How much longer can the binge continue.

http://biz.yahoo.com/apf/991224/market_eup_2.html

Link

Friday December 24, 9:25 am Eastern Time

Internet Spurs Stock Market Binge

By DUNSTAN PRIAL

AP Business Writer

NEW YORK (AP) -- Investors have indulged in an unprecedented shopping spree this holiday season, pushing stock markets to record levels both at home and abroad.

The Nasdaq composite index briefly crossed 4,000 for the first time on Thursday, less than two months after passing the 3,000 mark, and closed at a record high for the 58th time this year. Meanwhile, the Dow Jones industrial average leaped for its first record close since August. Records also were toppled by major market indicators in London, Paris and Frankfurt, Germany.

The buying continued today. Hong Kong's major index closed at its first record high since Aug. 7, 1997, before the Asian financial crisis began to take its toll on the territory, and London's stock index reached a new high in a half-day Christmas Eve session.

A driving force in the stock market surge is a fear among investors of being left out of an Internet-based economic revolution.

And mingled with that fear -- especially in recent months -- is a growing belief that the once vague potential of the Internet is beginning to solidify into tangible proof that the online revolution is fundamentally changing society.

These factors have created near hysteria among investors and sent the world's stock markets surging upward at an unprecedented rate.

On Thursday, the technology-heavy Nasdaq index rose as high as 4,001.63, and finished up 32.14 at 3,969.44. Even with the late pullback, the Nasdaq is up a stunning 81 percent with just a week of trading remaining in 1999.

The Dow industrials, meantime, rose 202.16 to close at a record 11,405.76, and the Standard & Poor's 500-stock index also is at a new high. U.S. financial markets were closed today in observance of Christmas.

``People are beginning to see what the Internet actually does,'' said Art Bonnel, a Reno, Nev.-based mutual fund manager. ``They're seeing that it really is working.''

The business community and society at large are rapidly adjusting to the idea of electronic commerce conducted via the Internet, Bonnel said. Consequently, the public no longer views the Web merely as a good idea with a lot of potential, but instead sees it as a viable and efficient way of doing business.

With that in mind, shares of companies with a broad view of the Internet are leading the recent stock market surge. A year ago, anything with a dot-com attached to its name was fodder for the feeding frenzy. But investors apparently are more focused in their view of where the Internet is headed, and e-commerce seems to be the consensus destination.

The companies benefiting the most from the recent frenzy are the ones that are building the networks upon which the Internet will be distributed around the globe. These networks will be the foundation that will allow companies to communicate with consumers and each other on a global scale.

The list includes so-called infrastructure companies as Oracle Corp. [NasdaqNM:ORCL - news], Qualcomm Inc., Sun Microsystems Inc., Cisco Systems Inc. and Broadcom Corp., all of which have surged in share price since late October.

``We're in the early stages of a second industrial revolution, and the market is very smart. It senses these things before it's being written up in the media,'' said Alfred Goldman, chief investment strategist at A.G. Edwards & Sons in St. Louis.

Also contributing to the recent euphoria is the widely held view that the world's stock markets won't be hurt by Year 2000 computer glitches.

Indeed, some analysts believe stocks have surged in part because money that was kept out of the markets based on Y2K fears is now flowing freely because those fears have faded.

Moreover, some expect the markets to see another windfall when -- and if -- Jan. 1 passes without incident.

But not all investors are believers in the so-called new paradigm.

``The frenzy that's going on right now, there's no substance to it,'' said Lou Methner, a retired investor in Denver. ``The new paradigm disregards 100 years of experience.''

Methner noted that many of the soaring new Internet stocks have never earned a dime, and their prospects of doing so are unknown.

The current buying binge is being fueled by a short-term investment strategy, he said, adding that he favors the traditional practice of buying the stocks of solid companies, and holding the shares as they gain value over time.

Jim Melcher, president of Balestra Capital Management, a New York investment firm, was blunt in his assessment of the current environment.

``It's more than euphoria, we're in an absolute manic phase,'' he said. ``It's more extreme than anything except maybe the speculation of 1928 and 1929.''

Melcher suggested that the phenomenal gains seen by many individual stocks and all the major indexes are essentially the manifestation of a sort of mob mentality.

Money managers who run large pension and mutual funds feel compelled to jump on the bandwagon of a given stock or sector, he said, because their jobs depend on short-term performance evaluations. And since most investors have grown accustomed to huge annual gains, fund managers have no choice but to chase whatever stocks are shooting higher, Melcher said.

``Fund managers are in a performance derby, so whatever's working they all pile into it,'' he observed. ``People are going to get what they deserve. They're going for maximum performance without concern to risk.''

-- (Fin@ncial.news), December 26, 1999

Answers

Buy high. Sell low.

-- Mara (MaraWayne@aol.com), December 26, 1999.

Looks like those who have learned from history are putting up the warning signs, not just in this article.

-- W (me@home.now), December 26, 1999.

You know the end is very near when one of the "New Era" paradigm heroes gets his mug pasted onto the Time front cover as Man of The Year.

WHY. Because his company has set the record for LOSSES by an I-net co., a half BILLION so far, and an estimated(accelerating)$350 MILLION loss for this current Fiscal Year.

Jeff Bozo's the name. Losing TONS of "investors'" money is my game.

-- profit of doom (doom@helltopay.ca), December 26, 1999.