Tech Stocks Not As Safe As They Appear

Since the market rolled over in July, the NASDAQ has been maintaining a strong performance relative to the broad market that began in May:

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Despite its inherent higher beta, tech stocks have performed decently as investors have recognized that they lack the immediate risk that financials and perhaps consumer discretionary companies face. After all, they have better balance sheets and ostensibly more exposure to businesses or foreign economies. A quick review of history, however, isn’t very encouraging that for those who believe that they can safely hide there if the economy deteriorates into a recession. In all recessions over the past 33 years, the NASDAQ has fallen, especially initially. Notice in the bottom panel that it tends to underperform the broad market. Valuations are a bit high historically again (compare bank PEs to tech PEs), and it is fallacious to believe that these stocks aren’t connected to the U.S. Consumer. I believe that as the situation gets worse, we will see tech investors flee.

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Comments

[Sr. Pessimist:]

I loathe current tech business. They suck. Just no programmatic capability. A bunch of politics. I did market research reports for my former boss when I worked for a real estate web design company. I can say a lot of negatives on the character of this guy, but compared to other tech businesses, his SQL queries were hand-written. I saw his source code. Inspecting all the competitors, just by the interface I could tell they didn't even use their own SQL. It was apparent they all used a basic standard tool that wasn't smart. This means they didn't have programmers that hand-author SQL scripts, but instead used high-level tools to do the authoring. It's not against the law to develop programs with click-drag-n-drop methodologies, but sometimes the competitive edge is bad.

Tech companies need engineers. America is lacking of engineers. The companies don't do well because of politics and the lack of programmers. You could go to a game software company and see a guy knocking on doors in there, and coming out to say, "NO ONE CAN PROGRAM." Frustrating? Yah, of course. You're born with or without the talent to be a programmer. Without it, you got click-drag-n-drop.

Plus, education doesn't teach you current stuff. Technology is outdated in 2 years in tech. You wanna read until your eyes bleed? Be up-to-date with working knowledge of contemporary tech, programming and typing until you're finger tips hurt and you have wrist issues? You have good memory and a natural logical skill? Then tech is for you. But forget this stuff about getting a degree in computers and that makes you ready. Paycheck programmers don't get the job done. If you want an easy job, don't get into computer programming.

2007 Sep 03 01:25 AM