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

To: HG who wrote (41991)	1/4/1999 5:55:00 AM
From: accountclosed	Respond to of 132070

Good morning Happy girl. It's the middle of the night where you are. Some arguement which I have never heard before. Ummm. That might be a tall order since you are perched in the middle of the yhoo thread. And of course I have no idea what arguments you have heard before. But, let me start. I don't want to be allowed only one post to present my ideas, though ;-). I always like to start at the beginning. The beginning for investors ought to be very basic questions like what assets and liabilities do they have, how old are they, what are their goals, etc. Another question in evaluating a stock would be what percentage of the portfolio are we talking about. It is hard for me to take any debate out of these contexts. You seem to be young. I'm 40. We have posters here 30 years and more older than me. We have people that can only buy one stock and are deeply in credit card debt to people that have very large diversified portfolios. So would you agree it is a debate that needs context? You seem to be very aggressive not only by your stock picks, but also that you have a one way bet on a specific part of technology. Also, would you agree, that we all don't play every game equally well?

To: HG who wrote (41991)	1/4/1999 8:06:00 AM
From: Skeeter Bug	Read Replies (3) \| Respond to of 132070

hg, not sure what you've heard before, but here is why i think the nets are WAY overvalued. 1. they won't live up to their promise (hype to the nth power) why, you ask? here are some reasons: 1. the revenue growth rate is very large - but the base is very small. the growth rates will slow dramatically as the base gets bigger. analysts tend to extrapolate current trends into the future forever. bad, bad analysis. that is why whittington had a $17 eps estimate for 1996 or 1997 for micron technology. let me give you hint whether he was right or not - the stock hit $17 ;-) the supply and demand issues are quite dynamic. 2. there is and will continue to be a glut of supply. the hype for the net is astounding. the ease of entry is quite simple. neighborhood 7-11s will have net sites. pricing power is dictated by supply and demand and these two issues GUARANTEE that supply will overwhelm even fast growing demand. again, dram has been groiwing over 100% a year. all the analysts for the past 2 years have quoted this and said mu was sure to make lots of money. NOT ONCE did they talk about supply increasing 20-40% FASTER than demand... 3. information flow benefits the consumer. i love the net b/ci get thing DIRT CHEAP. ms office for $35 (i found out i overpaid ;-) some poor fella is busy paying $400+ for it. my sony pii300 was $1k over 6 months ago - some people are paying that today. corel draw for $85 while somebody else is buying it for $700 somewhere. the net is nothing if it doesn't speed the flow of information. that benefits me. in the beginning, the newbie netizens will migrate to the amzns and the barenes and nobles, however, as their collective net intelligence increases, they will diversify towaRDS THE LOWEST COST. 4. doing business through the web is expensive. it is merely a glorified mail order company. sure, the analysts hype that few bricks and little mortar is required. they reperat that over and over and over. the same analysts that will say how great demand is while supply is growing much faster... the bottom line is that shipping is a HUGE expense. i argued many, many months ago that the real winner in this net craze is ups. shipping costs can easily be 10-30% of total costs. figure in some returns and your shipping cost is multiplied by a factor of 3. fulfillment costs are high. you need an automated distribution center and people to support fulfillment. this costs dollars. 5. shopping is a social event for the big time shoppers and the net is anti-social. sure, all the computer geeks are out there buying their computer books from amzn. now. but, at least in my family, my wife is the big spender and the big shopper. she might buy something on the net every now and then, however, she would go stir crazy w/o going to the mall on a regular basis. she gets lunch, has a latte. if she wants a book she can sit down and read a part of it before ordering. the net offers none of this social aspect - and it is a POWERFUL economic force... 6. the computer industry is growing... however, the rate of growth is slowing and is TOTALLY PRICE DEPENDENT. we've recently seen another round of 20% price cuts from companies that are having a hard time increasing eps (except dell - so far). pricing matters. if prices weren't dropping, and dropping quickly, then pc sales growth would turn into pc sales contraction. price will also matter very much for the avg ecommerce transaction. 7. net advertising has yet to prove itself. anybody can advertise successfully to lose money. can net advertising ever lead to great profits? well, that is being tested now with zero positive results so far. again, the net hype is extraordinary (more important than the wheel, for goodness sakes!) and everyone is willing to pay up to be a part of this "revolution." if there is no payback then nobody will pay up to be on the net. the net is also sensitive to the macro economic status of america. with the world in recession/depression, one ought to discount the possibility of the good ole usa being dragged down into the fray. 8. my personal experience is that the net is hard to use to shop - and i have a cable modem! i have a membership to netmarket.com. i hate them. besides their service being horrible (at least to me), it is difficult to navigate through their site and I FIND BETTER PROICES IN REGULAR STORES. i used to have a membership to a phone order service that, if i recall correctly, gave much better pricing. i haven't bought one thing from netmarket and have found them to not be too useful. i pitty the poor soul who has a 33k modem navigating their site. it would be less time consuming to go to the mall. 9. the expectations are absurd. amzn is valued as though it will earn every year what barnes and noble hasn't earned in its entire history - times two or three. i think that b&n's entire history is correct, though the time frame may be a little different. these are a few of the reasons why i don't like the net stocks - especially at today's valuations. anytime you buy something that everyone perceives as "better than the wheel" you had better believe you are overpaying by a handsome amount! ;-) as for yhoo specifically, they are a gamble that net advertising actually provides a return. it is fun and cute to ring up huge hits on yhoo and watch the stock price go up, however, hits don't pay salaries forever. they need green dollars. i've had 10s of thousands of hits on yhoo and never bought a darn thing from them. if i'm anywhere near normal, the net advertising budgets will be slashed and yhoo will look like what remains after a scorched earth policy is enforced. the key is to figure out how long people will give net advertising the benefit of the doubt... after that, game over...