Off topic - Worden Report:
We saw a quote today by Scott Bleier, chief investment strategist at Prime Charter Ltd.: "There are two markets going on. The old-world market and the new-age market. The new-age market is anything related to the Internet. People are literally saying 'why should I buy Sara Lee [SLE] or Gillette [G]? Why should I follow what Warren Buffett says? His stocks don't go up 40 points every day.' People that have been in the business for 40 years have never seen anything like this. Ever. It's just beyond the scope of wildness."
We can sympathize with him. Most old timers find this market surrealistic. Nevertheless, we can attest to the fact that anybody who has been in the market 40 years has seen many manias that flew in the face of all experience. Manias that persisted and persisted – long enough to drive Carry Nation to drink. But we have never seen a mania that didn't come to a bad end. Generally when least expected.
The nuttiest mania we can remember – we can't even remember exactly when it was – involved a public stampede into treasury bonds. Life savings were put on the line. Widows and orphans were ushered to the head of the line (right behind the dentists, that is, who are always the most fearless plungers). It seems that somebody had learned that these "riskless" instruments could be financed at the local bank. Ten percent, even five percent, equity was common, depending on how much your banker liked you.
Well, of course, bonds do fluctuate, and downward fluctuations of five or ten percent would be enough to turn your friendly banker into your worst enemy, as you find out your life savings have been wiped out – along with the last vestiges of your dear old mother's wealth. And that's how it turned out for thousands of investors involving hundreds of millions of dollars. The sorrow of a few who experienced truly heart-wrenching tragedies was perhaps mitigated by compassionate descriptions of their plights in feature articles on the front page of the Wall Street Journal.
The Internet stocks embody all the necessary attributes of the most wanton mania. It isn't that we don't know much about them. We know quite a lot. We know that most of the companies don't make any money. We know that many of them never will. We know that many of them will disappear. We know there will be a handful of long-term winners, and we know that we don't know their names. We know this mania will end, and we know that we don't know when. The main thing we don't know is, when the dominoes start to fall, how much collateral damage will be wrought on the market as a whole and on innocent civilians standing around watching.
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