This market is nuts. The Internet stocks are jumping by leaps and bounds, with no regard to any kind of sensible pricing. Yahoo was up something like 25 points. I've been in the market for some 50 years, and I never made 25 points on any stock in one day. I never came close. You know what? I'll bet none of you have either.

Sure, the Internet is revolutionary in scope, but so were automobiles. Then what happened to names that were very famous at the time, like Maxwell, Stutz, Graham-Page, Cord, Packard, Hudson, Nash, Studebaker, etc.? They went broke, that's what. And the last thing I am is a car buff. I'm sure you can name plenty more, but the point is that just because something has great money making potential, it doesn't mean that your stock will be a survivor. And they won't all be bought out either. Good old competition will kill many off, as it always does.

These Internet stocks are being priced as though they will all be winners, and some will wind up taking total gas. The bad part is that when a number of these stocks finally tank, it will frighten many investors who may become leery of all extended valuations, and there are plenty elsewhere. This is a scenario that can kill this bull market, and I don't like it. And if you have any sense, you won't like it either. If you're lucky or crazy enough to have bought these lately, may I timidly suggest that you get the hell out! If you're even luckier to be in on the "ground floor," I guess you could sell half and keep half.

Anyway, the market won't always be paying 500 times sales, so all I can tell you is that if you think you can construct some kind of intelligent valuation model, you're as nuts as the Internet market. I just hope that when this party's over, they don't take the punch bowl away from the rest of us. I hate to play it straight, and get nailed anyway. But to those of you who cannot be dissuaded, let me say that if you love the Internet stocks, you really would have loved tulips. Stay tuned.

The Market Pro - July 6, 1998