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 Technology Investments
  in U.S. Stock Market - Intro

- Types of Slowdowns

- Nasdaq & SP 500 changes

- IPO Hard Sells

- Value Investing - Buffett

- Risk Factors & Lessons


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the-south-asian.com                            March 2001

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Page  4  of  6

Technology & Investment in U.S. Stock Markets (cntd) 

Investment Bankers / Analysts - IPO Hard Sells  

Wall Street Analysts and Venture Capitalists have been on record during the last three years in fueling some of the most absurd valuations especially to technology and Internet Dot Com companies.

Here are some examples of Prediction Bloopers:

Venture Capitalist John Doerr, Kleiner Perkins & Caufield Byers, May 1999.

"…. Believe it or not, the Internet is actually under-hyped….. we are co-conspirators in the largest, legal creation of new wealth , primarily in Internet companies"

Mary Meeken, Analyst, Morgan Stanley, who was written up in Barron’s magazine, April 26, 19999 IPO by Morgan Stanley of Priceline.com said in a note to clients:

"….. are we nervous about Priceline.com’s valuation? You bet …. For risk-oriented investors, the risk of missing a big winner here may be greater than suffering from what may become near term valuation issues." Priceline shares were at $ 5 on March 14, 2001.

Henry Blodget, Internet Analyst, Merrill Lynch said Priceline and Amazon could eclipse $ 150 and $ 300 respectively within a few days - April 27, 1999

Donald Lufkin Jenrette [DLJ] analyst Jamie Kiggen in May 2000 that Priceline was worth $190 a share. Kiggen has moved to CS First Boston as part of the merger of the two investment banks and recently issued coverage with a "hold" rating and a price target of $ 7.

Some examples below of the damage done by the leading Investment banks


High Price

IPO date

Current Price

Investment Bank


$ 190


$ 5



$ 300


$ 13



$ 300


$ 11

CIBC, Oppenheimer, JP Morgan

Free Markets

$ 550

Jan, 2000

$ 11

DLJ, Bear Stearns


$ 250

March, 2000

$ 2

Robertson Stephen.


Free markets? Yesterday - All my Soros seemed so far away... Banking Crisis 

In the field of mutual funds the Names of Jeffrey Vinik of Fidelity, Peter Lynch, and George Soros of Quantum Funds are some of the well-known names. George Soros’ hedge funds made profits against the Bank of England in 1980’s and later in 1998 against the Malaysian economy. Later in the Russian debt default he was to lose a lot of his profits so much so that he became an advocate of Government controlled financial interventions in the Global markets much in the same vein as Prime Minister Mahathir of Malaysia was to defend his currency against speculators.

Investment Fads -The 1980s and the 1990s will be remembered as the future shock decades of financial management. Program & Day Trading, Leveraged Buyouts, junk bonds, derivative securities ["Long Term Capital Management" – LTCM bailout by the Federal Reserve Bank], Passive Index investment, small capitalization, growth, momentum, thematic, sector rotation, have occasionally proven financially rewarding. At other these approaches have failed their followers.

In the LTCM bailout, it was a team of the original Designers of the Options [Calls, Puts] Model, i.e. Professors Black & Scholes of MIT, who were in the management team leading to a debacle of about $ 20 billion dollars in which almost all [10] the major western [Barclays, Deutsche, etc] banks had an average exposure of around $ 500 million each .So much for free markets.

Banks will continue to introduce periodic crisis in various countries where they syndicate loans. Part of the problem seems to be the very nature of the banking industry. If Bank A does not loan to a country, Bank B will do so and hence pick up the commission on say $ 500 million. It looks good for the Managing Director of that bank to show such "assets" on the bank’s accounting books. Hence the regular debt defaults that have occurred in the financial markets – starting with 1985 in the Third world – Argentina, Brazil, etc [Citibank Chairman wrongly predicted that sovereign nations do not default – they did again and again. In 1997 in Far East Asia [Indonesia, Thailand, Malaysia, Hong Kong] and then in 1998 in Russia.


next page

page     1 - Introduction - Japan & US - Similarities & Differences

page     2 - Types of Economic Slowdowns

page     3 - The Long View - Nasdaq & SP500  Compositions

page     4 - Investment  Bankers/Analysts - IPO Hard Sells

page     5 - Value Investing - Warren Buffett 'the Sage of Omaha'

page     6 - Technology Investment Risk Factors
Lessons for South Asia




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