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To: Glenn D. Rudolph who wrote (4142)	5/10/1998 7:18:00 PM
From: Skeeter Bug	Read Replies (2) \| Respond to of 164684

of course, that piece depends on the economy charging forward forever just like it has the last 4 years. just a little detail i thought i'd highlight. remember when real estate was hot as an investment. not anymore. the same will happen with stocks at some point and all these lofty pes will go down in flames, imho. when, i don't know.

To: Glenn D. Rudolph who wrote (4142)	5/12/1998 3:23:00 PM
From: Oeconomicus	Read Replies (2) \| Respond to of 164684

Glenn, I don't know who Jim Jubak is or what his qualifications are, but the article you posted ("Git[sic] Out the Branding Iron") is a very good example of the twisted financial logic that is being used to justify ever higher prices for the so called "brand leaders" on the Internet. He argues that, in the year 2000 and with 1 million accounts, ETrade will be worth somewhere between $2.2 billion and $7.3 billion. How does he arrive at this? Simple - it's the present value of either five years or 20 years of revenue, with the number of years discounted depending on how strong a "brand" they have. Let's see, if we have a really strong brand and the average customer sticks with ETrade for 20 years (yeah, right!), spending $600/yr, then that customer is worth $7,300? This guy obviously skipped his intro finance class (if he went to school at all). First, he's discounting 20 years of revenue - What will the world look like in 20 years? Second, he's discounting 20 years of revenue - Did he forget that it costs money to operate a business? Third, he's using a discount rate of less than 5.5% to value equity - Even utility companies look for better returns than that on equity - Hasn't he heard that stock investors today are looking for 20-30% per annum on their money? Now, if you assume that his "50% gross margin" flows straight to the bottom line (no taxes either, I guess), then discount $300/yr instead of $600, you'd need to use a -1.9% discount rate to arrive at a present value of $7,300. This kind of spurious analysis contributes to the mania in Internet stocks by feeding investors with financial jargon and meaningless calculations to justify stock valuations. Though many investors would see the flawed reasoning, others may read his column and assume he knows what he's talking about. I don't know whether he claims to be a journalist or an analyst, but if the former, he should make a little more effort to understand the subject he is writing about before pretending to have any expertise. If the latter, he should be canned immediately as he obviously falsified his educational credentials in applying for the job. I assume this came from some Web site (no respectable business magazine would publish such rubbish) - anybody can be a columnist on the Internet. Regards, Bob