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February 12, 2000

Market Data as of Close, 2/11/00:

o Dow Jones Industrial Average: 10,425.21 down 218.42, -2.05%; down 4.9% for the week

o Nasdaq Composite Index: 4,395.45 down 90.18, -2.01%; up 3.6% for the week

o S&P 500: 1,387.12 down 29.71, -2.10%; down 2.6% for the week

o TSC Internet: 1,154.44 down 23.06, -1.96%; up 1.2% for the week

o Russell 2000: 537.10 down 5.11, -0.94%; up 2.2% for the week

o 30-Year Treasury: 99 22/32 up 3 22/32, yield 6.293%

Companies in Today's Bulletin:

Infosys Technologies (INFY:Nasdaq ADS)

America Online (AOL:NYSE) (MUEI:Nasdaq)

Berkshire Hathaway (BRK.A:NYSE)

In Today's Bulletin:

TheStreet Recommends

o The Coming Week: Market's Schism Shows No Signs of Improvement
o Smarter Money: Getting Started: Become a Pro at Personal Finance
o Evening Update: FTC Will Handle Investigation of AOL-Time Warner Deal
o Bond Focus: A Quiet Day Ends a Bumpy Week for Bonds

Also on

Internet: Can't Go Home Again: Infosys' U.S. Shares Skyrocket, Widening the Value Gap

The New York and Bombay shares are equivalent, but the New York price is three times higher.

Global Portfolio: While Asia Tech Opportunities Take Off, Dangers Haven't Disappeared

Individual investors looking for the next Yahoo! pick individual companies at their own risk.

Internet: Buffett Health Scrape Illustrates Power -- or Myth -- of Message Boards

Traders are split on whether to attribute moves in Berkshire stock to rumors about guru's health.

Hardware & PCs: Goldman Tech Conference: MicronPC Shows PC Industry the Way -- Out of PCs

As PCs become commodities, everyone wants to talk Web hosting and Internet and stuff like that.

The Coming Week: Market's Schism Shows No Signs of Improvement


Justin Lahart

Associate Editor

2/11/00 7:17 PM ET

Imagine for a second that you're the CEO of one of those big nontech companies. Maybe you're at an industrial company, something like

Georgia Pacific


. Or maybe you work for a strong regional bank -- something like

North Fork



And every day the papers get dropped off in your driveway and you go out and pick them up and read about the latest tech darling and how far its stock's gone. And every day you go to the office, and in the foyer there's a big screen that flashes your stock price, and most days lately it's been red. And you think about how far the stock price is from the strike on the options you got granted. And you think about how your compensation is tied to stock performance -- never mind the earnings you've produced.

Must burn you up. If the junk bond market were in better shape, you'd probably be engineering a leveraged buyout to take your company private right now. But it's not. Tough.

The schism in the market gets worse and worse. Tech stocks continue to perform well; everything else stinks up the joint. So far this year, the

Nasdaq Composite Index

has added 8%. Add that to last year's 85.6%. The

New York Stock Exchange Composite

has dropped 7%. It's down to where it was in January 1999. The

S&P 500

has yet to close above where it finished last year -- something that hasn't happened since 1978.

"In general, we're not happy with what the market is doing so far," said Jeff Warantz, equity strategist at

Salomon Smith Barney

. "There's a general lethargy out there. The high P/E stuff keeps going up and the rest looks mediocre. You're getting to the point where it's not even your relatively better valued tech stocks. It's just your highfliers taking off again. To say it's anything other than speculation is not realistic."

But it seems unlikely that any of this will change just because of the valuation differences between the market's haves and have-nots. "I don't see anything in the short term that's going to change the pattern we're in," said Gary Kaminsky, managing director of the asset management group at

Neuberger & Berman

. Mutual fund investors put money with the managers that have performed well. The managers that have performed well put money back into the stocks that have made them money. Individual investors scuttle their losers and put more money into their winners.

Lord Abbett

, the fund company whose name is synonymous with value investing, moves its offices from midtown Manhattan to Jersey City ...

Other than wondering about whether the non-highfliers ever see the light of day, investors will spend much of the coming week focusing on what

Federal Reserve


Alan Greenspan

will say Thursday when goes before the

House Banking Committee

to deliver his twice-annual



"The highlight of the week is Greenspan," said Don Fine, chief market analyst at

Chase Asset Management

. "He'll give you a definite read on what the Fed's thought process is now, and will probably give you a clue to future tightenings."

