from Salonmagazine.com
Net stocks: Who said "irrational"?
Two years ago, Federal Reserve chairman Alan Greenspan chided the stock market for its "irrational exuberance." Everyone could see that the markets, fired up by spiraling Internet stock prices, were into bubble territory back then.
Well, if that was irrational exuberance, we must be well into the land of demented mania by now. Monday's markets paid no heed to the first impeachment of an elected U.S. president. Perhaps, as Wired News suggested, they were fired up by a bullish profile of Net-stock analyst Mary Meeker in Barron's. Whatever the cause, Wall Street went nuts, capping the rally of recent weeks by sending Net stocks to the moon.
Yahoo gained 35 points to close at 247; its market valuation is now $24.4 billion. Amazon gained 32 points to close at 319; it's now worth $16.8 billion on paper. EBay gained 44 points to close at 296; it's now theoretically worth $11.9 billion. Of course, these stratospheric numbers may reflect how little stock in these hot companies is actually available to the trading public -- eBay, for instance, has only 3.5 million shares publicly traded, less than 10 percent of the total shares (37.2 million) outstanding. There's a lot of money out there, fired up by a lot of media hype, chasing a limited number of shares.
It's true that, if these companies grow up to be the cornerstones of the new digital economy, then they're still a steal. That prospect was framed yesterday by TheStreet.com founder and columnist James Cramer: "What if it turns out that the fundamentals are on fire? What if it turns out that the Net has energized everything and made it so that there are more tech purchases, both corporate and individual, than anybody expected? What if it turns out that the reason tech is going up is because the earnings are going to explode?"
A fair question. Here's another: What if the law of gravity hasn't been suspended, and what goes up must still come down?
-- Scott Rosenberg
SALON | Dec. 22, 1998
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