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Gary B. Smith:
Turn Off the Tube, Log Off the Boards and KISS Off Complex Strategies was right on.
I believe in the MIS KIS strategy: Make It Simple and Keep It Simple. My simple rules are based on simple assumptions: Most of the volume in stock trades comes from the fund people. When's the last time you bought a million shares of anything? The people who do most of the trading, the fund people, establish the price. This is simple supply and demand. Most of the fund people receive the majority of their compensation based on short-term performance. That's why they are nervous and trade a lot.
Trading a lot with short-term focus makes them trade with mob psychology. Why else, when
announced that its growth rate would "slow" to 40%, would every other PC hardware stock fall?
So here are the Simple Rules: If you buy what the fund managers are buying, you are going to win. If you buy what the fund managers are selling, you are going to lose.
Oh yeah, one more acronym: BAH, or Buy And Hold!
-- David. M. Johnson
Gary B. Smith:
According to your
Turn Off the Tube, Log Off the Boards column, I should resolve to read only one column per day on
. This would certainly make things much simpler. I become confused when I read a column like that and then turn to the excellent
shared by Jeff Matthews in
column. How can I keep things simple if I am analyzing the sequential sales growth of new Internet companies?! Anyway, keep up the fine writing. I'll just resolve to stay confused.
-- Mike Squillace
Early Birds Hit the (Tri)Mark
What a scoop on
In the Clear: Merrill Sets Back-Office Deal With Knight/Trimark, with the
agreement. Two days later NITE is trading up 20%-plus.
Great reporting! I'm certainly glad to have the opportunity to average down on NITE. You've made my subscription a bargain!
-- Stan Starr
Miss America, the Beautiful
Thank you for writing
Pulp Fiction: The New Era Growth/Productivity Squeeze at
and explaining a very dry subject, such as the economy, in such a way that it makes easy reading. Because I am not so good at American English (I live in Vienna) I could not follow your polls at the beginning. Now I believe they are just fun. I take them every day trying to guess which answer will create the most responses. I have no clue what the correct answer is, but I try to predict the correct, or majority, answer. Like the market, I don't know which way it will go, but I'm still trying to get it right. Carry on.
-- Alois Lippert
Don't tell me you missed
-- Kristopher Day
James J. Cramer:
As for your comments on the cribbers, in
Real Clough-t, the attitude is why wear out your shoe leather looking for stories when you can lift information from better-informed sources? This is the ethics of the '90s and it started with
way of operating. Be unethical, lie and apologize. Have you noticed that many more things go wrong through lack of commitment to customers, clients, etc. People think when they say, "We apologize, etc.," the slate is wiped clean. We are on our way to becoming a second-class nation because of complacency instead of commitment.
-- Peter Green
At the Margins
James K. Galbraith:
In your column
The Fed's Fighting the Wrong Battle, you state: "Since 1993 margin borrowing has tripled in relation to GDP. In relation to capitalization, margin debt now stands at levels surpassed only in the run-up to the crash of 1987. The actual volume of margin debt, $177 billion in June, is up 80% over 1996."
What I really want to know is the dollar amount of margin debt by all holders, compared to the dollar amount of stocks, bonds and other financial assets held by these same players. My personal margin debt might have increased 200% in the past three years. But if the stocks, bonds and other financial assets held to secure this debt has increased by 500%, then I am really being more conservative than before.
The fact that margin debt is up 80% since 1996 is not particularly relevant in and of itself. Since 1996, the
is up about 99% and the
is up about 143%. So as I see it, margin debt as a percentage of stock market valuation is actually falling.
Taking on the TaskMaster
I am a regular reader of your column and find it informative and funny. However, I want to take you to task for the line in the
Dollars and Sense column about
being thrown into a Turkish prison with
. In the words of the funniest short film ever made,
The Albert Brooks School of Comedy
, "That's not funny." In fact, what it is is homophobic.
I love all sorts of humor. I love to laugh at humor that makes a point, exaggerates a situation and pokes holes in pomposity and hypocrisy. But I don't think that real humor comes at another's expense. Laughs based on appeals to homophobia, racism, anti-Semitism and negative stereotypes may be why people listen to
, but in my opinion, that ain't funny.
