On 12/25/98, "Dan Anderson" <dcand...@uswest.net
> Have you ever wondered why there are suddenly so many stock "gurus"
> to give you the next great opportunity to invest? One of the reasons I
> the investment banking business was because I began to think about the
> number of companies going public that have no legitimate reason for
> so. Many of them are taking advantage of the investing craze to use
> peoples' money to float companies that have a 1 in 10 chance of being
> successful in the long term. That estimate may be rather generous.
> The investment business has evolved into a far different one than it was
> even just 5 years ago. As late as the early 1980's, companies were
> with high stock prices because they were profitable and well managed,
> there was a limit at which investors would draw the line.
> Now, companies trade at levels as to boggle the mind. Amazon.com, one
> the latest crazes, has run to as high as $330 a share, and now boasts a
> market cap greater than that of Sears. This in spite of the fact the
> has never turned a profit, and doesn't foresee doing so for at least
> more years.. Another notable company, UBid, has enjoyed a high of $188
> share, and like Amazon des not foresee a profit for several years.
> has gone crazy buying any stock that includes the Internet as part of
> plan. At a time when competition is becoming ever so more fierce in an
> infant industry that hasn't found its legs, rationality should be the
> consideration of investors.
> The most worrisome aspect of all of this is that most investors don't
> their money off the table when their stocks run, because they are afraid
> missing something. Wouldn't it more reasonable to risk losing some
> additional profit than not being able to get out when the stock turns
> downward? As an example, UBid's stock fell $67 a share on Thursday, a
> of over 35% in one day. How many people bought UBid at Wednesday's
> only to lose 1/3 of their money in a four hour trading session?
> One interesting note is that relatively few of the Internet-related
> are being bought by the big mutual funds. Why? It is impossible to
> estimate what is reasonable to pay for a stock that has no foreseeable
> profit potential in an industry that has barely begun to develop. Case
> point again, is Amazon.com, whose market cap is 8 times greater than the
> estimated total purchases being made on the Internet this year, and yet
> has real assets of less than $50 million. One Wall Street analyst put
> best when she was talking about TheGlobe.com's IPO, which opened at $9 a
> share and ran to $90 in less than a week. She said, are we supposed to
> believe that the investment bankers who brought TheGlobe.com public
> have done so at $9 a share if they thought the company was worth $90?
> For those of you who have been watching, you could have bought UBid
> year ago at $.21 a share and sold on Wednesday at $188. Wouldn't it be
> great to find these stocks? Of course it would.
> This is what gives rise to stock promoters, the "gurus" of the Internet
> stock trading community. They would have you believe that they know
> stocks are going to race ahead in the short term and make you fabulously
> wealthy in the process. Let's get real. When was the last time that
> saw Warren Buffet, arguably the most successful investor in America,
> press conference where he told everyone what stock to buy to make a
> on? Never. So what is the likelihood that he ever will? Exactly zero,
> nada, never.
> They are, in fact, the used car salesmen of the Internet. They are paid
> stock by the companies they "alert you to the enormous upside potential"
> They offer slick web sites, free newsletters, and the tantalizing
> giving you the next Amazon.com or UBid. Of course, they are thrilled
> offer you these services because they stand to make their own fortune on
Having read your message, I am courious about how manias occur.
In these days of the "great me generation" an the need to pay those
monthly bills and make a million while doing it, has anyone listened to
your message of warning?
The reason that I ask is that there was a generation that ran themselves
into the disaster of 1929 then again in the 1930's which then really
devistated this nation. It took a few generations to pass by before people
have again lost perspective to the issues of P/E and earnings. Will they
come back into vogue?
Is this exhuberant mania a making of the fed as it has no alternitive to
shelter us as a nation from deflation?
Is the issuance of the EOC from the European community going to cause
havoc with the value of the American dollar?
Will the precious metals regain their luster as a safe haven from economic
Will the market take a correction that will devistate the "baby boom
generation"? especially as they as go into retirement? (around the year
My heart has told me go with the flow, follow the trend as the trend is
your friend.....my brain on the other hand has told me to stay away from
the high fliers such as amazon, etc., but how do I explain to family and
friends that I too have not become a "dellionaire" and am just a poor
looser bearly making ends meet? (especially over the Holiday dinner table)
Anyway, thanks for adding some reality to what is really going on.
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