Recollections of the Greatest Market Bubble Ever

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11/22 Frank Veneroso - Memories of the Souk al Manakh
11/20 Frank Veneroso - The Stock Market - Shades of the Souk al Manakh
                                            Is This the Moral Hazard Meltup? Probably Not

The Stock Market

Recollections of the Greatest Market Bubble Ever
Memories of the Souk al Manakh


How large can a bubble grow before it bursts? Farther than you think. And there need not be a fatal pinprick that makes it burst. And when it bursts, the crash that ensues can be deeper and more discontinuous than you could ever imagine.

In May of 1982, while the bear market in US stocks was in its deepest throes, and the epic bear market in US bonds was still completing its base, I was called to advise on the greatest stock market bubble of all time---the Souk al Manakh in the Persian Gulf. Kuwait had had an organized stock market for some time. The great wealth created in Kuwait by the rise in the oil price in the 1970's led to seemingly endless appreciation in Kuwaiti stocks. In the Arab states in those days, only sheiks could grant corporate charters, and only corporations could become publicly traded companies. The royal family of Kuwait did not freely grant corporate charters for companies that might become vehicles for stock speculation, so there was a shortage of stocks to trade. This shortage and the new unparalleled wealth that was looking for vehicles of speculation gave rise to an over the counter market in Kuwait city where shares in companies domiciled elsewhere in the Gulf---principally Bahrain and the United Arab Emirates---were traded. Housed in a converted air-conditioned parking garage, this market was known as the Souk al Manakh---the camel market.

I was asked at the time by the government of the United Arab Emirates to advise on the creation of a stock exchange in the Emirates. Great fortunes were being made in shares of companies domiciled in the Emirates at the time. Why not bring all this wonderful new stock market activity home?

For six weeks I worked out of an office in the UAE central bank in Abu Dhabi. The city was modern, laid out along a crescent beach at the end of a promontory into the Gulf. The central bank was a modern glass building behind severe cement columns that met in graceful Moorish arches. From a great glass window of this modern building, I could see along a turquoise backwater old tanned fisherman working on brightly painted ancient fishing dhows that were beached on the blinding sands. The Sheik of Abu Dhabi was the richest man in the world then. Only a few decades earlier his brother, the former ruler, was afraid to walk the streets of what was then a small sandy seaside fishing village for fear of his creditors.

Being a macro oriented, top-down man, I set about to see how great a supply of stocks had been made available for trading on a formal market in the UAE. The results were simply unbelievable. The market capitalization of the Kuwait exchange and the Souk al Manakh combined ranked third in the world, behind the US and Japan. It was greater than that of the UK with all its foreign listed companies. How could this be? I asked, for both geographically and economically speaking, these few countries---Kuwait, Bahrain, and the Emirates (the former Trucial States under British domination)---were only postage stamps of sand on the globe. Oil had brought wealth to these small countries but their combined economies were still very small compared to those of the US or Japan or the UK. More striking was the fact that most of the visible wealth was not reflected in these companies. The rulers of these sheikdoms owned the oil wealth. The hugely expensive real estate was privately held, as were the extremely lucrative import franchises. What assets and income underpinned these multi-billion dollar market caps?

We did a bottoms up study to find out. In Bahrain, a financial center, there were banks, seemingly of substance. There was a raft of companies that made cement and clinker. These companies were domiciled in five former Trucial states whose names you never heard of that, alas, had no oil. There was a company or two that imported sheep and goats for slaughter. And then there was a handful of other companies whose principal activities were not at all obvious. 

The Sheik of Abu Dubai was the richest man in the world at the time and the Ruler of Dubai was also quite well to do. The five other sheiks who had no oil were poor cousins. For founders shares these oil poor sheiks granted charters for corporations that could be traded on the Souk al Manakh. I can remember driving one day to a small derelict town that was the capital of one of these oil poor sheikdoms to analyze a company with a high flying stock on Kuwait's OTC market. For the life of me, on the balance sheet of this company I could find no assets of any kind. It dawned on me that, behind most of this third ranking stock market cap in the world, there were only a few cement and clinker plants, a slaughter house or two, and quite a few shell games.