Greenspan often uses occasions like this to give the market a sort of map to Fed thinking, a guide to what it is keying off, what things might make it raise rates more aggressively, what things might make it stop. In particular, Fed watchers will want to know what chance there is that rates get raised at the March meeting by more than the 25 basis points the market expects.

"If this economy continues to demonstrate cyclical strength between now and March 21," said Fine, "a half point is possible."

There are also a slew of economic data coming out. Most important will be the February

Consumer Price Index

on Friday. Most economists reckon that the Fed will keep to its path of gradualism in trying to slow the economy -- unless they start seeing signs of inflation.

"The CPI could reignite some inflation fears," said Mike Cloherty, senior market economist at

Credit Suisse First Boston

. "We don't think it will, but there is some downside risk to the market."

Smarter Money: Getting Started: Become a Pro at Personal Finance


James J. Cramer

2/11/00 3:50 PM ET

How to get started.

How many times have you read that line? Each time you then read some trite piece that's going to tell you how to buy and sell a stock, how to make money and how to be the next

Peter Lynch


Warren Buffett


George Soros


What a pile of hooey! It just isn't that easy.

Smarter Money: Join the discussion on


Message Boards.

I'm going to tell you the truth. In this series about getting started, I'm going to give you everything you need to know about how to pick a stock, how to buy a stock and how to make sense of the market. And I'm going to do it using everything I learned from my years when I first traded out of phone booths, to when I was hired by

Goldman Sachs

, where eventually I helped teach young brokers, to my years as a hedge fund manager, where I've made millions upon millions of dollars for wealthy individuals since 1987.

But first things first. We are in an unprecedented time where owning stocks -- just buying and owning them -- has been an unbelievable investment. People have made millions simply by buying baskets of stocks, or so-called index funds. This market has made more millionaires than any company or companies will ever make. It has been a bonanza for those who own, a bummer for those who sell.

I am not presuming in this series of articles that this will continue. I don't expect it to do so. I just want you to have a chance at capitalizing on the stock market, and I want you to be as informed and intelligent as possible. When I sit down with the marketing department of Inc.


, I always want to say that we make money for you. But it is the market that makes money for you. We help you make money. I have a testimonial file several thousand emails deep detailing how we have helped make millionaires out of many people. If the market had gone down, though, we wouldn't have been so favored. While I regard

as an incredibly useful tool in the process, all we have succeeded in doing is helping you buy and sell smarter.

I regard that as a noble goal. I want to make you into a great investor and, if you would like, a great trader. But I can't. That's up to you. I can tell you everything I know, however, about what you need to know to buy and sell stocks like a professional. Let me help level the playing field for you.

First, some basics. Let's talk about the landscape. Remember, I said this primer, this guide, isn't going to be like any other guide. It's going to cut through all of the gibberish and give you the straight dope, even if it hurts. I won't sugarcoat , and every time I give you the boilerplate, I will then follow up with the truth as I see it.

1. What are stocks? I know this may seem like an obvious question with an obvious answer, but I meet people all of the time who don't have a clue what a stock is, even though they own a bunch of them. When you own a stock, you own a piece of a company. You are a part owner of the business. At least that's what the textbooks say. In reality, in the vast scheme of things, when you own a stock, you don't own much at all. You get the right to multiply the number of shares you have by the stock price that is in the paper so you can figure out what it is worth. You get the right to a stream of dividends, but these days most stocks don't have dividends. (A dividend is a call on something that is left over after all of the sales are taken in and all of the expenses are paid. Companies don't have to declare dividends, and these days many don't ever intend to pay them. They reinvest the money in the business.)

You get the right to vote, but the company doesn't really care about your vote; if you don't vote, it's no more important than if you don't vote in the upcoming election. Nothing happens. Sure, periodically, someone will buy enough stock and make some noise, and occasionally that person might even get to change something. But for the most part, it's all a big show. You can go to the annual meeting with one share and ask a question. They may answer it; they may not. This is not a democracy. It is a corporation. If you don't like what you hear, you should vote with your feet, not with your proxy vote (the ballot that comes in the mail when you own stock). You should sell. In fact, in the real world, buying a share of stock entitles you to sell that share of stock. I wouldn't think about it in any other way. Don't complicate things. That's all you need to know for the purposes of at-home investing.

2. Why buy a stock? Because you think it's going to go up. Why sell a stock? Because you think it's going to go down. Again, don't outthink this process. You don't buy a stock to own a piece of the American Dream or to have a souvenir or a right to the earnings of the company. You don't get any of those things. You don't even get a piece of paper anymore. You get a journal entry. That's good enough, because the journal entry allows you to sell it, which is all that the stock market is about. The wonder of the system is that when you buy a stock, you don't have to take physical delivery; it just lands as a journal entry into your account. And when you sell a stock, it gets sent automatically from your broker to the new buyer's broker.

