Forum Archive Index - June 2000

["Warner Lamb" <cloud9@i4free.co.nz>]

Read part 2 "HOWS THE WATER?"for an excellent explaination for your question
on bear market......."dark side investors get short squeezed"
Regards Warner
-----Original Message-----
From: ChangeWave.com WaveWire [mailto:wavewire@changewave.com]
Sent: Thursday, June 01, 2000 7:11 AM
To: wavewire@changewave.com
Subject: WaveWire Weekly -- Volume 1, Issue 5


ChangeWave.com's WaveWire Weekly
Making Your New Economy A More Profitable Place to Live

May 31, 2000: Volume 1, Issue 5
More than 43,000 WaveWatchers!
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The companies mentioned in this week's WaveWire include: RF Micro
Devices (RFMD); Stanford Microdevices (SMDI); Qualcomm (QCOM);
TriQuint Semiconductor (TQNT); PE Biosystems Group (PEB);
Flextronics International Ltd.  (FLEX); VeriSign (VRSN) XM Satellite
Radio Inc. (XMSR); McAfee (MCAF) and Trimble Navigation Ltd. (TRMB).


IN THIS WEEK'S ISSUE
1. Welcome Back.
2. Short-Term Market Forecast - Danger: Shallow Water Only.
3. The Kahuna's Big-Picture Rant: Just What Is The New
   Economy Anyway?
4. Buzzwords Of The Week - Third-Generation Wireless (3G).
5. Hot Sector Of The Week - Wireless Broadband Has The Connections.
6. Investable News On Our Favorite New Economy Companies.
7. Wave O' The Week: Our Favorite Buy And/Or Sell This Week.
8. Question And Answer Time - Fiber Optic Vs. Wireless.
9. More On The ChangeWave Revolution.


1. WELCOME BACK!

This is our fifth issue of WaveWire Weekly and our website is nearly
ready to be unveiled. In the meantime, thanks for the continued
support and the healthy supply of e-mails. We'll be answering the
questions in columns both in the WaveWire and on the site in the
coming weeks.

2. HOW'S THE WATER? OUR FEARLESS SHORT-TERM TECHNICAL MARKET
FORECAST- Danger: Shallow water only.

It's like déjà vu all over again: a record one-day price spike on
lower than the 50-day moving average volume (50-day MA for daily
trading volume 1.563 million-May 30 volume 1.44 million).

So what did yesterday's blue light orgy of bargain hunting in New
Economy stocks mean in the grand scheme of your making real money in
New Economy industry stocks?

The short answer is not much-here's why. One of the only
institutional investors making big short-term money in this market
has been short selling private funds and long/short hedge funds.
Moves like yesterday, on lower than average volume featuring big
pushes in the last hour, smell a lot to me like short-covering
rallies and not fundamental shifts in big investor psychology (read
sentiment and emotion).

You see, it's all about "dark side" investors (those going short on
a stock or trying to make money on stocks going down by borrowing
and selling a stock hoping to buy it back at a lower price.) They
are highly leveraged-50% or more of their investment is borrowed.
This means when their shorted stocks make a 5% move upward, short
sellers can be down 10% or more depending on their leverage.

This double-edged sword of leverage is why when one of the
dark-siders' stocks starts moving more than 5% like many did
yesterday morning, they get itchy trigger fingers. Five percent up
moves mean they have just had a 10% haircut on their trade.

Sure enough, as yesterday wore on, we watched many of our hardest
hit ChangeWave Select list stocks (the top New Economy companies we
follow in depth for our ChangeWave Investing advisory service
subscribers) move up 10-15% by 2:00 p.m. on lower than average
volume (read mostly retail investor buying). This meant a
short-covering squeeze was coming. You could smell it just like you
can smell rain before a thunderstorm.

The term short squeeze means that, from 2:00-4:00 p.m., short
sellers were getting 30-40% of their profits squeezed out of their
trade. Why? Because the people in the middle of the Nasdaq market,
the brokers' brokers called the market makers, were hiking prices up
0.25 to 0.50 points every time they could. How could they get away
with such a thing?

