Doom Is At Hand – At Least Until Tomorrow

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?

That was the tone of conversation at every Internet stock watering hole,
from CNBC to the online chat rooms. Never mind “bubble bursting” and
“correction”; words like “carnage,” “disaster” and “Titanic” were common
currency in the Internet stock community.

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.

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