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Non-Tech : Tulipomania Blowoff Contest: Why and When will it end? -- Ignore unavailable to you. Want to Upgrade?

To: lifeisgood who wrote (2050)	10/2/1999 5:24:00 PM
From: KeepItSimple	Read Replies (3) \| Respond to of 3543

Blodget Bearish? latimes.com ==================== Noted Analyst Sees Net Stock Shakeout By JOSEPH MENN, Times Staff Writer Saturday October 2, 1999 SPEN, Colo.--One of Wall Street's most closely watched Internet bulls said Friday that stocks in the category are "fantastically expensive" and warned that a shakeout is likely. Merrill Lynch & Co. analyst Henry Blodget, who late last year predicted the astonishing stock surge of Amazon.com and others, said in an interview that "we are probably nearing the end of a cycle" in Net stocks. "We are moving out of the period of low-hanging fruit." Blodget reiterated his earlier prediction that 75% of Internet companies will fail or be purchased, and he added that many stocks could fall 75% from current levels and "still be expensive." Speaking earlier to hundreds of Net professionals at a conference sponsored by Industry Standard magazine, Blodget acknowledged that Internet stocks have risen so high because investors recognize the legitimate historic change in the economy. But he said investors have shifted money to Web companies without regard to the valuations those stocks are commanding, which have also been driven up by the sheer scarcity of the stocks. Blodget rejected the argument that Internet efficiencies will lead to new ways of valuing stocks in the long term, saying that most stocks of surviving Net companies will eventually be valued within historical norms, relative to earnings. He said his outlook has changed little in the last two months, but that in that time the number of initial public offerings of Internet stocks scheduled for the next three months has swelled to 150. He said that will double the number of Internet companies available to investors, forcing prices down. Blodget said even Yahoo, one of the few profitable Internet companies, is priced according to the best projections for its earnings five years from now, making the shares "expensive, but not insane." He said most people should avoid investing in Internet stocks; that those who do invest should only put 5% to 10% of their portfolio in those stocks; and that even that money should be spread among 10 to 20 best-positioned companies. "Investors are far too aggressive," Blodget said. His comments, after the close of regular trading, came a week after Microsoft President Steve Ballmer called technology stock prices absurd, prompting a sell-off. Copyright 1999 Los Angeles Times. All Rights Reserved ====================

To: lifeisgood who wrote (2050)	10/3/1999 1:38:00 PM
From: Sir Auric Goldfinger	Read Replies (2) \| Respond to of 3543

"Any time you get a trend reversal in the discount rate, that trend remains in force on average for 14 months," Peabody said. "August represents the first month of a trend reversal. "Even if Fed Is Idle, Rates Are on the Rise Related Articles The New York Times: Your Money By GRETCHEN MORGENSON EW YORK -- To the relief of many investors, members of the Federal Reserve Board have made clear that they will not be voting to raise interest rates at their meeting next Tuesday. So why are yields on U.S. Treasuries rising? The yield on the 30-year Treasury bond jumped to 6.13 percent on Friday, from 5.97 percent a week earlier. The obvious reason for the move was renewed inflation fears brought about by rising oil and gold prices. Adding to the anxiety was news on Friday that an index of prices paid by factories rose to its highest level in more than four years and that manufacturing grew faster in September than analysts had expected. But investors who remain certain that bond yields will retreat again should take note. A pattern of unrelenting selling sweeping through the Treasury market in recent weeks is not caused by bad economic news alone. Some of those doing the selling may be foreign investors who see the decline of the dollar hammering their returns. But Charles Peabody, bank analyst at Mitchell Securities in New York, says the bond market's behavior also reflects a broad unwinding of bets placed by investors who were later caught unware by recent interest-rate increases. Many of these positions are now going bad; as they are unwound, they push rates higher. First was the so-called yen carry trade, in which investors borrowed funds in Japan at microscopic interest rates and bought Treasuries with the proceeds. When the yen spiked up, profits turned to losses and the Treasuries had to be dumped. Last week's disastrous trade was a variation on this theme -- the gold carry trade -- in which investors bet that the price of gold will drop. They borrowed gold from a bank, sold the gold and bought Treasuries, making perhaps 4 percent on the difference between what they paid to borrow the gold and what they earned on the securities. With gold prices running up this week, those trades had to be unwound. The gold carry trade is nowhere near as big as outright bets made on rates, known as interest-rate swaps, in which one investor agrees with another to exchange a fixed rate for a floating rate. Interest-rate swaps account for more than 80 percent of derivatives held at American banks. In the second quarter, the notional value of interest-rate related derivatives at domestic banks stood at $25.7 trillion, up 28 percent from the corresponding period in 1998. As rates climb higher, these holdings become worrisome. At the same time, Peabody believes that we are starting to see the ill effects of rising rates on the nation's financial institutions. "Because of the positive reinforcement of declining rates over the last two decades," he said, "most financial players have increasingly used that trend as a way of boosting their profits." Now, the reverse is happening. In recent weeks, three small banks -- Keystone Financial Inc., the Regions Financial Corp. and Flagstar Bancorp -- have warned of earnings shortfalls owing to higher rates. Will rates rise further? "Any time you get a trend reversal in the discount rate, that trend remains in force on average for 14 months," Peabody said. "August represents the first month of a trend reversal."