I believe that your "going for a laugh" in this manner was done without thought as opposed to with malice and forethought.
I don't think it brands you as a raving homophobe or that you are advocating violence against gays or any other of our fellow humans. I do, think you owe me and all the readers and subscribers to
a printed apology. I merely think it is the decent thing to do.
-- Barry Z. Levine
Much Ado About REIT Investors
Reflecting on your article,
Despite a Solid Quarter, REITs Get the Cold Shoulder From Investors, there is only one primary reason that REITs are avoided by the investor mainstream: the reputation of the operator class as cowboys, deal junkies wholly uninterested in operations.
Toss in a bit of self-dealing, nonreflective accounting, inherent conflicts of interest and previous boom-bust cycles -- and there's your story.
-- Mike Pearce
bought REITs for his own account for the income? Somebody has to be kidding. The second-richest man in the world, who eats at the Dairy Queen and lives in an old house, needs income from a REIT?
I am sure that
is going to do it any day now. He really
-- Gregor Riesser
With or Without Belluzzo
James J. Cramer:
I am a fan of your column, but your story
Belluzzo 3.0 Is a Huge Win for Microsoft is totally off-base. Rick Belluzzo had plenty to work with at
. The reason he will succeed at
is not because he is awesome; he'll succeed because Microsoft has too much talent, money and too many products for him to screw up. I know because I was a senior manager at SGI for five years. I am also certain that Bob Bishop will make
out of SGI.
-- Sharat Israni
The Other Side of the Fed Decision
In response to your column
Sharpen Your Invisible Pencil and Keep Score on the Fed, excuse me for reminding everyone of a totally tedious fact, but the
is supposed to be worried about monetary policy, not consumer spending or saving, not the price of the Internet stocks and not whether Americans are stuffing their piggy banks or the stock market instead, which it simply doesn't get.
As for wages, am I the only one going to the grocery store these days? Here in northern Virginia, due to the drought, tomatoes are $1.69 a pound! Other usual, local farm crops are either nonexistent or have prices that remind you of shopping in February, when you see romaine lettuce and carrots from California or Guatemala. Prices are up, and farmers are going bust. Meanwhile the technology whizzes continue to get more money out of their stock options than salary! How can the Fed continue to see inflation on the horizon? Lastly, when will the Phillips model for low employment be given up as being inflationary?
So, to answer your survey about Alan Greenspan, I think he will go down in history as a hero, if he manages to drag the regional presidents into the 21st century -- kicking and screaming.
-- Carrie Rountree
AMD vs. Intel
James J. Cramer:
I was just reading your
AOL chat and wanted to comment on
. These guys have been hapless. That said, the Athlon chip is amazing technology and regardless of AMD's past, its great rival,
, doesn't have anything that competes and it won't have anything for nine to 12 months. For the first time, AMD is truly ahead in technology that it's shipping out the door.
What Intel does have is history and manufacturing capacity. Intel will continue to be comfortably profitable in the chip market as long as it doesn't overreact with its price cuts. The company just needs to remember that AMD will not be able to make enough chips to hurt Intel for at least two quarters.
What AMD should be able to do is make enough Athlon chips to turn its bottom line black by at least the first quarter of 2000. I expect AMD to quietly recover over the next two quarters, and it
pose a serious threat to Intel's first- and second-quarter 2000 CPU business.
In short, I actually think that the planets have lined up for AMD this time. The company won't knock off Intel by any means, but there will be a different ballgame by the first quarter of next year.
-- Colin Hildinger
Sun Microsystems vs. Microsoft
In response to your article,
SGI CEO Quits; Appeals Court Sides With Microsoft, maybe I'm naive here, but it seems to me that
will come out better with this ruling than if the injunction were upheld.
What I get out of reading the news stories is that Sun is being told to sue for damages rather than force Microsoft to change its Java Lite back to Java ... well, heavy.
If Sun had won this court battle, it would have gained a moral victory over Microsoft. Now that Microsoft can ship product, and assuming the likely outcome that Sun wins the next suit for damages, Sun will get a slice of every sale of the very product it tried to keep off the market. I sure don't see this as a loss for Sun. Imagine, being forced to share the profits of a Microsoft product ... "Oh PUHLEEZZZ, don't throw me in that briar patch!"
