Observations

Greed. The press is excited about the sharp movement of the Nasdaq and technology stocks. The focus is again on this class of assets.

It looks like business is beginning to spend more on IT. This development adds to the thrill of investing and to the belief investors will soon recover the huge losses of the past three years.

Our subscribers are well aware of what is happening and are asking us why we are not recommending technology stocks. There is a nuance of greed in their voices and the feeling they may be left out of the party.

What amazes me is how little time it takes to forget. A rally of just two months and investors ignore what they had to endure in the last 3 years. They forget that value, products, profits, low debt, and dividends are the recipe for a successful stock investment program.

Investors are still not convinced that the 1990s were abnormal years as far as investment returns are concerned. The objective of the investment game is to find undervalued assets relative to the market.

The graphs of the Nasdaq and the S&P 500 tell the story. Technology stocks are considerably more volatile than the large cap stocks, and over the long term they appreciate exactly by the same amount.

The bottom line is that unless you are an exquisite timer, technology stocks are not a superior investment over the long term.

(This Observations appeared in the 12/16/2002 issue of The Peter Dag Portfolio).

More details in my The Peter Dag Portfolio , in Dag's Exclusive market Alert, and my free educational videos on http://www.peterdag.com/.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
2009 Market Timer of the Year by Timer Digest

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