Steve Zito, MS Fin/BS Econ Wharton School, HTML Writers Guild
uses economic and technical analysis to forecast the direction of the stock market. The views in this newsletter are opinions only, and should not be relied upon as advice on investment decisions.
Nasdaq June 4 How To Trade Index Intel Review STOCK PICKS

NASDAQ COMPOSITE
INDEX closed 2028.43

Final Rally Over, Retest of 1950 Soon
Sat., June 16, 2001

******************Commentary******************
June 16. Today I am writing without technical analysis. I will resume that June 17. Most readers have strong bullish or bearish opinions. I strive to be neutral, but hope for Nasdaq to recover soon. Brokerage downgrades of technology stocks are punishing Nasdaq. Damage by Lehman Bros, Goldman Sachs, Morgan Stanley and Merrill Lynch has postponed Nasdaq's recovery for 3 months. Why? Brokerages need transaction fees to make up for reduced investment banking fees. By whipsawing markets, scaring investors out of tech stocks and urging them to buy old economy, brokerages grow transaction commissions. Congress has just started investigation of analyst recommendations of active stocks in which their brokerages handle investment banking. I predicted the investigation. CS First Boston downgraded fiber optic equipment suppliers (JDSU), trashing Nasdaq on Friday. And the TV media, so-called "trusted, respected, and number one in the business" TV personalities who gleefully announced this, have paraded analyst after analyst crying the market is headed for new lows, with Nasdaq already down over 60%. One year ago, CNBC touted gurus pushing JDSU at $150. At the time I wrote that Nasdaq was ridiculously over-valued (choose any page I posted a year ago). Late December, I said Dell and Microsoft would lead a first stage of this year's rally. In late Dec, brokerage houses were downgrading Dell under $18. When it hit $26 in January, Lehman Bros. reversed and upgraded Dell. Lehman's senior computer analyst Dan Niles was asked for his stock picks by CNBC's Maria Bartiromo April 12. Said he liked Compaq Computer (then $22). He did not like Dell. From then, Compaq has plunged 34%. Before becoming an analyst, Dan Niles worked for Digital Equipment for ten years (according to Lehman Bros website biographies). Digital Equipment was taken over by Compaq Computer (exchange of Digital stock for Compaq stock). Digital employees holding Digital stock in their retirement accounts most likely received Compaq shares. Since that April 12 interview, Compaq Computer has crashed 34%, Dell has traded down just 2%. That's why Congress is investigating brokerage analysts for conflict of interest. They should also investigate the TV media for promotion of these analysts and misleading the public with regard to what stocks these analysts are personally holding. These analysts are no more than accountants who analyze balance sheets, forecasting earnings by drawing trendlines from the past 4 quarters. They are not deity. Not one of them forecasted the explosive growth of the Internet because most of them are detail-oriented beancounters who lack creativity or perspective. Unlike analysts I tell it like I see it. If I believe that Dell is going down, I don't have to worry if the firm I work for has investment banking relationships with Dell Computer.
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