-- Michel Strickland
Music in Your Message
In the Invisible Mouth column
Anticipating the Fed's Timid Tuesday, did the author put
the headers in, or the editors? All I saw in the column, aside from section titles, is a tired
reference. Surely prosperity and the Allman Brothers don't go together, but
and prosperity might.
-- Hans Disch
A Personal Perspective on FedEx
I would like to respond to your article,
Overnight Overkill: FedEx's Net Prospects Remain Uncertain. I run a business from my home. I use
and pay the going rate for the service. It would appear eminently simple to me that the distinction drawn between business and home deliveries is a distinction without a difference.
In Westport, Conn., where I live, the FedEx vans make deliveries to the many financial services and marketing firms in the community and to others like myself who work at home. Given the fixed cost of operation of FedEx (or any other comparable service) any pick-up in business volume is highly desirable regardless of the source. I used to use FedEx, for example, to ship my golf clubs to the West Coast on a two- or three-day delivery timetable because its rates were so competitive.
The real issue for FedEx is whether the shimmering oasis of e-commerce is real. The company's risk, in my view, is making inappropriate capital contributions to this business and to the detriment of its core business, which for the time being is considerably larger.
-- Leigh A. Wilson
AOL's Only Risk: Complacency
I don't hold any
and have no attachment to it, and I think you are
dead wrong. AOL has gotten to where it is now, profits and cash and megainvestments in stuff other than its services, through 95% inspired brilliance. The only danger to this approach, which has brought it such amazing success to date, will be in getting old and unimaginative.
Microsoft made a great mistake in the beginning -- its name. Just spending its money attacking the shadows of ghosts of enemies will not bring Bill Gates the solace you suggest he seeks. It is simply an ineffectual strategy. The end of all this is that Bill Gates will just get richer and Microsoft bigger and AOL will intermittently blow people's minds and continue to grow its way, not fighting the Bill Gates way ... and so on and so forth.
-- Greg McHugh
Don't Underestimate AOL
claims that AOL will lose a lot of people and money this e-commerce Christmas because "Microsoft is about to make Internet access free. FREE."
This might be conceivable if AOL were the only other ISP. However, long before AOL hits the mat, most small ISPs would be wiped out. Does anyone, other than Mr. Sherman, really think the
Department of Justice
would sit idly by while Microsoft becomes a monopoly in the ISP realm through predatory pricing?
A more realistic scenario is that MSN access fees will drop to $9.95. They might risk the $5 range, but this would result in a lot of activity in Washington and in the press by other ISPs. The group has already mobilized to make a lot of noise to get access to cable. While this has limited merit, the threat of its being wiped out would get Washington's attention. Mr. Gates knows this.
Mr. Sherman correctly credits Mr. Gates for being a powerful adversary. However, I think Mr. Sherman is making the same mistake Mr. Gates used to make: underestimating AOL.
-- John Waddell
Response From FBR
Your Aug. 18 column,
IPO Shares Make Good Bait Though They're Not Always Good Investments, makes a valid point: IPOs are not a sure thing for individual investors. That's why we have strict compliance requirements for IPO eligibility.
We disagree, however, with your impression of our IPO performance. Please note that if an individual investor had invested in the nine non-REIT IPOs cited in your chart, he or she would be up 25%.
We have not lead or underwritten a REIT since April 1998, and at that time, REITs were intended for institutional investors looking for steady dividend income and not for retail investors looking for an IPO "bounce" on the first days of trading.
The decline of the REIT sector and a choppy market notwithstanding,
Friedman Billings Ramsey
has had some runaway IPO successes in the last two years:
is up 159%,
Corporate Executive Board
is up 94% and
is up 179% -- all based on Tuesday's closing prices in your chart.
In the last 10 years, FBR has consistently delivered for its institutional clients while bringing a fresh perspective to the capital markets. Our recent strategic alliance with
testifies to these successes. Our plan now is to work together across seven sectors: technology, real estate, regional banks, thrifts, specialty finance, energy and health care.
We expect this alliance to be successful.
-- David A.R. Allan, Director of Investor Relations
Friedman Billings Ramsey