Tulipomania Blowoff Contest: Why and When will it end? Message Board

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Non-Tech : Tulipomania Blowoff Contest: Why and When will it end?

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Jun 26 5:00 PM EST

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To: EL KABONG!!! who wrote (2695)	3/13/2000 11:12:00 PM
From: Hawkmoon	Read Replies (1) of 3543

Kerry, You do make one hell of a good point about the transparency of the Nas over the big board. I've tried to give some thought to why we are seeing approx 75% of all NYSE stocks under their 200 DMA. But most of my perspective has focused on the inordinate amount of money controlled by mutual fund managers driven to maximize profits and lock in their bonuses. These guys aren't investors.. they're traders. They will be drawn to more and more liquid investments in order to meet their previous years gains. However, very few are able to beat the indices. So now they are taking their value money and putting it into momentum stocks and the average individual investor is following right behind them. So now later on this spring/summer, the funds will distribute their gains to the small fry and fight to lock in their bonuses. A lot of this have been driven by AG who, as Mad2 stated, has increased the operating expenses on the very industry that can least afford additional cost of money. So where does the investor dollar go (because that money continues to come and has to be invested somewhere)?? The growth stocks that represent the new technology who either don't need to worry about earnings or are growing fast enough that they will meet or exceed expectations. But there are some good points to be made about old world stocks. Why should people pay 30 times earnings for a company only growing 10-12%. This is not to say that it is justifiable to pay $85 to every dollar of revenue by a fast growing company. But just that investors are cutting the newer companies a hell of a lot of slack.... at least until they take the inevitable mistep and post a earnings warning. They they will just find another company that doesn't fail to meet expectations. That's why MSFT, CSCO, and so many other big-caps seem to be able generate so many investor dollars. They manage earnings, issue lots of options that generates additional income for them from their being exercized, and sell puts on their stock in order to capture the premium. Just as Steve Parrish stated in his MSFT analysis last year... only 35% of MSFT's earnings were actually derived from the sale of products and services. Just enjoy the ride as long as it lasts and prepare for downfall when the baby boomers start thinking more about locking in profits than investing in index funds. Great post on your part, btw.. Regards, Ron

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