How do you tell your host government that the stock market they want to bring home is a shell game? I pondered this diplomatic quandary for weeks as I looked out my office window at those ancient painted dhows in the desert sun. In the end I mustered the courage to tell the truth. "It is all a bubble," I told my client-. "And it will burst." To my relief and amazement, I was greeted, not with displeasure, but with laughter. "You Westerners have been coming here for five years", they told me, "and to a man you all have predicted a crash. Don't you understand, there has never been a place on earth like the Gulf with such unprecedented wealth? You will never understand that the Gulf market cannot crash."

I had a long time friend in London. His name was Ali. He was one of several Anglo Arab investment bankers that flourished in London in those years. When I passed through London on my way back to the US I stopped to tell him about my trip. Speculation on the Souk al Manakh was financed with a curious type of informal margin financing by way of post dated checks. So rapid was the rise in the Gulf market that post dated checks paid an interest rate of 100% per annum. Ali was financing speculators in this market. He listened and he smiled.

At the beginning of August I had completed my report for the government of the UAE. I told them that the market they wanted to organize was a bubble and that it would crash. Some weeks later I heard from Ali. He called to thank me for my advice on my recent visit. He had called in all his post dated checks. "Did you hear what happened to the Souk?", he asked. "No", I replied. "Well, it topped quietly at mid summer after you left, with no provocation. One can't quite say it declined or it crashed; it has just stopped trading."

The Souk al Manakh was the greatest speculative mania of all time. One could not even speak of valuation. Margin financing reached unimaginable extremes; one speculator, who had been a customs clerk two years earlier, had at the peak $14 billion in stocks financed with $14 billion of margin debt. The people involved believed that the oil rich Gulf was truly a "New Era". It did not take a trigger to burst this bubble; it simply crested sometime in the dreadful heat of the Middle East's summer. Its decline was so discontinuous it cannot be called a crash. There were simply no bids. ¨


Frank Veneroso
Veneroso Associates
lizsummit@aol.com
November 19, 1999

The US Economy: The Stock Market

Shades of the Souk al Manakh

Is This the Moral Hazard Meltup? Probably Not.

Executive Summary

    • Valuations in the high tech sector are unprecedented. So is the degree of speculation, despite serious underlying deterioration in the sector's fundamentals. Nothing in the history of the G-10 stock markets can compare---not even Japan. Nothing except the greatest bubble of them all---the Souk al Manakh.
    • Global semiconductor revenues peaked in 1995. Even with a good bounce this year, they will be below 1995's level.
    • Two and half years ago global PC revenues began to stagnate despite advance purchases to meet Y2K compliance. All the consulting firms predict a nuclear winter with down revenues in 2000.
    • Fred Hickey looked at 130 interent companies that reported in October. Of these 130, ten reported a profit. Two---AOL and Yahoo---reported a material profit. Of the eight remaining internet companies with reported profits, profits were only marginal. Of the 110 companies that reported losses, revenue growth was very rapid, averaging 100% over the last year. But, of the greatest importance, on average losses for these companies grew by 200%. The number of companies where losses are simply soaring relative to revenues is astonishing.
    • Part of this is due to sheer speculation by uninformed household investors who extrapolate a once in a lifetime bubble in stock prices forward forever. This is reinforced by a new era hype fostered by Wall Street, the media, and that ever-loquacious new era apostle, Alan Greenspan. But much of it is due to cynical relative performance money managers who feel compelled to go where the action is for, if they do not, they will lose performance and their jobs.
    • The peak of every such bubble is marked by stock fraud. The internet stock craze is perhaps the greatest stock fraud in history. Most of these companies have been hatched simply as objects of stock market speculation with the intention of bilking the public through IPO's.
    • Many, if not most, of the institutional money managers that are kiting these high tech marginals light years from reality know there is no defensible investment case for their holdings. They know they are involved in a stock scam.
    • One of these days one or several of the current ubiquitous internet stock scams will come definitively to light. Then, fund managers, realizing they have no justification as fiduciaries for owning such stocks, will fear suit and will try to sell. Others, realizing their trustees and shareholders are beholden to explore similar actions, will try to sell as well. Under such conditions, there may be no bids. Hear it from someone who witnessed it first hand: that is the way the Souk ended---with no bids.

The US Economy: The Stock Market

Shades of the Souk al Manakh

Is This the Moral Hazard Meltup? Probably Not.


Defiant Speculation
The Fed tightened. That was largely, but not completely, anticipated. The Fed raised the discount rate. It issued a warning that the labor force is depleting and the economy continues to grow unsustainably above trend. These were not expected. The bond market was supposed to like such stern Fed resolve. Instead it sold off a half point.

