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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club -- Ignore unavailable to you. Want to Upgrade?

To: Chuck Rubin who wrote (6097)	6/21/1999 11:53:00 AM
From: Carl R.	Respond to of 15132

Did the automobile industry disappear and shrink in the light of the 1929 bear market? Or electric motors? Did GE or GM go out of business, or did they go on to dominate their industries? Did their stocks continue to rise from their 1929 prices? The answers to these questions may be instructive. The answers are of course that the auto and electric motor businesses continue to exist, and that GM and GE both grew and prospered. It is also true of course that their stocks fell over 90% before rebounding. Therefore you must separate in your own mind the question of whether or not these companies will continue to grow from the question of whether or not their share price will continue to grow, because the distinction is a very important one. As another way of looking at these things, their stock price already assumes that these companies will grow by about 30 times in the the next 4 years or so. Therefore in buying an internet stock, ask yourself "will this company be more than 30 times as big in 4 years?" Of course for some companies (e.g. MRBA) the multiple would be higher, and for others lower, but the important point is that if in 4 years AOL is only 10-20 times as big as it is today, the share price may well be lower than it is today. Carl