Different points of view...James Dines, publisher of the Dines Letter, is crazy about Internet stocks.
''This is the real thing,'' he said. ''My vision has been of tremendous bullishness on the Internet, which is where the fortunes are
going to be made,'' said Dines, an original ''Internet bug.''
Dines does not think the Internet sector is a giant bubble ready to burst, even though some stocks have soared more than
1,000 percent at the blink of an eye.
''The technology is the future and it's starting to branch out to Latin America, China -- and the growth is going to be
unbelievable ... the ability of the entire world to communicate instantaneously, practically free, has a potential that frankly blew
our minds,'' he said.
Dines believes the Internet will eventually take some of the play away from the nation's biggest blue-chip companies.
The problem with the skeptics is that some people can't see the future because they are trying to evaluate the Internet in terms
of what happened in the last 100 years, he said.
But some Wall Streeters worry that investors may be going overboard on the fast-paced industry, and there is a risk that a
crash climate could be forming.
Fed chief Greenspan has warned that investors may be foolishly bullish about stocks, and that a sudden market reversal could
destroy a lot of the wealth that has produced annual double-digit market gains for almost five years.
One market strategist thinks that the Internet is just a fat speculative bubble that is just waiting to blow up and drag the rest of
the market into the dumpster.
Raymond DeVoe Jr., market strategist for Legg Mason Wood Walker, sees classic signs of trouble in the high-flying Internet
sector. He says Internet stocks that have recently been offered to the public should be renamed ''Crash.Com.''
''Bear markets begin at the point of maximum optimism,'' he said. ''For the Internet stocks, the maximum bullishness occurred
in April or early May, when they made their highs as America Online reached $175 and Amazon.com $221.
''Sure, the stocks could rebound from here and go even higher since overvalued stocks can become even more overvalued,''
he said.
''But the point where the bullish cycle ends will only be apparent in retrospect, when investors ask themselves 'What could I
possibly have been thinking?'
''The eye opener for me was MP3.Com (MPPP.O) that went public last week at $28 a share, started trading in the 90s, then
hit 105 and has since gone back down to the 50s,'' DeVoe said.
''What was outrageous was that at one point the company, which is just 16 months old and has no proprietary products, was
worth $6 billion and all it does is allows people to download music for free off of the Internet,'' he said.
DeVoe said that investors' tremendous optimism has also spread to the rest of the stock market, with the overall price/earnings
ratio at a record 35.
''In a bull market, there are several stages,'' he said. ''It starts with contempt for stocks. Then guarded optimism. Then
enthusiasm, exuberance and unreality.''
DeVoe said the start of the current bull market was on Aug. 12, 1982, when the Dow Jones industrial average was at 776 and
stock prices were just eight times earnings.
''If that multiple were applied the same way now -- the Dow selling at eight times earnings -- it would be at 2,600,'' he said.
Friday, the Dow was just a little over 200 points shy of the 11,000 level.
Indeed, some of the excitement may have gone out of the Internet sector, at least in stocks that recently made their debut on
Wall Street. |
