... "night of the living dead" stocks ...

Die US Investmentbank Morgan Stanley leistet sich ein hochdotiertes Marktstrategenteam. Namen wie die von Stephen Roach, Barton Biggs oder Steve Galbraith dürften allgemein bekannt sein.

Richard Berner ist ebenfalls einer der Chefmarktstrategen von Morgan Stanley. Er schreibt neben einigen anderen prominenten Vertretern seines Hauses im sogenannten Global Economic Forum.

Die ausgefallene und gewagte Wortschöpfung " "night of the living dead" stocks " könnte von uns sein.

Anbei die Kopie eines seiner aktuellen Marktkommentare.

Richard Berner (New York)

Technology stocks have been the star performers in US equity markets so far this year, up 9.1% compared with just 3.5% for the broad Wilshire 5000 price index. Are investors gravitating to tech stocks simply buying bombed-out shares and hoping for the best? Or is there more fundamental improvement underway that could give investors a reason to invest in this highly cyclical part of the economy? I think the latter.

As Morgan Stanley US equity strategist Steve Galbraith has noted, the rally in technology has morphed from what he calls "night of the living dead" stocks -- mainly those priced under $5 -- to a broad range of shares. Likewise, it now appears that technology fundamentals are improving: The "overhang" in many tech sectors is gone, companies have the wherewithal to replace worn-out equipment, and the plunging cost of equipment is practically compelling managers to invest.

I'm painfully aware that I've taken readers down this road before, only to see it turn brutally into a dead end (see "Technology Turning," Global Economic Forum, March 25, 2002). In fact, technology was turning just at that moment, with real IT investment that slumped 10.5% over the course of 2001 ending 2002 up 9% from a year earlier. The problem a year ago was that the volume gains were insufficient to offset price declines for the tech companies, so revenue and earnings slumped. And stocks were still expensive, so stock performance extended the bear market that began in the spring of 2000.

That was then. Even with a moderate revival in IT spending volumes, the passage of a year trimmed further the remaining vestiges of capacity glut except in telecommunications equipment. Revenues began to imcrease: In the fourth quarter, the S&P 500 IT companies posted the first gain in nominal revenues (3.5%) in nearly two years. And the revival seems to have legs. Despite the energy shock, the lingering aftershocks of the corporate governance crisis, and the broader post-bubble headwinds facing the economy, incoming data in 2003 suggest a strengthening in IT outlays. For example, new nominal orders for computers and electronic products jumped at a 22.2% annual rate in the first quarter -- the strongest pace in nearly three years. Most important, some of the fundamentals are beginning to turn in favor of stronger IT spending rather than a relapse. Here's a review.

First, let's revisit the capacity/capital spending overhang debate. The bears maintain that the world is awash in capacity, citing the low levels of capacity utilization in manufacturing and the global overhang of excess capacity, notably in China. In such an environment, new investment seems unthinkable, even to replace worn-out equipment. But manufacturing only accounts for 20% of capital spending, so by focusing only on factory utilization rates, we're missing four-fifths of the story. And in my own prognoses, I assume that the beleaguered and capacity-glutted telecommunications and airline industries will be slashing capex this year by 25% and 30%, respectively.

In my view, the bears are overlooking the simple analytics of depreciation that has, with the passage of another year, eroded the stock of equipment and software and brought capital in relation to output nearly to a standstill. It's no coincidence that the revival in computer and software equipment spending began when real capital outlays for computers and software fell to 1.25 times real depreciation -- a threshold that in the past has always triggered a rebound. By comparison, that ratio stood at 1.6 at the peak of the bubble. Indeed, the current ratio is the lowest since 1976, and real IT spending growth over the following three years boomed at average 24% annual rate. Given the excess of the bubble years, I expect gains this year and next to average only two-thirds that pace --or less. But I'm confident that the current "maintenance and repair" capital spending revival will morph into something stronger as the economy accelerates again.

In fact, the time-honored "accelerator" framework helps explains why capital spending began to revive in 2002. When the economy accelerates (growth rises), capital spending tends to grow. After decelerating to -6% in the second quarter if 2001, real nonfarm business output accelerated at a 4.9% clip in the third quarter of 2002. The accelerator, driven analytically by adjusting to a desired capital/output ratio, pushed up capital spending. Courtesy of the energy shock and the financial restraint accompanying the governance shock, an economic deceleration early in 2003 has temporarily promoted a slower pace for investment. In my view, even a moderate reacceleration in the economy likely will foster an IT rebound no later than 2004.

The acceleration of corporate cash flow last year was another factor fueling a capital spending revival, because it gave companies the internally generated wherewithal to fund it. Earnings continue to outpace admittedly low expectations. So far in the first quarter, Jay Lasus of our equity strategy team reports that earnings are coming in up 11.1%, or nearly 600 basis points above expectations. In my view, there is also sufficient free cash flow to pay down debt if companies choose to use it, but they are hoarding cash instead (see "Corporate Balance Sheets: Still a Work in Progress," Global Economic Forum, April 14, 2003).

Last but not least, the case for substituting cheap capital for expensive labor is as compelling as ever. The high and rising cost of employer-provided health care, pension contributions and workers' compensation insurance have kept compensation growth high. That may partly explain why the recovery has -- so far at least -- been jobless. Relative to compensation costs measured by the private Employment Cost Index, capital goods prices fell by 4.6% over the four quarters of 2002 and 10.1% over the past two years. Together with accelerated depreciation, that shift in relative prices has provided ample incentive to replace worn out gear.

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