Smart Investor, Re:”Is Monday going to be Black Monday?” My honest answer is I don't know. Here is my best guess .
-The pundits have been yelling overvalued Internuts for months: I find it very suspicious that all of them fall at the same time and come back at the same time: Fri YHOO was up 7% when market was taking. Many “pundits” then mumbled, “ hey, look at that: that shows real strength “. Great vision.
-Let ME ( gg ) tell YOU ( gg ) WHAT the “ pundits are doing: Pundit Merrill Lynch has just installed in most of their offices Desktop PC Video-Television capability. For what you ask? So they can watch CNBC believe it or not !!! I think that this particular pundit's light bulb finally came on and realized they had a lot of irate customers screaming and yelling at ML's recommendations the past few years not to buy MSFT, DELL , the INTERNUTS and “ all such overpriced tech leaders “, the net result being a net loss of potential gains for these folks. So now they got CNBC on their PC and whenever Marie and Creamer and CO say “ hey looks like folks are buying this or that “, they can at least tell their clients what the hell is going on in the market and possibly allow the customer decide , sometimes at least, what the market is saying. After all it is very difficult to guess what the market is saying. Ask C.Clough, Merrill's chief investment strategist who's been bearish on the market for 1 ½ years and missed big time.
The market has spoken: CSchwab's capitalization is now equal to ML's.
Maybe the markets are wrong. Will see.
- I think that markets have been gyrating the last couple of weeks because some people think the sky is falling because Billy is getting creamed and only he can save us. Only he ( and the Dems ) can pull the wool over the Republican's eyes to raise taxes on you and me to bail out Korea, Thailand, Russia. And now Brazil, Argentina etc. etc. They may have a point: Left to their devices many Republicans have espoused the ides of sink or swim to this folks, as in, “ get ( clean ) your act together. Your mother doesn't live here any more “. So everybody on margin in the nation may justifiably have been scared stiff the last few weeks.
- My take is that any collapse of the world economy will only help slow down this USA behemoth's march to a long sustainable level, without inflation, nice and easy.
- The cream: the Internet and e-commerce is where the hot action will be while all else sort of cools down a little.
If AOL goes down I will throw some more money at it: a great buying opportunity.
Here is a take from Bus Week 12-28-98 P.110:
businessweek.com
TECH STOCKS: WILD, WOOLLY--AND PROFITABLE IN '99?
While volatile, they're likely to outrun the herd once again
DIZZYING P-E. Higher valuations aren't scaring away all investors, especially if the company is perceived as a market leader. One expensive stock many pros like is America Online Inc. At a mid-December price of $89 a share, AOL was selling at a dizzying 159 times expected earnings for the year ending in June, 1999. Paul T. Cook, co-manager of the Birmingham (Mich.)-based Munder NetNet fund, says the price is so high that ''nobody in their right mind would buy this stock unless they believed in the story.'' And he does believe it. ''They have a real opportunity to become a staple of the Internet, if they aren't already,'' he says.
Here is another , P 138:
businessweek.com
SWIMMING DOWNSTREAM WITH THE SHORTS
Emboldened short-sellers are betting that this is the year the bubbles will burst
The spectacular performance of Internet auction house eBay Inc. also has attracted shorts, who are betting against the stock because of its stratospheric valuation. Tice hasn't shorted eBay but expects that, at a recent share price of 230 times sales, he eventually will take a short position. Another noted short placed a bet against eBay at about 170 and has seen it climb 20 points higher since then. But this eBay-basher is unfazed, arguing that Internet stocks such as eBay are ''phenomenal shorts'' that will buckle if there is any economic weakness.
Wagering against stocks on the basis of valuation is a time-honored strategy--and often a very bad one. It has fallen flat for stocks such as America Online Inc., which has been shrugging off attacks from short-sellers for years. A sounder practice is to short stocks of companies that are not just overvalued but also have some fundamental weakness--a product, for example, that works far less well than investors may expect. Some biotech stocks, such as Biotime Inc., have been targeted by shorts on that basis, with varying results.
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I hope this helps,
Good luck,
TA
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