People who say it cannot be done should not interrupt those who are doing it. Welcome to From On High.

Tuesday, August 30, 2005

Knowing Good From Bad

Some people probably have a tough time determining who is the good guy and who is the bad guy in the Arab/Israeli conflict. There are, for those folks, some telltale indicators. This from the New York Post is one of them:

JERUSALEM — Most residents of a Gaza Strip Arab village were transplanted to Israel yesterday because they feared Palestinian retaliation for alleged collaboration with Israeli security.

The 250 residents of Dahaniya feared they would be killed once the Israeli army completes its pullout from Gaza in about two weeks. (link)
Arabs seeking shelter - and protection - in Israel because those Arabs fear being murdered ... by Arabs.

There is no better reason to take sides in this war. Some of you believe the concept of "good and evil" is too harsh in this modern era. I say, embrace it. And support Israel's right to exist.

Let's Not Make It Something It Wasn't

Having a different take on history is one thing; altering it is another. Henry Blodgett, writing in the New York Times, likes to think of the internet investment madness that swept Wall Street in the late 90's as being more a matter of trial-and-error than of "irrational exuberance," as Fed Chairman Alan Greenspan labeled it back then.

Here's Blodgett's take:

Irreplaceable Exuberance

TEN years ago this month, the initial public offering of the Internet pioneer Netscape set off a dot-com boom that today is usually viewed as a sort of financial kindergarten recess, a regrettable free-for-all of idiocy and greed. Although this view does capture an aspect of the period - the arrogance and punch-drunk frivolity that come with easy money - it misses the big picture. It also implies that had we only been smarter and more disciplined in the late 1990's, we could have spared ourselves the pain and embarrassment that followed. History suggests otherwise.

The growth of the Internet has paralleled that of most industries based on revolutionary technology. Canals, railroads, telegraphs, telephones, cars, radios, personal computers - all progressed (or are progressing) through four phases of development: boom, bust, mature growth and decay. (link)

Blodgett goes on to outline the maturation of the internet, which is fine, but moves away from the argument that he raises about the internet investment boom. To me, having studied the phenomenon in depth back in graduate school as the saga was unfolding, I and an army of others began to argue that the irrational runup of stocks like Webvan (1999-2001), Pets.com (2000), Kozmo.com (1998-2001), Flooz.com (1998-2001), eToys.com (1997-2001), Boo.com (1998-2000), MVP.com (1999-2000), Go.com (1998-2001), Kibu.com (1999-2000), and GovWorks.com (1999-2000) should indeed be "viewed as a sort of financial kindergarten recess, a regrettable free-for-all of idiocy and greed." I even wrote up a lengthy study of the dot.coms and particularly of Amazon.com's miserable financial showing at the time for a finance class and entitled it, "If Amazon.com Can't Do it, Can It Be Done?"

Henry Blodgett poses the key question (and provides an answer) in the Times article:
If the boom-and-bust pattern is so common, the obvious question is: why don't we learn the lessons of history? Why do we overpay for thousands of doomed upstarts (Netscape, eToys, Webvan) and underpay for future giants (Microsoft, Google, eBay)? Why do so many investors plunge headlong into the fray, only to later lose their shirts? The answer, in part, is that stock prices and strategic decisions are based on predictions, and predicting the future in an industry's early days is hard.
That's true. Nobody knows how a stock is going to perform in the future. But don't ever discount two other factors; greed and stupidity. A big reason people invest in stocks that have never earned a dime is because they expect others to continue to invest in that same stock (eToys.com) which continues to increase the per-share value of that stock (ever heard the term, "hot stocks"?). I continue to argue that Google.com has no foundation. There is no there there. But people see it as a good investment ... because other people see it as a good investment. Are they all stupid or just greedy? So far they are certainly wealthy.

I don't know but my mama taught me to stick with the companies that have a strong track record of growth and solid earnings. That's why you can never go wrong with GE.