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To: Lizzie Tudor who wrote (88582)	12/26/1999 1:26:00 PM
From: H James Morris	Read Replies (1) \| Respond to of 164684

Re:B2B Not enough investors looked closely enough at what Mary had to say in her Barrons interview about B2B stocks. Although this sector has been a tremendous investment for all of us, I think these low margins that Mary is talking about will eventually bring these B2B back to reality. But then, I also thought that Bezo's low margins would have caught up to him earlier. I want to go on record as being the first investor here to set up a box on Cmrc @ 505. Was that the biggest mistake of this year or what? Now I'm in what they call dead man's land. That means a bunch of money tied up going no where!!! >Table: Meeker On Internet Stocks Q: There has been a lot of excitement about so-called business-to-business Internet companies. What's your view on that sector? A: There will be a new wave of business-to-business companies coming public. The changes caused by these companies will arguably be more powerful than the business changes caused by the business-to-consumer companies. Let me explain why. It's not critical for me to buy a book online for my mother or father for Christmas. But if I'm a procurement officer at Hewlett-Packard or AT&T or Morgan Stanley, it is critical for me to try and save money for my firm. And so while it's unlikely that business-to-consumer commerce goes to more than 10% of retail in the next five years, it wouldn't be a surprise if we see a more rapid migration to e-commerce by businesses. In which case there should a lot of companies that really are exciting and do deserve financing and do get out into the public markets. That said, hear me out: The business-to-business companies that we have seen to date don't all have business models. And it is very easy to set up an exchange, or in theory set up an exchange, to sell widgets. The reality is that is not a very high-margin business. When push comes to shove, distribution businesses by and large are 1%-10% net margin businesses. Many of those models will probably be aggressively accepted by the public markets because they are in the right space. Yet many will not have shown that their models work in the year 2000.

To: Lizzie Tudor who wrote (88582)	12/26/1999 1:39:00 PM
From: H James Morris	Read Replies (1) \| Respond to of 164684

Re: our conversation yesterday on Hedge funds. I didn't know you where rich? But, why you don't buy a home is beyond me. Do you think that Bay Area real estate is going to ever get cheaper? From BW. >Nice Hedges, but Beware of Thorns The upside is huge. And the risks can be minimized Only a decade ago, hedge funds were the playgrounds of a chosen few, socking in terrific returns while mutual funds and other vanilla investments plodded along. Today, hedge funds are getting a bad rap. They have the flexibility to go both long and short and to use extensive leverage, which allows them to prosper even in bear markets. But negative publicity has focused on Long-Term Capital Management, which almost had a meltdown a year ago, and poor performers such as Julian Robertson Jr., chairman and CEO of Tiger Management, whose once-successful hedge fund group has fallen 22% this year. Hedge-fund investing, though, is actually healthier than ever. The hedgies are up 23% through Nov. 30, beating the Standard & Poor's 500-stock index by a full nine percentage points (table). As these numbers show, investing in hedge funds can still have a rich payoff. That makes sense, because to invest in one you have to be rich: Your net worth must be at least $1 million, and minimum investments are commonly that high or higher. Hedge funds attract some of the smartest investment pros on Wall Street, but the Robertson woes show that even the best-known names in hedge-fund investing can produce rotten returns. Still, there are some common-sense steps you can take if you want to avoid getting burned by potential losers. First, don't be tempted to buy into a fund that happens to be the hot player at that moment. High-tech hedge funds are current leaders, up 76% so far this year, but such gains will be hard to repeat. E. Lee Hennessee, a veteran hedge-fund maven who runs the Hennessee Group consulting firm, is putting her clients into hedge funds that invest in Europe, in the belief that European markets are poised for growth and restructuring. Investors should take a sharp look at the liquidity of hedge-fund portfolios to ensure that they don't wind up putting their money into another LTCM. That fund took positions in derivatives that proved difficult to unwind when the fund needed cash--and nearly sparked a global financial crisis. Charles Gradante, Hennessee Group's chief financial officer, says potential investors should also ascertain the extent to which funds have positions in securities that don't trade often. Those positions may not only be illiquid but also have imprecise pricing. LOCKUP ALERT. High leverage is also a potential danger because it can make hedge-fund returns fluctuate wildly. Leverage has helped as well as hurt ``macro' funds, which speculate in a wide range of global currency and stock markets. Currently they're hurting: Macro funds, up a mere 2.5% this year, are among the two worst performers this year. The other one is short-selling hedge funds--down 7% this year--which also use substantial leverage. Investors should also avoid ``lockups': arrangements where investors must keep their money in a fund for several years. But even that's not a hard-and-fast rule. For example, Morgens, Waterfall, Vintiadis & Co., is raising money for its Restart Partners hedge fund, which will require investors to tie up their money for four years. The lengthy lockup, though risky, makes sense because Morgens is buying discounted distressed bank debt, which doesn't exactly trade like IBM. For safety, stick with funds that use moderate leverage and have a year-in, year-out record of healthy returns. A good example is the Zweig-DiMenna Partners, which has managed to achieve a 26% annual return for the past 15 years, after fees, without a single down year. Consistency is not too much to ask of a hedge-fund manager. After all, they get 20% of profits plus 1% of assets--a nice piece of the pie, and the reason most hedge-fund managers got into the business in the first place.