Hey, when I was talking abut Y2K panic, I didn't mean
kind of madness. I was talking about consumers running around, pulling money out of banks, stocking up on canned beans and buying generators.
Today's market mover: IBM or Y2K? Discuss it on our message boards.
But this market is so fearful, so on the edge anyway, that
CEO Lou Gerstner's relatively gentle direction last night about Y2K-related sags over the next couple of quarters led to market madness.
Not only did IBM get knocked down to 90 1/8 at the opening this morning -- a level at which, by the way, it may well be a buy for buy-and-hold investors, if there are any of those still around -- but the disease was, as my eight-year-old says, "catchy."
down. And so on.
By the close, IBM had rallied back only a point or so, to 91 1/2, for a stunning 14%-plus overnight drop.
Just offhand, would you say this market is looking for something --
-- to get spooked by? Is my calendar wrong? Did Halloween come early this year?
This drop in tech stocks was not triggered by reason, but by frantic trading by institutional managers who didn't want IBM on the books, didn't want to be associated with IBM, and just flat got out. "Y2K" became short-hand for "offer big blocks at or just under whatever the market is," and it was bombs-away time.
A lot of money managers are devoted right now to protecting their 1999 gains. I know people with juicy, 35% to 45% gains who have decided to strip out anything even slightly dodgy. Why risk losing their big year's big gains if things ebb -- and especially if they fall apart -- between now and the end of the year?
It's defend-the-cookie-jar time for them, protecting their record. Who said they had to be fully invested? And who can criticize them for battening down their hatches?
Here's another case where smart individual investors have a real advantage over the institutions. No, you can't stop the madness, and if you held IBM this morning, you got hurt, period. But you don't have to buy or sell now based on fears about how it will look to someone else when a quarterly report comes out showing your holdings.
Trade smart: Don't sell under pressure -- at least, without good reasons.
to sell? That's another matter. Look at your realized gains for the year. Do you have a stock or two trading well down from when you bought it, one you no longer have much confidence in? This may be a safe period to dump it, book the loss for tax time next April, then re-establish the position later (if you want to) at a much lower basis than you have now.
Watch out for the wash-sale rule, of course. But you may have enough time in this market to run that 30-days-out-of-the-game drill, then get back in before the stock you sold kicks back up materially.
Lost, for some, in the bad news was yesterday's
news, and today's robust move in the market, for
holders, of which I'm one. With the agonizingly slow rollout of ADSL by the RBOCs, shares of Aware -- a premier developer and licensor of DSL technology -- its shares had been drifting down from mid-July's near-60 to yesterday's close at 20 7/8.
That hurt. Since Aware is on my list of stocks to watch this year -- and especially since anyone who bought in this time a year ago, when I first mentioned Aware, got in at around 5 to 7, and had a heck of a nice gain by that July high -- my mailbag has been filled for months with notes from worried Aware holders.
As I've written here before, I think most of the slide this summer and fall was due to widespread misunderstanding of a decision by
to add a second DSL-technology supplier, in addition to, not in place of, Aware. And, of course, from market frustration with the RBOCs' sloth-like DSL rollout, which has retarded the revenue stream Aware will earn from them.
Last night Aware and
announced a licensing agreement which looked like it would reverse that trend.
And how. By the close, Aware was up a stunning 11 5/8, to 32 1/2. That's a 56% move from Wednesday's close, and a lot of Aware investors are obviously breathing more easily.
Both Aware and Intel were mum on the details of their deal, and neither would put a price tag on it. It covers the licensing to Intel "for use in future Intel products," both Aware's
slowed-down DSL technology and also, thankfully, its full-rate DSL patents.
The Intel deal looks even better for Aware since it comes in the wake of competitor
announcement last week that it had snagged what smells like a huge deal with
, the biggest and maybe the clumsiest of the RBOCs, to supply DSL equipment and technology for SBC's DSL rollout. (Note that that "largest RBOC" title may well be fleeting: The merged company resulting from the proposed
deal will top SBC, assuming it's approved by regulators.)
SBC, which includes the former
in its portfolio, along with its own
customers, has announced plans to spend $6 billion over the next three years on its "Project Pronto" DSL-capacity upgrade.
The French phone-equipment maker acquired
a year ago; the
product line SBC's buying from Alcatel came along in that acquisition.
I'm convinced Aware is still strong, and has a bright future over the next few years.
There were other bright spots for tech investors today.
was up on word of AOL's $800 million investment in
supplier which I am long, moved up 6 5/16 against this cranky market; and Austin's
, which produces a superb Web publishing system, soared over 30% on good quarterly results. (Get ready for a nice split, VIGN holders.)
But none of that takes away the pain for those who got bushwhacked on the IBM craziness, does it?
Jim Seymour is president of Seymour Group, an information-strategies consulting firm working with corporate clients in the U.S., Europe and Asia, and a longtime columnist for PC Magazine. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. At time of publication, Seymour was long Aware and Exodus, although holdings can change at any time. Seymour does not write about companies that are current or recent consulting clients of Seymour Group. While Seymour cannot provide investment advice or recommendations, he invites your feedback at