Steve Zito, Wharton School BS Econ, MS Fin, 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 solely relied on for your investment decisions.
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NASDAQ COMPOSITE
INDEX closed 1252.13

Sept. 18, 2002. E-Business Bites the Bullet

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Go To Page 2 Sept. 18, the Nasdaq Composite closed at 1252.13 -7.81 Nasdaq fell 39.27 (-3.0%) since my Sept.16 page. After close Sept. 18, EDS lowered its revenue estimates. That sent E-business leader IBM plummeting in after hours trading, at 5:00 PM down 5.75. EDS opened after hours trading at 24.48, down 13.38. Slide will punish E-business ACN, KCIN. Brokers will also get whacked on a story Merrill Lynch terminated Vice Chairman Tom Davis despite his planned retirement in November. ML Chairman Stan O'Neal beat Davis out for a top Merrill job, now making a scapegoat of Davis. Will the bad news ever stop? No, but the environment reminds me of the bad old days in 1982 when Reagan was promoting a "Star Wars" missile defense shield and the only stocks going up were Defense. Back in July 1982, Merrill Lynch was also leading broad market down to the bottom at Dow Jones 772. Then mid-August 1982, the markets exploded for no apparent reason, and within three months, Merrill Lynch had gone from 23 to 77, IBM from 48 to 88, and ASA (gold) from 28 to 55. I know because I bought call options on those the day the market bottomed. Lucky? No, I had lost a few dollars getting stopped out over and over, or watching all call options go to $0. Today, Raymond James chief technical analyst Ralph Bloch, appeared on CNBC, and we respect his opinion (along with Phil Roth). Bloch is totally confused, which is the first time he is. I don't blame him. This Bush government has its head on backward, arresting brand name CEO's to make headlines, talking about war for over a year, instead of taking quick decisive action, and praising tax cuts (which are actually rebates) which obviously have not worked. The economic rebound ended after 7 months yesterday with a lower Industrial Production number. As usual, Dell Computer did nothing. Dell has done nothing for over 2 years. With IBM down 5.75 in after hours, watch to see if Dell moves on Thursday. Michael Dell claims in TV ads Dell is the largest computer company. Is it? Cisco Systems 10-K released today states the case Dell is main networking RIVAL, according to CNBC. Accenture (ACN) and KPMG Consulting KCIN will be punished on EDS and IBM fallout Thursday. These comprise four leading E-business consulting firms. The Bush team has diverted funding away from Internet and technology and into Defense security and litigation. Sell Internet stocks and buy GD, LMT, or paper millers who supply to a legal profession. Recommend going short Accenture with the November 12.50 put - but Bid no more than 0.50 for ACNWV. Time to buy Gold stocks. Recommended 2 positions for gold mining stocks, Newmont Mining (NEM) at 27, and Placer Dome (PDG) 9.50. Subscribers still holding XAULQ December 85 call option (Bgt 2.50) Gold Stocks should now be moving higher following oil prices, and soaring grain (winter wheat), falling dollar on weak economic reports. Bonds a bubble in the last two months, gains will go back into stocks.
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