Armed Liberal

AUTHOR: ArmedLiberal

EMAIL: armed@armedliberal.com

IP: 4.46.87.58

URL: http://www.armedliberal.com

DATE: 10/17/2002 09:52:51 PM

Date: 10/09/2002 00:00:00 AM
Mostapha:You're absolutely right, and I know better. This IT 'wave' is no different than the railroad 'wave' or the automobile 'wave'; in each case the early years were littered with dead companies and fleeced investors.Sheesh.A.L.

AUTHOR: Zizka

EMAIL: zizka@vanitysite.net

IP: 206.103.35.152

URL: http://www.vanitysite.net

DATE: 10/17/2002 09:52:51 PM

Date: 10/09/2002 00:00:00 AM
Effects of the Internet: A friend of mine who runs a used bookstore says that 80% of his business is now internet. He had to go that way to stay in business. He got no advantage from it -- he had to hire more skilled people and invest in hardware, software, and a shipping operation.From the consumers' point of view there is an advantage. When I started buying on the internet I was able to buy about 50 out-of-print books I'd been looking for for 10 years or more, only paying premium prices for 4 of them. So there's been an enormous gain, but not to investors.

AUTHOR: Zizka

EMAIL: zizka@vanitysite.net

IP: 206.103.58.76

URL: http://www.vanitysite.net

DATE: 10/17/2002 09:52:51 PM

Date: 10/08/2002 00:00:00 AM
Over the last few years (can't remember how long) I've kept seeing references to "consumer confidence" or "investor confidence". These were watched closely to see how healthy the economy was. To me this is a sign that lots of well-informed people knew that we were in a bubble. But no one wanted to say so, because all the big players were invested in the bubble. Of course, they could have shifted assets into relatively bubble-burst-proof investments (whatever those are), but they would lose money doing that unless the bubble burst on schedule. "Investor confidence" is a subjective psychological concept and should have no place in economics. In a sound economy, if economics is a good description of reality, underconfident investors who sell out would be losers, and the investors who scavenged up the stocks they dumped would be the winners.I posted this idea on Brad DeLong --no response. I'd love to see an economist's response.

AUTHOR: Mostafa Sabet

EMAIL: mostafa988 at yahoo.com

IP: 204.91.170.3

URL:

DATE: 10/17/2002 09:52:51 PM

Date: 10/08/2002 00:00:00 AM
I work in the securities industry (though I started right when the slide did) and my feeling is that all the wealth that was created earlier has pretty much been wiped out by the falling market. This is simply because moer people were buying than selling at the top and now the opposite is happening.That said, I think there were some very real gains due to the psychotic over-investment in technology. IMO, had the the internet industry evolved at a more sane (read: profit-driven) pace, it would probably take us another 5-10 year for it to reach it's current state of cultural ubiquity. Case in point, most retail webfronts for stores are not at all profitable. They are essentially the digital versions of marble and gold-encrusted bank branches, mere status symbols. The cost of the web front is canceled out by the loss of prestige and advertisisng in addition to the risk of losing a customer to an alternative found on the net.Had there not been the rapid, idiotic over-investment in internet technologies, we might still be putzing along with something barely more robust than the old Prodigy or Compuserve. In short, money-wise we're no better off really (but we sure have a lot of infrastructure), overall the productivity gains make up for the wild ride.

AUTHOR: Mostafa Sabet

EMAIL: mostafa988 at yahoo.com

IP: 204.91.170.3

URL:

DATE: 10/17/2002 09:52:50 PM

Date: 10/09/2002 00:00:00 AM
Don't worry 'bout it A.L., it happens to the best of us. Besides, those binges and purges are overshadowed by the more recent market crashes. When the auto and RR 'waves' are probably more accurate analogies.Like Sir Winston Churchill said, "The farther backward you can look, the farther forward you are likely to see."MoP.S. It's Mostafa not Mostapha (though I wish I was cool enough to have a 'ph' in my name.

AUTHOR: Michael

EMAIL: michael.ladd@dmh.state.ma.us

IP: 146.243.115.8

URL:

DATE: 10/17/2002 09:52:50 PM

Date: 10/09/2002 00:00:00 AM
Mostafa,I can't really be true that "more people were buying than selling at the top". After all, for every buyer there has to be a seller. However, I agree with you about some of the progress made. One has to be careful not to equate the stockmarket with the entire economy. Just because the stock price bubble burst doesn't mean that what was created in the real world was valueless.

