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To: KeepItSimple who wrote (38479)	2/6/1999 11:48:00 PM
From: Bill Harmond	Read Replies (3) \| Respond to of 164684

>>And where will it be from when eBay drops back to its fair value of 3 dollars per share? Do you wonder why no one takes you seriously when you post drivel like eBay is really worth just 16x this year's earnings? Get real.

To: KeepItSimple who wrote (38479)	2/7/1999 11:18:00 AM
From: Glenn D. Rudolph	Respond to of 164684

20 Unfortunately, and for a variety of reasons, Delta withdrew the surcharge. Officially, it was for "competitive reasons.", which suggests that, since other airlines didn't follow suit, Delta would have been stuck with slightly higher fares. Of course, cutting through the language from both Delta and the folks at the American Society of Travel Agents (“consumer victory!”, “discrimination!”), we get the keen sense that this retraction had everything to do with protecting sacred cows (read: travel agent's commission fees) and close to nothing to do with “protecting consumers.” From where we sit, we think this issue will inevitably be tabled again, at a time when Delta (and the rest of the airline industry) has more clout…and more courage. Valuation Watch The Triumph Of Hope Over Experience This past week brought a flurry of comments from dignified authority figures on the ever-widening debate about Internet stocks and their valuations. Both Alan Greenspan and Arthur Levitt (the later the head of the SEC) were equally unabridged in their commentary about the sector, one using a lottery analogy and the other suggesting investors only use money they can afford to lose. As it turns out, however, these weren't exactly leading indicators: most of the top names in the group (AOL, AMZN, YHOO, EBAY, and ATHM) had long since consolidated well off their highs (though those highs were awfully high) and have now settled into a trading range. The wait for catalysts, for visibility on the first half of 1999 revenue, and for the competitive jostling (M&A, partnerships, etc.) to play itself out has lowered itself onto the space and caused, well, almost normal trading. As a frustrated economist in analyst's clothing, we were particularly interested in Greenspan's commentary, since we believe that many of the market forces underway in the stock market have their basis in reality, and that the positive operating measures we're witnessing from these Internet companies correlates nicely with our belief that something very real is taking place beneath the surface of the economy. To this end, Greenspan's testimony (to the commission on Social Security ironically enough) is insightful, the more salient pieces of which we faithfully reprint below: “First of all, you wouldn't get hype working if there weren't something fundamentally sound under it…undoubtedly, some of these small companies , whose stock prices are going through the roof, will succeed. And they very well may justify even higher prices. The vast majority are almost sure to fail. That's the way markets tend to work.…there is at root here something far more fundamental. And indeed it does reflect something good about the way our securities markets work; namely, that they endeavor to ferret out the better opportunities and put capital into various different types of endeavors, prior to earnings actually materializing. That's good for our system. And that's, in fact, with all its hype and craziness, is something that …is more plus than minus.” And this is where hope is cleaning the clock of experience. Though we believe that many of these lesser Internet names may someday trade at drill-bit size levels, a few stand-outs will prosper thanks entirely to the very efficient market mechanisms that Greenspan spoke of. And this thesis has supporting data in the form of all technology offerings: the lion's share of the market cap created in the IPO market over the last decade has come from just a handful of names, a condition we expect to continue for the foreseeable future. For now, the underlying bias in the Internet space continues to be that most news is good news and that truly bad news happens in other sectors (like retailing), suggesting that the consolidation we are seeing today may be the base building (and rise) for tomorrow. In short: stay long.