THE INTERNET REVOLUTION HAS JUST BEGUN
Wall Street stock market strategists have been trying to convince investors that the Internet sector is an overvalued mania while pushing the cyclical stocks. Mutual fund managers with a pile of cash to invest from April pension fund deposits began to invest in the paper, chemical and oil sectors. If you examine these sectors, you will find unimpressive sales and earnings. The only basis for these hopeful recommendations is rising oil prices.
This rise may or may not be sustainable given the desperate need for cash by oil producing nations such as Russia, Brazil, Mexico and the Middle East countries, especially Saudia Arabia. Demand for oil in Japan and China is still declining.
Economic growth in Europe is still weak. Only Southeast Asia has begun to turn the corner. The only other piece of supportive evidence for Wall Street's current enthusiasm for cyclical stocks is the possibility of a bottom in the long slide in Raw Commodity Prices. Money managers bought Wall Street's pitch for cyclicals only to be shocked by AT&T's stunning announcement: The world's largest phone company has just become the world's largest cable company by purchasing MediaOne.
AOL, offering Internet access with a phone wire, watched its stock slide 23% in price . Many of us use cable for Internet access in the office and at home, but use a laptop and AOL on the road. Cable is 20 times faster than AOL with a phone line.
Anyone given the choice between cable and a phone wire would choose cable for Internet access without hesitation. AT&T's announcement shocked Wall Street back to reality and the Internet stocks regained market leadership. Mary Meeker, Wall Street's premier Internet analyst, raised her recommendation of AOL to a strong buy from a market outperform. Mary says don't worry about AOL, but if you have ever used high speed cable to access the Internet, you have a clear understanding of AT&T's latest move into the cable industry.
The next step in this Internet Revolution will be digital wireless access to the Internet . By the year 2002, there will be 600 million wireless phones in the world.
Wireless/satellite access to the Internet will cause an Internet revolution in Asia where one third of the world's population lives without phone wires or cable TV. Closer to home, 325 million people will be using the Internet by the end of 2000. That's triple the number of users at the end of 1997. Also by the year 2000, 25 countries will have at least 10 percent of the population on the Internet. The Internet Industry Almanac says the number of U.S. Internet users will nearly double in the year 2000.
Only 25% of Americans currently use the Internet. Over time that figure will grow to 90%. Well known investment advisors write about the Internet and warn investors that the Internet is the world's largest overvalued bubble that will burst and go away.
You and I know the Internet is a world wide revolution. No one on this planet will escape it's influence. The Internet will never stop growing, not in your lifetime or mine. Andrew Kaplan, portfolio manager of Fidelity Select Developing Communication Portfolio is bullish about Technology and Developing Communication with the Internet. He says, "We are only in the 2nd inning of this revolution. The Internet industry is far from mature.
We have barely captured 10% of the potential subscriber base for the Internet. And they have only scratched the surface as far as ways to make money using the Internet." Knowledgeable investors see the Internet as a marathon that has just begun.
Those who see the Internet as a bubble or a temporary mania think the Internet is a sprint that is almost finished. How very short sighted! They are missing the greatest investment opportunity since the first Model T Ford rolled off the first automotive assembly line. The next ten years will be phenomenally profitable for investors who purchase the right Internet stocks. Amazon.com, Onsale.com, and Priceline.com may or may not ever show a profit.
In the meantime, there are numerous companies that are profitable now and they will make a fortune for you building out the World Wide Web. The thunderbolt message from the AT&T acquisition of MediaOne is the importance of the speed of fiber optic cable.
Many analysts refer to it as broad bandwidth which allows much faster digital transmission of video, voice and data. AT&T spent $124 billion to purchase the broad bandwidth, fiber optic cable facilities of MediaOne and TCI Telecommunications. Last year AT&T had $6.4 billion in earnings on revenues of $53 billion. Compare those figures to the $124 billion AT&T spent to purchase the speed of fiber optic cable. The future direction of the Internet is crystal clear:
Cable and digital wireless access to the Internet is the future. Profitable companies supplying digital fiber optic cable and wireless access to the Internet are the best places for your money.
Credit- Guardian |
