Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: llamaphlegm who wrote (32359)	1/4/1999 12:05:00 PM
From: Rob S.	Respond to of 164684

<"Corporate balance sheets look fine," said William Dudley, chief economist at Goldman, Sachs, "as long as you focus your eye on debt as a ratio of the market value of a company's stock. But when you look at debt as a percentage of book value -- the actual value of a company's equipment, buildings and other assets -- it makes you sort of nervous."> This encapsulates the current situation in corporate America pretty well. CFO's have convinced the boards of companies that they can parlay the enormous valuations of their stocks in acquisitions and increased debt while inflation rates are low. The FED has been forced to curtail a tight money policy in favor of world financial stability. It's important to keep in mind that fluctuations in currency valuations and the benefits of a deflationary price spiral that is being buffered by large increases in liquidity will roll their way through the world-wide economy. The US consumer and investor is greatly benefiting by this increase in liquidity in combination with lowered prices for imported goods. While some corporations have benefited in the short term, the longer-term effect of greatly lowered prices and excess liquidity could be less than desirable. The hope is for a "soft landing" as Far East, South American and other economies pull themselves into a better balance between a supply glut and demand and dig themselves out of recession. Still there has been little choice to avoid a crisis. Either pump things up or watch the world slip into a great depression. Amazon and other Internet stocks are riding on the wave of consumer confidence that is bolstered by a gigantic infusion of liquidity combined with cheap prices - the "Goldilocks Economy" has come home to the average person. Helping to bolster this confidence and willingness to plunge deeper into debt, both in consumer credit and corporate borrowing, is the gargantuan rise in the stock market. Why not feel great and spend more? Why not invest in the high flyers when the critics have proven who have pointed out the historically high valuations have proven to be wrong again and again over the past year? Why? Because history does eventually tend to repeat itself. The tremendous "pump" of the liquidity markets can't go on forever. And the lowered commodity prices will wind their way into corporations with the result of lower profits. Profit projections for 1999 are lower than for 1998 despite the increased liquidity. Economic growth in the US should be modest. Before long this will result in fewer pay increases and new jobs. When the expectations for wage increases start to shift, consumers will be forced to pay down their debts. The Internet stocks are the apex of consumer confidence (speculation) and will ride the tide as long as the momentum of increased liquidity flows into the US. But what goes up the most in these times of flush pay checks and drawn down credit limits will be precisely what contracts most when the joy ride is over. But for at least for a while let the good times roll! Amazon, as I posted about seven weeks ago, may se sales as high as $400 million this quarter. That is great growth and keeps Amazon at the lead of the e-commerce pack.