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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: Freedom Fighter who wrote (1154)	1/29/1999 8:20:00 PM
From: porcupine --''''>	Read Replies (1) \| Respond to of 1722

"I consider this man to be the single greatest threat to our way of life ever." Wayne, why do you keep pulling punches? Tell us what you really think about the Fed Head! [Just kidding, Wayne --!!!!:> ]

To: Freedom Fighter who wrote (1154)	1/29/1999 8:45:00 PM
From: porcupine --''''>	Respond to of 1722

Greenspan Says Internet Mania Not All Hype By Caren Bohan WASHINGTON (Reuters) - Federal Reserve Chairman Alan Greenspan said Thursday ''hype'' was helping to feed the frenzy over Internet stocks, but some of the run-up made sense because the fast-growing sector shows enormous promise. Indeed, Greenspan said some loftily priced web companies may well succeed. ''Is there some hype in this? Of course, there's some hype,'' Greenspan told the Senate Budget Committee in his first detailed comments on the soaring Internet segment. But he added that the hype would never have caught hold if there were not some sound reasons for buying into the sector. ''The size of that potential market is so huge that you have these pie-in-the-sky type of potentials for a lot of different vehicles,'' Greenspan said. ''Undoubtedly, some of these small companies which have stock prices going through the roof will succeed and they very well may justify even higher prices. The vast majority are almost sure to fail.'' The Fed chairman's remarks, made during a hearing to discuss Social Security, encouraged a rally on Wall Street, where traders already were celebrating yet another web merger and strong earnings from America Online Inc. (NYSE:AOL - news) Investors were pleased the Fed chief refrained from offering a stern stock-market warning akin to his 1996 comment about ''irrational exuberance,'' which sent stocks reeling. ''He is looking at the reality of the situation. Even though valuations are looking a little stretched, industries that are new generally carry some excessive multiples,'' said Barry Hyman, strategist at Ehrenkrantz, King and Nussbaum. Attempting to head off a spillover onto the U.S. economy from economic crises in Asia and other countries, the Fed cut short-term interest rates three times last year. The U.S. economy's sizzling growth since then has weakened the case for further rate cuts, although some analysts have said fear of blowing air into the stock market might lead the Fed to err on the side of keeping interest rates tighter. Greenspan Thursday gave few hints about the direction of rates, which most analysts believe will stay steady for a while. He said the U.S. economy's resilience in the face of international problems was remarkable, but the picture could change if the global economy did not pick up. Pierre Ellis of Primark Decision Economics in New York said Greenspan's remarks about Internet stocks showed a reluctance to interfere with the market despite some wariness at the Fed. ''The stock market is about risk-taking,'' Ellis said. ''He can't say a certain sector is overblown.'' In the latest example of the cyberspace craze, Internet media company Yahoo! Inc.'s purchase of Web company GeoCities sent Geocities' stock rocketing 56 percent on Nasdaq, ending the day up $42.25 at $117.25. America Online Inc.'s stock rose $8.94 to $174.44 on strong earnings announcements. The American Stock Exchange index of Internet stocks rose 70.20 points, or 2.92 percent, to 2,477.34, after climbing earlier to another record high of 2,477.47. Over the past year, the index has nearly tripled in value. Many of the darlings of the sector, such as online book seller Amazon.com have yet to turn a profit and may not for a couple of years. Yet its stock has risen astronomically. Amazon's market capitalization is almost $20 billion -- nearly eight times that of Barnes & Noble, a giant of traditional book-selling with four times the revenue. Players bidding up Amazon envision not only a growing book business but also the prospect that the company will become a ''Walmart'' of the Internet -- a full service retailer that offers aggressive prices because of economies of scale. At the Senate hearing, Greenspan said he saw validity to the comparisons between the stock market and a lottery, especially when it comes to risky areas such as the Internet: the market's bettors are putting down cash against steep odds in the hopes of reaping huge riches. ''What lottery managers have known for centuries is that you could get somebody to pay for a one in a million shot,'' he said. But he emphasized that such gamblers provided benefits to the economy. ''Mainly, that they do endeavor to ferret out better opportunities and put capital into various different types of endeavors prior to earnings actually materializing.'' He concluded, ''With all of this hype and craziness -- that is something that at the end of the day is more plus than minus.''