What do you think of those Internet stocks?
If there is one question that defines 1998, it may very well be this one. So when
asked readers what single event could get in the way of these high-fliers, the responses flew in from all angles.
We offered up a few possibilities and polled readers on their likelihood. Of about 700 readers who've voted so far, 52% said a flattening of year-over-year revenues was the most likely aggressor among our selection. 22% said the end of retail's busy season could be what turns investor psychology against the Net stocks. Recession and a massive network breakdown followed, 15% and 10%, respectively.
But plenty of readers had their own ideas. Here's a selection.
Insider Selling Kicks In
Gimme a break! Are those the best triggers you can imagine for a reversal of the internet juggernaut? Try the market finally satisfying the demand for these shares through the approaching end of the lockup period for a host of these companies. --John Barton
It Barks Like a Dog
If Internet years are dog years, where one Internet year equals seven normal years, then perhaps that's why we're seeing 10 to 20 normal years of appreciation compressed into one or two. One might conclude that the rollover and decline of the leading Net stocks might be equally as breathtaking. --Len Glassner
New Year's Resolution? Take profits!
Along with the alternatives you suggested, what also could happen is we could have substantial profit taking in the first few days of 1999. This could be done by mutual funds not wanting to stick their shareholders with massive, unanticipated dividends (short-term capital gains are treated as dividends on a 1099 form) which would arise if funds were sold in 1998. --Stanley Nugit
None of the Above
You left out "None of the above." That's my vote. --Bobby Caudell
An Insider's Warning
Working as a site designer for many corporate Web sites, including some of the ones investors have seen just released into the IPO market, I can easily tell you that the rise of Internet stocks has been seen by workers in the industry as a joke. I feel sorry for the investors in Net stocks, because they know very little about what they are buying. Most of the sites we design will never make money. The reason is simple: They are free. I don't care what any Net stock analyst tells you, advertising alone won't cut it, and page views mean nothing. Our research on post-site implementation shows that about 1% of all viewers even click on an ad, and based on numbers alone, this percentage may fall to .5% by spring. The ultimate killer would be recession, because of the nature of these companies' revenue streams. Do you need a book a week in a recession? Would you pay five cents per email to AOL? Would you auction for merchandise at eBay? While these stocks are the purest manifestation of this bull market's greed, the sites are an extension of that. Based on what I have seen of the sites we are currently developing and the conversations with colleagues at work on other sites, 95% of these companies will be bankrupt by next year. --Erik Pupo
No Rationality Required
Your multiple choices miss the point, given their rationality. Of course, after the fact, any of the items you mention may be ascribed as the cause. The real cause will have at its roots the same trigger as that for the rise in the .coms -- and it will not be rational, and therefore is not predictable as to time or nature. I am neither long nor short any of the .coms. --Keith Williams
They'll Sleep with the Fishes
You know how large schools of tiny fish, like herring, can turn on a dime, suddenly and without any apparent trigger? Each member of the school reverses course in exactly the same way as his neighbor, without any apparent signal, as if each fish "sees" a reason to turn 180 degrees at the same moment every other fish does? That's how I see the Internet break occurring -- for some unexplained reason, every investor in Net stocks will decide at the same moment that enough is enough, and they'll all change course (sell) at the same moment. The trigger? Take your pick -- recession, lost sales, someone screaming "They're all worthless!" -- anything that happens or is reported to have happened that engenders fear in the stockholders. Widespread fear hitting all the investors, all at once. And it will happen. --David Yeidel