Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: IQBAL LATIF who wrote (30457)	1/14/2000 5:08:00 AM
From: IQBAL LATIF	Read Replies (2) \| Respond to of 50167

: BUY, BUY, BUY! Kevin Prigel America Online NYSE:AOL Internet \| Technology Quote \| News \| Snapshot \| Charts \| SEC \| Ratings Time Warner NYSE:TWX Consumer Stocks Quote \| News \| Snapshot \| Charts \| SEC \| Ratings Jan 11 2000 Over the past 24 hours the arb spread (the difference between what TWX and AOL shares are worth as a combined company, and what they're worth in the market) has narrowed immensely. As you can see in the chart below, Time Warner's shares are only "undervalued" by about 5%, while America Online shares are "overvalued" by about 5%. These spreads are completely normal, and represent the belief by the market that the merger falling apart is very unlikely. I continue to believe that AOL Time Warner, as a combined company, and America Online, as an independent company represent compelling investment opportunities. However, unlike yesterday (when the advantages of buying TWX far below its merged value far outweighed risks), I believe that the way to buy the merged company now is with shares of America Online. The key points to this strategy include: In the event of a failure of the merger, Time Warner shares will fall dramatically. I do not believe that America Online would suffer the same fate. A 5% spread is not worth the aforementioned risk. I believe that the possibility of a hostile bidder entering the picture is slim to none. Who else can pay over $170 billion for TWX? There are only 8 companies with market capitalizations above $180 billion. One is an oil company (ExxonMobil), one is a money center bank (Citigroup), one is a retailer (Wal-Mart), two are technology companies with no need for content (Intel and Cisco), one would have a minor interest (IBM), and two are serious contendors (Microsoft and General Electric) who would both be scrutinized by the government. Current Market Capitalization AOL 149 TWX 111 Combined Market Cap 260 Share of Combined Company AOL 143 TWX 117 Market Value To Merged Value Difference AOL -4.0% TWX 5.4%

To: IQBAL LATIF who wrote (30457)	1/14/2000 12:15:00 PM
From: N	Respond to of 50167

Dear Ike, Latif:The biggest impact of any correction would be on the asset side of the balance sheet. Companies like INTC are exposed to the New World but they are not thriving on market profits to make the numbers AG:If capital gains had no evident effect on consumption or investment, their existence would have no influence on output or employment either. Increased equity claims would merely match the increased market value of productive assets, affecting only balance sheets, not flows of goods and services, not supply or demand, and not labor markets. But this is patently not the case Latif:. In my opinion the dynamics and fluidity of the markets demands that our thoughts have to be subservient to the trend. The major problem I see is superimposition of 'our wisdom' over conventional market wisdom. That what history teaches us.. Well said...and Alan said in effect 'we haven't a clue...' but 'While we endeavor to find the proper configuration of ...policies..to sustain the remarkable economic performance..., there should be no ambiguity on the policies required to support enterprise and competition'. So bring on the basis points... Alas, my only grumble.. AG: In economic terms, we are reducing risk premiums and variances throughout the economic decision tree that drives production... wondering how recent monetary policy has contributed to the reduction of risk premia. Happy last year of last millenium, [in the A.D. calendar, of course!]dear Ike. Nancy