Much has been written about how the internet will change everything and usher in a new economy of unparalleled prosperity. Most of this euphoria has been generated by the incredible performance of technology stocks in general, and internet stocks in particular in recent years.
My own view is somewhat less grandiose. Yes, the internet and associated technology will bring in a whole new "information economy" but this sort of thing is nothing new. It last occurred in the 1920's when the "mass production economy" came into it own, supplanting the old "railroad economy" that preceeded it. The key new technologies then were the automobile and electricity. And they did transform the world. But the promise of a "new era" of unparallelled prosperity foretold by the exuberance of the New Era bull market of the 1920's devolved into the grim reality of the Depression.
It is interesting to compare now with then, to see just how dynamic times today are compared to then. Over the 1925-29 period the growth rate of GNP, wages, productivity and profits in real terms was 4.9%, 2.2%, 2.3%, 8.5%, respectively. Over the last 4 years the corresponding values are 2.6%, 0.8%, 1.7%, 4.6%. The 1920's beat today on all counts. In fact the only major macroeconomic factor today in which we have it over the 1920's is in stock price growth.
Then we can consider common sense. Suppose consumers end up doing most of their shopping over the net. They will still be spending the same amount of money buying the same stuff, only there will be masses of unemployed retail workers (not a very appealing picture). For the internet to truly create a new economic boom, it must create whole new categories of goods and services to buy, much as the mass production economy invented the mass-produced (i.e. affordable) automobile, which enabled people to buy larger homes in the suburbs and fill them with all sorts of new contraptions that simply had not existed in the previous economy.
I'm sure this will happen, but it hasn't yet. And the enormous prices fetched by internet companies that basically are still doing "old economy" stuff (like selling books), will sooner or later come back to reality.
Considering for a moment that the internet economy will be vastly lucrative. Doesn't it make sense that such attractive profits will lure other competitors into the field once the trail has been blazed? The competition will place downward pressure on the as yet unrealized profit margins, as well as making a bigger pie to be divided. Competition will also be global, just as the net is a worldwide phenomena. Ultimately, the companies adept at marketing will be the big winners. Take a look at Compuserv, Prodigy, and Genie. All were trail blazers with big corporate backers. Little ole AOL came from nowhere with deals of 50 free hours and put the others away or bought them. Now, thousands of ISP's are springing up all over the place to put a squeeze on AOL. So it will go with other money making opportunities on the net. Stick with Blakes list, which includes ORCL, and let these internut companies battle it out. If you have to invest in the internut stocks, look for ones with healthy cash flows.
Mikebert, I have enjoyed your posts for a long time. Keep up the good work.
High there Hounders.... How's it hanging ?......About h.c.f's ( filthy hash cows, or, holy cow flashes - or, even 'ealthy cash flows)...........Blake's "Tiger(s)" -[ Burning bright.... In the forests of the night]........are all 'ealthy, aren't they ?.......Flash cows are what these intercourse stocks are, mostly..... I joked, here, about a month or so ago, about Amazon.com buying Berkshire Hathaway...... Now AMZN has (I think) a "market worth" of some $41 Billion, so it could buy W. Buffet easy.......... Ridiculousness reigns on Wall St., NY matching that on Capitol Hill, DC.......... This millenium appears to be ending, appropriately enough, in farce........s.
Mikey : I believe I have met your mother..... Her name is (or was) Casandra, yes/no ?....... These intercourse stocks make up one small bubble, only...... Admittedly, it is on the vast behind of the cutting edge of progress, probably....... But it's only a tiny bubble, to date...... NOW, IF ORCL WERE TO RISE TO 60 OR 70 TIMES OR MORE EST. EARNINGS that WOULD CAUSE me TO SWEAT ON THE SIDELINES.......... One always has the opening of taking oneself out of the game, if warranted, for a bit..... Don't you think ?............ S.