But the stock market proved to be another thing. The Dow rose 173 points. The Nasdaq, which had been up for 10 out of 12 days after making a new high, soared another 73 points. Perhaps 20 stocks, most of whom you had not heard of a year ago, rose more than 20 points. One stock rose 1000 % in a day. Its name was China Prosperity. We understand it is Hong Kong-China maker of toilet paper. It rose from a dollar to ten dollars because of the news that China will be admitted into the WTO. Today it rose further to 81. Today, 2.9 million shares traded by noon. Yesterday 521,000 shares traded. From October 19th through November 12, daily trading volume averaged 300 shares a day.

People ask us, "Is this the moral hazard meltup?" We have hypothesized that an unprecedentedly overvalued market amid rising interest rates, serious fundamental deterioration at its rotten heart---high tech, and record deterioration in breadth would be subject to incipient crashes. If government moved to bail out the stock market at all costs at such a juncture, it would become apparent to all market participants that the stock market is too big to fail. A seller's strike would ensue and the market would melt up.

That has sort of, but not quite, happened. The Dow fell 13% when it broke 10,000 on an intra day basis the Friday before the anniversary of the Monday October 1987 stock market crash. Over the prior week the market had entered a crash pattern. Market breadth was atrocious. The parallels were eerie. Yet, the market mysteriously rebounded for no apparent reason.

Chairman Greenspan gave a series of speeches extolling a new high tech era. The guys and gals on CNBC now frequently mention that the market is too important to fail. Despite the Fed tightening, more and more commentators point to a record 20% annual rate of expansion in the monetary base, albeit mostly related to a Y2K provision of currency, as a true measure of a Fed policy that will not let anything go wrong through the millenium date. 

What we know is that valuations in the high tech sector are unprecedented. So is the degree of speculation, despite serious underlying deterioration in the sector's fundamentals. Nothing in the history of the G-10 stock markets can compare---not even Japan. Nothing except the greatest bubble of them all---the Souk al Manakh.

High Tech---the Hardware Sector
We turned bearish on the hardware high tech sector years ago. Our decision seems laughable now. Why did we do so? The answer is simple. For three decades global revenues from computers and their components and peripherals grew at perhaps a 20% rate with an annual growth rate of 40% at cyclical peaks, roughly a zero growth rate at troughs, and a four-year average periodicity. The prices of the stocks in this group moved with this cycle. In the mid 1990's peak 40% annual revenue growth lasted two to three years versus one year in prior cycles. Excesses developed. A downturn comparable to past down cycles could be foreseen. History indicated that the stocks would follow suit.

What in fact transpired was worse than we ever expected. Global semiconductor revenues peaked in 1995. They fell for three years. Even with a good bounce this year, they will be below 1995's level. Yet, the Sox index peaked at 300 back then and is approaching 700 today.

Two and half years ago global PC revenues peaked. The stodgier mainframe sector has continued to grow, but at a single digit rate. Such a slowdown has no precedent. Worse yet, revenues were bolstered late in this period by a surge in purchases needed to meet Y2K compliance. Some computer purchases scheduled for the year 2000 and beyond were made in advance in 1999 and 1998. Now that tomorrow's computer needs have been met, all the consulting firms predict a nuclear winter with declining industry revenues next year. Forrester Research predicts no growth for several years. Disappointing reports are now coming out of IBM, Hewlett Packard, Unisys, and even Dell, as well as all the PC distributors, suggesting nuclear winter in fact began in the third quarter. There is very considerable evidence that this whole industry on a global basis may exhibit no revenue growth for a half decade from early 1997 to 2001 or 2002. Yet, the stocks of the most seriously affected companies, now at record valuations, only go sideways. The least affected companies soar.

