Good evening, all - Sometimes you read an article that seems like it was written by someone who was reading your thoughts. I'll repost it here, FWIW -
By Geof Wheelright
"It seems only appropriate that the recent tumultuous times in the world's stock markets began on April Fool's Day - perhaps leaving many with the idea that it was just a bad prank. But it was all too real as investors watched in horror while share prices in telecommunications and technology stocks plunged - only to start bouncing back as the week drew to a close.
The whole experience left many users wondering what was going on - and whether or not it signaled an end to the roaring bull market that has propelled markets throughout the world to new highs. Was it merely a market correction? Would there be a full recovery to levels achieved only a few weeks ago? Or is it all so uncertain that the only reliable prediction is continued investor confusion?
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Investors are being given a reminder of why money put into technology stocks is called "risk capital".
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There seems to be no strong consensus on any of these issues, although most analysts seem to be convinced that they were right, they saw it coming and that they wish more people had just listened to them. Well, the fact of the matter is that no one really knows what will happen - and that analyst hindsight is always 20/20.
It does seem obvious, however, that many investors who now find themselves feeling a little bumped and bruised by the recent gyrations of the stock market are being reminded of why the money often used to invest in technology stocks is called "risk capital". Risk capital is exactly what the name implies - money that you are willing to risk in order to win a chance to gain a higher than average return.
The other thing worth recalling at this point is a strategy long used by technology companies - and largely credited to IBM - to maintain control of a market. The strategy is often known simply as FUD (Fear, Uncertainty and Doubt). IBM was credited with using this strategy for many years to keep the computer industry - and IBM's own users - from straying too far from the IBM path.
FUD was designed to keep its corporate customers mindful of the dictum that "no-one ever got fired for buying IBM". The idea was that if customers were in doubt about whether or not to buy competitive computer products that did not happen to be compatible with the "standards" set by IBM, they would always consider IBM the safe choice.
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"Fear, Uncertainty and Doubt" tactics don't work forever.
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All of that came to an end on April 1, 1987 when IBM, having set the standard for personal computer designs with the original IBM PC and the subsequent IBM AT, decided to introduce a range of new computers with the name IBM PS/2. These computers used a completely new operating system (something called OS/2) and a new way of adding extra capabilities to the computer (an expansion system called Micro Channel Architecture or MCA) - neither of which were compatible with IBM's own previous offerings.
The market refused to follow, despite the FUD that IBM's marketing department tried to create about the dangers of not following Big Blue. Arch-competitor Compaq instead picked up the "old" IBM PC standard and developed new products based on it - and build a $40 billion company in the process. FUD didn't work forever.
And just how, you may well ask, does this relate to pronouncements of today's stock market prognosticators? It relates in only one way - that a great deal of FUD has been created by those who analyze the markets according to long-held and unchanging principles. Such analysts are using the current uncertainty in the market to bring investors to conclusions that don't necessarily follow from the sequence of events that have unfolded over the past several weeks. Only time will tell how far the FUD will spread before investors reach their own conclusions"
investment.com |
