Rule Breaker Portfolio

<THE RULE BREAKER PORTFOLIO>

Welcome! You've Got Insomnia
Electronic Economy Never Sleeps

by Jeff Fischer (TMFJeff)

ALEXANDRIA, VA (April 20, 1999) -- Just when you thought it was safe to sleep six hours a night, the Internet is here to give you second thoughts. (Da da da dum...)

There is no sense of time in cyberspace: stores are open 24 hours a day, news is incessantly updated, millions of people are found in cyber communities any time of day, e-mail is always flowing, and somewhere in the world, financial markets are open any time of the week. In fact, soon, this country's stock markets alone could be open much of the time.

As many of you know, the New York Stock Exchange might be open for trading until at least midnight each day within two years. Why? Because as the world grows "smaller," the need for very liquid equities increases -- at least in the minds of the Wise. Not one to languish, the Nasdaq market is considering lengthening its hours as well. As early as this summer, the Nasdaq might keep its market open until 9:00 p.m. EST (it now closes at 4:00 p.m. EST) so that West Coast investors have more opportunity to trade in the afternoon. (In fact, traders are pushing for longer hours because they want to trade after the normal work day.)

The fact that Nasdaq is considering this change due to requests from traders isn't surprising (Nasdaq was probably already considering a change). Closing shop early results in lost opportunity cost. If Nasdaq can trade 12 hours a day, or even 24 hours, it will. The longer it is open, the more potential trading volume. The more trades, the more income for the market and its makers.

Financial markets are far from the only entity poised for eternal change.

Business overall is quickly moving to a time when it will truly never sleep. The Internet is always open. If not already doing so, many companies will need to double or triple relevant staff to run websites round the clock. It might be akin to the practice of some software companies -- those which send software code in process around the world to facilitate 24-hour-a-day code writing. When a California employee leaves work, he might return the next day to code what has seen 16 hours of work while he was gone -- the code having been sent to Asia and Europe while he munched on quiche and slept.

The "always on" nature of the Internet and its requisite requirements should help to sustain the tight job market in the next decade (at least to some degree), and it should keep any technologically knowledgeable person far from the unemployment line. A new electronic world needs to be built, managed, staffed, and -- yes -- capitalized upon. The Industrial Revolution ushered in a great boom for decades. The electronic revolution could do the same.

So, you weren't actually considering going to sleep tonight, were you? Why not start to plan your next vacation online, or study biotechnology? Or consider listening to a conference on eBay.

Today the CEO of eBay (Nasdaq: EBAY), Meg Whitman, discussed the new electronic economy ("A New Economy for a New Century") and you can see and hear the video replay of the speech here: http://www.connectlive.com/events/ebay/. Also today, Ms. Whitman announced that eBay will test its auctions in local markets (something like AOL's Digital Cities, which serves local markets) in order to facilitate the sale of large items that can't easily be shipped long distances.

eBay is also strongly considering fixed-price sales, she said, essentially classified ads. (Classified advertisements were worth $18 billion to newspapers last year.) For more on eBay (including the fact that it aims to have 800 employees by year-end, up from 350), click the link above and give the video a spin. We'll see first quarter results from eBay next week, on April 26. Positive earnings of $0.02 per share are expected. Also on the horizon, Amazon.com (Nasdaq: AMZN) reports first quarter results on Thursday, April 22, and America Online (NYSE: AOL) on April 27.

After the market closed, Amgen (Nasdaq: AMGN) reported earnings of $0.46 per share, topping the consensus estimate of $0.44 by 4.5%. Earnings rose 31.4% as Neupogen sales climbed 10% to $287 million, and Epogen sales jumped 30% to $395 million. Total first quarter sales rose 23% to $745 million.

For 1999, Amgen foresees Epogen growth in the low 20s (percentile) and Neupogen growth in the high single digits. Management believes that earnings per share will fall between $1.80 to $1.85; the current estimate is $1.84, so this forecast might not receive all smiles from short-term thinkers. For investors, however, it's better that Amgen predicts conservatively -- as Starbucks (Nasdaq: SBUX) arguably did this year, and as Microsoft (Nasdaq: MSFT) is famous for doing -- rather than make tall promises and risk falling short. The $69 stock trades at 37.5 times the $1.84 estimate. To discuss Amgen, please visit the active Amgen board.

Speaking of Starbucks, the company announced a new line of organic coffee. It sounds good. Visit a Starbucks (i.e., step outside your front door) to give it a try!

