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

To: Eric Wells who wrote (73941)	8/15/1999 10:35:00 PM
From: Bill Harmond	Read Replies (3) \| Respond to of 164684

>>Do you disagree that the psychological impact of AMZN's negative YTD return might help to contribute to negative sentiment on the stock? I'm not a mind reader. I don't know what others are thinking. No one has told me that their opinion of Amazon has changed because it's trading below 12/31. If a Ferrari is caught in heavy traffic, or a Gulfstream is flying through headwinds, that doesn't make them depreciate any. We're having a correction based on interest rates. The dot coms are high-beta stocks, and they will overshoot on the upside and downside.

To: Eric Wells who wrote (73941)	8/16/1999 7:13:00 PM
From: Glenn D. Rudolph	Read Replies (1) \| Respond to of 164684

We spent a good part of last week in San Francisco and the Silicon Valley in the midst the of internet stock downturn to get a "quick" assessment of what some of the "pro's" were thinking. We met (in order) brokers, venture capitalists and students (of which any one could be worth a billion...in a couple years). First in San Francisco, the mood was so gloomy among the brokers we met, we felt we should put every penny into the market, as any good contrarian would. The primary problem amongst the brokers was A) an over concentration in the "big" names, B) position building, C) position building on margin and D) the complete inability to give any rationalization to their clients to take losses due to "deteriorating fundamentals," because the recommendations were never based on the fundamental characteristics of the companies in the first place. A) Over Concentration In The Big Names. What this means is the brokers tendency to buy the "big names," to lessen the chance of being sued by a client, in the event this entire Internet craze does in fact turn out to be a bubble. The defense being, "well it was AOL. Every major institutional investor in the country owned AOL. We all took a bath." Everyone we met seemed to own the following and little else. Name/Symbol/ % Off High That Day America Online (AOL) Down 50% Amazon.com (AMZN) Down 60% AtHome (ATHM) Down 65% EBay (EBAY) Down 68% Yahoo (YHOO) Down 50% B) Postion Building. Some of the most successful brokers we have met and/or dealt with are "position brokers." In essence what they do is pick their favorite stock and recommend to everyone and everything that moves. They live and breathe the stock, meet management, follow corporate events on a daily basis...in short, they know everything you could possibly imagine about the stock. They buy it day in and day out until they amass huge postion of 100's of thousands of shares and sometimes millions of shares. They typically do that with three maybe four stocks at any given time. The game plan is when they eventually get out, in a year or two (hopefully at 2-3 times what they paid for it) and then roll the proceeds into their new favorite stock, they have a commission payday running into the 100's of thousands of dollars. This works most favorably in stocks which during downturns limit their loss to 15 or 20%. The problem with the strategy is when the position turns south 40 or 50% (generally rare). Then it becomes a situation of where the broker dreads coming into the office. They find themselves buying the stock for new clients and selling it for "old and departing" clients. Let's look at the reality. A guy gives you $100,000 and then in two months it's worth $50,000 is not a happy camper and has little interest in investing in his second favorite idea or chatting about golf scores. C) Position Building On Margin. Well...considering the performance of the widely held (by broker) Internet stocks, this is sort of self explanatory. Now the broker comes to work everyday to meet an onslaught of margin calls. The back office is on his back, the office manager is telling him if the money doesn't come in, it's coming out of his paycheck, the clients aren't answering his phone calls. We can't tell you how many times that when we have been in brokerage offices when this was going on (all the brokers having glum faces) and it was the absolute signal to buy whatever that firm was selling to meet margin calls. It's morose, but it works. D) Not Taking A Loss. Any good broker can call a client when a company reports less than expected earnings and tell him, "we made a mistake, let's take our loss and get out." We once remember getting a call from a broker to bail out of a Mexican restaurant stock because the rising price of avocados was wreaking havoc on the restaurants margins (for real). We didn't get mad, how was the broker supposed to know avocados were going to double in price. But it is an entirely different event for a broker, to call a client and advise the client to take a loss simple because it's...going down (even though that is the right thing to do). They're just not trained to do it. We would say we probably reached an inflection point Friday. In fact if not for Friday's action (which could be reversed Monday) we know of a number of million dollar brokers who were about to leave the business. It was that close. And that of course is the absolute best time to buy. That if history is any indicator. Friday: America Online + 4 1/8 Amazon.com (AMZN) + 5 11/16 AtHome (ATHM) - 2 EBay (EBAY) + 6 5/8 Yahoo (YHOO) + 4 7/16 Cruising down to Palo Alto found much more level headed thinkers (the venture capital people)--and a much shorter story. We'll sum it up this way. If they never take another deal public (highly unlikley) it doesn't matter. The historic cake has been made. If an Internet company does go public and trades flat or slightly down--contrary to poular belief--it's still time to pop open the bottle(s) of champagne. It's just that they got to do it behind doors. Here's how one VC explained it. He said, "take a look at the Cobalt Group (CBLT). They design web sites for car dealers. It ws priced at $11 and traded to $8. The company had sales of $6 million last and lost $8 million. You think they're crying. Let me clue you in on something, they raised $49 million. Do you think we could do that for an apparel maker or a restaurant chain ? They'd be lucky to raise $2 million, and I'm being generous. Forget what the stock did, they raised $49 million, and they now have a currency (their stock) to buy other businesses. If they're crying, it's all the way to the bank. It's a beautiful thing." Over at Stanford, and we'll make this real short, these kids think a $100 million dollar net worth is a sign of failure.