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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (13402)	1/13/2002 1:25:03 PM
From: smolejv@gmx.net	Read Replies (1) \| Respond to of 74559

The theory of reflexivity - see Soros papers - ... it makes real good sense to read the ref, Dak pasted. Whatever I will write here, will be half-cooked (but I can still try;) A posteriori one can of course take the scalpel and cut up the past in some predetermined, surgeon-like way ("Was it a fraud? What did SEC have to say about it? was the Rev a maniac/ insane/ coockoo?"). What is the best wishy-washy description, would be a "self-fullfilling prophecy". Anyhow something very much away from our assumption of efficient markets. Rationally - missing probably the whole issue, but again, read Soros - one could say, in the case of the earnings discussed, that the run-up in the number of believers caused the run-up in the market price, which made the dilution possible without diluting the capital ("just take my money, Rev, Hallelujah"). With all the bathtubs full of money you can buy up competition and their cashflow etc... I mean, Im just extemporizing from my (fond) memories of cisco blow-overs. And then, there comes a moment when somebody shows up with numbers that prove that, given the current multiples, every household in the world will have to own one CSCO router, in 6 quarters at the latest. A great idea, a great chance, resonant cavity (standing waves reflecting from the worldwide walls, filling up our greedy ears) and after that everything is different. Worldwide phase transition. Again, here's the ref soros.org dj

To: GraceZ who wrote (13402)	1/13/2002 3:23:38 PM
From: Ahda	Read Replies (1) \| Respond to of 74559

Notice now that equity capital is no longer cheap, companies are now using the debt markets to raise capital. When that becomes too expensive (and it will even though the Fed is trying to artificially hold down the cost of money, again) they will be left with the other option, funding growth from operations. Its a self correcting mechanism that would have corrected itself far sooner and with far less pain if the Fed had stopped interfering in the pricing of money. First you have to define the company in a public company it is not always conventional debt that starts the initial ball rolling. The loan comes from private investment the private investment is secured in a non tradeable issue of stock that at a set date providing the company goes public now become tradeable. The fed here has nothing to do with the original loans that are issued as those loans in some companies come from any and all corners or the world. The Feds major impact here has been to create inflation in wages under the assumption they could increase prosperity. Europe faced a similar problems as wages were too high in contrast to the US dollar who exceeded most other dollars value prior to global economy competition. Seed money is what Dak is talking about. The investing group knows exactly what it is doing and how large the return can be for them . It is not just the least expensive way to get capital sometimes it is the only way to get capital. The problem surfaces when people purchase some small cap stocks and over the counter issues and find there investments have divested them of capital. It amounts to the legal taking of funds from the public who don't realize how limited their chance of return is. Issuing paper (stock certificates) is one of the ways companies solve debt problems. It is not all that simple but it is done all the time. The return can be vast and it costs very little in terms of real dollars to your company, mostly it is your litigation fees. The return for the investors for investment in you can be huge as the paper can increase significantly. These people are shrewd they usually recoup the original investment they make in you very rapidly and if you make it they really rake in a bundle on warrants and other goodies attached to the loan. There is no self correcting mechanism in this world it is ad infinitum as the world is filled with investment bankers not just in the US. The only self correcting mechanism is just how good our laws are that really becomes the only question as to how good the argument is to prove the law states that which it does not state. In this was a protected economy you would be right.

To: GraceZ who wrote (13402)	1/13/2002 5:51:21 PM
From: Stock Farmer	Respond to of 74559

Hi Grace, Perhaps see my reply to Darlene. Message 16903030 The earnings these companies reported exist. What is phantom is their ability to grow the business without constant, ongoing infusion of capital that has been coming from the equity markets. Not through secondary offerings, but through their use of stock as alternative currency. The companies are not generating enough capital to grow as fast as earnings expectations would have them grow. They aren't borrowing this capital (money) from the banks either. So where does it come from? They are borrowing from shareholders though a very nifty sleight of hand. Which shareholders don't seem to care or even know. Even though they were tumbling all over themselves to become owners of 'debt free' companies. Thereby queuing up to be their lenders. It would be laughable if it weren't so impolite. The amazing thing is that it's working. Pay no attention to the man behind the curtain. John