TGIF MARCH 2, 2012

The tech rich Nasdaq Composite Index hit 3,000 this week, a level it hadn’t seen since the bubble burst in year 2000.

In the late 1990s, investors enjoyed a period of euphoria that rivaled the Roaring 20’s.  Internet stocks were all the rage, and the World Wide Web was promising to change the world: Traditional methods of communicating no longer applied.  We certainly know that the internet has been a game-changer, but the stock market got ahead of its elf when investors became irrational.   How could we forget the irrational exuberance which created the hyper-inflated bubble?  Some companies with names ending in had no plans for making a profit, and were primarily focused on its IPO a/k/a its Initial Public Offering.  The multi-year party ended with a massive hangover.  Great wealth was created rapidly then quickly disappeared.

The Nasdaq remains well below the peak of 5,000, but the tech heavy index is primed for long-term growth.  Technology stocks have reasserted their leadership in recent years, and Tech is clearly the strongest industry within the US Economy.  It might surprise some, but Technology has been the largest sector in the S&P 500 since 2008, which means it has the greatest influence on the stock market.  For those Market historians, NASDAQ was founded in 1971, and stands for National Association of Securities Dealers Automated Quotations.  It replaced the traditional Over-the-Counter system of trading, and is still commonly referred to as the “OTC”.

Innovation remains a staple of the American Way, and Silicon Valleycontinues to lead the charge.  This week, we spent time at Morgan Stanley’s Tech Conference in San Francisco, and the buzz continues.  We have discussed many times the massive migration to mobility which is upon us: It is still very early in the transition to mobile computing and communicating.   Investment opportunities abound.  The primary themes this year revolve around “Social Media”, digital distribution of Traditional Media, and 24/7 connectivity, being dubbed “Always On”.

Smart-Phones and Smart-Tablets are the key “Must Haves” which are no longer just for “Techies”.  It is still so early in this trend, because despite the fact that the Consumers around the globe have jumped on these sleek devices, Corporations have yet to embrace them.  It is only a matter of time until Companies will be providing these devices for its employees, and the next wave of growth will hit, and it will be tidal.  Further out we should see massive adaptation from emerging markets as they develop and modernize.  To put in perspective, less than 20% of Chinese and Indian citizens have a computer, let alone a Smartphone.  These 2 countries represent nearly 40% of the global population.

It’s been a fantastic start for investors in 2012.  Traditionally one of the worst months for the Market, February had one of its best showings ever.   March is ripe for some profit taking so we anticipate a healthy correction.  There are many key risks still out there, especially Europe andIran.  We continue to manage through these risks while seeking growth opportunities and cash flow for years to come.  It won’t happen this year, but we are confident that we see NASDAQ 5,000 again in our future.

Have a nice weekend.

By: Mike Frazier

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