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Pastimes : The Naked Truth - Big Kahuna a Myth -- Ignore unavailable to you. Want to Upgrade?

To: Terry Whitman who wrote (41721)	5/19/1999 12:56:00 PM
From: RJL	Read Replies (1) \| Respond to of 86076

A bit off topic, but on target: plesman.com ---- Internet stocks flying high Many investors are rushing too quickly to find profits in a Web-related stock By Tom Venetis Anyone who has been watching the growth of the Internet over the past several years can marvel at the equally rapid rise of Internet-based company stock prices. In fact, the valuations on some of these companies is so spectacular that several analysts and economists have started speaking about a whole new kind of economy and business model emerging, one that abandons older, classical economic theories and business assumptions. Certainly that is the argument David Alger, CEO of the New York-based investment firm Fred Alger Management, made in an April 26th Wall Street Journal editorial. Alger dismisses the idea that the high values given to Internet-based stocks is a speculative fad, akin to the 16th century tulip bulb craze. Instead, Alger takes up the mantra that the Internet is such a fundamentally different kind of creature that has "the power to transform the world's economy . . . it is a revolution in communications and commerce." Therefore the high value being placed on Internet stocks, with companies making millions overnight by just adding .com to their names, is something that should be expected because of "the transforming power of the Internet." This last little jab seemed aimed at such naysayers as Jeremy Siegel, a professor of finance at the Wharton School in Philadelphia who wrote an editorial a week earlier in the same paper arguing that Internet stocks are greatly overvalued and investors need to take a hard look at "whether their current prices realistically reflect their economic potential." After reading both opinions, I would say it is Algers and others like him who are in need of more jabs from someone like Siegel. Alger's argument rests on the Internet's hyped ability to reduce the costs of doing business since an online startup does not have to worry about building . . . well, a building. Since they don't have to invest in bricks and mortar, the savings can be passed onto consumers and reinvested in advertising to bring even more people to their services, inevitably leading to the "demise of the conventional competitor." But Siegel's point is that a company's stock value should be based not on some mythical future potential to kill off competitors, but on how well they are doing right now and whether they can continue doing so in order to justify the high stock values. Good ol' common business sense, really. Siegel points out that AOL, one of the "blue chip" Internet stocks, has a market value approaching US$200 billion, putting it near the top 10 in value. But take a closer look and you will find that AOL is only 311th in profits last year and 415th in sales against other more "outdated" bricks and mortar firms. It didn't even make the top 500 in tangible assets. Now if AOL's market value was matched to its ranking in profits or sales, its value would be only about US$4.5 billion, closer to the value of Apple Computer, and that venerable company's stock is not going into stratospheric la la land. A New York-based stock analyst I spoke to said much of the rapid growth in the value of Internet stocks can be explained by investors looking for the next big thing. But many companies are now going online only to boost their stock prices and not offering any real business or consumer value in return. What is happening is not so much a change in how the world's economy is going to be run, but an abandonment of rational thinking that can only do the world's economy more harm than good. ---------

To: Terry Whitman who wrote (41721)	5/19/1999 1:33:00 PM
From: John Pitera	Read Replies (1) \| Respond to of 86076

Everyone is lugging around lots of XAU stocks, who gets thanked when they go down -g- I remember you razzing me on the XAU break-out...(all in good fun) so thanks for the kind mention. And yet I 've got a few xau stocks I have not been able to bring myself to sell. -ng- but I did move 82.5% of my PAAS and shaved back ABX and HM. And you know- no one ever thanked you for that call. Guess they didn't trust you. <g> Of course we will be very wrong once we gain their trust. hoho yes follow us zombie-like to financial oblivion....isn't that what the Myth thread is all about? -vbg-