Stock Market Internet Essay Research Paper The

Stock Market Internet Essay, Research Paper

The Internet bubble – Still deflating – WTF? ========================================The Internet Bubble contends that all the whoop-tee-do stocks you have been in love with were overpriced. So, shortly after the first major deflation in the Internet stock, he was like WTF?At the peak of the market for Internet stocks in January of this year, the 400-plus public Internet companies were worth a steep $1.5 trillion combined. As of a new calculation done in mid-July, they are now worth about $970 billion, a decline of more than 30 percent. At their low at the end of last May, the combined market cap of the portfolio was as low as $750 billion. During this lull, when the Nasdaq bottomed out near 3,000, the market had Steve Jurvetson in a headlock.Anthony B. Perkins, who warned seven months (6/28/00) ago in his book “The Internet Bubble” that Internet stocks were overpriced, said the stunning decline in technology stocks has created investment opportunities.”The Internet sector was valued at $1.5 trillion, based on only $29 billion in revenue and $3 billion inprofits,” said Perkins, chief executive of Red Herring Communications. “We’ve seen that mountain ofmarket capital melt down in half. Now it’s back to reality.”Because “we’re only in year six of a 30-year tech boom,” investors need to “look through the wreckageand identify some cool companies” that will survive, Perkins told the Bloomberg Forum.”These are great companies that are going to be highly profitable in the future,” Perkins said, even ifsome aren’t profitable yet.The washout in Internet stocks slowed Wall Street’s love affair with initial public offerings of profitlesscompanies and taught inexperienced venture capitalists that “they can’t always expect a 300 percentprofit on their portfolios,” he said.THE ECONOMY DIDNT GO BUST AFTER THE INTERNET BUBBLE BURST=Remember those dire warnings about the Internet bubble? Millions of investors, gripped by a mass speculative mania, had driven dot-com equity valuations to ridiculous, perhaps unprecedented,heights of fancy. When the dot-com bubble burst, the investment Calvinists warned, the market collapse would take both the New and the Old Economy down with it. Well, it sure looks like the Internet balloon has popped. Employees at dot-com startups hold worthless stock options. But where is the economic crash? Consider this: The big debate on Wall Street is whether the Fed’s yearlong campaign of monetary tightening has successfully slowed the economy.Why didn’t the Internet crash take the economy with it? For one thing, the talk about an emotionally driven, vastly overvalued stock market was greatly exaggerated. Yes, investors got wildly enthusiastic about many a dot-com business model or an entrepreneur’s virtual vision. But the theory that millions of investors from around the world have been systematically stupid for the past six years is simply untenable. Indeed, the current economic expansion is remarkable not only for its record length but for how rapid high-tech innovation is boosting business efficiency and keeping prices relatively stable.=”Our advice to Internet investors is simple: If you hold any of these stocks it is time to sell.” =============For several years the stock market has made major gains, adding up to what has probably been the greatest bull market in all of history. Setbacks that appeared threatening, such as those which occurred in April of 1997 and August/September of 1998, have proved temporary and have served merely as renewed buying opportunities. With each renewal of the upward trend, the conviction has grown that if one buys a diversified list of good stocks (and even many that are not so good), one simply cannot lose in the stock market, except temporarily. Indeed, the persistence and size of the gains has drawn a growing number of new players into the market–to the point where it is now common to hear stories about doctors, lawyers, accountants, and people in practically all other walks of life cutting back on their normal activities in order to devote time to day trading on the internet.

Clearly, something is wrong. It simply cannot be that we can have a society in which everybody lives by day trading in the stock market. . . . Yet such an absurd outcome of practically everyone being able to live by means of buying stocks cheap and selling them dear is what is implied by an indefinite continuation of the bull market. As a result, it is inescapable that the bull market must end. Something must occur that will destroy the conviction that the stock market is an easy source of gains. That something, of course, will be a major and prolonged drop in the market, in which much of the gains that have been made in the last few years will be wiped out and in which millions of investors will rue the day that they began playing the stock market. What is directly and immediately responsible for the current bull market is a sustained and rapid increase in the demand for stocks. This increase in demand in turn has been the result of the repeated pouring into the market of large sums of new and additional money, created by the banking system under the umbrella of the Federal Reserve System and related government intervention. What this means is that stock prices have been rising on the foundation of nothing more than an increase in the quantity of money. In essence, their rise is no different in principle than the