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May 7, 1999

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Subject: Re: Anemic Response
Author: nole1

Warning: another long post, this time about risks and ATHM

I wrote:

I agree that everything that Armstrong has done is in @Home's favor. I still wouldn't say low risk, though. . . don't get euphoric, keep your head, and you will make plenty of money with ATHM/XCIT.

Catiline replied:

How can say that ATHM isn't low risk and then say that I "will" make money on it? Maybe you've gotten into the habit of pointing out risk in the stock without admitting to yourself how small it has really become.

I'll rephrase...probably will make money on it. Anyone who thinks there is a low risk way of making a killing on the stock market hasn't seen a bear market. I bought in November, when I first became aware of ATHM and got my account set up. I think, personally, that ATHM is the best risk/reward play in the market today. But.......there are large risks to match the large potential rewards. To say there aren't flies in the face of reality.

"I'm saying what I'm saying because there are new, impressionable investors who look at these boards every day and I don't think the low risk/high reward words should be said without any cautioning words. That's all."

1) The national system hasn't been tested, with millions of people on it. We assume that the geniuses will figure it out. What if Milo Medin dies, for instance? That's a risk.

2) Government intervention (I'll get to that later).

3) Economic problems....high oil prices lead to high inflation, economic slowdown, etc., etc. If you think ATHM is an island that will magically float above all that, midApril's price decline from a close of 189 to a close of 118 in a week on no news should have given you a reality check.

That's what I'm talking about when I say there is risk. Do I think the potential rewards are larger, obviously I do, if you've read some of my posts. It just stands the hair on the back of my neck up a little when I hear someone say this is a high reward/low risk situation.

I don't believe in the "efficient market" theory (the late rally is a case in point), but I also don't subscribe to the "totally inefficient market" theory. There was a reason AOL sold for 25 cents in 1992. At that time, the internet was not a household word, only geeks had computers (OK, just go with me here), the home market for computers was not that large (Windows 3.1 just came out that summer), you get the idea. You could have made a fortune if you had invested and held them at that time, but how many people had the foresight to know what was to come?

Now, fast forward to 1998. ATHM was under $50 a share until midNovember. Why? Because of the risks that were involved. Now that it's over $150, how much growth is already built into that price (or, more accurately, market cap of $19 Billion before the Excite merger)? The risk is that something will happen to cause a delay in the growth numbers that are already built in.

You can go ahead and think it's low risk if you want. I'm saying what I'm saying because there are new, impressionable investors who look at these boards every day and I don't think the low risk/high reward words should be said without any cautioning words. That's all.

Now about the government, Catiline continued:

I, for one, have never been worried about government intervention. Just because the government has the power to interfere doesn't mean they have any reason to do so.

I could list a litanny of laws that have been created by government when they have no reason to do so. Most reasonable people can (especially when they look at the tax code when filling out their forms <g>). The bottom line is that government is made up of people who have their own interests at stake. The T/MediaOne deal happened after the FCC had already said it would be watching the situation closely. While their approach has been laissez faire up until now, mostly because their mandate in the 1996 telecom act was to ensure local phone competition, they might be concerned
"I could list a litanny of laws that have been created by government when they have no reason to do so. Most reasonable people can (especially when they look at the tax code when filling out their forms <g>)"
that AT&T has all of a sudden become the largest cable company around with two deals in 4 months. In addition, the DOJ antitrust whipping post (Microsoft) and AT&T are doing backroom deals about the Windows OS on set top boxes. Can you say "red flag at DOJ"? I know you can....The government does not always act rationally and there is influence peddling going on all the time (AT&T is among the best at this, I will grant you (and thank goodness!)). At the same time, if you take government risk for granted, as you seem to, you may be in for a rude surprise.

And that brings me full circle back to my original (actually now modified) phrase:

don't get euphoric, keep your head, and you probably will make plenty of money.

Take risks and large $$$ in the future as a given, and you won't even know when things are going wrong. I don't expect you to change your opinion, like I said. I just want to make people aware that the low risk/high reward scenario is not adhered to by all.

nole1