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Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: Paul Merriwether who wrote (69155)	7/23/1999 12:26:00 PM
From: Eric Wells	Read Replies (2) \| Respond to of 164684

>>you choose to participate in it, long or short, >>at your own risk. Very true - any position on any of these stocks is very risky, even on the short side on which I currently sit. And I fully realize that I may step away from my monitor for a few minutes only to come back and see YHOO up 10. But I believe that in the long run, prices have to be based on something more than pure speculation. The price of something is what someone else is willing to pay for it. Internet stock investors are willing to pay high prices for internet stocks because the future is unknown, and I believe that there is a tendency among internet investors to have a highly optimistic view of the revenue and profit generating potential of internet companies. When such investors interact, their individual optimistic views tend to build upon one another, resulting in an even greater general optimistic view. And then there are a number of other effects which lead to the inflation of prices of these stocks: 1. Addiction to past investing success: if you've made a million on riding one internet stock up 100 points, you think you can do it again, and so you try again - and you try over and over again - which has the effect of pushing up prices of other internet stocks as you buy them. 2. Envy and fear of missing out: you look at those around you who have made millions because they bought YHOO in 1996, and your are envious, you want to make millions also - and so you buy in, before it is too late - before you miss out. 3. Irresponsible promotion of IPOs by investment banks and VC firms: VCs and investment banks feed off the public sentiment from items 1 and 2 above and reap millions (if not billions) from bringing more and more companies public. I often find it perplexing when an IPO should be priced at say $15 and open at $50. This is a sure win for the VC or investment bank holding the stock. But when such price disparities occur the day of an IPO, I ask myself "Do the investment banks have outdated pricing models that they should be so far off? How can this continue to happen over and over and over again?" And the darker side of me thinks that there is some sort of a game going on - a game that takes advantage of public euphoria to the tremendous advantage (and profit) of insiders, VCs and investment banks. At some point, the future will be here - and even the most optimistic of internet stock investors will have to rely on something tangible on which to base the price of a stock. I would like to see the future get here sooner rather than later - as I like to think of myself as being rooted in some sort of semblance of reality. Greenspan called this force that inflates stock prices "irrational exuberance" - but he said this when the DOW was at 6000, so everyone thinks that he was wrong. I beg to differ - I think the exuberance that props up the prices of these stocks is irrational - it is based on the compounding optimistic effects that I list above. I can sit here as an individual and say to myself "Yahoo is just a bunch of web pages with links and Amazon hasn't made a dime," but then when I see their stock prices start to go up, I say to myself "Oh well, better ignore these salient points and go long and get on the train before it leaves the station." It just seems the train is getting awfully crowded - there are more and more trains on the tracks - and well, things seem to be slowing down. Accuse me of being pessimistic - perhaps I am. But for once, I would like to hear Bezos or Koogle or Whitman say something to the effect of "How companies will make money on the internet in the future is a big unknown - therefore, there is a tremendous amount of risk that should be built into the pricing of internet stocks - technology can change the business environment at any time, and companies that may have appeared as 'winners' can become 'losers' in a very short period of time. Invest with extreme caution." Thanks, -Eric Wells