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Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: Mark Fowler who wrote (4422)	5/17/1998 6:08:00 PM
From: marion (Hijacked)	Respond to of 164684

Here is an article from todays NY Times. What I find interesting is how insiders can be protected from a stock decline through the use of derivatives. Market Place: Speculation May Be Different This Time By FLOYD NORRIS NEW YORK -- Some things change. Some don't. A penny-stock brokerage firm was charged last week with fraud in the sale of securities to its customers. The securities were warrants to buy shares of a company whose NASDAQ ticker symbol is now PUFF. The brokerage firm, Biltmore Securities, denies the allegations. Speculators have been flooding for a month into tiny Internet stocks, with trading volume far in excess of the number of shares outstanding. K-tel, the peddler of collections of old hits on late-night television, is losing money, but its stock rose tenfold after it announced plans to peddle CDs over the Internet. Some insiders sold. Goldman Sachs is considering underwriting securities that would let investors bet on rainfall or cold weather. Already some securities amount to wagers on hurricanes. A couple of weeks ago, an executive from Lehman Brothers told a conference that the market for collars was booming. He was not discussing fashion trends, but rather an over-the-counter options package. Corporate executives give up some of the possible upside from share price gains in return for the promise of getting cash if the shares of their company happen to drop in value. The Lehman executive complained, however, that his firm was losing market share because the securities arms of banks were offering executives better terms on the collars. He warned that some of the banks didn't understand how much risk they were facing. Asked if Lehman's top management understood, he replied that his bosses did not know details but were doing a good job. He was fired for the tepid endorsement. What's new here? Not the penny-stock fraud charges. Such selling of ridiculously overpriced securities has been a feature of every bull market. And frothy markets have often sparked absurd run-ups in companies with little to recommend them other than the fact that they want to be involved in businesses thought to be hot. Three decades ago, something called Minnie Pearl's Fried Chicken wanted to be involved in businesses thought to be hot. Three decades ago, something called Minnie Pearl's Fried Chicken traded as though it was going to outdo Kentucky Fried Chicken. Some made a lot of money by buying and getting out in time. Others were left holding shares worth less than a crispy gizzard. But one thing is different this time. Derivatives have enabled risks to be passed on in ways not dreamed of in bull markets of yore. Your bond mutual fund may own securities that will yield good income -- unless there is a big hurricane, in which case the securities will be worthless. A company executive may "own" a lot of stock but have no risk of loss if the stock collapses. That risk may be held by your bank, which may or may not have accurately weighed the risk in determining how much it needs in reserves. This bull market has been fueled by cash from individual Americans who have come to believe that stocks are now and always will be the best long-term investment. There is no sign that the flood of cash will ebb any time soon. But when it does, the big surprises are likely to come as we -- and managements and regulators -- find out just where the risks ended up when the music stopped.

To: Mark Fowler who wrote (4422)	5/17/1998 6:10:00 PM
From: Glenn D. Rudolph	Read Replies (1) \| Respond to of 164684

Mark, Is this article about two weeks old? Just wondering. Jeff is an Amazon bull and always has been. He is getting a lot of flack on the Motley Fool board due to his opinion. Everything from The Motley Fool is an added value reseller for Amazon (which they are) to the rediculous assumptions on the part of Jeff. Jeff is entitled to his opinion which is what makes a market. I feel he is incorrect but not sure I would take the stance he is biased because his firm receives money from Amazon. I suppose they could get money from BKS if they decided to change or BGP. Oh well:-) Glenn