AUTHOR: Mostafa Sabet

EMAIL: mostafa988 at yahoo.com

IP: 204.91.170.3

URL:

DATE: 10/17/2002 09:52:50 PM

Date: 10/09/2002 00:00:00 AM
Ziska,On the confidence numbers. Because of the nature of equities it is a very important concept. You said "In a sound economy, if economics is a good description of reality, underconfident investors who sell out would be losers, and the investors who scavenged up the stocks they dumped would be the winners." And in the long run (>5 years or so) this is true. But because investors are purchasing stock based on numbers the company gives, confidence and trust is a key component to the pricing of a company. The market-wide fall after the WCOM scandals demonstrate this. How can you trust a sound decision based on data that you are not sure is accurate? To account for this, prices are adjusted down, just in case. While in times of high investor confidence, everything is riding high, the future's so bright you gotta wear shades, people are willing to pay more.Yes it's a messy and unreliable, but it is a very important component to understanding the markets in the short term at the very least. Most people knew it was a bubble ("irrational exuberance"), but because of the nature of the street no one wanted to get out. Look what happened to those that stayed out of tech, like Buffett. They were ridiculed by others unfairly. While Warren Buffet can handle the short term discomfort, Johnny Portfolio Manager is going to lose his job if he stays out of the techs too long because he thinks it's a bubble. Beta may have been better than VHS and the Amiga was the best computer of it's day, but niether are successful nowadays. In the world of the markets, if you're wrong with everyone else, you're a lot better off than being wrong alone (or sometimes wrong in the short term and right in reality).Anyways, I digress. Confidence affects behavior, behavior affects reality and we are all trying to figure out reality. Ignoring confidence effect in the markets is like ignoring hunger effects in a restaurant.Mo

AUTHOR: Mostafa Sabet

EMAIL: mostafa988 at yahoo.com

IP: 204.91.170.3

URL:

DATE: 10/17/2002 09:52:50 PM

Date: 10/09/2002 00:00:00 AM
Michael,I worded that sentence poorly. The point I wanted to really make is most people bought high and sold low. But the reason for it was that there were more buyers than sellers.While it is true that for every buyer there has to be a seller, one can look at exchange data and see that on a given day there are more buyers than sellers or vice versa. Looking at the the quote of a stock when a trade is made and where it is relative to the bid and the ask you can see if there is a buy bias or sell bias. This is especially true of market orders. If the market orders are skewed on one side (for the rest of this I'll assume buy is the greater side), it can be reasoned that those on the sell side will benefit from more favorable (read: higher prices). Often, when people speak of more buyers/sellers in the market, this is in regard of market orders. Since these esentially say, "Get me this stock now, damn the price."So while you do need equal buyers and sellers, all buyers and sellers are not equal.I also agree that the stock market crashing doesn't mean value was lost (there's an old saying, "The stock market predicted 10 out of the last 7 recessions"), but there was a lot of stuff created on the internet that IS worthless (think sock puppets). Even that worthless stuff changed the way things were done in other arenas, bringing value in their death (even shit isn't worthless, just ask anyone with a garden or farm). I don't believe we lost much value from the crash because many of those gains were smoke and mirrors. I kept telling my dad it was a house of cards and profits were necessary. Towards the end I wondered if I was wrong and the pros were right because it had been going on for so long(I was just a college student for essentially the whole boom, until 6/2000). The current loss in value is from a) the smoke blowing away and b) failures of trust. Since, so much of our economy is based on trusting people you have never met, seen or heard of, this was especially devastating. Our economy is looking healthy (albeit punchdrunk), unemployment is still at what was once thought to be an unsustainably low level and the market will recover eventually. Now it is time to hunker down and wait it out (and arrest a bunch of corporate criminals).Mo

AUTHOR: Mostafa Sabet

EMAIL: mostafa988 at yahoo.com

IP: 204.91.170.3

URL:

DATE: 10/17/2002 09:52:49 PM

Date: 10/09/2002 00:00:00 AM
On your efeects of the internet: The internet helps customers find the perfect price, taking into account substitution effects. By it's nature it will help the small retailer more than the big retailer. Since (in theory), all stores are equal on the internet (i.e. if I type 'plaid golf pants' in Google all stores with said item will show up), the stores with the rare or obscure are at an advantage. This is because, unlike a brick-and-mortar store, the Internet will not tell you, "Sorry we don't carry it or know anyone who does."This is especially beneficial for small specialty stores because of reduced marketing and advertising costs, in addition to increased volume. However, this will also be balanced by lower prices, which is probably why the shift/increase of business online has not had the gains that one would expect. Since I don't know the exact situation it's hard for me to remark particularly accurately in the case of your friend.Also, I'm sure the added internet costs didn't make the increased internet sales as benficial as they were, but you said he had to go online to stay in business, which means that going online DID help out your friend. I can almost guarantee that the internet helped out your friend more than it helped Borders, for example.Your last paragraph merely demonstrates the economic concept that more information for the customer will help the customer get better prices and more of what s/he wants.Mo