Cramer on Technology

Jim Cramer thinks the tech rally the market is enjoying at the moment is not sustainable:

The group's got no momentum going into the summer and given that there is no Vista in sight, you lose a lot of the reason to buy. The buying is concentrated in FTTP and some cell-phone stuff, mostly because of competitive forces (cable vs. telephone, telephone carrier vs. telephone carrier).

I think that anything away from those two sectors in tech is just a trade. I sure wish I could be more bullish, but PCs have become like mid-ranges in the previous decade; they don't work as a theme. And the Web seems to be off and on.

Cramer may well be right, but equally the rally has only just begun starting to happen, and it's worth bearing in mind that the way all rallies begin is in bouts of short term trading activity. Look back three years and even this type of short-term tech fad was a distant hope: the difference is that it's now a reality, even if it is only emerging in brief spurts over positive earnings periods.

Tech stocks are still a mixed bag when it comes to earnings quality but this isn't what counts  when it comes to the real momentum behind large capital gains in the sector - it's the risk the equities present relative to their reward potential, and right now, that risk/return trade-off looks pretty good to most investors with a sector price-to-earnings average  in the fourties.