Meanwhile, Iomega (NYSE: IOM) is teaming up with Sega. The company signed a "non-binding letter of intent" to include its Zip drive in a new gaming product that will be designed to attach to Sega's Dreamcast system. It's always good to see more uses for the Zip. Many kids already use Zips to (illegally) copy games. Not great for game companies, but... well... Iomega does okay by it.

Final thought: Yesterday the Rule Breaker had its largest one-day loss in history ($100,000 -- twice its starting value), and today it gained back about $50,000. What changed so dramatically to make stocks tumble one day and rebound the next? Only investor sentiment. So who was it that said the stock market is always efficient based on financial underpinnings?

For more reading today, check out a collection on return on invested capital (ROIC) written by all-around Boring guy Dale Wettlaufer. Worried about how the Y2K bug will affect you? Find out what the U.S. government is doing about it in this interview with the Chairman of the President's Council on Year 2000 Conversion. Finally, don't forget to vote in today's Polling All Fools, which asks if you think Internet stocks deserved the hit they've taken recently.

What's up with Harry Jones today?

04/20/99 Close
Stock  Change    Bid 
------------------ 
AMGN  +8 1/16    69.00
AMZN  +13 1/16  172.00
AOL   +10 1/2   128.25
ATHM  +13 11/16 132.75
CAT   -1 7/16    60.69
CHV   -4 7/8     97.06
DD    +  9/16    68.69
DJT   +  1/4      4.25
EBAY  +8 3/8    162.50
GT    -2 3/8     56.88
IOM     ---       5.00
SBUX  +1 1/4     30.81
TDFX  -  3/8     19.253


                  Day     Month  Year   History   Annualized 
      R-BREAKER  +7.29%  -4.07%  52.46% 1430.29%  78.54%
        S&P:     +1.29%   1.54%   6.58%  198.50%   26.16%
        NASDAQ:  +2.73%  -2.12%   9.89%  234.59%   29.25%


    Rec'd    #  Security     In At       Now      Change
   8/5/94  2200 AmOnline       0.91    128.25   14011.24%
   9/9/97  1320 Amazon.com     6.58    172.00    2514.28%
  5/17/95  1960 Iomega Cor     1.28      5.00     290.50%
  12/4/98   450 @Home Corp    56.08    132.75     136.71%
  2/26/99   300 eBay         100.53    162.50      61.65%
 12/16/98   580 Amgen         42.88     69.00      60.93%
  4/30/97 -1170*Trump*         8.47      4.25      49.82%
  2/23/99   300 Caterpilla    46.96     60.69      29.22%
  2/23/99   180 Chevron       79.17     97.06      22.60%
  2/23/99   290 Goodyear T    48.72     56.88      16.75%
  2/20/98   260 DuPont        58.84     68.69      16.73%
   7/2/98   470 Starbucks     27.95     30.81      10.22%
   1/8/98   425 3Dfx          25.67     19.25     -25.00%

    Rec'd    #  Security     In At     Value      Change
   8/5/94  2200 AmOnline    1999.47 282150.00  $280150.53
   9/9/97  1320 Amazon.com  8684.60 227040.00  $218355.40
  12/4/98   450 @Home Corp 25236.13  59737.50   $34501.37
  2/26/99   300 eBay       30158.00  48750.00   $18592.00
 12/16/98   580 Amgen      24867.50  40020.00   $15152.50
  5/17/95  1960 Iomega Cor  2509.60   9800.00    $7290.40
  4/30/97 -1170*Trump*     -9908.50  -4972.50    $4936.00
  2/23/99   300 Caterpilla 14089.25  18206.25    $4117.00
  2/23/99   180 Chevron    14250.50  17471.25    $3220.75
  2/20/98   260 DuPont     15299.43  17858.75    $2559.32
  2/23/99   290 Goodyear T 14127.38  16493.75    $2366.38
   7/2/98   470 Starbucks  13138.63  14481.88    $1343.25
   1/8/98   425 3Dfx       10908.63   8181.25   -$2727.38

                              CASH   $9924.87
                             TOTAL $765143.00

Note: The Rule Breaker Portfolio was launched on August 5, 1994, with $50,000. Additional cash is never added, all transactions are shared and explained publicly before being made, and returns are compared daily to the S&P 500 (including dividends in the yearly, historic and annualized returns). For a history of all transactions, please click here.

</THE RULE BREAKER PORTFOLIO>

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