By Clyde Noel
Stock Report
The stock market returned to an escalating mood last Friday, as investors overlooked a possible Federal Reserve’s half-percentage point increase in the interest rate at the Fed’s Tuesday meeting.
The rally surprised analysts who had expected the market to drop after a strong employment report which gave further impetus to raise the rates. This coming week can be very interesting.
By the end of last week, the Dow Jones industrials were down 157 points, the Nasdaq down 44 points and the Town Crier index, 115 points. That 4.7 percent loss in the Town Crier stock index reduced its value by $2,685, on a $50,000 investment.
Major Town Crier losses for the week were: Apple Computer, down 11 points; Applied Materials, -9; Intel, -12; KLATencore, -11; LSI Logic, -8; Rambus -23; and Yahoo!, down 5 points.
Warren Buffett is widely acclaimed as the world’s best investor, but his holding company, Berkshire Hathaway, with $24 billion in revenues, has underperformed the market because it’s without any technology issues.
When a shareholder suggested Buffett use his stock-picking abilities to switch 10 percent of his portfolio to high-tech, Buffet said, “We will never buy anything we don’t understand.” Buffet, 69, refuses to change his thinking because he has built his empire with companies like American Express, Coca-Cola, General Electric, Gillette and Wells Fargo.
The question a lot of shareholders want to know is: Has the high-tech sector left Buffet in the dust, or does the “Oracle of Omaha” still cling to the old economy that is out of favor because he knows something we don’t?
With the market in a volatile position week after week it becomes interesting which way the market will go. Not only is Buffett avoiding the high-tech sector, he may also avoid equity investments altogether, because he told his shareholders the stock market is overvalued and it doesn’t look very exciting for the next 10 years.
Do we understand the issues we buy in the high-tech market, or are we buying into the new economy because it’s stylish?
Noel, a seasoned investor, covers the stock market for the Town Crier.
