Replies to post #1309 on Go.com

[DickMN]

Re: Work this through with me... people of common sense.

>>>How long will the market sustain the high multiples awarded to many of these stocks in the technology field?
.....Isn't it reasonable to see further correction, i.e. either minimal upward stock movement to catch up with current pricing, or, further pull back.<<<daisyobear

I really don't think there is any working it through. Your argument makes perfect sense, but the market doesn't. Consider Openwave (the combined Phone.com and Software.com), for example, one of my more speculative wireless bets. They have been condemned as one of the most overpriced high tech stocks. Monday night they blew away analysts estimates, including First Call/Thompson Financial, of –3¢ and turned in their first profit of +9¢/share! They also substantially raised their projections for the rest of 2001.

Today the stock rose $13 or 24%. Now analysts are falling over one another wildly raising estimates and submitting strong buy recommendations. I actually considered dumping my OPWV at the end of 2000. Glad now I didn't. There's just no figuring it. I'm going to sit on everything I have, including DIG, mainly because I've lost so much that it's worth nothing to sell, but also because there's just no figuring it.

DickMN

[blair1q]

daisy

The high multiples awarded many technology stocks were based on growth...

I think that's where the train left the rails in this market.

It might be more apt to say that these high multiples require improbable growth rates to make them valid.

But it's become pretty clear that most "investors" in the heaviest-hit technology sectors had not "based" their estimates on any rational computations. Feng-shui and the caffeine intake of CNBC commentators seems to have had more to do with it.

--Blair

[Meme]

Re: Work this through with me... people of common sense

Oh, D'Bear, I'd love to work with you on this. Of course, this is assuming that you attribute any common sense to me. <G>

I'll try and address this tomorrow as it's late and I'm tired and only had a moment to pop in. I'm sure you know, I'm never lacking an opinion.

Meme

[Meme]

Re: Work this through with me... people of common sense.

I'm taking a deep breath so that I might keep my response as brief as possible. The truth is that you've touched on so many different issues that it is hard to seperate the wheat from the chaffe.

As succinctly as I can put my finger on it, much of what you bring up is relative to cycles. For the PC industry the cycle began in ernest with a relatively affordable PC with an easy to use OS.

One must look back to earlier times and a statement made by a great mind who's name escapes me, but to paraphrase "the value of one fax machine is increased by the number of other fax machines that come online." In other words, the abilities and value of a product like the PC or the internet are enhanced by the growing number of adopters to said product. A single telephone is useless; two, then four, then sixteen, then thirty-two, ad infinidum...ahhh now we've got something.

However, eventually we reach a saturation point before the next wave of innovation drives the consumer to upgrade. In the meantime, everyone speculates on just how far the cycle will go and how many profits can be achieved before the ebb kicks in. This was further fostered by an era in which a new breed of investor came to bear on the markets. The individual acting on his own behalf and not always in the wisest manner.

Right now not all PE's are unreasonable. There are still some notable examples of companies who may appear to be out of whack, but that's perhaps due to some still high expectations of future growth.

In your example you cite Yahoo. Yes, Yahoo still does sport a high PE, but in my opinion it is also a gorilla. Gorilla status goes a long way. However, I'm in no way saying that I would invest in Yahoo nor recommend it. Despite its phenomenal growth it always scared me because of its ridiculous PE, amongst other things. You think DIG's bubble burst? How would you have liked to have purchased Yahoo at 250?

Now, all that being said, there will be new cycles ahead. How wild the speculation gets remains to be seen and dependent on factors involved with the economy in general.

I now feel like I've rambled on and not said a damn thing worth any value. <G> Oh well, take what you like and leave the rest.

Meme