At the time, many observers were saying that technology was deflationary. In the call, we suggested that technology might indeed be deflationary in an economy that had a normally functioning capital market. However, we did not believe that the U.S. capital market was functioning normally at this time last year. The technology bubble was steering capital away from other industries and sectors. We even showed that the technology bubble was steering capital away from other countries.
Some people believe that the technology bubble was simply a set of expensive stocks.
We have argued it was much more. Technology companies began to run their businesses as though free was indeed their true cost of capital, whereas portions of the real economy were damaged. We continue to believe that the best investment opportunities looking forward are in those sectors that were damaged by the bubble. Along this theme, we continue to overweight energy and utilities. We believe the downturn in technology is not only cyclical but also structural.