Because the short sellers had to buy stock and they knew it. From
2:00-4:00 p.m., the Nasdaq moved 100 points-and 70 points in the
last hour. The short sellers who had to buy back our Select List
stocks had no choice-they had to accept the ever-higher asking
prices from the market makers or risk losing even more of their
profits-or worse.

Short covering rallies are what we call at our shop "unnatural
buyers." They aren't buying out of conviction about the economy, a
company and it's business prospects-they are buying in a panic to
save their keesters.

Major shifts in investor psychology commonly are reflected by
natural buying-that is institutional investors committing
significant amounts of long-term investment capital into companies
they feel will be worth a lot more 6-12 months down the road in a
safely growing economy.

But the good news is the market has now told us three times in this
bear market that bottom end valuation for the market leader
super-big cap tech stocks (i.e. the Ciscos, Intels and Oracles of
our New Economy industry world) appear to be at the 3200 level.

This means it's safe to buy or add to your favorite core tech
leaders at this juncture with no more than 10-20% downside price
risk from here on downdrafts. We call the big cap tech world the
"shallow end" of the New Economy investment pool.

For most of the leading New Economy companies, technically speaking
we'd wait to commit a majority of your aggressive growth capital you
want to put to work until volume and price movements tell us this
rotational shift selling is through. You'll know it's done when
after another big volume (more than 2 billion shares) down day
occurs.

Then, the Nasdaq Composite index should begin a move upward on more
than 1.5 billion share days and follow through with a 1% up day on
a following day like today within 5-8 days. As always, trading
volume is a fact-it tells you exactly what the big money is
really thinking. Everything else you hear or read is an opinion and
a guess.


3. THE KAHUNA'S BIG INVESTMENT PICTURE RANT - By Tobin Smith
JUST WHAT IS THE NEW ECONOMY ANYWAY?

For most people, a three-day Memorial Day weekend is filled with
travel, graduations and, hopefully, a few cocktails along with
catching up with your family and friends.

For me, over the last few years, these occasions have taken on a
different flavor. As you know, stock picking has now officially
replaced sex and fast cars as the obsession of most adult males (and
many females, too, I might add.) Because of my chosen profession,
this nationwide epidemic has turned me into everyone's favorite
guest anywhere a large group of investors has gathered.

I use these functions to search for the psyche of the Great American
Investor. Here is what I found this last weekend: The most wrongly
used expression in America is not "I did not have sexual relations
with that woman." No, the most abused phrase today is "New Economy."

Should I run into you at a social function sometime soon, let me
save you and me more time for the Puligny Montrachet and foie gras
by firmly planting the following concept in your cranium.
THE NEW ECONOMY IS NOT A "CODE WORD" FOR INTERNET STOCKS OR THE
DEMISE OF THE BASIC LAWS OF ECONOMICS.

The term is confusing because it is "multi-contextual"-people use
the term in different senses.

My simple definition is the New Economy is a term to describe the
new ways people worldwide are empowered to get more economic
productivity from less labor and physical resources. If you think of
an economy as the sum of every action people take to provide
themselves more with less, you are on the right track.

In an economic sense, the term represents how we now able to
substitute knowledge, information and capital for physical resources
in ways mankind has never been able to do. New Economy technologies
means more economic productivity from less labor and physical
resources. More for less.

In a technological sense, I think the New Economy is not about
technology at all per se. The term is best used, in my opinion, to
represent how business and science are using high-speed/
high-bandwidth and highly interconnected information technologies
to solve business and scientific problems in unique and highly
more productive ways.

Just as the infrastructure of railways and electricity changed the
dynamics and efficiency of commerce in the last century, the new
"efficiency utility infrastructure" of ubiquitous, pervasive
information and computing changes this century's business strategies
and opportunities.

