Hi Mary, an article in today's Washington Post that is pertinent to our discussion:
WHAT GOES UP . . . A DAY-AFTER STORY
On the Friday after Thanksgiving, when most professional traders stayed home from Wall Street to eat leftover turkey, the turkeys went to Wall Street and got eaten.
That day small investors gorged themselves on Internet stocks in a feeding frenzy that market watchers said was facilitated by the Internet itself. The influx of orders came not from the big institutional investors that ordinarily dominate the market, but from individual investors, many of them trading via their home computers.
Usually when an influx of small orders begins to drive up stock prices unexpectedly, the pros step in, cash in some of their shares for a profit and in the process relieve the buying pressure. But too many of the pros had taken the day off and Net stocks just kept going up.
Shares of half a dozen Washington Internet companies rocketed to new highs for the year that day, many of them taking huge jumps even when their trading volume was not particularly heavy. AOL shares climbed more than $2 to just under $95, PSINet stock went up more than $1 to $20.12 1/2, shares of Network Solutions Inc. jumped from $70 to $82, and the stock of a small Christian Internet site builder in Chantilly called Didax Inc. blasted from $10.50 to $20.87 1/2.
Investors who swallowed those stocks at those prices woke up with indigestion on Monday morning and haven't gotten over it. Every one of the stocks came down as soon as the market reopened and most of them kept slipping last week.
When trading ended Friday, AOL was down almost $7 from the previous week to $88 a share. PSINet was back below $18.50, down more than $1.50. Network Solutions skidded from $82 to a little more than $59 and Didax plunged more than $12 to close at $8.
Small investors did themselves in during that post-holiday hysteria, but there's no reason to believe that the costly lesson cured them of Internet fever.
washingtonpost.com
washingtonpost.com
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