Regardless of y2k.

The biggest growth industry of the last few years has been IT, specifically the internet.

However, the internet has not yet

-- Leo (leo_champion@hotmail.com), December 29, 1998

Answers

Regardless of y2k.

The biggest growth industry of the last few years has been IT, specifically the internet.

However, the internet has not yet attained the critical mass it needs to become a vitally important part of society. The technology simply does not exist yet.

Everyone believes that it WILL exist soon, and they believe this very strongly (since it has been going up meteorically since 1994 and shows no sign of stopping), IT stocks that run on LOSSES and will not make profits for a few years are worth a vastly inflated amount.

Examples of this include Yahoo! Inc, which has a hard-assets value of about $180 million but a stock market value of $3.5 billion. Amazon.com is also worth about 1500% it's real value.

These companies expect to gain revenue from advertising. This is how they currently make money.

The target audience, home internet users, are unlikely to consider the Net as anything more than a "nice" luxury. With interesting, maybe-even-useful stuff, but it costs $30-40 a month.

People can afford this now. They can also afford to buy new computers in order to go online. But if financial bad times hit, chances are a lot of households would have internet access as one of the first things on the financial chopping block, to save money.

At the same time, it has been repeatedly proven that one of the first things companies slash in a recession, is advertising. Whether this is good business sense is disputable, but the fact remains that companies repeatedly and consistently do it.

The fact that most internet advertising is done by internet, often IT, sites, further adds to the problem. These businesses will be in deep trouble themselves.

The disintegrating home audience will make advertising online even more undesirable for businesses.

Therefore the "internet bubble" collapses. When the internet companies go out of business, they take down a lot of IT companies that specialise or work mainly with internet companies. This wave comes across the IT industry and cascades out across the economy.

Result: economic crash even WITHOUT y2k.

How does that sound? Comments?

-- Leo (leo_champion@hotmail.com), December 29, 1998.

Hi Leo: Looks like your post got cut. At the risk of posting an answer before you even finish your thought, I submit that the NASDAQ (Tech stocks) is at record level with the so called "Tech Leadership". The following was posted on the kitco forum by "Cage Rattler." I feel it is instructive:

"At its recent price, Amazon.com ( AMZN ) has a market valuation worth more than Sears Roebuck Inc. ( Over $18 billion dollars. ) Per their last annual report, Sears had 344,000 employees. AMZN had 650 employees. 1/500 th as many. Sears had $44 billion in sales. AMZN had $200 MILLION. 1/2000 as much sales. Sears had PROFITS. AMZN had LOSSES".

Interesting, no? Some internet stocks have Price to Earnings ratios in the stratosphere, and they grossly overvalued by any historical measure you choose, which leads these idiot analysts to conclude that the historical measures are no longer relevant.

-- Rob Michaels (sonofdust@net.com), December 29, 1998.

Rob, I would dearly love to have access to company information such as you display:

Total value of a company on the share market

Total value of company's assets

Number of employees

And so on. Where do you find it?

In exchange..here's how to do bullets ;)

The "li" command- inside tag-markers (> and < signs), of course.

-- Leo (leo_champion@hotmail.com), December 29, 1998.

I don't know where Cage Rattler got the info, Leo. But I do know that this type of info is available from Value Line, which many libraries have (at least here in the States). They have in-depth analysis and charts for most publically traded companies.

Now that I have seen the rest of your post, I think you already may know that I think this market is a bubble in search of a pin. Even without Y2K, there are many global pressures from Asian, European, and Latin American sinking economies that will affect everyone else since we are in a global economy. Add in the huge amount of bad loans, huge amouint of national debt, huge amount of speculation via hedge funds and derivatives, and the picture is not pretty. Then there is the new Euro currencycoming next week, which I posted about on the Euro and Y2K thread. This, at a minimum, will increase the instability of global financial systems from what I have learned. Thanks for the bullets,and remember to duck!

-- Rob Michaels (sonofdust@net.com), December 29, 1998.

Leo,

Try this link:

http://newsweek.com/nw-srv/printed/us/bz/bz0115_1.htm

"The Crash of '99?"

-- Kevin (mixesmusic@worldnet.att.net), December 30, 1998.

Thanks.

-- Leo (lchampion@ozemail.com.au), January 01, 1999.