If it means anything, Rockefeller biographer Ron Chernow appears to be even more exuberant, anticipating some sort of sort landing, it would seem, as money shifts out of high tech and into other economic sectors. His op-ed in today's NT Times, "Dot-coms in an Alien Universe," makes interesting points but nets out as too complacent, IMO; after all, how do you pull off a "measured decline" -- what Chernow hopes for -- in these wildly inflated Internet stocks without triggering a rout? An excerpt follows:
“America Online's bumpy experience last week suggests that high-tech executives wishing to capitalize on inflated shares to shop for real assets may be trapped in a paradox. On the one hand, their current power resides in their elevated stock prices. Yet once they try to exercise that power in the conventional economy, their stocks may plunge, dispelling that very power.
“The AOL-Time Warner deal was initially trumpeted as a vindication of cyberpower. As AOL stock subsequently plummeted, however, it underscored instead the perils of Internet companies venturing into the real economy. Should this trigger an exodus of investors from such high-flying companies, it will have profound repercussions, for the stock market has played a critical role in high-tech business strategies.
“Once upon a time, fledgling companies relied upon bankers for start-up loans until they had booked enough earnings to justify stock listings. Now, in a superheated investment environment, companies can bypass the banking system altogether, advancing swiftly from conception to a billion-dollar initial public offering in less than a year. These companies then exploit their wildly appreciating shares as currency to take over other companies. At the same time, by dangling stock options, they can lure talented managers from the old economy without paying hefty salaries.
“Tumbling share prices in the virtual world would hamper the ability of high-tech companies to hire, expand and innovate, and America might lose some technological sparkle in the process. Yet the bursting bubble would have collateral advantages. Fresh capital would be more equitably distributed across the economy instead of being concentrated in just one sector. The willingness of investors to bankroll every dot-com venture has often appeared indiscriminate, creating expectations among investors that may never be fulfilled, and a measured decline in Internet stocks might mitigate the damage from these excesses.”
Carl
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