On Oct. 8, OldTrader made the call: The market has bottomed, and the tech bull is back. "This is what a bottom looks like -- sell when the cannons are outside the fort, buy when they are in the courtyard," OldTrader posted on SiliconInvestor.com's message board. OldTrader, known offline as Bill Michaels, a 70-year-old La Jolla, Calif.-based stockbroker who has been successfully trading tech stocks for 43 years, began scooping up more shares in Dell ( DELL) and Intel ( INTC). "Market bottomed," his post concluded, "Go get rich, folks." While Michaels was advising his colleagues on the individual investor boards, his timely post may as well have been offered to mutual fund managers, many of whom have subsequently echoed that the market bottomed in early October and that technology may pace the recovery . Money managers and individuals have been disproportionately funneling money into the beaten-down tech sector. Since Oct. 9, the S&P 500 is up 14.5%. The Nasdaq Composite, meantime, has climbed 25.9%, the Nasdaq Telecom Index has added 37.6% and the Philadelphia Semiconductor Index has surged 40.3%. However, many market professionals and academics caution that tech stocks remain richly valued, highly risky and far from pole position for 2003. "Tech stocks have rallied more because they are more volatile -- when the market moves, they are going to move by some greater multiple on the upside and downside," says Jeremy Siegel, professor of finance at the University of Pennsylvania's Wharton School and author of Stocks for the Long Run . "The market is going to be decent next year, but nothing great, and I don't think you're going to see leadership coming from technology issues."
Still Exposed After All These Years
The debate on tech's recent surge and whether the sector will lead in 2003 is far from academic. Individuals have socked $1 trillion in retail bank deposits during the past 18 months, according to Avi Nachmany, director of research at Strategic Insight Mutual Fund Research and Consulting. Nachmany said the buildup represents nervous investors waiting to determine where the markets are headed. "If market confidence returns, it will go back into the markets," Nachmany said.