Bear Tracks

Portfolio manager’s Letter December 2000

The Market environment has improved a lot since the first of year. Alan Greenspan has indeed unplugged the bubble machine, and the bear is consuming tech stocks like they were so many blue berries. This summer they where taking the tech stocks out one at a time and executing them. By November they were being shot in groups. One day it is the chip stocks, the next day it is telecommunications.

It is a testimony to the size of the speculative bubble that it has taken so long for the market to work though this correction. The correction may not yet be over, but the market is definitely more rational than it was last year at this time. At the low last Thursday The NASDAQ average was 50% below its March high, and as you can see from the table below Many Individual stocks have an even more sorry story to tell.

As bad as it has been it may not be over yet. The PE of the NASDAQ is still over 100. Just because a stock is down 90% does not mean it is cheap. The good news is that there are many old economy some stocks that are attractively priced. When you look at your December statements you will begin to see some new names there. This does not necessarily mean that I think the market as a whole has bottomed. It means that I am finding good companies at attractive prices, and that I am afraid that they may not get much cheaper even if the rest of the market turns back down.

Any year were we outperform the indexes is good, but the best of all worlds is when you are up when the market is down. There may be years when we make more money, but few that are more important to the longterm performance of your portfolios.