"Dragon years often give rise to celebrations or festivals. These years are meant for those who dream of vast success and brilliant victory over adversity. Because of the essentially mythical nature of Dragons, any gains reaped during his year may be fleeting and largely unreal."

According to the Chinese astrological cycle, 2000 is the Year of the Dragon.

It occurred to me on the deck of the Grand Princess, during the Agora Wealth 2000 Cruise, in the midst of Chinese New Year, after I slathered my buffet-stuffed, pasty-white tourist hide with suntan lotion, that the ancient prophesy was fully consistent with my King of the Carnival hypothesis. The tech bubble is a reincarnation of the ancient Carnival, a nomadic Dionysian frenzy in which societal laws are temporarily inverted...

Don't get me wrong. I'm not one of those recalcitrant grouchy bears who dream of market crashes, only to miss out of the greatest bull market in financial history.

Taipan subscribers have fully participated in the current technology boom. My U.S. Small Cap Technology portfolio is up 161% year-to-date. My Global Technology portfolio is up 78%.

I am a religious believer in technology. My biotech (AVAN, up 550%; XOMA, up 140%) and internet picks (UPRO, up 350%, about to launch a NASDAQ IPO) are flying — and I recommend following a "let your winners run" strategy with most small cap tech plays.

Rising forward dollar swap rates, the expanding spread between corporate paper and treasuries, and robust commodity prices are bearish leading indicators of global liquidity.

If the flood of liquidity dries up, the musical chair of .com paper will become the stomping ground of the bears the size of dragons singing songs of Chapter 11. Given the carnival characteristics of the U.S. equity market, I recommend looking for profit-taking opportunities in overvalued sectors and regions.

The semiconductor sector is experiencing a blow-out terminal rally. The current craze for semiconductor stocks is ridiculous. Rambus (RMBS-NASDAQ) just quadrupled in three weeks on the back of a short squeeze (last month's reported short interest equaled 42% of the float)!

The market cap of the top eight Asian semiconductor companies is US$150 billion! You could have bought the entire Southeast Asian market (ex-Hong Kong and Singapore) for US$150 billion at the Asian crisis low!

The average U.S. semiconductor company is valued at a bloated 30x forward EBITDA. RMBS is trading at 716x forward earnings. The Philadelphia Semiconductor Index (SOX) has almost doubled since January. This kind of parabolic market action has historically coincided with major peaks in the sector.

There's only one problem with the semiconductor industry: it's a commodity business.

Like all commodity businesses, semiconductors are highly cyclical. Cyclical, commodity stocks don't deserve to trade at 30x forward EBITDA.

Semiconductor capital equipment is highly leveraged to semiconductor prices. High semiconductor prices tend to encourage capital expenditure. DRAM prices tripled from June to September 1999, in line with my expectations.

However, DRAM prices have since collapsed 60%, revealing that Moore's Law is still intact. Lower DRAM prices will eventually feed through to cashflows at the big semi manufactures, hurting orders for new equipment.

This trend should soon manifest itself in a deteriorating book/bill ratio. As evidence of a slowdown is digested by the market, semiconductor capital equipment stocks will get crushed.

Don't expect another 1991-1995 superbull market in semis (you could have made 90x your money on Micron Technology [MU-NYSE]). Since 1995, the SOX index has hit a major cyclical low approximately every two years. Based on the recent ramp-up in semi capex, I expect this technical pattern to continue.

Taipan subscribers have made huge profits in Israeli tech stocks. ELRNF is up 400%. ELBTF is up 610%. ORCT is up 320%. We have realized substantial gains in ESLTF, EMITF, ELT, and ORBK.

Why did I keep pounding the table on Israeli tech? Because it represented a undervalued alternative to high-flying U.S. tech stocks. And the Israeli tech market was structurally inefficient.

Unfortunately, the easy money in Israeli tech is over. Every week, I seem to read a new story about the Israeli tech boom. The number of dedicated portals for Israeli tech stories keeps growing.

The quantity and depth of research on Israeli tech stocks keeps improving. A number of successful Israeli IPOs on NASDAQ have attracted the attention of daytraders. Investment banks issue new buy recommendations on old favorites like ORBK and ZRAN (now that the stocks are up 10x).

Given the ballooning interest in Israeli tech, the opportunities to score huge profits are disappearing. As a contrarian, I view the massive re-rating of Israeli tech as a clear warning sign. In my opinion, Israeli tech is close to hitting a two- to three-year peak. I don't know what the catalyst will be for a bear market in Israeli tech. However, Israel remains an emerging market. Terrorism, war, political turmoil, and inflation are possible rally-killers.

ELBTF's most exciting asset was its holding in Peach Networks. I have written about Peach's blockbuster solution for internet access over cable TV set top boxes in Taipan.

I had believed that ELBTF intended to bring a strategic investor such as Microsoft (as a 10-20% holder) into Peach and float it on NASDAQ. As a public company on NASDAQ, Peach would have been worth US$500 million to US$1 billion, based on valuations awarded to Peach competitors such as WGAT or EAG.

Instead, ELBTF sold Peach to Microsoft (MSFT-NASDAQ) for US$43 million in cash, or US$35 million after-tax. Instead of getting a strategic stake in a billion dollar company, ELBTF is getting a one-time gain of US$1.40 per share. The price that Microsoft paid for Peach is absurdly low. I believe that ELBTF shareholders are getting ripped off.

Having been deprived of the clear and immediate upside potential provided by Peach, the outlook for ELBTF has been radically degraded. Furthermore, the weakness displayed by ELBTF's directors in negotiating with Microsoft throws cold water on my projections for the realizable value in Contop and HyNex.

ELBTF is currently trading at a 57% discount to estimated gross NAV. However, this calculation does not take into consideration that tax liability that ELBTF would incur if it tried to realize value in its subsidiaries.

The after-tax value of ELBTF's assets (at the 35% tax rate) is roughly US$25 per share. Consequently, I believe that it will be difficult for ELBTF to break above US$20 in the near-term based on a 20%+ holding company discount.

That said, ELBTF remains fundamentally cheap. Keep an eye on PTNR. PTNR rebounded above US$20 after a recent technical correction. If PTNR keeps rallying, it will drag up ELBTF. However, there is substantial overhead resistance above US$20. The weak hands who bought ELBTF on the Microsoft rumor need to be flushed out.

I am downgrading ELBTF from a Strong Buy to Hold. ELBTF still has value, but management needs to regain credibility. If you are holding ELBTF; don't sell. I expect the stock to drift back towards US$19 on a string of positive forthcoming announcements regarding Contop and HyNex.

James Passin is a Portfolio Manager with Firebird Management and Contributing Editor to Taipan. A fund managed by Firebird is currently a shareholder in Uproar. James Passin's views are strictly his own and not necessarily the views of Firebird Management or Taipan.