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Technology Stocks : Amazon.com, Inc. (AMZN)

AMZN 244.41

+0.6%

Nov 7 9:30 AM EST

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To: John Donahoe who wrote (78165)	9/23/1999 2:17:00 PM
From: Rob S.	Read Replies (3) of 164684

<Negative breadth simply means that there are going to be a lot of losers in our transition to the "new economy".> That is THE assumption that is already built into the market. There are many arguments to the contrary. I think the divergence between the darling stocks and sectors and the overall market is greatly exaggerated by a number of factors: 1] The popularity of on-line trading favors Internet (on-line) stocks. 2] The large increase in capital invested in mutual funds over the years of the great bull market favors the higher cap and darling stocks and sectors and largely ignores the rest of the market. 3] We are at the tail end of a period in which capital markets were pumped up by favorable FED and international monetary policies and in which foreign investments flowed into the US. 4] As the economy grows overseas pricing pressure will increase. This will reverse the "Goldilocks" trend of lower materials and raw price inputs and will put increased pressure on overall corporate profits. 5] The huge expansion in stock options programs has not been effectively priced into economist's wage inflation models. Real wage inflation is about 1.5% higher than the non-adjusted figures. This will show up going forward in greater stock dilution to the detriment to investors. 6] The "window of opportunity" for early adopter Internet growth is about over. The next phase of the Internet's development will see emergence of traditional retailers and increased competition resulting in yet lower prices. While Amazon and others can likely survive the battle, the time-line for profitability will likely be driven back further than most investors anticipate. 7] The "new economy", whatever that means, is unlikely to have re-written the laws of economics. Some of the ways products are sold will drastically change for sure. But that doesn't mean that competition will be any less severe - current trends and studies indicate that margins will be lower and competition more fierce than "conventional" retail. The net stocks display some of the characteristics of "leadership" but also many of the characteristics of overdone speculation and hyper valuations. I think the market and the Internets are very vulnerable to a drop over the next couple months. Christmas sales will be great but that expectation is probably already factored in. Greenspan will likely raise interest rates despite considerations for Y2K. The economy shows many signs of over-heating. "Irrational exuberance" in stocks and in the level of consumer spending will drive the FED to tighten, IMO. The dollar will continue to sink, causing higher prices but eventually helping out exports. But then who knows? If anyone could guess the twists and turns of the market they would have already made so much money they could buy Amazon.com!

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