from the toronto star today:
I caught Net fever, but I'm getting better
When 150% gain made me crabby, I began to see the symptoms
A virus has forced me to suspend trading in my self-directed RSP.
I became infected Jan. 17, 2000, when I ran a volume filter on my Canadian stock database using the riskier daily data instead of the more reliable weekly data.
The daily chart of Vengold Inc. was selected. It was among several junior gold stocks displaying a classic breakout on increasing volume.
I bought 10,000 shares at 33 cents only to find out a few days later Vengold was reinventing itself and was no longer a gold miner.
The news about Vengold's new Internet path was posted at Yahoo Finance.
I held on to my new Internet investment because I thought the stock could run up to resistance at 90 cents and I would sell for a nice profit.
I sold out on Feb. 16 at 89 cents for a 150 per cent gain only to see the stock add another 150 per cent the following day.
That afternoon I wondered how I could produce a 150 per cent return in 22 trading days and still feel crappy.
I had the piggy virus.
The first symptom is Internet fever, which develops into a voracious full-blown virus affliction.
Internet fever sets in when an investor over-estimates the potential of the dot-com companies to be profitable.
The fever tends to mask what is really going on in Internet commerce.
For example, investors with Internet fever should remember the Internet has a huge dark side, which is rich with counterfeit software, bootleg music and pornography.
But the real danger is fears about privacy on the Web.
The current activities of DoubleClick Inc., the leading online advertising firm, have become a lightning rod for such fears.
The U.S. Federal Trade Commission's Bureau of Consumer Protection late on Wednesday said it has initiated a routine inquiry to determine whether DoubleClick has engaged in unfair or deceptive practices in violation of the Federal Trade Commission Act.
DoubleClick has amassed 80 to 100 million detailed individual profiles from an alliance with 1,800 of the most prominent Web publishers and more than 11,000 sites worldwide.
Any bad news here could have a negative impact on DoubleClick and a lot of other Internet companies.
In another but related realm, I've now seen an outbreak of biotech fever.
Everything with ``bio' in the name is having a run. In order to stop the biotech fever from turning into the piggy virus, I would like to suggest the following treatment.
Meditate on the current rising U.S. interest rate environment - stock markets can never win a fight with the U.S. Federal Reserve. Then think about the possibility of a weaker U.S. dollar - that could encourage a shift away from the U.S. stock markets.
Don't forget the interest-sensitive bellwether stock, Federal National Mortgage Corp. (FNM-NYSE). In a column in this space on Dec. 6, 1999, we were concerned FNM was in danger of breaking down through a 10-year up-trend line. Well, FNM broke down a few weeks ago.
Another great market leader was severely wounded on Thursday. The late, great General Electric Co. (GE-NYSE) quietly slipped down below a four-year trend line.
Our chart this week is that of the weekly closes of GE. The long trend line under the plot of GE has its origin in 1994.
The long trend line illustrates the current secular up-trend (explained here July 12, 1998) in place for GE. The shorter trend line beginning at the October, 1998, low was placed to illustrate GE's current bull cycle.
Now that GE has broken the shorter trend line, the next target for the stock would be about $115 (U.S.), or down to the long-term trend line. This alone could be enough to trigger a bear in the Dow Jones Industrial Average. This bear cycle could then spill over into most of the major North American stock markets.
A short bear market at this time could be beneficial and allow the markets to digest their recent advances. The scenario changes if GE breaks down through the longer trend line.
That could trigger a round of selling in the big cap technology sector.
A little cash would look good in a few weeks. |
