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Enron Mail |
Sunday evening, June 3, 2001
COMMENT: The Tech Wreck isn't over yet. This is the finding of the May CIO Magazine Tech Poll. Last summer, I partnered with the good folks at the magazine to conduct a web-based poll of chief information officers to assess the outlook for information technology (IT) spending on a monthly basis. The resulting "CIO Magazine Tech Poll in partnership with yardeni.com" is already proving to be an accurate measure of technology spending and business trends. In May, our panel predicted IT budgets will grow by just 4% over the next 12 months, down from a 7% prediction in April and down sharply from 19% last November. The panel reported IT budgets grew an average 5% over the previous 12 months, down from the 10% April estimate, and again down sharply from 22% last September. Now we know: High-Tech spending is not recession proof. Like the low-tech variety of capital spending, it depends on profits and financing conditions. It will rebound when these two conditions improve. Since February, we've asked our CIO panelists what is the number one negative for IT spending. In May, "weak profits" was cited by 37% of the panelists as the primary negative factor facing IT spending plans in 2001. That is up from 30.8% in February. In May, another 26% saw "tight financial conditions" as the main problem, down from 35% in February. The Fed's aggressive easing has had an impact on our panelists' perceptions of credit conditions since fewer are reporting that this is a number one problem for IT spending. At the same time, more of our respondents say that weak profits are depressing technology budgets. SUBSCRIBERS: For more on the poll and tech capital spending see my latest GLOBAL PORTFOLIO STRATEGY. In last week's GPS, I examined the valuation question. The mean (and not market-cap-weighted) P/E for the S&P 500 is down from a record high of 31 last year in March to 26 now. Stocks are cheaper, but certainly not cheap. The median P/E for the S&P 500 actually rose over this period from 16 to 19. S&P 500 technology stocks are also cheaper, but not cheap. The mean tech P/E is now down from 89, while the median is down to 35 from 58. Despite the Tech Wreck, technology stocks remain the most highly priced in the market with a market-cap weighted P/E of 33. That is down from a high of 47 early last year. Transportation valuations remain in the bargain basement. Makes sense, right? Technology earnings grow faster than Transportation earnings so they deserve a higher P/E. Yet, when we actually compare the performance of the two since 1990, the fact is that Transportation has outperformed Technology! PUBLIC: Laszlo Birinyi, my friend and one of the best technical market analysts in the world, will be my special guest on Monday's Weekly Audio Forum. The live event is open only to accounts with passcodes, but the rebroadcast will be public. The June EARNINGS MONTH, with "Squiggles Inside," will be posted on Monday afternoon. Dr. Ed ******************** 1) You can now automatically add/delete this update and other products. 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