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Jewish World Review June 2, 2000 / 28 Iyar, 5760

James K. Glassman

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Consumer Reports

Keep Buying! --
WILL NASDAQ close the year at 5,000 or 1,500? Will the Fed raise rates again in 2000? Will this year follow the pattern of previous Presidential election years and be kind to investors? You canít possibly know the answers to any of these questions right now. So itís a waste of your time Ė and potentially harmful to your financial health Ė to try to answer them. Specifically, trying to predict the marketís next move can be harmful if uncertainty about the future causes you to sit on the sidelines instead of saving and investing your money.

As weíve discussed before, U.S. stock markets are perhaps the most efficient markets in the history of the world. Unless you have inside information Ė which means you canít trade Ė the price of a stock already reflects just about everything there is to know today about the company and the markets. So in times of declining prices, itís absolutely crucial that you donít start trying to time the market. In the end, you cannot know whether NASDAQ is headed north or south.

What you do know is that, in general, stocks are very volatile in the short term and they deliver tremendous gains over the long haul. If it matters a great deal to you where your stocks are at the end of December 2000, then you should not be investing in stocks. Any money that you will need in seven months should be invested in a money market fund. However, if youíre playing for the long haul, perhaps saving for retirement 10 years out, then ignore everything the doomsayers tell you about current risks. This is a terrific buying opportunity! NASDAQ is almost 40% below its high. Could it fall much further this year? Of course, but itís almost certainly well below where it will be trading in five years.

We often use the NASDAQ as a proxy for the tech economy, but letís be a little more specific, and letís assume that you want to put some kind of screen on your tech investments. For example, you donít want to buy any money-losing companies with unproven business models. Still, youíre bullish on the future of technology. Recently I told you about investing in the NASDAQ 100 (ticker symbol: QQQ) as a way to make a long term bet on tech. I ím still a big fan of QQQ, but thereís an even more precise tool out there for tech investors.

The NASDAQ 100 has an excellent representation of leading tech firms, of course, but it also includes some non-tech companies and obviously it only includes companies whose shares are traded on the NASDAQ. If you want a pure, unfiltered investment in Americaís leading tech companies, no matter on which exchange they trade, you might consider buying Technology Sector SPDRs (Standard and Poorís Depositary Receipts). These are shares, trading under the ticker symbol XLK, which represent partial ownership in Americaís 94 leading tech firms. The list is similar to the NASDAQ 100 Ė both feature heavyweights Microsoft, Intel and Cisco Ė but XLK also includes Glassman Tech 30 companies like IBM, AOL, AT&T and Lucent, a recent addition to my list of Americaís greatest techs. Trading at a recent $47 per share, this collection of Americaís leading tech firms is roughly 28% below its 52-week high. I believe that buying shares in XLK is a terrific long-term technology investment, no matter where NASDAQ closes on December 31st, no matter what the Fed does, and no matter who gets elected President.

JWR contributor James K. Glassman is the host of Tech Central Station. Comment by clicking here.


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