No Stampede, Yet, to Technology: "Many investors have been studying small and midsize high-technology companies like Mercator, hoping to uncover a stock that will soar whenever the two-year tech slump ends. But there has hardly been a stampede back into the sector. With the pain of recent losses still fresh, many professionals are especially cautious, demanding lean operations, clean balance sheets, substantial cash reserves and significant market share in companies' core businesses."

My portfolio has held up very well over the past two years since I sold most of my technology stocks near the market highs and made a nice return buying Treasurey zeroes as the 30 year rate dropped from 6.1% to about 5.2% over the course of a year. Rates are up substantially again. The market still looks somewhat overvalued based on earnings yields compared to the 10 year treasury.

I did well by concentrating on retail stocks over the past year, with Williams Sonoma being the star performer in the portfolio.

There will be a time when cyclical stocks, including big technology, will provide nice returns. Knowing when to get back into cyclicals is one of the toughest calls in investing.

The continued threat of war and economic disruption is keeping me and the market from bidding up cyclicals in anticipation of the next upswing.  12:42:30 PM    

Debate on Arafat Stalls U.S. Policy, Aides to Bush Say: "President Bush tried to settle the issue of Mr. Arafat's leadership in two meetings of his principal advisers before he left for Moscow on Wednesday, administration officials said, and Mr. Bush took part in the second meeting. But lengthy discussions failed to resolve the question of whether the United States is prepared to accept Mr. Arafat based on his pledge to undertake extensive changes, intended to tighten security, end corruption and broaden the Palestinian leadership."

The NYT this morning portrays the Bush administration as being unable to decide. It's seems to me just likely that they have decided not to decide because the situation among the Palestinians is so fluid. There's a lot of criticism of Arafat being reported for the first time in a long while, perhaps fueled by the events of Sept 11th resulting in less acceptability of attacks on civilians as a means of conflict. There seems to be a possibility of a moderate Palestinian leadership that the world community could negotiate with in good faith. Perhaps the decision is Arafat's: either continue to play every side as he has done over the past 40 years or seek a political solution in earnest.

From the decision analysis side, I would council excluding Arafat from consideration as a leader. If one accepts the general principle that the past predicts the future, then one should expect a replay of past efforts to seek a political solution like the Oslo accords.  12:32:51 PM