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Non-Tech : The Critical Investing Workshop -- Ignore unavailable to you. Want to Upgrade?

To: abstract who wrote (14688)	4/18/2000 12:13:00 AM
From: r.edwards	Read Replies (1) \| Respond to of 35685

Man, I feel priviledged to have someone P O'd at me !<g> (I once was a judge at the Local Gay beauty Pagent. I was a Disco DJ Personality,Big STUD 1978, [I am straight]. But thats what they wanted, a straight guy. It was a Hoot......! was 18 at the time.) However; I have been forgiven through the blood of the living LORD JESUS . (had a cousin, off'ed himself, couldn't fit in ,he was gay) I have studied biology and human behavior. I understand experimentation. But, I believe it is against God's Will and sinful. We are never going back to a stable, mature civilization where things are predictable and improve only incrementally. This isn't a "bubble" - it's a permanent change in the nature of risk and the markets. Growth rates won't slow down again and give us a breather. They are just going to speed up. The reason for this is the nature of intellectual capital. It builds on itself geometrically, even combinatorially. This means very slow growth initially, and a long time ramping up to where things take off. But when we get there, look out. The Internet has enabled humans to begin putting knowledge to work in so many different ways that the rate of innovation and value creation is hitting the steep part of the hockey stick curve. I don't know where it ends. No one does. But it doesn't go back to where we were before 1995. Secondly, the direction of risk has changed. During an aging, slow growth, mature industrial civilization, there were virtually no super growth companies, growing at 50% - 100% per year, to make up for mistakes. So the risk was that you picked a stock that tanked, say, 50% for some reason. Mistakes like that could wreck a portfolio, because it took the other, better companies a long time to make it up. Even even the really fast growing companies like the big pharmaceuticals only grew 15% - 20% a year, for the most part. Growth rates higher than that lasted only briefly. Portfolio managers focused on what's known in tennis as a "Loser's game" - on not screwing up, and letting the other guy make the mistakes. This is what "value" investors do. That's no longer true. The risk today is that you aren't in those companies that are growing sales 50%+ per year, and earnings at 100%+. It matters much less if one of your companies gets into trouble and drops 50%, because you can make it up on another company in a day, and your fund is stuffed full of 'em. So successful portfolio managers today focus on what's known as a "Winner's game" - pushing the other player into a mistake by aggressive play. This is a fundamental change in the way we should be picking stocks. Furthermore, the reasons for 50% drops have changed. A 50% drop in the old industrial world before 1995 meant a company had screwed up big-time, and it would probably take years to recover, if ever. That's still true of the old economy companies, but not Internet stocks. Price drops of 50% or so are a routine part of the annual trading range of virtually all Internet stocks. In this group, it is not usually a reason to sell. It just goes with the territory. So, you can't apply the old rules like stop loss orders, or you will simply sell off all your best companies, and be stuck with a bunch of canal and rail stocks from the Dark Ages. If you think this is some crazy, wild, speculative leap, maybe so. Go visit our Amazon.com book store and read Complexity, by Mitchell Waldrop. Read Out of Control, by Kevin Kelly. Read At Home in the Universe, by Stuart Kauffman. Do it in that order. It won't seem crazy at all then, I guarantee it. So if you thought that if you just stuck it out, you'd get a breather and be able to get back in, or have time to figure out what the hell's happening, forget it. We're never going back, guys, and we're never slowing down. Get used to it. I did not mean to specifically offend you. Good fortune to all of us !