Cisco Briefly Tops Microsoft in Value

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From: Adam Rifkin -4K (
Date: Thu Mar 23 2000 - 12:56:59 PST

The Artist Known As Rimpinths forwarded me this link:

Which I'll cut and paste here, with comments to follow.

> Cisco Briefly Tops Microsoft in Value
> Thursday March 23 2:27 PM ET
> PALO ALTO, Calif. (Reuters) - Cisco Systems Inc., the
> world's biggest maker of equipment that powers the
> Internet, on Thursday briefly topped computer software
> giant Microsoft Corp. as the world's most valuable
> company.
> The two companies are now locked in a dead heat for
> maintaining that title on an ongoing basis, but the trend
> is clearly in place. Shares of Microsoft are little changed
> from their August levels while shares of Cisco have surged.
> Based on its intraday trading high, San Jose, Calif.-based
> Cisco had a stock market value of $575.93 billion on 7.296
> billion shares outstanding and a stock price of 78 15/16.
> Cisco split its stock on a 2-for-1 basis on Thursday.
> Microsoft's market capitalization, based on its intraday
> high of 111 1/8 and 5.177 billion shares outstanding, was
> $575.29 billion.
> The difference in stock market values between the two
> firms was a scant $640 million, or 0.11 percent.

So I wrote back to him:

> I'm thinking it stops later rather than
> sooner because everyone still wants to believe.

And he responded:

> I don't get it, do you expect people to just wake up
> one day and say "We don't want stock prices to go up
> anymore." They will want to believe that they can get
> rich quick forever. It's all a matter of when the
> money is going to run out. With five rate increases
> and the countdown to bankruptcy for many Net companies
> (I'm sure you saw the Barron's article), the money has
> to run out eventually.

Eventually, yes. But soon? Maybe not.

First, almost every time someone who's been granted employee
options or has owned a stock cashes out, they immediately look
for where they can "put that money to work".

Second, there's the richest people in the world, who are
incented to keep the confidence game going as long as possible.
Government interests are equally aligned since capital gains
taxes are helping out budgets significantly.

Third, there's demographics. Baby boomers want to fund their
retirements, so they're socking as much as they can into 401ks,
pension plans, IRAs, and savings. They will continue to be in
their peak earnings years -- kids' colleges paid, mortgages
paid, at the height of their careers -- for the next decade.
Where do you think most of that money will end up?

And fourth, there's the pipeline. A thousand venture capital
funds, with ten thousand "vanity venture funds" set to launch
in the next year or two. Everyone associated with the venture
industry has a vested interest in keeping it going, too.

So when will the money run out? Not while companies can issue
their stock to pay employees *and* that stock is still useful
currency. When will that stop? Your guess is good as mine.

> In that book I quoted on the CMGI board, "Only
> Yesterday", the author talks about how everyone was
> fully convinced that the bull market was going to
> continue for several more years even when prices peak
> in September 1929. Nobody wants this mania to end,
> it's going to come to an end forcefully. Not forced
> to an end by Greenspan or analysts or speculators or
> Matt's uncles in KC, but an unpleasant slap in the
> face by Adam Smith's invisible hand.

Yup. Can't predict when it will end, I agree with you completely.
And can't cry when it ends, either.

But we can at least enjoy it while it lasts; this is a once in
a lifetime thing to enjoy, so let's make the most of it.

And heck, it might very well last another decade, for all we know.

> At the close today, I'm sure the RimpyPort will have
> finally fallen the full 100%. Just got margin from
> Datek today and now I have to decide whether to fold
> my hand or buy a few more chips. I should've called
> it the MoneyPit instead of the RimpyPort.

Sorry about that, buddy. Short interest in the Nasdaq has swelled
tremendously in the past three months, and that in turn fuels further
rallies as shorts are forced to cover at higher prices -- I myself got
the wind knocked out of me when I read Oracle's 10-Q citing a "mere" 13%
revenue growth and looked at a stock price that had quintupled in the
last year and said, "No way it goes higher" and bought some puts. Since
then, of course, it has almost doubled again, and my puts are a nice
realized loss to offset some gains I have recently taken.

And I scratch my head when I look at the current price. Oracle has a
market cap of $250 billion?! That piece of human slime Larry Ellison is
worth HOW much?

And then I move on. Because there's nothing I can do about it.
The market, for now, has spoken. And, when & if the deck of cards
comes crashing down, the market will again speak. But between then
and now the trends are more likely to continue than end, because
let's face it, a lot more time is spent in the middle than at the ends.

A year ago, MicroStrategy's stock was at 8 bucks a share.
Two weeks ago, it was at 333 a share.
Last Friday it closed at 220 a share.
By mid Tuesday it was down to 63 a share.
Today it was up to 133 a share.

That is to say, it went from a $26 billion market cap to a $5 billion
market cap and now back up to a $10 billion market cap in a matter of
two weeks. You want me to tell you that makes sense, and I can't, not
any more than Xcelera selling 17% of Mirror Image to Exodus yesterday,
and Xcelera's shares running up to 225 yesterday as a result. (Yes,
the 52 week low is eleven thirty-seconds. From under 50 cents to $225
in less than a year.)

It is an incredible market we're in. This is definitely a
once-in-a-lifetime phenomenon. So we may as well enjoy it while it
lasts, right?


Do you have any bear claws? -- Weird Al, "Albuquerque"

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