The disappointments are everywhere. Oracle, once a 40% grower, reports year-over-year revenue growth of only 13%. Yet the stock soars. Cisco's guidance calls for only a 3% sequential rise in revenue in the fourth quarter and a decline in earnings. The stock rises. Intel has disappointed once again. It has been disappointing for years. In Q1 1997 it earned $.55 a share. In Q3 1999 it disappointed, reporting $.55 a share two and a half years later. AMD is shipping 750-megahertz chips. Intel can not meet shipments of test quantities of 700 and 733 meg chips. The big PC vendors must have the top of the line chips, since that is where the big profit margins lie. Via, with Formosa Plastics and the Taiwanese government behind it, has licensed low-end chip designs from Cyrix and IDTI, and plans big inroads next year into the low end of the microprocessor market. Add to this nuclear winter. Yet Intel's stock holds. Even Microsoft suffers. According to Goldman's Rick Sherlund, Microsoft took "unearned revenues" down in Q3 1999 for the first time, inflating year-over-year revenue growth which was, in reality, 19%, not 28%, as reported. The US judge ruled against them in the monopoly trial. CNBC commentators argued that they would win in an appeal, but the expert legal commentary in the newspapers indicated such rulings are seldom overturned. Suits from allegedly damaged companies wait in the wings. Before the judge's ruling, Microsoft management said its stock was absurdly overvalued. Yet, the stock remains unfazed.

The Manic Fringe
Such disappointments do not matter, argue the high tech bulls. This is the old high tech. The growth is in the new high tech. Of course, the top six tech stocks ranked by market cap which account for well in excess of 10% of the entire market cap are all driven primarily by old tech, not new tech.

More than two years ago when the PC slowdown started, Wall Street bulls focused on networking and servers as the new source of unending rapid growth. Yet, now, as the fundamental disappointments surface, they are to be found in networking and servers as well as in straight PCs and mainframes. Maturation, saturation, competition, and Y2K appear to be affecting virtually almost all hardware businesses. Apparently software is also affected---witness the slowdown in real revenue growth at Oracle and Microsoft. Even the service business has been hit with disappointments at Unisys and IBM. 

Faced with these problems, the high tech bulls have turned to the Internet sector. More than a year ago we argued that, though the internet was a significant technological revolution, most stand-alone internet companies would never make a profit (There Are No Ricardian Rents In Cyberspace, 10/14/98). Our argument was simple. Technological innovations provide the innovators with transitory monopoly positions and therefore transitory monopoly rents. Therefore, technology companies at the frontier should earn large profits early on. But, almost all internet companies were in fact losing money. Why? Because there was too much ease of entry and subsequent competition to allow lucrative franchises to be established on the Net. The flood of IPO money aggravated such competitive pressure. It also corrupted business discipline, which could only lead to greater losses.

A case in point was Amazon.com. This early pioneer in Internet marketing had as good a chance as any to earn a profit. It was there first and early. Barnes and Noble and Bertelsman and Borders were slow to compete. It was perhaps the best know brand name on the Net. Yet, losses grew more rapidly than revenues. In order to earn a profit, they entered more and more new businesses. Losses continued to explode. The company soon appeared to be "out of control".

From all we can tell, our analysis of the internet industry has been right on target. Take Amazon. Sequential quarter-to-quarter revenue growth fell to roughly 10% on average in Q2 and Q3, despite entry into numerous new businesses. Apparently, their book sales have plateaued, as saturation and competition in a low growth business have materialized. Now, if ever, they should be making a profit. Instead, their loss in Q3 was more than half their sales. Year-over-year revenues rose 1.3 fold . But their loss rose 4.4 fold. They must be burning cash at a $300 million rate. They raised $1.5 billion early this year before underwriter's fees. That is not much greater than their current annual burn rate. In their Q3 report, gross margins fell and they forecast yet another decline in gross margins. The state of this alleged Internet blue chip is simply horrendous. With $1.5 billion in convertible debt, if the stock falls, whatever its assets, those assets will belong to the debt holders and there will be nothing for the shareholders. This stock could readily go to ZERO, yet the overall Internet craze buoys the stock.

Amazon is no exception. Fred Hickey looked at 130 interent companies that reported in October. Of these 130, ten reported a profit. Two---AOL and Yahoo---reported a material profit. One must wonder how real are the profits at AOL and Yahoo. AOL capitalized marketing expense for five years and showed a profit. It then wrote off its capitalized marketing expense; the write off exceeded its cumulative reported prior five-year profit by fivefold. Employee compensation via options is never expensed. Yahoo's current P&L benefits from past write-offs of future advertising expense. There are growing reports of ever more liberal accounting practices at internet companies which AOL and Yahoo must share.

More importantly, of the eight remaining internet companies with reported profits, profits are only marginal. In many cases, profits were buoyed by interest expense earned on cash from IPO's, not from their basic business. Of the 110 companies that reported losses, revenue growth was very rapid, averaging 100% over the last year. But, of the greatest importance, on average losses for these companies grew by 200%.

