The fall in the value of technology shares at the beginning of the year gave plenty of opportunity for analysts to vent their angst over the phenomenon that the sector has been over the last 12 months.
Many fund managers have been well and truly caught on the horns of a dilemma - the shares are, in lots of cases, so severely overvalued by normal reckoning that any rational person shouldn't touch them with a barge pole. But they've been instrumental in driving the markets up to record highs and, since the managers are supposed to either track or beat the index, being short technology shares would mean abysmal performance.
And yet the cautious side of any fund manager has him or her quaking at the thoughts of buying in at such high levels.
So there was a bit of relief all round to see some price falls. Lots of people were rushing to exaggerate the scale and nature of it, quite possibly in the hopes of driving them down a bit further and turning them into something that doesn't require a health warning to buy.
Perhaps the massive AOL/Time Warner merger will mean Internet shares will start to become part of the establishment rather than renegades, although the initial impact seems to have been more bullish for media shares than Internets. Obviously every media company now has to consider its technology links.
Mind you, that'll mean the technology/Internet sector will start having to make profits sooner rather than later as institutional shareholders aren't enamoured by holding companies which won't even begin to make profits within five years. There's faith and blind faith!
All the same, I think the AOL/Time story is good news; I like the idea of old and new managing to co-exist no matter how difficult it'll probably be.
The big bulls of the technology sector are still the day traders, of course, who leap in every time the market goes down, happily confident that it'll go right back up again. And they don't care when a profit is turned, since they don't expect to hang on to the shares long enough for it to make a difference. So far they've never been wrong.
I watched another one of those day-trader programmes on TV over Christmas. (Huddled in front of the TV, using my Millennium candle for warmth owing to the great central heating debacle). I still wonder about the long-term future for the trucker who sold his rig to set up his trading operation and who is quietly confident about the prospects of retiring for good in a year or two. If only it were that easy! Another couple of excellent TV programmes recently were Bubble Trouble: Meltdown which was shown on BBC2 on Sunday and British Empire which was shown on Channel 4 on Sunday. You may think that I lead a very sad life when I reveal that I watched one, videoed the other and watched it directly afterwards. But Sunday nights are the absolute dross of TV, with the exception of the business programmes. (And the only other thing on last Sunday was the movie Philadelphia which I thought was sentimental trash the first time I saw it and which seems even worse since Tom Hanks made that awful Oscar acceptance speech!)
Bubble Trouble covered the decline of the Japanese economy from its wonder years of the early 1980s. It interviewed people who had made and lost fortunes on the stock market, the property market and the golf-club membership market and showed reruns of the leaders of Japanese banking and industry sobbing on camera as they begged forgiveness from their shareholders as share prices plummeted and companies went bankrupt.
The problem was clearly exacerbated by the banks' desire to lend as much money as possible using property as collateral. While property prices continued to go up the banks shovelled out the cash, often funding deals on the same piece of land over and over again. As soon as the property market turned, the banks were left high and dry, they called in loans that couldn't be repaid and it all ended, as my mother still says, in tears.
British Empire concentrated on the turbulent times of NatWest while charting the progress of the British economy through the 1960s to the 1990s. Funnily enough, the banks were happy to lend lots of money to consumers in Britain when property prices were going up as they used the property for collateral. Companies borrowed more and more money based on the value of the premises they owned. When property prices started to fall . . .
And does anybody learn anything from it? Not at all, I'm sure. As one Japanese lady said, you were made to feel stupid if you weren't wheeling and dealing at every available opportunity. Just as people look at you in surprise in Dublin when you tell them that you don't own five properties all of which are rented out and on which you're getting massive tax concessions. And that you haven't yet set up your own website company which you confidently expect to sell for a couple of million. Or that you didn't buy dotty dot com at $1 last month while it's trading at $1,000 today.
The one share I really do wish I'd bought was Apple. When I do buy shares I like to buy sectors that I like and companies that manufacture products that I like too. I remember enthusing about the iMac back in 1998 when it first hit the streets. And when I saw the iBook I was hooked.
Unfortunately, I didn't take the Victor Kiam approach and buy the company. I just bought the computers. I know I agonised about spending the extra money on a designer Mac instead of a grey PC but it looks really cool. And sales of the Macs have been so good that the shares have gone up from around $30 to $100. Small beer in the Internet market, but nice if you have them. You always remember the trades you didn't do more than the ones you did!
Sheila O'Flanagan is a fixed-income specialist at NCB Stockbrokers