3. How do you know what is a good stock? A-ha, here's another one of those questions that the textbooks fib on. They would say, "You have a good stock if the fundamentals are sound at the company," or "Good stocks are the stocks of companies that make a lot of money." Sure, sometimes there is an intersection between stocks and companies, but more often than not, how a stock does is a function of many, many different variables -- everything from the economy and interest rates to the sector that the company is in to the company's earnings. I would not want to overdo the linkage. For example,

Gary B. Smith

doesn't even want to know the fundamentals. And he makes very good money. I always analogize to sports when it comes to stuff like this. If this were horseracing, the company is the horse, but there are also the jockey, the conditions and the field. In sports, we know that many people bet on teams to win, but the best team doesn't always win. Same with companies and stocks. The company is only part of the equation. This is a really important concept because I would rather own the stock of an OK company in a great industry than the stock of a great company in a bad industry.

4. If


(KO) - Get Coca-Cola Company Report

sells at 57 and


(PEP) - Get PepsiCo, Inc. Report

sells at 33, is Pepsi $24 cheaper than Coke? Here's one that many people don't get, although no one likes to admit it. The stock price itself is indicative of nothing. A stock that is $300 a share is not more expensive than a stock that is $3 a share. If you take the dollar amount of the shares and you multiply it by all of the shares outstanding, you will get the "size" of a company. But if you divide the dollar amount by the earnings per share of the company, then you get the key number you are looking for. That's the price-to-earnings multiple. We need that because that's what tells us relative worth. That's what puts things in perspective. Let's go to the supermarket. One brand of cookie is $4 a box. Another is $2 a box. The first box is twice as expensive. Now let's look at the stocks of the cookie companies.

Acme Cookie Co.

stock sells at $30. It will earn $1 a share.

Zenith Cookie Co.

stock sells at $60 a share. It will earn $6. Which one is the cheaper stock? You divide $30 by $1 and you get 30, which is the price-to-earnings multiple of Acme. You divide $60 by $6 and you get 10, which is the price-to-earnings multiple of Zenith. Now you have an apples-to-apples comparison. Zenith's


is three times cheaper than Acme's. Now it may turn out that this makes sense -- maybe Zenith has declining market share. Maybe its cookies taste bad. Or maybe its brand is not being supported or has fallen on hard times. The point is that if you know only the price of the stocks, you don't know anything, because on the surface Zenith is twice as expensive in a dollar amount than Acme. A value guy might think that Zenith is a better buy because it is "cheaper" on an earnings basis than Acme. But if Acme is kicking Zenith's butt, you might want to be long Acme as its earnings might go up next year and Zenith's might go down.

More next Saturday.


James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund was long and Goldman Sachs, and Cramer was long His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at

Evening Update: FTC Will Handle Investigation of AOL-Time Warner Deal


Eileen Kinsella

Staff Reporter

2/11/00 8:45 PM ET


Federal Trade Commission

will handle the antitrust investigation of

America Online's


proposed $127 billion purchase of

Time Warner


. Among the issues the FTC is expected to look at are possible interlocking ties between AOL, Time Warner and long-distance giant


(T) - Get AT&T Inc. Report


MTVi Group

, the online music-content provider developed by


(VIA) - Get Viacom Inc. Class A Report


MTV Networks

, filed with the

Securities and Exchange Commission

to raise as much as $10 million in an initial public offering.

Mergers, acquisitions and joint ventures


(BRC) - Get Brady Corporation Class A Report

said it agreed to acquire bar-code-label maker



for about $21 million.

Reynolds Metals

(RLM) - Get Realm Therapeutics PLC Sponsored ADR Report

said its shareholders approved its merger with


(AA) - Get Alcoa Corp. Report





said CEO T. Paul Thomas will resign March 1.

Bond Focus: A Quiet Day Ends a Bumpy Week for Bonds


David A. Gaffen

Staff Reporter

2/11/00 4:16 PM ET

Today, the Treasury market managed to end a long, crazy week on a reasonably quiet note. After the meager demand displayed at this week's quarterly refunding auction (especially

yesterday's $10 billion sale of 30-year Treasuries), investors joined the fray today, rallying the market. Treasuries were also helped by a weaker-than-expected

retail sales


The market settled into a quiet range in the afternoon, perhaps steeling itself for stepping back into the fire next week. A full calendar of some of the most important monthly economic releases awaits, and if that isn't enough,

Federal Reserve


Alan Greenspan

will appear before Congress with his semi-annual


testimony, where he'll assess the economic outlook for the coming year.