The number of companies where losses are simply soaring relative to revenues is astonishing. For the internet analysts, this does not matter. Loss growth is good, because it shows the company is "executing". The list of spectacular such "growers" is endless.

The Street.com, a pioneer internet investment rag with great early exposure on CNBC and a booming high tech stock market, should be making a profit if anyone in this market is. Yet, while sales rose from $1.1 million to $3.9 million, loses rose from $3.2 million to $7.2 million. The company fired its CEO and the new CEO faces rapidly burning cash.

For I Village, sales rose from $4.0 million to $10.7 million quarter to quarter and losses rose from $12.0 million to $28.4 million. Other issues exhibit yet more stellar growth in losses. The Globe.com, the greatest performing new issue ever, reported quarter to quarter revenue growth from $1.6 million to $4.7 million and a growth in losses from $4.0 million to $14.0 million. Better yet is Mortgage.com with revenue growth from $2.0 million to $5.0 million and loss growth from $1.3 million to $22.6 million.

Investors are kiting these stocks light years from their grim realities. Investor behavior regarding individual issues defies all logic. Take Peapod, the internet grocer. Year-over- year the stock's revenues barely grew from $15 million to $16 million. By contrast, their loss exploded from $4 million to $10 million. A competitor, Webvan, had an IPO. The market ran Peapod's stock up 40% in a day in sympathy with an IPO from a competitor. Peapod then announced that they were burning cash so fast they would run out of money in several quarters.

Herding Dynamics
Stock market breadth has been eroding for over a year and a half. Even though the Dow and S&P are roughly at their highs and the Nasdaq is in all time new high ground, the A/D ratio remains just off its lows. Even the big cap high tech favorites cannot buck their adverse fundamentals; more often than not they are still in rounding top formations. All the money in the market is funneling into one narrow group of stock whose fundamentals are virtually non-existent.

Part of this is due to sheer speculation by uninformed household investors who extrapolate a once in a lifetime bubble in stock prices forward forever. This is reinforced by a new era hype fostered by Wall Street, the media, and that ever-loquacious new era apostle, Alan Greenspan. But much of it is due to cynical relative performance money managers who feel compelled to go where the action is for, if they do not, they will lose performance and their jobs. We have seen in other markets how such herding behavior ends. We quote from a piece we wrote last fall (The Apogee of the Pendulum, Nov. 1, 1998).

Now, above all, money managers are in the business of maximizing fees, and fee income is a function of the quantity of money under management. If households have adaptive expectations behavior regarding returns earned by investment managers, short-term performance results will determine assets under management and fee income. It is a fact that the best long-term investments are often anything but the best performing issues in the short run. This is especially true in speculative markets when extrapolative or adaptive expectations behavior regarding future returns become predominant and drive asset prices ever further from long run equilibrium. Then speculative dynamics with their short-term self-fulfilling positive feedback loops begin to flourish. Under such conditions, managers who focus on long term fundamentals lose clients when short run speculative dynamics diverge from long run fundamental trends. Under such conditions, momentum oriented managers with skills as trend following traders attract funds. Gradually, in a process of Darwinian selection, investment managers mirror the adaptive extrapolative behavior (laced with a good bit of greed) of the uninformed households who entrust them with their money. The incentive structure of money management turns fiduciaries into bandwagon speculators.

Bandwagon money managers generally care little for long term fundamentals. Tulip bulbs are as good a trade as any, as long as everyone else wants to buy them. George Soros, the most celebrated investment manager of our time, has stated clearly again and again the rationale behind bandwagon management. According to Soros, markets are always in error; they are always in disequilibrium. The path to riches is to recognize these market errors early, jump on board to enjoy the meat of the move, and then jump off before they come a cropper.

Bandwagon management is for a time self-fulfilling. When everyone wishes to jump aboard a bandwagon, the object of the speculation continues to move further and further from its equilibrium. During a period dominated by bandwagon speculation, all other approaches to investing become discredited. Investors who look to long term fundamentals to buy assets cheap suffer losses as they become absurdly cheap. Timing becomes everything and the investor rooted in time tested parameters of fundamental value is always too early, often disastrously so. 