The term New Economy does represent the extended impact new
information technologies have had on economic cycles. Quality and
timeliness of mission-critical information DO heavily impact
traditional business concepts of inventory, geographic location,
customer service and marketing.

We HAVE entered a new age of just-in-time buying and selling
information, made-to-order products assembled within huge electronic
manufacturing service and intellectual property development
providers located all over the world. The business cycle of boom and
bust, driven by inventory inefficiencies, customer ignorance and
scarcities of labor, no longer exists anywhere near industrial age
levels.

It does not mean we have repealed recessions-one bad monetary move
by Alan Greenspan and our economy can tank, New Economy industries
or not.

In a business sense, the term also represents the way in which
businesses now structure themselves to deliver value-added services
to their customers. High-speed/high-bandwidth and highly
interconnected information technology infrastructure create new
business models. Those models are based on intellectual property and
informational value-added product/service benefits and not
geographic or distributional value-added services.

The New Economy does not represent fundamental changes in economic
laws. Supply and demand still govern free markets. It does, however,
add a complete new economic input into the economic growth and
inflation calculus. Here's why.

For investors, the term is really shorthand for this simple math
equation: the larger share that the price-declining New Economy
industries have in our economy, the higher to chance for a low
inflation/high productivity economy. New Economy technology
industries represent more and more U.S. total GDP. (Now, equaling
more than 10% of GDP and going to more than 20% by 2010 and more
than 50% of corporate profits if you include biotech industries and
services.)

The economic impact of declining cost/improving productivity
industries dominating our economy means we have a much greater
capability in our near future for sustainable 4%ish annual economic
growth without price inflation.

In other words, investment heaven for stock holders.

GOT IT?


4. NEW ECONOMY INVESTING BUZZWORDS OF THE WEEK
THIRD-GENERATION WIRELESS (3G)

The broadband revolution is already making its mark on the wired
world, now its time for wireless to follow suit. Third-generation or
3G technology promises much faster transmission speeds than current
wireless networks-up to two megabytes per second.

What does this mean for the wireless world? Well, these faster
connections will allow cell phones and PDAs (personal digital
assistants like the Palm Pilot) to access multimedia content or even
allow videoconferencing from wireless devices developed for 3G.

This goes beyond the text access to e-mail and news currently
offered through these devices and will open up rich web content
to more non-PC devices. And the standard calls for go-anywhere,
system-independent connections.

Look for 3G service to launch in Japan sometime this year, followed
by Europe in 2001 and the U.S. in 2002. Analysts at Micrologic
Research predict 3G data subscriptions to reach 40 million by 2005
with global revenues of $9.2 billion from the sale of 3G cellular
devices.

What are your favorite hot New Economy buzzwords? Send your
suggestions
for the hottest emerging spaces in the New Economy to
research@changewave.com.


5. HOT NEW ECONOMY SECTORS AND SPACES (i.e. SUBSECTORS):
WIRELESS BROADBAND HAS THE CONNECTIONS

The Revolutionary Monster ChangeWave We're Riding: The
trillion-dollar shift of the world's communication understructure
from non-digital, narrow band connectivity to digital
voice/data/audio broadband pipe to any device anywhere.

Wireless Broadband Killer Value Proposition: Go-anywhere broadband
connections. These companies will make the understructure required
to accommodate and transmit the higher-bandwidth data flow to non-PC
devices.

The Addressed Market Opportunity: As the wireless market continues
to grow, so will the demand for more information in the same form we
get from wired connections. According to analysts at Prudential
Volpe Securities, the wireless broadband market (including both
equipment and construction) will grow from $200 million in 1999 to
$9.9 billion in 2003.

How To Best Ride The Wireless Broadband ChangeWave: As wireless
broadband becomes a reality, you want to get in on the ground floor
with companies that will develop the technology anyone in the sector
will have to use. Chip makers and those developing technologies that
are part of the sector standard will make good plays here.

