Nice to get a mention in Barron's CyberMania...
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Barron's on Cyberspace Mania
From: Henry Niman
Date: 13 Feb 1999
Time: 04:17:15
Remote Name: 12.79.45.230
Comments
February 15, 1999
One-Day Wonder?
By Alan Abelson
Whew! At least that's over.
No, we don't mean the President's impeachment trial. From day one, the result was preordained. If cheating, lying and betraying the public trust were sufficient cause for removal from office, there wouldn't be enough people left in Washington for a rubber of bridge.
And we're certainly not talking about Monica Lewinsky's public debut. The prosecutors made a big to-do before their interrogation began of announcing they would forgo questioning her on the intimate details of her relationship with Bill Clinton. That created a prospect as exciting as visiting a topless bar to listen to the music.
We must admit that the video version of "Beauty and the Beasts" forced a mild revision of our preconceptions of the players. Ms. Lewinsky was something of a disappointment -- she wasn't as silly as advertised. On the other hand, the inquiring congressmen rather exceeded our expectations by proving even dumber than anticipated.
In any case, the expression of relief that opened this screed was not prompted by the end of the impeachment follies. Instead, it was in response to the abrupt fizzling of last Thursday's blazing rebound by the Internet stocks, a rebound that happily ignited the market as a whole, if only for a day.
We were relieved, let us hasten to add, not because we harbor any ill will toward the group. It's merely that we've been yearning for an interlude of peace and serenity in the market. And there's manifestly not a prayer for one so long as the Internet stocks are all the rage; IPOs double and triple in a day, and little old ladies in Dubuque sit in front of computers for hours on end trading the online favorite of the moment.
The Internet stocks, of course, had been battered from pillar to portal before the spirited rally retrieved some of the ground lost. The brutal pummeling had driven down a number of the leaders in this wondrous sector as much as 50% from recent highs (or, to levels where they were only 49% overvalued).
It grieves us to report that this terrible trashing failed to evoke universal sympathy. A motley crew of malcontents, including latter-day Luddites, unregenerate Graham & Dodderers and other various and sundry losers, roused from their sour slumbers, couldn't wait to gloat that the poor, abused Internet stocks were merely getting what they deserved, that they had it com.ing to them.
And striving to distill reason from their venom, these nasty negativists dusted off the tired, old argument that the Internet companies were ridiculously overpriced because they had no earnings. Nothing, of course, is more revelatory of how out of it this curious crowd really is than the importance it attaches to profits.
As the market reiterated so resoundingly in Thursday's sensational recovery by the online contingent, old-fashioned yardsticks like profits are hopelessly inadequate when measuring the value of an Internet enterprise. Dwarfing profits in significance, for example, is creativity.
Case in point: Amazon.com, the by-now-famous bookseller. As noted in this space a few weeks ago, the company not only has successfully avoided earning money right from the start, but has a great shot at doing so forever.
Stocks like Amazon, pure and simple, should be judged not by P/E but by P/C (price times creativity). On that score, there can be no dispute that it merits an exceedingly rich multiple, if only for its ingenuity in enhancing revenue, fresh evidence of which emerged just last week.
Specifically, the New York Times discovered that the company has been putting the arm on publishers for the privilege of having their books included in its highly popular recommended reading list. Actually, there are two lists, one called "Destined for Greatness" and the other consisting, obviously, of books not destined for greatness and bearing the less resonant heading of "New and Notable."
In keeping with its renowned concern for its customers, Amazon refrained from burdening them with knowledge of the arrangement, lest it dilute their appreciation of the recommendations. They might even have resisted buying the recommended books, which obviously would have been a tragic disservice to literature.
Inevitably, cynics ascribed this lack of disclosure to all manner of dark motive. But even they must have been swayed by the chairman's compelling explanation that unlike a conventional retailer, "We're a buying cooperative on behalf of our 6.2 million customers," and squeezing the publishers enables it to lower prices. We found that description powerfully persuasive, if only because Amazon, as a nonprofit organization, admirably meets the acid test of a co-op.
Besides the creativity of the America Onlines, Amazons, Yahoos, Lycoses et al., what eludes those inveterate bad-mouthers of the online stocks is the dynamic impact of the Internet investors. They're a new breed, distinguished from traditional stock buyers by their eager embrace of risk and their lightning reflexes, qualities that add a wholly different dimension to the centuries-old business of investing.
To illustrate, a week or so ago, these new-age investors, mad to find the next Charles Schwab, bid up with wild abandon a bevy of small brokerage-firm stocks. Past performance was no deterrent to present passion, as witness the flare of enthusiasm for the likes of JB Oxford and M.H. Myerson.
The frantic scramble to glom on to the next Schwab
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