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10/21/02  

Ten Great Surprises for 2001

This is not an entirely idle exercise. While I am guided by charts and considerations like the unfolding economic backdrop 6 to 9 months into the future, at the same time focusing on powerful cyclical and secular themes, it is also useful to look at possible surprises that are in conflict with consensus but which would exert powerful influences, if true. Some of these predictions may not be surprises so much as possibilities that are not in the forefront of investor consciousness. 

1. Out of vogue investing styles will come back into style, including market timing, economic timing, and technically derived trading vehicles like de-trending oscillators. Fortunately for you, you know what all this stuff means. If not, look to the left.  
2. The NASD will not break its old high for years. 
3. Cyclicals will behave like momentum stocks in the first half borne of attractive relative values, an accomodative Fed and weakness elsewhere.
4. Value and traditional and valuation metrics will be more popular, as Graham and Dodd enters the New York Times Bestseller List.  
5. Bush popularity ratings soar as civility and non-partisanship becomes popular. Sniping and back biting become frowned upon. People want something different and they get it. The public becomes revolted by "focus group" politics, and packaging issues like soap or deodorant.  
6. It will be learned we have too much capacity in technical areas like fiber optic communciations, PC manufacturing (and its peripheral device manufacturers) and too little capacity in energy. The next supercycle will be in energy, wireless, biotec, and B2B.
7. Education over the internet becomes a major opportunity for investors. Universities shutter as "degree" equivalency is offered. As the economy weakens, cash starved investors opt for on-line Universities. Harvard, Princeton, and Yale start offering group discounts and commuter courses over the internet.
8. The concept of virtual workers, virtual continuing education, virtual "this and that" becomes real as true efficiency becomes deliverable through the internet.
9. The Internet traffic at the B2C level slows as e-retailers raise prices, and e-publishers charge for entrance. There are massive bankruptcies and layoffs, but from the ashes emerges a highly concentrated business with a profit model. AOL, MSN, and NBCI emerge as the consolidators and the big networks, if you will. In the game of musical chairs, Yahoo is odd man out. 
10. Walmart buys Amazon.

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