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Technology Stocks : Amazon.com, Inc. (AMZN)
AMZN 229.12-0.2%Nov 26 3:59 PM EST
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To: Glenn D. Rudolph who wrote (31312)12/27/1998 5:12:00 PM
From: Steve Yuan  Read Replies (3) of 164684
 
I guess the moral of this story is: enjoy the game when it is in 2nd inning, but stay out if it is in its 8th or 9th inning.

The problem is that many times people mistake the 2nd inning as the 8th, and then shorts get slaughtered and longs miss an opportunity to get rich. This has happened to many people on the short side of amzon or on the sideline.

On the other hand, it is also a disaster to mistake 8th inning as 2nd inning and have a slow death with losers. Sympathy goes to people who are still hanging around with Y2K stocks. However, if you study stocks in their 8th and 9th innings, their demise is usually written all over the wall before the final calamity occurs. An overvalued stock has rarely, if not never, collapsed simply because of its valuation. It will collapse only when it misses wall street's expectation. Therefore, it actually fairly safe to stay on the long side of overvalued stocks. Longs should have plenty of opportunities to exit. When it is time to exit, do not be greedy. Hopefully people on this thread can remind each other when this comes.

Another word about valuation. Complaining about the insane valuation of overvalued stocks is like complaining that the society is not fair. The society has never been about fairness. Similar things can be said about stocks. The best stock will rarely be fair-valued. It will always be overvalued.

Steve

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