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.

Non-Tech : Bill Wexler's Dog Pound -- Ignore unavailable to you. Want to Upgrade?

To: Graeme Smith who wrote (6114)	1/15/2000 7:23:00 PM
From: Phil(bullrider)	Read Replies (1) \| Respond to of 10293

Graeme, Without responding to your post point by point, let me attempt to address this one: But, your right. I could be flawed to expect PE's to return to the 10-20 range. That was my possbility number 1, PE's might remain at 200 indefinitately. Most people that are currently investing in stocks based on the Internet believe that in the future the companies will grow into the PE. Will it happen? I don't know. But I do know that I am not investing in any of the so-called "first tier" internuts. All of my Internet based longs are the so called "support" companies. Am I wrong to think that the Internet will change the lives of the worlds population? I don't think so. Now, let's get to the subject of the Internet companies losing money to operate. Don't almost all start-up companies lose money when they are in their infancy? Aren't almost all Internet companies still in their infancy? I will not argue the fact that investors are appearing to overvalue a lot of start up technology companies. The only point I would offer as an argument is that we have nothing to base an argument on because we have no history yet. I'll get back to you in a couple of years. Have fun, Phil

To: Graeme Smith who wrote (6114)	1/15/2000 9:35:00 PM
From: BDR	Read Replies (2) \| Respond to of 10293

The article cited below makes many of the same arguments as "fiendbear". In fact this article quotes the same Yale economist's prediction that stocks had reached a permanent plateau just before the crash in 1929 and also gives the automobile and radio as examples of technology cited at the time to support the then new paradigm. In fact he references the FiendBear site at the end of this article. Are all these guys reading from the same script? Anyway, here are some excerpts in case you can't access the site. cross-currents.net Alan M. Newman Editor, HD BROUS & Co., Inc.'s CROSSCURRENTS Technical Market Analyst, HD BROUS & Co., Inc. Pictures of a Stock Market Mania Milennium Mania Meets the Decennial Cycle In support of his assertion that we have a mania he states: "Through most of December 1999, stocks with no earnings were up an average of 50%. Stocks with earnings were down an average of 2%!" Then he says: "For the year, about 54.2% of all stock issues traded in U.S. markets were down in price." "Half of the S&P 500's gains for 1999 were accomplished by the action in only seven issues; Microsoft, Cisco Systems, General Electric, Wal-mart Stores, Nortel Networks, Oracle, America Online. Clearly, the so-called bull market is in name only, as evidenced solely by the rapid and continued appreciation of the major indexes - fraudently implying that most stocks are rising in value. On the NYSE, the basis for the indicator pictured below, only 38% of all NYSE issues rose in value for all of 1999!" "Share prices cannot rise at the levels expected by the participants of this mania unless GDP rises at nearly the same levels for many years to come. The highest annual growth rates - in excess of 20% - for GDP have previously come only after depression and war, factors that would wreak havoc on stock prices. The highest 10-year GDP growth rate in "normal" times was 10.7% ending in 1981, a period actually marked by high inflation and near zero gains in stock prices! Nevertheless, we could easily infer that such a robust growth rate might indicate a theoretical limit of about 12% on annualized price gains for any particular decade. But share prices have already discounted dramatically higher growth by rising at a rate of 17% per year over the last 17 years, despite an annualized rate of growth in GDP of only 6.1%! In other words, prices have all along been predicting an explosion in economic growth, yet the explosion has not yet occurred. At this juncture, the "prediction" requires growth in GDP of about 20% per year over the next decade without fostering any serious inflation. This scenario is beyond fantasy - it is impossible. Any regression to a more "normal" rate of growth in prices could easily result in lower stock prices as far as five to ten years out!" So, having read all that I am a bit confused. -We are in the middle of a market mania because stock prices are shooting through the roof. -But most stocks aren't going up, they are declining. (So which is it?) -Only a small sample of stocks that happen to be represented in certain indices are going up and that skews the indices. (That may be misleading but is it unhealthy? Some stocks go up, some go down. What is unhealthy about that?) I am left trying to figure out if we have a stock market mania or a segment mania. Even some of the internet stocks are already coming back to earth as they fail to perform: Web Retailers Pressured on Profits wire.ap.org The stocks highlighted in the AP article are AMZN, ETYS, BYND, VUSA, and BNBN. Just a few months ago they were being given as examples of the absurd valuations. The valuations seem to already be correcting. siliconinvestor.com I don't mean to be the ostrich with his head in the sand but I don't think Chicken Little has it right either.