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Oracle Corporation Message Board

  • mikebert mikebert Jan 12, 1999 7:28 PM Flag

    The internet economy

    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.

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    • 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.

      Barking from the

      Hound_Pound

      • 1 Reply to Hound_Pound
      • 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.

 
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