RF Micro Devices-RFMD-RF makes proprietary radio-frequency
integrated circuits for wireless communication products, including
cellular and PCS phones and other wireless networks. The firm
recently opened a sales and support center in Europe to enhance its
position in that market, little more than a month after opening a
similar center in Taiwan.

RF's clients include Nokia, NEC and Motorola. For the nine months
ending in December 1999, the company reported 112% higher revenues
of $204.1 million, when compared with the same quarters from the
previous year. RF Micro Devices rose 16.6% to close at 104 15/16
Tuesday during the Nasdaq romp.

Stanford Microdevices-SMDI-Stanford Microdevices makes
high-performance radio components for the wireless industry to
enhance voice and data signals. The firm's $56 million IPO was well
received during its debut Thursday as shares rose 28 percent from
its $12 opening price in a market on a downward slide.

Avnet, Minicircuits Labs, and Richardson Electronics account for
more than 90% of Stanford's sales, and end users include Hughes and
Motorola. Stanford Microdevices closed up 25% at 20 5/8 on Tuesday.

Qualcomm-QCOM-Qualcomm is the primary owner of the best mobile
broadband system, i.e., CDMA technology, and as such stands to
benefit most from wireless mobile broadband. Although they have to
wait to a little longer to access the 1.25 billion people in China,
they will be collecting a royalty from over 50% of phones sold in
the world by 2005.

Revenues for the six-month period ending in March fell 1% to $1.85
billion due to the sale of their handset and base station
businesses. Qualcomm closed up more than 15% at 76 3/8 Tuesday.

TriQuint Semiconductor-TQNT-TriQuint uses its proprietary gallium
arsenide technology to produce analog and mixed-signal integrated
circuits that surpass the performance of those in the more common
silicon devices.

Their products can be found in cell phones, pagers, fiber-optic
and telecom equipment, and data networking devices. Last week,
the company announced plans to purchase a Richardson, Texas,
wafer fabrication plant from Micron Technologies which will allow
the company to expand its operations in that state.

TriQuint's customers include Nokia, Nortel Networks, Alcatel,
Ericsson, Lucent and Raytheon, and TriQuint also offers design and
fabrication services. TriQuint's revenues for the first quarter rose
76% to $59.3 million, and its stock closed up 16.5% at 96 15/16 on
Tuesday.

Put these companies in your personal ChangeWave watch list and look
for my ChangeWave Investing advisory service (coming soon!) for the
best time to buy and the right price.


6. INVESTABLE NEWS: AGGRESSIVE GROWTH SECTORS

PE Biosystems Group-PEB- (May 30, 2000) PE Biosystems and Third Wave
Technologies canceled their plans to merger. Although the two firms
say they will continue to work together, the announcement nullifies
the previous plans for PEB to acquire Third Wave in exchange for
stock. PE Biosystems closed just over 52, up 2.1% during Tuesday's
Nasdaq charge. Upshot: Neutral, for now. PEB has wasted time but the
combination was small in the grand scheme of things.

Flextronics International Ltd.-FLEX- (May 30, 2000) Motorola (MOT)
is going to outsource $30 billion in electronics manufacturing to
Flextronics International during the next five years. In addition,
Motorola is buying $100 million in equity in Singapore-based
Flextronics. Flextronics climbed 18%, to 59 1/16 during Tuesday's
Nasdaq jolt.

Upshot: Very positive. This is why we like the Electronic
Manufacturing Services biz so much-we are only 10% into the
strategic e-sourcing ChangeWave. FLEX Solectron, Jabil Circuits
and Vishay (VSH) and Celestica are our favorites.

VeriSign-VRSN-(May 30, 2000) Thanks to an SEC ruling, U.S. companies
can now submit their filings over the Internet by using some of the
public key infrastructure. This should enable the SEC to handle
faster and more accurate data updates to the EDGAR system. At the
same time, the SEC is also incorporating VeriSign's digital
certificates and payment operation into EDGAR. VeriSign closed
Tuesday at 135, up 11.7%.

Upshot: Positive. This is yet another reason for VeriSign's
digital certificates to gain more widespread use and acceptance.


