Taking Stock / Don't Ask

Should you get into the Tel Aviv Stock Exchange, or Wall Street, you ask. On the one hand, every Tom, Dick and Harry is making a fortune on the market, and people are saying 2004 will be another boom year. On the other hand, you don't see any signs of the economy really picking up.

Don't ask questions. Don't look for answers in corporate financial statements. None of that is relevant. Interest rates are low, momentum is strong, money is streaming to the Street, and everybody is slavering to make a buck. Money talks and everything else is pure background noise.

Alvarion (Nasdaq: ALVR) rose 300 percent last year and another 30 percent this year, which isn't even a month old yet. Its market cap has risen to $700 million. You ask if it matters that the company is still losing millions of dollars, or if what matters is the pace of announcements to the press about new contracts.

To which we have to say: that isn't the relevant question. And don't try to turn into some overnight expert on wireless communications and really understand the contracts and deals the company declares. No press release could explain the fact that Alvarion has added half a billion dollars to its company value in a year. Money talks, interest rates are low, Nasdaq is roaring and everything else is just excuses.

You ask if you should jump onto the Attunity (Nasdaq: ATTU) bandwagon. The wee computer company, formerly called ISG, has risen 75 percent in the last two weeks, after rising several hundred percent last year.

On the one hand, you like the idea that famous entrepreneurs Shimon Alon and Ron Zuckerman are invested in it. On the other, you look at the company's performance over the last decade, under its previous name. It is evidently the type that rides the tide, soaring hundreds of percent when the waters run high and ebbing back when the tide runs out. The bottom line is it's at the same place it was 10 years ago, when it first went public.

But you aren't asking relevant questions. The Nasdaq casino is open for business, the mood is gay, and it's standing room only at the roulette tables. Dreams are firing imaginations everywhere you look. Don't be too lazy to read Attunity's financial statements, but don't bother looking up the acronyms JCA, ODBC, or JDBC that grace the company's press releases. It won't help you make a dime this year.

The year of the smallcap stocks

You ask what we think about Arotech Corporation (Nasdaq: ARTX), the hottest horse on Wall Street, having jumped a thousand percent in the last few months. Once upon a time, half a year ago, the company was called Electric Fuel, and the only thing it generated was dreams and losses. But now it has a new name and a new focus, and is generating press announcements at a dizzying rate.

On the one hand, you like the contracts the company announces week in and week out, and appreciate its dynamic management. On the other, you wonder whether its revelation last week that it will be generating losses in the coming year due to one-time costs is a good sign or a bad one.

Don't bother to ask, don't try to delve into its contracts, and don't even get into whether those are really nonrecurring costs or proforma shenanigans like in the gay days of 2000. Because 2004 is the year of smallcap stocks. Every preschooler surfing Wall Street websites after lunch knows it's going to be a hot year on Nasdaq. It doesn't matter what this or that company will actually make in two or three years. Money talks, and what it wants is stocks that can climb hundreds of percent, which is exactly what high-tech can supply.

Don't ask us if Tower Semiconductor (Nasdaq:TSEM) is worth half a billion dollars even though it has debts of - let's see - half a billion dollars, and even though analysts can't seem to point out the Migdal Haemek-based company's relative edge in the giant semiconductor producing market.

Don't waste time trying to comprehend its complex equity structure or the possible dilution of its minority shareholders. Don't dwell on the fact that seen over a decade, the company hasn't made one red cent. Don't get stuck on Tower's contending in a fiercely competitive market requiring enormous investments of hundreds of millions of dollars, and undertaking terrific risks. None of that matters now; high-tech is boiling hot, each upbeat announcement in the semiconductor sector sends Tower stock up another 10 percent, interest rates are low, the mood is high, and the company is selling a good story.

Don't ask if the lesson of the five bubble years and the subsequent crash has been forgotten. Don't ask why high-tech, which has done more to enrich the wealthy and the bankers and workers than investors, remains such a favorite.

Don't get bogged down in analytical reports or forecasts of the high-tech market. None of that is relevant. Interest rates are low, the mood is high, the general feeling is that 2004 is going to be the year of smallcap stocks. All you can do is hope you get out in time.