Strategist sees dark year for Net stocks, marketsgreenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
Strategist sees dark year for Net stocks, markets By David Henry USA TODAY
NEW YORK -- In 2000, Internet shares will finally crash, the stock market will lose 25%, Japan's restructuring will backfire and health management companies will be seen as saviors.
Those are among 10 surprising developments for the new year predicted Monday by strategist Byron Wien of Morgan Stanley Dean Witter.
The list, Wien's 15th annual edition, is widely read on Wall Street. Wien uses it to provoke thought among clients and to hold himself accountable for his predictions and stock picks. He believes each development has a better than 50% chance of happening. But, he says, most investors would give each a less than 1-in-3 chance.
His batting average over the years tops .500. Wien's January 1999 list predicted Y2K meltdown warnings would ''turn out to be a hoax.''
His 2000 list, condensed:
* Powerful U.S. and global economies create enormous demand for capital. Yields on 30-year Treasury bonds top 7.5% (vs. Monday's 6.62%), straining stock prices.
* The Federal Reserve gradually tightens short-term interest rates by more than a full percentage point to slow the economy. The tightening starts a stock slide that carries Standard & Poor's 500-stock index down 25%, where it remains for months.
* Democrats nominate Bill Bradley, and Republicans nominate John McCain. Bradley wins, and Democrats achieve a majority in Congress.
* The Internet meets its Waterloo. Congress moves toward an Internet sales tax to be allocated to states. Online users complain about speeds and delivery. Carnage gradually moves through technology. Some Internet content and retailing stocks correct 50%. Hardware companies with earnings decline only 25%.
* Crude oil tops $30 a barrel on world economic growth while the Organization of Petroleum Exporting Countries (OPEC) limits supply. Oil service stocks rally. Halliburton, Schlumberger and Smith International have big gains.
* Hospital management companies become strong performers as legislators see them as part of the health care solution. Columbia HCA, Tenet and Health Management Associates do especially well.
* Restructuring cures eurosclerosis. European economy surges 4%; euro soars to $1.25 (vs. Monday's $1.03).
* Restructuring backfires in Japan as the economy slips back into recession because of high unemployment, low consumer spending and weak capital outlays. Foreign investors sell, driving Nikkei below 15,000. But a large trade surplus helps strengthen yen to 80 per dollar.
* Russell 2000 outperforms S&P 500. Commodity prices rise. Intermediate materials stocks beat indexes. Active portfolio managers beat the market a second year.
* Positive views of trends generate new investment themes: Global warming dangers viewed as overstated; biotech breakthroughs extend life expectancies two years for people under 40 in developed economies; computers and the Internet revolutionize the classroom.
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-- Teague Harper (firstname.lastname@example.org), January 04, 2000