INVESTABLE NEWS-EMERGING GROWTH SECTORS

XM Satellite Radio Inc. -XMSR-(May 30, 2000) XM Satellite Radio Inc.
continues to announce partnerships as it battles Sirius for
leadership in satellite radio. Honda and GM have said they will work
with XMSR to create data applications. Honda also said it is
negotiating with XM Satellite Radio to allow satellite radio in
American Hondas and Acuras. On Tuesday, Best Buy also announced it
would sell XM Satellite service and radios in 2001. XMSR closed at
30 1/2, up nearly 10%.

Upshot: Mildly positive. XMSR is working hard to catch up with
Sirius.

McAfee-MCAF-(May 30, 2000) McAfee, the anti-virus company, came
roaring back from the dumps Tuesday with a 27% gain. MCAF, which had
dropped more than nine points over investor fears about released
lock-up shares lowering the stock price, regained much of that loss.

The firm has continued to receive "good news" as yet another version
of the Melissa virus struck businesses late Friday in the form of an
e-mailed resume. Upshot: Positive. Fears of the stock drop were
unwarranted and the influx of computer viruses means good business
for McAfee.


7. WAVE O' THE WEEK:
Several companies will do their best to take advantage of the
regulatory ChangeQuake brought about by the U.S. normalizing trade
relations with China. One company that is, you could say,
well-positioned is Trimble Navigation Ltd. (TRMB).

Trimble is the world leader in Global Positioning System technology
and the firm just got a contract with the Chinese Ministry of
Railway to provide 40 GPS survey systems. Trimble is not a
johnny-come-lately. The firm was founded in 1978 and has a huge
edge in GPS patents.

New third-generation (3G) wireless technology is designed to
integrate with GPS. That should provide cell-phone users with better
emergency service and useful content such as maps and directions.
The China deal helps position Trimble for entry into the worldwide
market for this opportunity. Trimble closed Tuesday at 45 3/16, up
almost 16%.


8. GOT A QUESTION?

This is our second week in the question-and-answer zone. This week,
we will address the reasons why both fiber-optic technology AND
wireless technology have a great future.

First, let's rehash the ground rules. Send your questions about
ChangeWave Investing, technology, stocks and other topics to
research@changewave.com. Each week, we will try and address some of
the questions that seem to crop up the most.

Now, remember.

* We aren't a brokerage, so we can't answer questions like: "Should
I buy this stock?" However, we can explain why some sectors seem
better than others, for example.

* Don't expect an e-mail answer. We will, at times, respond that
way, but with more than 43,000 WaveWire subscribers, that could
easily get out of hand. However, we will try to address questions
both in the WaveWire and on the website.

* Feel free to send content suggestions, stocks we should be
tracking and anything else of that sort to the same address.

Now, the question.

Several readers have commented that we have written about both
wireless and fiber-optic infrastructure of late and they want to
know more about the choice between the two.

In most cases, wireless handles the so-called last mile of the
delivery-essentially, the phone calls you and I receive or the data
that gets transferred. Fiber optic, on the other hand, handles
long-distance delivery. Obviously, wireless is also mobile and that
makes it ideal for hand-held equipment.

In the long run, wireless broadband may battle with fiber-optic and
that battle will focus on economics. Wireless, right now, has
limited bandwidth but is cheaper and lacks the infrastructure costs
that fiber-optic needs. However, in urban areas where wireless
signals may be blocked, fiber optic has an edge.

Right now, it isn't an either-or choice. If that changes, you can
count on us to let you know.


9. CHANGEWAVE BOOK IN STORES NEXT WEEK. NASDAQ HAS RECORD DAY.
COINCIDENCE?

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It's not too late to grab your second chance at New Economy riches,
so get ready to lock in the next no-brainer winners of the
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and get a special pre-pub discount price today. Go now!
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If you liked this week's Triple W, spread the word: Feel FREE to
forward this WaveWire Weekly to a friend or associate.

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