Ed Yardeni, chief global economist and investment strategist at Deutsche Bank Securities in New York, revised his cynical view of the hi-tech frenzy following a series of meetings with institutional investors around the world. He commented: "The widespread view is that the market is experiencing a classic speculative bubble.... So what are they [the money managers] doing? Buying more of the technology stocks they believe are grossly overvalued!"
His latest investment note added: "Could it be that the tech-buying panic isn't just a bubble? How many companies can cut costs, increase productivity, innovate frequently and sell their innovations worldwide quickly? Not too many, and most are in the tech sector.... These are the stocks for the New Economy."
Mr Yardeni's views corroborate those of many small investors in the UK, who are piling into long-term funds targetting Internet and technology firms. Shares in many small hi-tech companies are trading at 20-times net asset value as investors bet that at least one of these turns into an Amazon.com, the successful online bookseller. In November, sales of technology funds soared 200 per cent over the previous month to pounds 222m, despite a warning by the City regulator, the Financial Services Authority, that investors should be more cautious about joining the hi-tech bandwagon.
But few believe that market prices match the companies' fundamental value. One trader said: "You'll definitely see a correction in a lot of tech stocks next year."