Eric, I don't agree, mostly..."...And each of us is a contributor to it - every time we buy and sell, and every time we encourage others to do so as well. We make the market go higher. We are the ones who have decided to throw away the old rules on how to value companies, and hand it over to the crowd."
In 1970, the best selling stock market book was called 'The Money Game'. GAME! The sequel, 2 years later, 'Super-Money' was about IPOs flooding the market. These were great books. Everyone investing should read them, even now. Does this mean we have to have a crash like in '74? (No - we don't have Viet-Nam, which the government forgot to fund - we have a surplus - argue the accounting rules if you want, but it ain't the same.)
Does anyone remember the howls that went up in 1974 when Catfish Hunter demanded $1 million to pitch for the Yankees? Outrageous! The end of baseball!
We didn't dump the value idea. We realized the values were out of sync. The rules are still the same! There is no Avogadro's number on Wall Street, no universal constant, no E=MC squared. There is money, and it seeks value. In whatever form it comes.
I have been an active tech investor for more than 10 years. In '90 I first started noticing that on the smallest bit of bad news, the market would start dumping all tech stocks. Everything! Tandy gets a cold, dump MSFT, LOTUS and ORCL! It was like ICs and PCS were a fad that would soon pass. The average trader couldn't understand tech. He could understand P&G, Coke, etc., so these were the darlings. Yet, the tech companies were clearly the most dynamic, and productive vehicles around.
Now we can all buy our own stocks. With a computer! And we don't even have to write a computer program. Wow! I'm a long time programmer from paper tape and punch cards - this is amazing!
What we are seeing is like what happened to house prices in the US in the 70's and early 80's. (Adam Smith wrote about this, too, in 1980, was it 'Paper Money'?) A one time turn of the worm. A total reorganization of society. My 72 year old mother, with only a high school diploma, issued in 1945, can now run a computer! She's on the Internet 6 hours a day! (She assumes the personna of a 20 year women on her chat sites; imagine that!!!)
What this is, is, reality is hitting the stock market. If KO is worth a PE of 40 (!!!!!!!!!!) yes, MSFT is WORTH a PE of 140. And so is DELL, and ORCL, etc.
In the 70s, if you didn't already own a house (I didn't) you missed out on an enormous transfer of wealth when housing prices went through the roof and never came back. This is a similar situation. We're just playing the game as best we can. I didn't make the rules; I just identified some of them.
Will there be fallout from massive change? Yes!! Huge. But, we're not doing it trading our little stocks. It is as inevitable as the iron horse, the wireless, and the Tin Lizzy.
What you can't do is hold it back by your actions. What you can do is use this opportunity to try and be a better person. Check out yesterday's LA Times story about Bill Joy, and how he insisted his friend test drive the car he wanted to buy so that the salesman would fill good about the sale. We should all be better people. It IS gonna be a brave new world.
Now, what will happen next year is, Wall Street doesn't really believe that CSCO does 70% of their business on the net. Wall Street doesn't really believe GM will cut their costs 2B by using CMRC, Wall Street doesn't really believe 2b2, that it is a trillion dollar business just because Gartner and Forester said so. So ARBA, CMRC, VERT, ITRA, BVSN, ICGE, etc are gonna bounce around like ping pong balls! But, they represent something real.
And they are gonna fly.
Merry Christmas,
Tom
p.s. I know I'm gonna get flamed for this one! I started to kill it twice. And I know the market will have some real bad days next year, along with the good ones. That doesn't mean I'm wrong. |
