The Week in Review -- April 23, 1999

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  4/16 Close 4/23 Close Change %Change
DJIA 10,493.89 10,689.67 +195.78 +1.87
S&P 500 1,318.88 1,356.85 +37.97 +2.88
Nasdaq 2,482.39 2,590.69 +108.30 +4.36

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Panic! No, wait -- Don't!
by Jerry Thomas (tmfcheeze@aol.com)

Greetings, Fools.

On Monday it felt like the bubble in this market had finally burst. Tech stocks plummeted. Internet issues were crashing right and left, with some well-known names like America Online (NYSE: AOL) and Amazon.com (Nasdaq: AMZN) dropping by 20% or more. Compaq Computer (NYSE: CPQ) had sacked its management, and maybe that was all the stimulus needed to generate this panicky response. But by midweek, technology bellwethers like IBM (NYSE: IBM) and Microsoft (Nasdaq: MSFT) were issuing strong earnings reports and Monday's carnage was quickly forgotten. Some companies that had been cut off at the knees early in the week were scoring new all-time highs by Friday, IBM and Amazon among them. Bubble? What bubble?

You can study Compaq's woes in a penetrating Fool on the Hill by Louis Corrigan (TMF Seymor). Compaq's managers, says Louis, had long been indulging in practices that cast doubt on their integrity, most notably offering guidance to Wall Street insiders without bothering to alert the investing public at large. While this sort of behavior is all too routine in the halls of the Wise, Compaq's disregard for the individual investor seems particularly brazen in these days when calls for Foolish accountability are increasing at a most happy rate. Combine that with a couple of years of underperformance and what has happened is not all that surprising. Check out Louis's piece for the gory details.

As appropriate as the knocks Compaq has suffered this week may be, was it fair to extrapolate that single company's troubles beyond its own industry to the entire tech sector at large? Well, golly, it sure seemed like it at the time, didn't it? Last week in this space I spoke of how difficult -- nay, impossible -- it is to predict short-term moves in the stock market. I just didn't realize I'd have such an abject demonstration of that principle at hand so quickly. Call it kismet. By the time Microsoft had announced its earnings -- which are examined by Matt Richey (TMF Verve) in Wednesday's Rule Maker Report -- everything was copacetic. Then, after IBM's report, wahooha! Talk about whiplash. If the stock market were a carnival ride, the safety inspector would shut it down.

Which brings me to Wade Cook. There are a lot of folks out there who would like to shut him down. If you haven't stumbled over one of his best-selling books or seen his pasty visage on brokered television, Cook runs a series of day-trading seminars with fees that amount to more than I pay in taxes every year. Mr. Cook's Wade Cook Financial Corp. (OTC BB: WADE) is under investigation by a number of government attorneys nationwide. This makes him a prime target for Foolish scrutiny: check out our special series this week on Wade Cook and his operations. David Forrest (TMF Bogey) looks at the highly questionable structure of his organization, Jim Surowiecki examines the man himself, and Yi-Hsin Chang (TMF Puck) proves herself so brave as to actually attend a Wade Cook financial clinic. If you're only going to read one Fool feature this week, my vote is to make it this one.

Now let's talk about bubble stocks. No, not Amazon and Yahoo!, I mean Coca-Cola (NYSE: KO) and Pepsi (NYSE: PEP). These fizzy-water companies got some special attention this week, first by George Runkle (TMF Runkle) in Monday's Drip Portfolio Report, and then by Matt Richey (again) and Warren Gump (TMF Gump) in this week's Dueling Fools. Coke has long been granted a price premium over its effervescent rival, thanks in part to its superior market position and its wider margins. But Pepsi's ownership of the Frito-Lay brand, Warren argues, may just make it the better buy.

There are a number of other Foolish highlights worth mentioning -- is it just me, or are my colleagues across the country just writing more great stuff every day? I especially enjoyed Nico Detourn's (TMF Nico) Rule Breaker recap on Wednesday, with her very insightful observations on the personality of this stunningly successful portfolio. Earlier this week, the Nasdaq stock exchange announced its plans to expand its trading sessions by several hours every day. Jeff Fischer (TMF Jeff) looks at that development in Tuesday's Rule Breaker. And if you're at all concerned about the Y2K computer glitch, you'll want to read the transcript of a Fool Radio Show interview Tom and David Gardner did with John Koskinen, who is the Chairman of the President's Council on Year 2000 Conversion.

Anyway, that's this week's lesson in panic -- a lesson Wall Street is sure to forget as soon as the next trading bell sounds. No wonder it feels so good to be a Fool.

Until next week,
Fool on!

Cheeze

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