David A. Sylvester of the Mercury News notes a quiet stock market rally may signal the recovery’s underway:
Since the beginning of the year, the tech-dominated Nasdaq composite index has risen 13.8 percent, better than the 6.1 percent of the broad Standard & Poor’s 500 Index and 3.2 percent for the Dow Jones industrial average. Friday, the Nasdaq rose a solid 2 percent to end the week with a gain.
More important, individual stocks are on a rampage. The stocks of 24 of the 150 largest companies in Silicon Valley have risen more than 50 percent since the beginning of the year, including five that have doubled.
Will this last? Or could the rally fizzle into another bear-market bust?
Another indicator is a relative dearth of venture capital, noted by George Avalos in the Contra Costa Times
The Bay Area’s market to finance fledgling companies plummeted to fresh lows during the first three months of 2003. The grim trends emerge from data supplied by the authors of the MoneyTree Survey. The MoneyTree is a quarterly review of venture capital financing in regions such as the Bay Area.
Privately held companies in the Bay Area raised nearly $1.3 billion during the first quarter of 2003. That was down 38 percent from the nearly $2.1 billion that private firms raised in the region in the January-March period of 2002.
The two trends aren’t contradictory, because a glut of VC-backed startups, all doing the same thing, ensures that nobody makes money. Remember Cerent and all the me-too optical networking companies? Something similar has already taken place with 802.11 chipset companies, the corpses of whom will soon litter the Valley. When customers start buying PCs and networking gear again, it will be from established companies, not from startups. So this is a different kind of recovery, after all.