Dot.coms do well on stock market

Shakespeare, JP Morgan and Philip Virgo cast a sceptical eye over the City's e-cstatic behaviour.

In the City, the "e" word is king,...

Shakespeare, JP Morgan and Philip Virgo cast a sceptical eye over the City's e-cstatic behaviour.

In the City, the "e" word is king, and e-stocks are carrying the wealth of the stock market on their back. But are they strong enough to bear the weight?, asks Julia Vowler.

The latest FTSE index has seen prestigious names in traditional industries such as power generation and brewing ousted by impudent information-related upstarts, all of which share the magic TMT brand - technology, media and telecoms (plus e-banking) - which the City just loves these days.

The acute bifurcation of the stock market into TMT (buy) and non-TMT (dump) sectors is, according to some analysts, highlighting a stock market crash in the value of non-TMT stocks three times the size of the £50bn October l987 crash.

It seems somewhat ironic, perhaps, for those in the IT profession to regard this as cautionary. At last, so they might be forgiven for thinking, IT - with the added magic new "e" ingredient, of course - is getting the recognition it deserves.

But, as Julius Caesar's wife warned her husband, intent on going to the Senate on the Ides of March, "thy wisdom is consumed in confidence".

The problem is that confidence is what the City is all about, producing what appears to outsiders in the real world to be an almost infantile herd-instinct of investment behaviour.

True, some voices are muttering "overheating" and "inevitable correction", and there is an expectation that the dotcoms will have to show an ability to trade profitably, not just soak up venture funds and stoke pyramid selling of their inflated shares. But at what point? And what about the rest of TMT stocks?

The late, great JP Morgan said it first, and said it all. When asked by a hopeful bellhop (the day traders of their time) what the markets would do, JP replied - honestly but unhelpfully - "Fluctuate, my boy, fluctuate!"

But will the TMT sector crash, or just gracefully correct itself as it becomes one integrated wavelength in a full spectrum stock market? Or, is the global economy undergoing a shift as radical as the 19th century's industrialisation, where enhancing humanity's information-carrying capabilities, rather than our power-generating capabilities is the revolutionising step-change?

If so, it is perhaps sobering to be reminded, as Philip Virgo of the Institute for the Management of Information Systems points out, "someone still has to make the cornflakes."

Information may be valuable - indeed invaluable - but we can't live on information alone. We discount at our peril the value of manufacturing and moving product and people around, as much as those who discount the value of agriculture. It only takes a famine to remind us of that.

Julia Vowler

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