>A set of speculative stocks seems to be the last place one would
>want to "park...a lot of liquid capital," particularly at a time when
>absolutely secure long-term bonds are yielding a real interest rate
>exceeding 5% p.a. IMO the term "bubble" is not the best one to
>describe so selective (among sectors) a market, particularly when,
>in whatever is currently the most dynamic sector, there are periodic
>sharp declines in price that, far from "puncturing" a bubble, merely
>set the stage for a further advance *of those stocks that reasonably
>merit a leadership role*.
Five hasty thoughtlets on this beaut thread ...
1: I reckon we should be careful about leadership, too. The leader often does the the hard yards and risks the big mistakes. The nippy predators and carrion-feeders, and only few of them, tend to get the fattest the quickest. I'm not sure we live in times that are all that different from the early nineties, when many a hope was dashed within months of its being lauded the way of the future (old copies of 'Wired' are real fun to read now - which they weren't at the time). What we do know is that you gotta be huge (IBM- or MS-huge) to be able to afford to drop the ball just once. Everybody else goes straight down the S-bend - with not a cent in the dollar left.
2: I don't even begin to understand Lev. When you buy e-commerce projections, you're buying the destruction of decisive swathes of the current economy. That is, you're buying the likely mass-migration of transactions from one sector to another. That ain't costless growth as far as the economy is concerned - it has limits to growth built into it. And what's left after that? Projections of lower transaction costs do not a 5000% stock appreciation warrant. Nor 20% per annum index-appreciation over more than half a decade, for that matter.
3: And the media keep talking about convergence as it it has specific meaning, but even today nobody knows what's gonna converge where (I'm not convinced, for instance, that mobile phones with mini-screens is gonna be the way we watch our porn'n'footie in future - nor that what we really wanna do with our tellies is physically interact). Some recent mergers look rather dodgy if you agree with these reservations.
4: 'Periodic sharp declines' is one thing, but a decline that suddenly exposes stuff like margin debt and corporations feeding their bottom line by stock speculations - and I don't know exactly how steep a decline that would need in today's context, but I imagine it needn't even be of the proportional order of the '87 - well, we could suddenly be talking a 71-year 'period', eh?
5: I'm not sure the investments a lot of these companies should be confused with long-term pay-offs. The idea seems rather to be to keep the Levian utopia alive for the moment and to price incipient competitors out of the picture. How else to understand the nature of some of these 'investments' - like deliberately losing money via the very transactions that constitute one's apparent core business?
Where do I need putting right?
Cheers, Rob.