INTERNET SUBSECTOR PERFORMANCE, JULY 2000
The chart shows how volatile things do get. Past week was fortuito. Sooner or later each generation faces walls of fire. Note the successive blood-letting of internet properties in mid 2000. Consider today, the Elon Musk house has been halved in the past 12 months. This chart shows a range of Internet properties cut down to reality.
Does anybody but me remember the day they took IBM out to be shot? Or the afternoon they red-dogged Motorola after it posted disappointing quarterly numbers. Analysts scooted for a phone booth to call their traders.
This was pre-Internet time. The broad tape, an electro-mechanical contraption, could run 4 hours late in crunch-time. Like when the Russian freighter loaded down with missiles, was ordered by our naval vessel to heave-to, and it did so.
It wasn’t till next morning that I found out I hadn’t been swept away after that past Friday. In fact, I was no longer poor, even comfortable, finally.
I just sold down growthies like Microsoft and Amazon. I bought value stocks like Ford and GM, both value plays . I remember the day our trader, Joe, rushed to the ticker when it sounded its bell. My God! Joe exclaimed. They’re sounding the ticker over GM declaring its normal quarterly dividend.
Past Friday, I also bought AIG, a so-called defensive fire and casualty stock. Such value paper, making new highs. I hated them for boosting their homeowners premium rates. No mercy for policyholders.
This is the same AIG (was Greenberg still there?) that had to be bailed out with multi-billions in Treasury loans during the banking crisis of 2008-09. Management, foolishly, had guaranteed tons of fictitious mortgages with practically no asset coverage. Foreclosures ensued in 2010, left and right. They were buried.
Lemme get back to how easy it is to lose serious capital when growth is out-of-phase. Consider past Friday. Growthies took gas while value stocks turned buoyant.
This read 'em and weep short list shows growth is out, value was in. The market still likes bank stocks at moderate PIEs. Loves MLP’s yielding 7% or so.
No one-day correction. More deep-seated. The FRB has already signaled that any rate cutting can be tabled at least a couple of quarters. Treasury bond yields edge higher. Wage settlements are coming in on the high side 6% to 7%. The negative yield spread between 2-year Treasuries and 10-year paper has begun to close. This is an indicator of higher rates to come.
The world remains a battling ground. No George Washington, waiting in the wings to be summoned forth as a maximum leader.
The Street should ask itself about pricey valuation at 20 times earnings not even a peep fellas? Free lunches are few and far between. Note this chart on NASDAQ come-uppance from its peak in 2000. I ran out and bought more MLP’s yielding 7%. If value is “in.” I’m pretty golden.
Pricey valuation always gets purged. Then, everyone waxes value conscious. A new group of players can step in. Tech gets dished out for a season. Faceless properties like AIG selling at 10 times earnings start to make new highs. I bought this faceless wonder that moves a dime a day.
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