularly for those with financial assets. (James Flanigan, LA Times 2-11) The slow uptake of broadband Internet access in the consumer sector has ramifications through the entire high-tech industry, argues columnist Kevin Maney. Only 5% of US households currently have access to DSL or cable-modem Internet access, despite numerous studies that suggest that the demand is significantly higher than that. Broadband providers are struggling to wire homes and, more importantly, to upgrade the existing infrastructure so that it can handle broadband. "At some point in the next year or two, broadband will appear to happen very fast," says Broadband Services CTO Andy Paff. However, Maney wonders how that 1-2 year wait will affect consumers, Web-site operators, and hardware makers. Maney suggests that one reason for the much-discussed slowdown in PC sales is that consumers have no use for faster, more powerful PCs when they cannot access the broadband-based applications for which the newest PCs are designed. Web sites that were banking on streaming video or audio to draw traffic are also suffering, as traditional dial-up connections often render these applications unusable. (USA Today, 2-7) {Related IBD 12-27: Dial-up modems account for 91% of all Internet connections in US households, Jupiter Research reports. However, many analysts believe that 2001 will be a key year for those ISPs that offer or plan to offer high-speed access. Although only 4.8 million US households currently have such access, that number will rise to 28.8 million within five years. The number of dial-up subscribers will begin declining in 2005 after topping out at 53 million in 2003.} Mouse makers Microsoft and Logitech have turned their attention to the trackball, which fell out of favor in the 1960s after research scientist Douglas Englebart turned it upside down, creating the first mouse. Industry analysts say the trackball may be poised for a comeback as it has several advantages over the mouse. Trackball users roll a ball with their thumbs to move the cursor, causing less ergonomic stress than a mouse. Because the ball itself faces up rather than down, it does not collect as much dust and dirt as a mouse's ball does. Also, trackball users do not need a mouse pad or the room the pad requires. The new trackball devices being developed by Microsoft and Logitech feature optical technology to measure the movement of the cursor as accurately as possible. (Investor's Business Daily, 2-6) Last year was the first year in a decade in which the total assets in stock mutual funds declined from the prior year. And yet, 2000 also set a record for net new money soaked up by stock portfolios. Clearly, the full $309 billion intake was lost, and then some, to account for the 2%, or $80 billion, decline in equity-fund assets in the year, according to ICI figures. Despite the dissipation of fund deposits, domestic stock funds ended the year controlling a larger piece of the US stock market than they had at the start of 2000. Some cocktail-napkin arithmetic using the ICI asset data indicates that at the end of 1999, the money in stock funds, excluding those classified as international funds, represented 21.2% of the $16.3 trillion capitalization of the US market as measured by the Wilshire 5000 index. By the end of last year, domestic stock funds accounted for 23.8% of the country's public equity, which had shrunk to $14.4 trillion. As recently as 1998, that figure was under 20%. (Barrons 2-5) Pop quiz: Name the people who appear on the $100,000 and the $10,000 bills. The answers: Woodrow Wilson and Salmon P. Chase. (NY Times 2-4) Last week, the Conference Board said its January survey of consumer confidence showed the steepest dive in more than 10 years. But many economists question the value of confidence readings in forecasting future consumer spending - which is, after all, the economy's principal driving force. Richards, economist at the National Assn. of Manufacturers in Washington, argues that consumer confidence measures tell you more about about peoples' recent spending patterns than about what they're actually likely to do in the months ahead. "It's a lagging indicator," he says. (Tom Petruno, LA Times 2-4) Although spending on goods was weak in Q4, spending on services rose at a 5.3% annualized rate, up from 3.7% in Q3, the government's GDP report showed. (Tom Petruno, LA Times 2-4) Although most options expire in a few months, Leaps options, for long-term equity anticipation securities options, which mature in one to three years. Leaps are available on indexes and some stocks. (NY Times 2-4) Random data: In 1999's hamburger/sandwich chain sales - McDonald's led in share, with 35% of sales. Next was Burger King, at 16%, Taco Bell at 10%, Wendy's at 10% and Subway at 6%. You can look for market share information by visiting www.google.com online and typing in, for example, "soft drink market share." Sites such as activemedia-guide also offer market share info. (Motley Fool, AJC 2-4) Former Fed Vice Chairman Alan Blinder says Mr. Greenspan is moving more aggressively because "he sees a more pressing need than is normal. Second, the market has gotten better at thinking ahead to what the Fed is going to do. The result is that his previous worry - that if you move too much at once you'll unsettle the markets - isn't a worry any more." (WSJ 2-1) Home Page Previous Factoid Top Sites |