Final GDP Numbers - Technology & Software Spending Implodes
You have to click on the graphic for a clear visual but what I want to highlight is the spending for technology and software in the 4Q GDP numbers. Sector rotation, a strategy used by many market timers to rotate through the business cycle, rolled many investors out of banking stocks and into technology in 2007 and 2008. Stocks like HP, Sun, Oracle, IBM, Dell, & SAP to name some of the larger firms. In actuality this strategy was going from one fire to another.
One can gain an appreciation of what Wall Street expects will be the next hot investment by listening to the buy recommendations. Sector rotations almost always come in waves. In other words, one firm will issue a call and most will follow suit as it pertains to this type of strategy. While these stocks were still making new highs we wrote that 40% of the domestic consumption of technology and software was in the finance sector. And, that these companies were going to suffer re our concerns over the biggest Wall Street bubble in history.
Many technology stocks remain significantly overvalued. One we highlighted a few years ago when everyone was jumping on it was IBM. Without going back and reading that post, I believe our two potential downside targets were in the mid $50s or high $20s. At that time IBM was the second most richly valued company in the Dow. The most expensive was Boeing. Boeing has already fallen 70%. Again, without looking, I would now suppose IBM is now far and away the most expensive Dow component.
One can gain an appreciation of what Wall Street expects will be the next hot investment by listening to the buy recommendations. Sector rotations almost always come in waves. In other words, one firm will issue a call and most will follow suit as it pertains to this type of strategy. While these stocks were still making new highs we wrote that 40% of the domestic consumption of technology and software was in the finance sector. And, that these companies were going to suffer re our concerns over the biggest Wall Street bubble in history.
Many technology stocks remain significantly overvalued. One we highlighted a few years ago when everyone was jumping on it was IBM. Without going back and reading that post, I believe our two potential downside targets were in the mid $50s or high $20s. At that time IBM was the second most richly valued company in the Dow. The most expensive was Boeing. Boeing has already fallen 70%. Again, without looking, I would now suppose IBM is now far and away the most expensive Dow component.
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