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Strategies & Market Trends : Rainier's Column -- Ignore unavailable to you. Want to Upgrade?

To: kjhwang who wrote (30)	3/21/2000 4:43:00 PM
From: HeyRainier	Read Replies (1) \| Respond to of 106

TCI, <<Any thoughts re: return to fundamentals/valuations due to 1. Neg. Barron's article on internets and cash flow, and 2. Blow-up of microstrategy?>> I've been rubbing my chin on the rotation back into semi-rationality. The Barron's article highlighted some things that have been taking place for quite some time now (they tend to jump in after the fact), so the surprise factor is low, but only now with the sustained compression in internet stock prices has the window for equity financing finally begun to close. It makes the cash flow situation more acute. The noose gets tighter because these companies now have less room to maneuver in terms of screwing around with their unsustainable business models. It's a negative spiral that plays upon my theory of "price affecting price." They'll get stamped out in the manner predicted, IMO. Blodget even agrees that a shakeout is coming. I get the feeling, therefore, that the market is getting more disciplined with regard to keeping its capital more focused on the companies that have longer term staying power. You can see it in all the X-firm indexes/long term picks that include mostly the big names. Is the return to fundamentals and valuations sustainable? I don't know; I do, however, like to keep my exposure via a barbell strategy just so I don't get left out of the party. For example, I loaded up on a beaten value name like XRX at 23 5/16 just last week (the position got called away for a nice 1 week return), but had traded some MSFT and other tech-like names. Barbells don't necessarily mean performance at the expense of the other end, if constructed well (and adding a sprinkle of good fortune). As for Microstrategy, it's certainly an eye-opener, but I think the market has come to accept these one-day wonders as a necessary evil of the market; it's probably too small to shake the market into embracing a more rational approach to investing. Rainier