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

To: MoonBrother who wrote (33860)	1/9/1999 7:52:00 PM
From: Glenn D. Rudolph	Respond to of 164684

The Internet Capitalist SG Cowen Internet Research 14 Prima facie, the addition of these IPO, secondary, and lock-up shares should represent no more than the addition of about $30 billion in new market value over the next six months. This represents, in reality, only a fraction of the $200+ billion in market value that was created in 1998. From this we would conclude that the influx of this supply may have little impact on the price of Internet stocks since demand will continue to outstrip supply, (despite the best efforts of investment bankers). To these measured points about supply and demand we would add the very real rule that the stock market tends to make the most people wrong. And everywhere we look these days, we see newly ordained Internet analysts suggesting that this sector must come back down to earth and that the bubble is about to burst. The chorus for a correction is growing larger, not smaller, which suggests to us that, all other things being equal, these stocks may just keep on going until that chorus shrinks and consensus thinking believes that 1000% returns per years are expected. Furthermore, thought we don't pretend to be market strategists, we can't see what conditions would precipitate a change in the market's predilection to value the concept of “growth” much more than that of “value” soon. Add all of these market conditions together (low supply, expectations of a correction, and no change to the market's desire to own high growth stories) and you've got the makings for the continuation of potentially significant advances in this space. That may be greeted by scowls (though it is the nature of people who don't understand something to condemn it), but it may just turn out to be the case in the Internet space over the next few months. Internet First Principles One of our Internet first principles, those rules of engagement for Internet investing that we've collected over the last handful of years, has been the by-now self evident fact that these stocks don't trade very efficiently. The normal process of price discovery, where demand meets supply at a theoretically perfect price, is structurally altered by an artificial condition. In this case, that artificial condition is the limited supply of Internet stocks to be traded. Most readers are now aware that we've been suggesting that, once the supply (float) of these stocks increases, they should start to become more efficiently traded. The first real data point we have so far to test this thesis is Amazon's 3-1 stock split, effected this past Tuesday. One would surmise that a three fold increase in the number of shares outstanding in a stock would help to make it trade, well, more regularly. So far, however, the increase in Amazon's shares doesn't seem to have impacted (in any real way) how the shares trade; the gap between bid and ask prices is relative unchanged and the magnitude (percent basis) of the moves in the stock price (up and down) doesn't seem to have faded. Since we've only got a few data points to base out initial conclusion on, we'll hold off on coming to a more complete answer about whether our theory holds water. But for now, our Internet inefficiency theorem sure looks like is more likely to sink than swim. Homer, Re-Visited In the last edition of The Internet Capitalist, we put forth the perhaps novel notion that, as much as the Internet changes the dynamics of certain industries in the US economy, it changes our very own corner of the universe, Wall Street, just as much. Our quote from Homer's Iliad “Be silent, wretch, and think not here allow'd, that worst of tyrants, an usurping crowd” tried to capture the idea that retail investors and day traders are having as much influence over stocks prices (particularly Internet stock prices) as Harvard educated MBAs who manage billion dollar portfolios.

To: MoonBrother who wrote (33860)	1/9/1999 9:57:00 PM
From: Dwight E. Karlsen	Respond to of 164684

MoonBrother, re Looks like you've been on AMZN short camp for quite a while now. Not short amzn, and never have been. Never bought AMZN puts, nor shorted the stock. But my thinking is bearish, i.e. for example while I didn't doubt that AMZN would go up in Dec., on a fundamental basis I felt that AMZN was way way way over valued, so I couldn't go long what I perceive to be nothing less than a tulip. As for my staying power, well I haven't lost a dime in AMZN yet. Glenn is not my hero. I posted to him in Dec. that "It's not a good time to be short Amazon". I didn't know how long the surge would last, but combine the expectations of +300% Christmas sales and a pending stock split, and I didn't care to step in front of that train. And so I haven't. It's all sentiment MoonBrother, and I think that as soon as an influential I-nut disappoints on the sales side, you longs are going to be pulling a fast disappearing act and running for cover as fast as you can, to beat the other guy to the door. That's when the fun really starts. Eventually the law of supply and demand in the free business market (as opposed to the manic stock mkt) will cause an I-nut to disappoint. It's called competition.