The 10-year Treasury bond was lately higher by 14/32 to 99 6/32, pushing the yield down 7 basis points to 6.612%. The 30-year bond was up 21/32 to 99 18/32, yielding 6.282%. The five-year note was up 7/32 to 96 20/32 to yield 6.714% and the two-year note was up 2/32 at 99 17/32 to 6.632%.

The March bond contract, traded on the

Chicago Board of Trade

closed up 16/32 to 93 10/32.

Investors finally began looking for opportunities today, after a volatile period where confusing signals from the

Treasury Department

put many people on the sidelines. Comments made at the Treasury's refunding announcement last week had some temporarily believing that sales of the long bond could be eliminated, pushing the yield down by almost 30 basis points in two days. The result was one of the worst 30-year bond auctions in recent memory.

The excessive volatility spurred investors to sit it out, and they only started to support the market with buying today.

Strategists believe the instability will decline next week. For one, the threat of new Treasury supply is out of the way. Also, whatever short positions the market had been holding -- and as of Jan. 25, speculators in the bond market were holding a record short positions -- were certainly flushed out in this week's seasick trading.

"A lot of accounts had bad trades," said John Blough, chief investment strategist at


. "People expected the yield curve to become more positively sloped after more

Fed tightening. That didn't happen, and when people started putting flatteners on it (betting that long yields would continue to outperform the short end of the curve), it only exacerbated the move." In other words, those who were betting on a return to a normally shaped curve were in worse shape, and were forced to sell.

It's telling that people expect


volatility in a week that not only contains a Greenspan appearance, but the release of the

Producer Price Index

and the

Consumer Price Index


It's hard to imagine Greenspan's tenor has changed much since his January

appearance at the

Economic Club of New York

(unless he's a bass now, of course). Then, the chairman warned of imbalances in the economy and the startling pace of consumer demand, but didn't characterize it as out-of-control. Christopher Low, chief economist at

First Tennessee Capital Markets

, expects as much at Greenspan's appearance Thursday.

"Based on past performance, the January New York Economic Club speech is almost an exact template of what we're going to see next week," said Low. "There's going to be cautious optimism -- 'the economy is growing faster, but we can get it under control.'"

The market will also face more supply, this time of the corporate variety. Late in the day,



sold $2 billion in 10-year notes and 30-year bonds. Next week,

Freddie Mac


will sell $3 billion in three-year notes.

Economic Indicators

The consensus estimate for the Producer Price Index, an important measure of wholesale inflation, is for a 0.2% increase in the overall PPI in January, and for a 0.1% increase in the core PPI, according to


. The core PPI excludes food and energy prices. The PPI is released Thursday, 8:30 a.m. EST.

The Consumer Price Index is expected to increase 0.3% in January, according to Reuters. Economists are looking for a 0.2% increase in the core CPI. On a year-over-year basis, the CPI is currently rising at a 2.7% rate. The CPI is due out Friday at 8:30 a.m.

Retail sales rose 0.3% in January, lower than economists' expectations for a 0.6% increase, according to


. Excluding autos, sales fell 0.3%. Economists were looking for a 0.5% increase. December's retail sales were revised up to a 1.7% increase from an original 1.2% estimate in December. Excluding autos, sales were revised up to a 1.9% gain in December from an original 1.4% estimate. November's figures were also revised higher, the

Labor Department


However, a 2.2% decline in food store sales -- which Charlie Reinhard, market strategist at

ABN Amro

, surmised was a weather-related event -- was responsible for some of the decline. Reinhard said the strength in auto sales and in clothing sales prove that consumer demand isn't slowing just yet.

Excluding autos, the 0.3% decline is the first time sales have dropped since December 1997. The decrease is also the largest since April 1997's 0.9% decline. Excluding autos, sales rose 2.3% in January.

Currencies and Commodities

The dollar gave back earlier gains against the yen and the euro. Dollar/yen was down 41 cents to 108.81, while the euro was up, trading at $0.9866 against the dollar from $0.9850 yesterday.

Crude oil for March delivery on the

New York Mercantile Exchange

was up 7 cents to $29.50.


Bridge Commodity Research Bureau Index

was up, lately trading at 214.47 from 212.69 yesterday.

Gold for April delivery on the


was giving back yesterday's gains, lately traded at $313.7 per ounce, down from $318.7 yesterday.


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