What percentage of the stockmarket is overvalued?

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As far as I can tell the "mania" in the stockmarket does not cover all stocks. From what I have gathered most of the market has gone down over the past year or so. If bubble.com crashes along with the grossly overvalued stocks will that necessarily bring down the whole market? A Bubble.com crash will make a lot of people lose money but they are not established business' with hordes of people to lay off or equipment to sit idle. These .com companies produce nothing. I see them as just glorified internet catalogs with traditional retail info that are just faster than using a printed catalog and phone or fax. Any thoughts anyone...

-- Tom Willams (windsng@sirl.com), January 20, 2000

Answers

These .com companies produce nothing. I see them as just glorified internet catalogs with traditional retail info that are just faster than using a printed catalog and phone or fax.

Maybe not, but one of them just bought Time-Warner...

-- (think@about.it), January 20, 2000.


Good question. IMHO you're right in the sense that BUBBLE.COM could (and should) burst because they really aren't much of an industry (i.e. profits, # of employees, etc.). In the short run, however, I do a 180o on it because I think that we are seeing real economic disruptions (oil, inflation, higher interest rates, etc.) that will cause a sell-off on established (i.e. profits, employees, etc.) industry while the new paradigm continues to march to the White Cliffs of Dover.

-- Paranoia Will (Destroy_Y@BlackCopters.com), January 20, 2000.

In my opinion it depends on how fast the bubble goes down. If really fast it will freighten the rest of the market, if very slowly then maybe only the very oversold stocks will be affected. I suspect it will be fast, thats more of a guess.

-- goldbug (Goldbug@mint.com), January 20, 2000.

From Silicon Investor: The Contrarian - 01/20/2000

The real Y2K story... Just to reiterate, since I've seen so much nonsense about Y2K, the reason there was and will be a hardware disruption in most corporations, is not because people were afraid to buy new computers because they might not work over Y2K (as I saw in an article yesterday). Corporate America bought hundreds of billions of dollars of hardware to be prepared for the Y2K transition. It worked. These companies now have more horsepower than they need, and prospectively expenditures are going to fall off. That's been the story and that will be the story. They are not holding their breath waiting for Windows 2000, like Wall Street says, but that's what Wall Street is going to continue to say.

So there you have it. Another day where "Beat the Number" and spin matters more than how the earnings were constructed and whether they bear any relevance to the market cap. "Beat the Number" never talks about, were the numbers clean and is the market value of the implied business representative of the business?

From the mania chronicles... A reader sent me the following email: "My 82-year-old aunt, who has never invested in stocks or anything else, called recently to ask if she shouldn't put some money in the market. She's a widow living on a fixed income from a federal pension and Social Security. Her net worth is mainly what she has in her house. She has a small contingency fund for emergencies, yet wanted to put money in the market. Fortunately, I was able to talk her out of it."

It looks to me like everyone's in, and if you look at the margin statistics and other debt statistics, not only is everyone in, everyone is in and levered up. When this thing goes, it will go in a crash. I'm not going to stop saying it, because it's going to happen...

You tell 'em, Fleck! I'll hold your coat!

-- DeeEmBee (macbeth1@pacbell.net), January 20, 2000.


DMB, the stock market is going to crash HORRIBLY. I won't stop telling people. They're sick and tired of hearing my warnings. They still scoff and smirk.

-- dinosaur (dinosaur@williams-net.com), January 20, 2000.


Ask yourself why such a hotshot company (sarcasm on) would trade it's paper for that of a "washed up old media" company?

It's quite simple, because Steve Case knows without a doubt that he will never be able to buy more with his AOL funny money than he can right now. He's no dummy. He knows it's value and when to sell. Think of AOLTWX as a huge sale of AOL stock, because that's what it was.

The market treated it somewhat appropriately, although most were un willing to admit this simple fact to themselves. The dot.com game is almost over.

-- Gordon (g_gecko_69@hotmail.com), January 20, 2000.


The dot.com hype in the market reminds me of one of those pyramid scams or chain letters. A bunch of smartass con artists who know a lot of geekspeak got their bucks down on the table early in the game, spread lots of hype around, and now they're sitting at the top of the pyramid. As long as suckers keep paying the high prices to get in on the ground floor the pyramid grows higher. But very soon a majority are going to start to see that there is nothing in the future of these website businesses that can justify those kinds of prices. Then the guys at the top will bail out leaving the suckers holding nothing but a broken promise.

-- Hawk (flyin@high.again), January 20, 2000.

Most of the time, the troops won't charge when the generals are taken out and shot.

-- Nathan (nospam@all.com), January 21, 2000.

What amazes me is that all this frantic acquisition activity is pure fiction-yet it is continually promoted as real economic growth (got to keep them dividends coming, don't we?). Corp."A" consolidating with Corp. "B" to form MegaCorp "C" is not quite the same thing as coming up with new products and opening up new markets. At best, it is rearranging the proverbial deck chairs on the Titanic.

If I was a "dot.com" zillionaire, I know what I'D be doing with my new found "wealth"-converting my based-on-thin air stock options into tangible wealth, in the hope that at least part of it would survive the inevitable.

-- Chairborne Commando (what-me-worry@armageddon.com), January 21, 2000.


Which is why it is a good idea to watch for lockup expirations for the next few months. A number of those "massive first day" tech IPOs from late last year will have their lockups (which keep the initial investors from selling) expire over the next 90 days. For example, "new tech" darlings Liberate (LBRT), Cobalt Group (CBLT), and Quotesmith.com (QUOT) (along with mnay others whose stocks didn't go up the usual 60-300%) will all expire next week. Look for a few "zillionaires" to change some of that paper for real coin.

It will be interesting to see if other "investors" buy in and keep the price up, or if some of the highflyers lose a chunk of that phenomenal market cap because the stock was bought up primarily on momentum.

-- DeeEmBee (macbeth1@pacbell.net), January 21, 2000.



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