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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Jess Beltz who wrote (40954)	12/25/1998 8:09:00 PM
From: Skeeter Bug	Respond to of 132070

jess, the only issue i have is that eps are dropping and share prices are doubling. oh well, merry xmas and back to bizzaro world ;-)

To: Jess Beltz who wrote (40954)	12/26/1998 1:40:00 AM
From: Kerry Phineas	Read Replies (1) \| Respond to of 132070

Jess, the only thing I had any real issue with was your statements: <<More likely is the notion that there are simply a lot of people who do not understand the notion of geometric or exponential growth who are afraid of what they do not understand. note also that i am not saying that it is not possible for investment valuations in these companies to get ahead of themselves. Rather, i maintain that we simply od not know how to value these companies at this point. >> Implicit in these statements was the case that people who think the internet companies are overvalued think that because they do not understand the concept of exponential growth, whatever that means. My argument would be that there are problems with the business models of most of these companies that interfere with their ability to expand their business exponentially a la companies that have done so historically such as Intel, AMAT, Coke, etc. Most importantly there are no effective barriers to entry to the way the internet is set up right now. Companies may have an advantage right now because of their head start and the press they are getting as a result of their high-flying stock prices and their easy access to capital, but it is unlikely that advantage is sustainable. Note that I haven't been playing the internets to the downside of late(last four months, thank God), but thats only because of fear and not a rational evaluation of their true value. If I do play them to the downside in the future it will be an amazingly small position in a particularly manic stock like INKT or EBAY, and I will probably lose money if I do because I have bad Karma as a result of killing a small Mormon family.(OK, there were a lot of people in the family, but they were not very tall). When you make a statement like << it is not clear that any of the stocks in the Burke article that fostered this discussion are overvalued>> and then go into an argument as to why the semiconductor equipment manufacturers are still undervalued you argue that the market should be the best gauge as to the value to place on internet stocks because too little is known about correct methods of valuation for their stocks to place a correct value on their shares but that for semi-equip stocks because the market has incomplete knowledge re their true value you are more capable of placing a proper value on them. You agree with somebody that the market has a tendency to overreact on the downside for these companies, without agreeing with anyone else that companies might also overreact on the upside. With tech companies it is great if you understand some, most, or many of the issues surrounding the particular industry, but that isn't necessarily going to help when some company totally loses any advantage it once had and is leapfrogged by someone else in the industry. My only take is that AMAT and a few other companies may have an advantage because of their presence and size, but that for most of the other companies it is a roll of the dice. And nobody can correctly predict what kind of growth an inherently unstable industry like semi's is going to have in the future, or how much growth the companies will have when compared to a period like 95-96 where we had a ridiculous capacity expansion that still hasn't played itself out. Either the market is efficient or it isn't. People who consider it efficient with regard to a particular set of stocks but not for others may be correct but shouldn't ridicule people who consider it manic with regards to a certain set of stocks. Personally I'd argue the markets are not efficient whatsoever and supply/demand is the only real determinant of stock prices in the near term, and that all kinds of manipulations/inefficiencies/etc can come up; in the long term fundamentals may play out, but in the long term we will all be minions of Bill Gates, and we will be trading only MSFT, which of course always goes up. People who disagree with me are entitled to their opinion, but are of course wrong.