Doom Is At Hand - At Least Until Tomorrow
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I was flying back to Boston from Internet World in Los Angeles over the weekend when our 757 hit some turbulence over the Rockies. Nothing heavy-duty - a few trays rattled, some drinks spilled, everyone ordered back to their seats until things settled down.
While I don't much like turbulence, I certainly know what it is, and a few bumps and rolls aren't going to make me burst up the aisle wailing, "We're all going to die! We're all going to die!"
(Not that I don't have my flashes of terror. A good wind shear can make me grab for my kids' photos so I can look at them on the way down, thus guaranteeing me individual coverage in the crash stories: "One devoted father was found clutching pictures of his children.")
The point is, you can't assume a pending disaster just because you hit a rough patch, especially the kind that is totally expected. So why are so many people assuming that Monday's across-the-board plunge in Internet stock prices means the beginning of the end?
The word that seems to be missing most in this multimedia discourse is "perspective." Sure, Internet stocks took a record one-day hit on Monday, and the truth is that the past week has been unsettling, with last Wednesday being another particularly bad day.
Still, as Steve Harmon points out in Tuesday's Morning Report, Internet stocks are way up this year, even after the past week's events - 74% from Dec. 31 through Monday, as measured by the ISDEX.
Look at it this way: If you told me on Dec. 31 that if I bought AboveNet Communications (ABOV) shares at $21 each, they would be worth $84.81 on April 20, I'd be pretty happy with that performance. Likewise, my $33.63 per share investment in GeoCities (GCTY) on Dec. 31 would be worth $106.69 today - again, an excellent return.
(Conversely, if I bought AboveNet on April 12 at $150.25 and GeoCities on April 5 at $143.56, I'd be cursing my own stupidity, and rightly so.) Part of the problem is our "instant news" culture. Everything has to be analyzed and extrapolated immediately.
A few months ago a reporter for a daily newspaper called me to get my opinion about an Internet start-up that had gone public that day. He wanted to know what the stock's performance in its first day of trading "meant" in terms of the company's success.
I told him it meant the stock had a good opening day, nothing more, and that we would have to wait until Day 2 to draw any lasting conclusions. Perhaps we're in the middle of a correction. If so, that's good; we all knew one was due, and everyone agrees that many Internet stocks have been overvalued. I'm all for rationality.
And if what we've been seeing is something more -- something worse -- well, we'll all know that soon enough.
Until then, don't go bursting up the aisle.