Sep 30, 1999 at 12:00AM
To me, stone slinging can be a rewarding hobby done up solitaire. In the weekly Dueling Fools feature I have often laughed at the irony of my situation. I have bashed Coca-Cola (NYSE: KO) fueled by a six-pack of Diet Coke as inspiration. My pessimistic take on Intel (Nasdaq: INTC) was Celeron-powered. I've gone Country Bear Jamboree on Disney (NYSE: DIS) with annual park passes dangling in my wallet.
I haven't been dishonest. I genuinely felt that those stocks, while quality companies, were overvalued at the time of the Duels. Yet, looking back, how credible can one be when head and heart aren't in alignment? If I sleep with the enemy, am I not obliged to buy it breakfast?
So, here I stand, today, on the last day of the month, on the last day of the quarter, and I can floor you with market and portfolio data for any and all of these milestones. This was an amazing month, as the Rule Breaker shot up 12.92% as the rest of the market lost ground. The market corrected. We were correct. I might even bore you with the fact that eBay (Nasdaq: EBAY) traded as high as $148 1/2 today after it was announced that the company would be joining the Nasdaq Composite next week. It gave most of those gains back now, but I might mention it. I did. Daily dissection. Even as we preach the long-term. Sensible?
Solitaire, exit, stage right.
Let's turn to America Online (NYSE: AOL). Two weeks ago, in The Liquid Dowry, I pondered the bearish take on the online giant from hedge fund manager Doug Kass. He gave Barron's Alan Abelson an earful as to why he thought AOL's days were numbered. I trust that Doug has made some solid calls in his tenure. This might prove to be another one. I doubt it, but that's not my point. After reading my recap, Doug wrote me, inviting me to check out his analysis that ran more thorough than Barron's venomous ink would allow. He wrote me. From his AOL account.
Having hosted quite a few online chats in my time, most of them on AOL, I am always amused when an AOL subscriber decides to bash the stock itself. As sound as the argument may run, it loses a bit of zing when one is spitting out one's own cooking. Like clockwork, someone will always question the obvious. Why is someone so bearish and so short patronizing the service in the first place? Say it ain't so User53425? Oh, it's the chatrooms. Oh, it's the e-mail address they don't want to give up. Oh, it's the proprietary content you can't get from a run-of-the-mill ISP.
Whatever the reason, and there is always a reason, isn't that the competitive advantage right there? If AOL is offering something so compelling that it motivates one to continue to put up $21.95 a month into AOL's coffers, how twisted is it to bet against your own greenbacks?
Of course, we're in a much bigger world now. A lot of our Foolish readers are plugging into us directly off of www.fool.com or other AOL-free mediums. Their beefs with the stock might pack a bit more of a wallop. At the very least the sincerity-o-meter is shooting up the mercury a little higher.
Then again, maybe the non-subscribers aren't the best qualified to judge AOL. Over the weekend I downloaded AOL 5.0. It's a sneak peak beta that only my AOL buddies, like Doug Kass, can check out. It's pretty nifty. For starters you can have up to seven screen names, not just five, and the monikers can now run 16 letters long, not just ten.
That's right, more creative and often available screen names are there for the taking. Other features include an interactive calendar (which is not ready yet, but the possibilities are limitless) and other technical enhancements. As someone who has accidentally deleted important e-mail thinking it was spam, I also appreciate the ability to now retrieve recently deleted incoming mail.
It all boils down to dependency. It all boils down to creating a product where lower-priced competitors will fail in their intervention -- despite the busy signals and sometimes buggy connections. Do generics outsell the pricier brand names? Yet AOL goes beyond the label. It has proprietary content, immediately loading proprietary content, that an ISP at any price will be hard-pressed to duplicate.
Then again, Doug Kass also referred me to a site where I could pay for his more complete treatise. And, if I want the abridged Barron's piece I'll be out $59 for an online subscription. I'm not saying that it's beyond me to buy a vowel, but why do it for someone who argues that the public will go against that very practice. If the free Internet will kill AOL why should I pay up to read it?
It's nonsensical -- as was Friday's Washington Post front-page slam on Amazon.com (Nasdaq: AMZN). Leeward Investments' Eric Von der Porten, naturally banking against Amazon by buying put options, claimed that online retailers are doing "terribly." I know, after yesterday's huge gains it might be the put players faring terribly. But how can one argue that e-tail is dying? Today it was revealed that the amount of AOL subscribers who now shop online has doubled over the last 14 months. Von der Porten's proof? CDNow's sequential sales declined between the first and second quarters.
Let's follow the logic here. Amazon, whose sequential revenues rose over that same time period by the way, entered the prerecorded music market earlier this year -- toppling CDNow. CDNow's sales fell, quarter-to-quarter, because CDNow lost market share to Amazon. So we're supposed to short Amazon?
Oh joy. Logic swan dives into an oil slick and the judges give it a 10. Don't tell me what comes next. Let me guess. Von der Porten or some of the other Amazon bearish pundits will now sell their pessimistic prose through Amazon's new zShops?
And what say ye of this port here? Immune? Probably not. Iomega (NYSE: IOM) and 3Dfx (Nasdaq: TDFX) are still residents here even though fundamentals should be ringing the bellhop to let them know that they have clearly overstayed their welcome. This is not Hotel California. This is not a roach motel. Pack your bags and go already. Beds need to be made and chocolates need to be left pillowside for new arrivals.
Hypocrisy coats the world and never dries. What, you dissent?
Nice try. Join the club.
-- Rick Aristotle Munarriz
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