Bandwagon management drives prices in markets ever further from their long run equilibria. In the end, however, relative prices matter. Prices in deep disequilibria set into motion economic processes that act to drive prices back to their long run equilibria. The self-fulfilling success of bandwagon speculation drives the maximum number of market participants into markets at their extreme, and at that point they are positioned against an array of fundamental forces now acting against them. In the recent apogee of high performance hedge fund investing, the bandwagon managers attracted so much money and employed so much leverage that their positions became too large for their markets. When they wanted to sell, not only were fundamental market forces arrayed against them---they could not arrange to execute their sale. There was no liquidity. And when they were forced to sell, the markets moved in a discontinuous manner against them. Hedge funds and proprietary traders owned most of Russia's securities. Unwinding carry trades in the yen, a hugely liquid market, led to the largest two day discontinuous price move of any major floating G7 currency.

The end of the unwinding of bandwagon trades has not yet arrived. There are still bandwagons waiting to come unwound. Most notable is the US stock market with its huge public participation and its vast supportive industry of "herding" money managers. 

Beware
We have argued, there are no Ricardian rents in cyberspace. The experience of the entire interent group over the last two years provides endless evidence we are correct. There is no sign that, with corporate maturity, comes profit. Let us put it bluntly: the US stock market is the greatest stock market bubble in G-10 history. The high tech subsector is the most absurd stock market bubble except for the greatest bubble of them all---the Middle East's Souk al Manakh. The peak of every such bubble is marked by stock fraud. The internet stock craze is perhaps the greatest stock fraud in history. Most of these companies have been hatched simply as objects of stock market speculation with the intention of bilking the public through IPO's . 

Never have so many instant billionaires been created, let alone on companies that have perhaps no hope for a profit. One company, Sycamore Networks, has sales of $11 billion through October, losses of $21 billion, and one customer---and it just went public with an immediate market cap of $25 billion. Such stories are endless. You can be assured that the greatest criminal minds in the nation are pursuing this mass stock scam. Not only will many, if not most, of these fledgling high tech companies never show a profit; many of them will turn out to be outright deliberate frauds. We can expect in the future that internet moguls, faced with the inevitable demise of their non-viable businesses, will seize the company kitty and head for asylum abroad, Vesco-style.

Many, if not most, of the institutional money managers that are kiting these high tech marginals light years from reality know there is no defensible investment case for their holdings. They know they are involved in a stock scam. Britain's largest pension manager, Mercury Asset Management, has just been sued for 100 million pounds by the Unilever Corporation in a suit alleging negligence in the management of its money because of underperformance. The Surrey Council Pension Fund and the Saintsbury Pension Fund in Britain are considering whether they should follow Unilever on the grounds that their trustees are under a fiduciary duty to explore similar actions should the Unilever legal action succeed. One of these days one or several of the current ubiquitous internet stock scams will come definitively to light. Then, fund managers, realizing they have no justification as fiduciaries for owning such stocks, will fear suit and will try to sell. Others, realizing their trustees and shareholders are beholden to explore similar actions, will try to sell as well. Under such conditions, there may be no bids. Hear it from someone who witnessed it first hand: that is the way the Souk ended---with no bids.

Conclusion
There are elements that may make for a full-fledged moral hazard meltup in today's market, but a conviction that the market is too big to fail is not yet widespread enough. That may come later, after another and more shattering stock swoon. We do not buy the hypothesis that stocks are rising because the Fed is pouring fuel on the fire. The explosion in the monetary base reflects a special provision of currency and reserves through the millenium date. The monetary aggregates and credit, not the monetary base, drive portfolios, and these, though rapidly growing, have not accelerated. What we are seeing is unbridled speculation of an old fashioned variety taken to a new extreme by a Wall Street gone Madison Avenue, a media that finds the stock market plays better than the Super Bowl, and a Fed Chairman whose behavior has departed from that of prior central bank governors at any time and anywhere to cheerlead on a new era market mania. The case of China Prosperity---the Chinese toilet tissue company---tells us a lot about the type of dynamics that are driving the unprecedented speculation in the high tech sector. Now that the Fed has tightened, all market participants feel free to speculate without fear through the millenium date. Maybe we will keep melting up, but, with everyone on one side of the boat, we could just as easily fail again. The real moral hazard meltup, if it ever happens, is probably an iteration or two away.


Veneroso Associates:

All portions of this work, copyright 1999, all rights reserved.




Frank Veneroso
Veneroso Associates
lizsummit@aol.com
November 19, 1999

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