Internet Stocks Vs. Phantom Menace
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Perhaps it's just coincidence but maybe there's something to the fact that Star Wars Episode 1, The Phantom Menace, opens soon while another phantom menace also has been stirring: Alan Greenspan, the man who has yet to log onto AOL for the first time and has trouble spelling it.
I am a big Greenspan fan but as the Federal Reserve unsheathes its light sabers (interest rates) to battle the dark side of the Force (inflation) then I wonder if Obi-Wan Alan is just posturing for the sake of not being a broken record with the usual "rates unchanged position" or if there's something stirring under the robe after all. And we're not suggesting Bob Dole's product endorsement of Viagra hasn't had an effect on the market schwings of late either. Anything goes in the choppy market, as Lorena Bobbitt's investment club might say.
Take into consideration the blast the overall market took yesterday as those not accustomed to the Force may be wanton to forget: all the indices dropped on Obi-Alan's rate swash buckling. Tally at the bar:
ISDEX, off 6 points; NASDAQ, off 3.48 points; DJIA, off 16.52 points. On a point basis that's not enough to worry about but the underlying rip current is in my opinion.
Looking at a week's snapshot shows the current has turned somewhat bearish as just 9 of the 50 stocks in ISDEX make gains since May 13. The amazing thing is that this week's worst performers were last week's best. Let's see:
|ISDEX ®||19-May-99||% change|
|The Internet Stock Index||close||from|
|Open Market||OMKT||$ 14.00||10%|
|CheckPoint Software||CHKPF||$ 44.00||7%|
|Cyberian Outpost||COOL||$ 13.94||7%|
|CMG Info||CMGI||$ 239.44||0%|
|Network Solutions||NSOL||$ 71.88||0%|
|Preview Travel||PTVL||$ 23.38||-2%|
|Earthlink Network||ELNK||$ 62.13||-2%|
|24/7 Media||TFSM||$ 43.75||-3%|
|America Online||AOL||$ 134.06||-3%|
|Network Associates||NETA||$ 13.44||-4%|
|ISS Group||ISSX||$ 58.25||-4%|
|Security First Technologies||SONE||$ 50.13||-5%|
|@Home Network||ATHM||$ 150.25||-5%|
|Security Dynamics||SDTI||$ 19.88||-9%|
|Sportsline USA||SPLN||$ 35.25||-17%|
Essentially Fed reserve rate fear increases could hamper the Internet stock sector as it softens the underlying demand for more speculative issues in general. The basic formula is higher interest rates equal tightened earnings as money becomes more expensive.
Driving the bull market these past millenniums has been a very economy-friendly interest rate level that makes the American economy (and the information economy which drives it) the envy of the world.
Among the galactic shifts:
There's a musical chair game being played now with community sites and those without major media merger partners may be left standing undercapitalized in the coming ecommerce wars of the future.
theglobe.com (NASDAQ:TGLO) founders should be hiring investment bankers to shop their deal and stop playing college graduates-turned-Internet-millionaires wondering what to do now. Said another way it's time for Luke Webwalker to leave the farm.
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"Fresh and provocative" -CBS Marketwatch, who named Steve Harmon one of the top Internet stock analysts and only independent one honored
"I am a huge fan of Steve Harmon's analysis" -Kleiner Perkins' John Doerr