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As I have pointed out long time ago, the e-retailers have shown themselves to be unable
to make a profit.  The amazons of this world have no pricing power.   Indeed we can regard
the e-retailers as the modern day Robin Hoods.  Robbing the rich (shareholders) to subsidize
the middle class consumers. But there are still strong techs out there: the B2B internet stocks,
the software and net infra-structure stocks. Although no one is making money on the internet,
it is still paramount for all companies to present themselves on the net, if only to defend their brand image.
So we should see continued investment by companies of all sizes on e-commerce software, and internet
infra-structures. And companies will have to get ready for the next wireless phone internet presence.
Therefore we wouldn't sell off all tech stocks indiscriminately.  .

I wrote last week:

The European markets have hold up well in face of sizable drop on Wall Street last
week.  Will the European markets finally diverge from Wall Street?  We doubt it.
If the Dow should close below the 10000 level next week, we could also see
the Dax plunging below the 7000 level.

That statement still holds true.  The German rally is getting tired.  We should
see profit-taking across the board next week.    The 7400 level on the Dax
will constitute the first support level.  Holding above the 7000 level will be
crucial.

We were wrong about the Paris bourse last week.  The correction was much
milder than we had expected.  So next week will be interesting.  Will the CAC
finally test the 5000 level again?

As we had expected, the Swiss Market remained weak.  Indeed it has become one of
the weakest in Europe.  The Nestles and Roche just don't seem very sexy in comparison
to the high flyers on the Nasdaq or the Nemax.  But steady growth and earnings should
not be sneered at.  Long term investors, now is the time to load up on these two stocks.
As I had already pointed out before, we should almost regard Roche as a biotech
incubator company.  It is therefore still very much undervalued.  Buy on weakness!

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We had talked about Roche repeatedly in this column, but I have not yet
put it into the official recommended list.  Last week when Roche fell
down to 17900, I just had to act on it.  We feel that Roche is a good
solid company with lots of biotech company shares in its investment
portfolio.  There is immense hidden value in this company.  But being so unpopular
nowadays we should accumulate it very slowly.  Maybe one at a time.

Siemens is spinning off Infineon, its chip making subsidiary.  We recommend
trying to get into this IPO.  Infineon is the world's fifth largest chip maker and
its main products, connected with wireless telephony seem to be doing
very well.

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When talking about the asset bubble, analysts and jounalists tend to forget about
the volatility of the bond , currency and real estates markets in the last decades which cause
investors to be less than enthusiastic about those instruments.  Stocks have shown themselves to be a better
investment for the long term.  As this insight begin to sink in the psyche of the world baby boomers,
we should see greater allocation to equities than ever in history by the European and Japanese investors.
That trend will cushion the blow of the rising interest rates in the US.
 

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The internet will transform our world in a massive way.  I think it is time to
begin and do some thinking on what kind of change it will bring and see if
we can draw some conclusions that are relevant to our investment decisions.

First, as we have opined in this column we do not believe many of the today
sky high internet stocks will eventually make a lot of money.  The internet
is such a competitive forum.  The pricing pressure is so great so that only
providers with brand name recognition and meaningful contents will be able
to have some pricing power.  We must remember what the internet eventually
will bring is absolute international competition.  Price competition will be fierce.
Middle men will be eliminated.  Therefore we see many service sector jobs
will be eliminated.  For example, we see this trend in the financial sector already.
More and more people are trading stocks on line.  With internet brokerage
charging less than $10 per trade, we should see brokers and financial advisors
being eliminated at major brokerages in a big way soon.  The same should
happen in other tradable items.  For example, there will be less need for
retail stores for items that one can buy easily on the internet.  Of course
there will be branches of the economy that will profit.  For example:
the telecoms, the Federal Expresses, and the computer software industries.
But the question is: Will the general economy really profit or will the general
deflationary trend continue and become worse and worse?  Without pricing
power and with lots of jobs being eliminated and salaries on hold, we see
the world economies trending toward deflation, even if it continues to grow.
That means real estates and gold will become even less appealing.  If we
believe our argumentation, we would not invest in the "internet" stocks
themselves but in the companies that do have contents and pricing power
as well as companies that will offer services to the internet providers
and users: ie.  companies such as Sony, Time Warner, Dow Jones,
and UPS. We would also recommend the stocks of Corsair (CAIR),Qualcomm,
Ericsson, Nokia, Epcos  the equipment and software provider for the CDMA,
the next wireless telephony standard as well as stocks of telephone companies
like Sonera, ATT, Worldcom-MCI, Colt Communications, and Swisscom.  We also
see internet companies needing ever more sophisticated software.  Therefore
we're quite optimistic about the long term future of the likes of IBM, Oracle,
SAP, Cap Gemini,Broadvision and i2 technologies.

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