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

To: Mike M who wrote (20257)	10/6/1998 11:07:00 AM
From: H James Morris	Read Replies (1) \| Respond to of 164684

By JOHN CUNNIFF .c The Associated Press NEW YORK (AP) -- In so many of the recent calamities in the securities markets, a consideration of investment value is absent. As absent, you might say, as prudence is absent in the lending habits of troubled banks. In both instances, betting or gambling -- on the direction of prices, on the possible actions of others, on the accuracy of esoteric charts and graphs -- better describes the market involvement of the victims. Long-Term Capital Management, the hedge fund that needed an infusion of $3.6 billion to remain solvent, bet among other things on temporary price aberrations and the likelihood of corporate takeovers. Victims in commodities markets, such as Victor Neiderhoffer, bet on the reappearance of certain price patterns and on their conviction that they possessed insight into the future not possessed by other mortals. Mutual funds took a dive betting that historic price-earnings and other ratios no longer applied in a new era, and because they believed the momentum of the market itself would forever carry it to new heights. Asian banks lowered reserves dangerously and violated simple lending standards because they couldn't resist the temptation to make a killing, apparently forgetting they might be among the victims. Forsaking old investments standards is as ancient as the human tendency to dump ethical norms, either in greedy pursuit of something extra or in cynical disdain for a past thought to have no lessons. Presumably, profits are the basis for evaluating investment potential, but no profits at all were needed to make Amazon.com one of the hottest stocks in the marketplace, or to make upstarts with an idea worth more than companies with big profits, big plants and big-name products and services. Investor overreaching hasn't been confined to upstarts. Somehow, investors thought Coca-Cola and Gillette could endlessly, even without temporary interruptions, raise consumption in nations mired in poverty. Check into any investing disaster, institutional or personal, and you're likely to find underlying values such as corporate management, new product development, market share and profit history were ignored. Substituted for value were price momentum, promotion and publicity, institutional following, market letter recommendations, visionary concepts or some other reason only vaguely, if at all, connected with value. In lending, especially in lending other people's money, prudence is the essential virtue. Regardless of how often it is violated or honored only in promises, it is still the ideal -- but one forever strained. Although it isn't often admitted, domestic and foreign lenders know when the line of separation has been crossed in lending to speculative hedge funds, to real estate developers or even to credit card customers. Prudence and value, therefore, may always remain ideals, but they take a pummeling when the risk is related solely to the possible reward rather than to the assured value. AP-NY-10-06-98 0002EDT