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Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Short A. Few who wrote (16956)	1/13/1999 4:56:00 PM
From: BelowTheCrowd	Respond to of 18691

SAF, This is looking a lot like biotech in a lot of ways: * An industry that claims to "own the future" * Very few earnings, if any. Incredible hype around the one or two companies who have acutally gotten to a point where they have money coming in. * Rapidly escalating share prices as investors rushed to buy up the relatively small number of shares in companies which were "front runners" in the business of curing cancer, diabetes, heart disease, etc. * The claim that you couldn't evaluate these companies on earnings (true enough) or even try to estimate the potential earnings in the future. Ultimately, several high-profile drug candidates failed to prove any effectiveness, people began questioning whether ANY of this stuff would work, and dumped the whole lot of them, good and bad. Many of the good ones still survive, working on the same or similar long-term research programs in cooperation with big pharmas. Many have disappeared outright -- bought out by others for their R&D at 10 cents on the dollar. Some have actually had successes, though most of those still have not re-attained the kind of stock values many people set for them early on. Bottom line to me is that the psychology is very similar, and I believe that is the primary factor at work. When the psychology is FORCED to change in the face of irrefutable facts, it will get very ugly, very suddenly. There are some differences worth noting: The startup biotechs never actually had a product to sell, they had an idea for a product, and and R&D program to develop and test it. Many of these just plain never worked, and never resulted in a penny of revenues. Most internuts, on the other hand, DO have a product and do have revenues. The question is whether they can turn those revenues into profits, and if so how fast and what stable margins. I think this adds to the psychological effect. It's a lot easier for somebody to "buy in" to a company whose product is available, interesting and useful than it is to do the same to a company whose "product" exists only in the form of a research proposal written by MDs and PhDs. It's easy to miss the fact that the two may be similarly speculative from a financial point of view. Also, I think today's communications infrastructure (including the net) throws in a level of hype and interest that just didn't exist during the biotech bubble. In the 80s TV series "Barney Miller", one of the characters (Sgt. Harris) spent 90% of his time at work talking with his broker and looking for the latest "hot deal." In that era, he was a caricature, an exaggeration and an oddity. Would he be today? If you did a sitcom today with a character who sat at his desk day-trading online and talking about stocks with his co-workers would he even be something to laugh at? Or would he be something that we've all come to accept. Maybe even something we've all become? This newly widespread attention and participation in investing has magnified the bubble by several orders of magnitude beyond that which it could reach in the professional-dominated stock market of the early 80s. mg