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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (63007)	11/23/2000 11:18:05 AM
From: Stephen M. DeMoss	Read Replies (1) \| Respond to of 99985

Dear Les, Your my #1 read and I very much appreciate your inputs. Your Nov. 20 'What to expect Now' has rightly predicted the lows we saw between Tuesday evening and Wensday (all day). The volume was light. If the prediction continues to be correct, we should be moving up near term. Am I correct in this? On the face of it, it seems correct in that we should get some resolution re the elections this weekend plus we are technically oversold (down 10% on the naz just this week). There also is a ton of money on the sidelines. Having said that, however, I notice how the charts of about 20+ companies (techs) are all below their 50 and in most cases 200DMA's. Those charts do nothing but predict continued lows. You also say you are long the Naz 100, yet its chart looks like it is falling off a cliff. Any additional thoughts would be very much welcomed. Ps. Do you have a site one subscribes to? And in it, do you make recommendations on individual companies to own or short? I would be interested in such a site from such a student of the market like yourself! Happy Thanksgiving. Steve D.

To: Les H who wrote (63007)	11/23/2000 3:17:45 PM
From: Rob S.	Respond to of 99985

The NASDAQ has been propelled by the explosive initial growth of the Internet and the promise that the huge margins of companies like CSCO can be projected forward. The immediate problem with that is that it hasn't anticipated any slowing. Another problem is that Wall Street has promoted several companies in the fiber optics field as if they can each capture the same market share. A broader problem with a market that places values on companies based on projections several years into the future is that this new media (Internet) is, by it's very nature, causing a tremendous change in the way business and people communicate and organize data. One of the basic ways that it is affecting these relationships is in how it serves as a vehicle to spur a new level of competition and producer to consumer efficiencies. A few years ago, an IBM sponsored advanced think tank did a study of the commercial aspects of the Internet; how it was expected to effect business, including such things as the level of competition and gross profit margins. They went so far as to model much of the new forms of Interactions on a super computer. The conclusions they came up with, also echoed by research reports done by a couple big 8 accounting firms, was that the Internet would become a fantastic media for conducting business to business and biz to consumer e-business. But they also projected that it provides a tremendous new way to communicate and compare product and pricing information and conduct business transactions at the speed of light (almost). The net effect (pardon the pun) would be to reduce margins to such an extent that economic "dislocation" was almost inevitable. A likely scenario might be that the "new economy" would evolve through stages patterned after traditional business models: 1] The introductory phase in which growth to build infrastructure and do business on the new media would be more explosive than anything in history. 2] A very rapid change in how this business climate would effect profit margins. Competition would grow fiercely as consumers found it much easier to "shop around" to compare products and services. It can be argued that this is particularly true for b-to-b commerce because one of the primary objectives of business is to obtain inputs at a favorable price. 3] As the initial growth phase of the internet subsided, price savings would become even more important a competitive force. This would potentially drive margins down to levels, which cause a re-structuring of business and current media structures (like television or the music industry). The inevitable result would mean that more business would be done more easily but at a drastically reduced profit level. What is more important to investors than a philisophical discussion is how this combination of explosive growth and greatly heightened and changing competitive landscape will effect investment decisions. By it's very nature it will lead to false assumptions about profitability imo. The growth is terribly exciting and of historic proportions. But the profits being projected are based on old world expectations for competition and profits. We have seen some of the shake on in the collision between these two massive forces in our society already: the massive scaling of capital thrown at the hyper growth Internet dot coms. Then has come the shocking realization that it is very hard to make decent profits. Analysts should have seen this conflict coming. The initial studies were done years ago. Common sense told you these had more than casual merit. But the opportunity for Wall Street was far too great. Shove out the IPOs built on a voodoo stew of old world profitability combined with new world explosive growth and investors become zombies.