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Tech bulls rip rate raise
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May 16, 2000: 7:34 p.m. ET
Short-term outlook questionable, techs turning by year-end, fund managers say
By Staff Writer Alex Frew McMillan
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LAS VEGAS (CNNfn) - Prominent technology fund managers, speaking at an event at Bally's hotel, reacted harshly Tuesday afternoon to the Federal Reserve's decision to raise interest rates a half point.
"It's crazy. I think Alan Greenspan is completely out of touch," said Alberto Vilar, who manages $8 billion as president of Amerindo Investment Advisors and the Amerindo Technology funds. "He's going after the wrong guy."
 Since technology stocks tend to have very high price-earnings ratios, they are some of the first to suffer when interest rates rise.
Rather than causing a problem by running up to over inflated valuations, Vilar said tech companies will actually help the Fed by creating efficiency and dampening the effect of inflation.
"If he's worried about tight employment, wait until he sees massive layoffs in brick and mortar companies over the next two years," Vilar said in an interview before speaking at an investment panel for the Money Show here in Sin City. With interest rates at the 6.5 percent level they reached today, "it's inevitable" that thousands of people will lose their jobs, he said.
The tech bulls were stampeding through Bally's Pacific Ballroom as Vilar and four other fund managers spoke on "The Best Technology Stocks in 2000." Each of the managers also gave their top five tech-stock picks.
 The managers credited higher interest rates with contributing to the volatility that has plagued tech stocks since they peaked March 10. And, although they unanimously agreed that tech stocks would turn around and show strong gains by the fourth quarter, they were more muted about the investment prospects of technology over the short-term, particularly the next two quarters.
Much of their frustration was directed toward the Fed chief and his attempts to cool the economy and tech stock prices. "I think Greenspan should say `I did a good job,' and spend some more time with his wife," Vilar said. When Vilar, who generated rapid returns through concentrated, prescient investments in companies such as Yahoo, America Online and Cisco, repeated similar comments to the audience, they were met with whistles and bursts of applause.
Garrett Van Wagoner, president and portfolio manager of the five tech-oriented Van Wagoner funds, shared Vilar's frustration. "I wish Alan Greenspan would find something else to do, like work on his tennis game," Van Wagoner quipped, eliciting chuckles from the crowd of 1,100 individual investors, who had each paid $59 to attend the luncheon.
Tech turning the corner?
Beyond the Fed baiting, the tech bulls were confident the technology correction and the rate hikes are about to turn the corner. "We're bottoming out, after a healthy correction, a little healthier than we wanted" in technology, Van Wagoner said.
He also thinks the Fed may be done. "This raise may be the last, or we'll have one more in June. The Fed is declaring victory in the war versus inflation, because frankly nobody showed up."
 But faced with a higher-rate environment, Van Wagoner was not sanguine on tech's short-term picture. "The days of 100 percent or 200 percent [gains] are over. We have to drop our expectations," Van Wagoner, who specializes in picking emerging tech stocks, said. But it's up from here."
Kevin Landis, portfolio manager and co-founder of the Firsthand Funds in Silicon Valley, said the short-term picture is unknowable for tech. He thinks volatility will continue, with tech stocks leaping up and down in a narrowing band, as technicians work out where the buyers and sellers jump into the market.
"We'll be happy to have a good year, and not disappointed if we don't have a blowout year," he said. He joked that investing in technology stocks is like a scene from the movie "The World According to Garp." Robin Williams' character is inspecting a house when a plane crashes into it, and decides to buy it on the basis that it's been "predisastered." "I certainly feel like that house felt," Landis said.
Long-term prospects healthy
All of the panelists were upbeat about tech's long-term prospects. Vilar, explaining that the 250 million Internet users worldwide now would grow to 700 million or more within three years, said computer and Internet technology is in the second inning of a game that will see it beat out even the Industrial Revolution for the rate of business and consumer change.
"You cannot put the Internet genie in the bottle," he said. Two percent of business is now done via e-commerce, he added. As that share grows, he expects it to lead to the largest period of wealth creation in history.
This year's volatility is not unusual even compared with last year, he said. Though his funds gained 250 percent in 1999, most of the gains came after August and his positions did not look good before then. This year the situation seems to be reversed, he said.
Biotech on the verge of something great
Michael Murphy, editor of the California Technology Stock Letter and Technology Investing newsletters, said tech stocks will turn the corner in the fourth quarter of 2000.
The panelists agreed that, with an upcoming election this year, both the Democrats and Republicans will likely be keen to see the stock market rebound and have any future interest-rate hikes over well before then.
 Ken Kam, CEO of Marketocracy and portfolio manager of the Ingenuity Capital Management Medical Specialist fund, said biotech is also looking very promising, thanks to the impending completion of the human genome project.
But like the other speakers, he was also cautious near-term. "I can't promise you there are going to be good performances this quarter," he said. Since he invests in medical and biotech companies that take eight to 10 years to bring a product to market, he is always looking long-term. "But there are going to be tremendous returns generated in this sector."
The end of the human genome project "has nothing to do with interest rates," he jibed.
Murphy added that, while there are now 14 profitable biotechnology companies, there will be 20 by the end of the year and 40 by the end of 2001. "We're turning the profitability corner," he said. "We hit that with product approvals two or three years ago."
The Money Show is a three-day conference that lasts through May 18. It has drawn 14,000 individual investors to educational and sales events held here in the Paris and Bally's hotels and casinos. 
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