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April 29, 1999

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Subject: Nietzsche.com
Author: verb

Hello all,

Some thoughts regarding my posting of that bearish article yesterday, much of which is preaching to the converted. I'm a fairly new investor, so it's fairly easy to get the shakes. But I practically fell over when, after reading so many portents of doom in that article, it was held that the stock price of Amazon was deemed realistically close to its valuation! AMZN, the epitome of a supposed "internut"? Egads!!

If the Wise are going to allow AMZN to carry its high valuation, who's to say that the other internet leaders don't deserve theirs? I get annoyed when I hear talk of the internet sector being "overvalued." Compared to what, IP? CAT? Frankly, the internet leaders deserve to be valued much higher than Grandma Ethel's cyclicals. No tulip ever had the effects on the way companies do business than the internet. And everywhere I go here in Chicago, it seems that people are talking about the internet non-stop. Almost every night on the news, there's something related to the internet. Indeed, Paul Allen would not have paid a steep $90/share for GNET if he saw it as being anything but a cash machine.

While I'm still very much learning about the markets, common sense tells me that you cannot use the same metrics for every sector. That article doesn't mention exactly how internet stocks were evaluated, but I must assume that it was the "traditional" benchmark of the sacred P/E. Any "expert" who states that any stock with a P/E over 25 is practicing idle numerology. To me, if a company is doing business in a way that treatens to turn tradition on its head, then you can't turn to tradition to make sense of it. One must invent new benchmarks.

"To me, if a company is doing business in a way that treatens to turn tradition on its head, then you can't turn to tradition to make sense of it. One must invent new benchmarks."

I do agree that investing in anything.com at the IPO price is pretty foolish. To me, the way to invest in this sector is to stick with the big guns (like AOL), while also keeping an eye out for lesser-known companies that are clearly carving out a niche for themselves in the internet cyberscape (like CMGi). I have a very difficult time imagining AOL's stock sinking to $35 and staying there for the next several years. If anything, the stock's price will begin to slow down as the company tweens, perhaps with a period of uncertain volatility. This won't happen until broadband becomes widely available, and ATHM begins to command market share.

Pumbah made the point that there are many pundits on the sidelines who are irritated that so many people have made so much money in the "overvalued" tech sector while they, lacking any nerve, have stayed on the sidelines. With the recent talk on this board about Ayn Rand, I'd like to venture an interesting idea presented by the much more provocative Friedrich Nietzsche that might speak to what Pumbah said.

Nietzsche had a term for the mindset of the Wise: ressentiment. This French word denotes more than simple resentment, but rather a form of active form of resentment that carries the potential to actually create moral values. However, the values created in the attitude ressentiment are but weaker negations of other, more original and life-affirming moral values already in existence. Unable to aspire to the standards set by those who believe in reveling in life's decadent dance, weaker individuals aspire instead to revolt against life-affirming values by insituting a (less interesting) moral order that labels all such values as 'bad' or 'evil'. In Nietzsche's view, this is the only way that weaker, less original individuals are able to stake any claim to power and authority over those stronger-willed than they.

"Too meek and unoriginal to think for themselves and take risks that other, more independent investors see as wholly prudent and Foolish, the Wise spout the familiar "conventional" wisdom of the crowd."

Doesn't the morality of ressentiment bear an uncanny resemblance to the admonitions of the Wise? Too meek and unoriginal to think for themselves and take risks that other, more independent investors see as wholly prudent and Foolish, the Wise spout the familiar "conventional" wisdom of the crowd. By uttering time-worn cliches about "the coming correction," the Wise hope to shake the confidence of Fools and induce a self-fulfilling prophecy, one that they would undoubtedly hope to profit from by selling the whole internet sector short.

There is a stark difference between getting caught up in IPO mania, and doing the necessary due diligence to separate the winners in the .com sector from the rest of the herd. An independence of mind and will, combined with sound knowledge regarding one's investment choices, will trump the ressentiment of the Wise and their endless stream of boring, doom and gloom prophecies. It's not always easy. Thanks to CNBC and the endless stream of finance 'news' that ushers forth over the 'net, it is easy to mistake so much jive talk for truth. Just remember what Chuck D said about those who would "bring the noise": Don't believe the hype!

verb(ose)