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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: Mark Marcellus who wrote (57562)	4/21/2001 4:26:21 AM
From: Joseph Pareti	Read Replies (1) \| Respond to of 74651

Re , anyone who can spin a conspiracy theory involving Bill Fleckenstein and Mary Meeker has a streak of originality. Thank you, but this was not my intent. First, it's my great pleasure to answer directly one of the members of the "clowns only zone", since your top priest has denied me access to that thread a long time ago. Never mind, the greatest reward at the end of the day is fatta pockets. And I have enough patience for this. As to the "theory", I'll try to articulate it once more, hopefully in a language that is palatable to the SI reviewers. I base my analysis on the following points. (i) in the time period between 1997 and March 2000 the tech stocks rallied to levels that were clearly unsustainable. The fatal flaw in it was that people lost any sense of reality (= profit, P/E, etc). I identify Meeker as the symbol of this systemic change. Of course Meeker was not the only one, but my theory needs a scape goat. This is what I would call the e-sabotage phase. As I live on the other side of the ocean where some peaks get filtered out I may not have direct information, but it appears people were borrowing against the net-worth fueled by the "Meeker's effect". Likewise as the process gained momentum top tier wall str. underwriters got into this thus effectively taking crap companies public. Besides the "dot-bombs" the penguin league springs to mind as a clear example. This is what I would call the "Korean phase" (i.e. the e-sabotage ran deep enough to subvert key tenets at THE VERY CORE of the financial system, in a manner that resembles the Korean financial melt down in late 1997-1998 time frame). (ii) The fed raised interest rates to a level that was also highly questionable, especially the 50 points in May 2000. A friend of mine called AG "the King Midas in reverse", i.e. anything he touches turns to trash. I don't really share that view. i believe AG's target was the Ponzi scheme that at the time was calling the shots and he might have acted BEFORE the indicators had a chance to fully reflect it. (iii) when the notion of profit and valuation finally made its way back into the system - Fall Y2000-- the real damage got accelerated by the bears. This is what I would call the "Fleckenstein sabotage" phase. (Again BF like Meeker is just another token that I need in order to put flesh onto the bone). The net result was not very different from the e-sabotage phase, i.e. the street turned AGAIN into a Ponzi scheme. The fact this time it happened on the short side is just a detail. The common factor between the e-sabotage and the Fleckenstein-sabotage is that in both cases the process was driven by vicious, destructive forces. The real dark side. (iv) Finally there is a way out of this mess and it's based on an "extended" Warren Buffett, i.e. "ignore the market delirium all along, while investing in technology". The magic formula as indicated by Ed Yardeni is: p = (p/e) * e Where (p/e) is approx the inverse of the 10years T-bond yield and E is the key thing. Because it's a function of superior technology, market dominance, AND STRENGTH IN THE PIGGY BANK. AND THIS IS WINTEL WINTEL WINTEL.