The Internet Bubble: Inside the Overvalued World of High-Tech Stocks--And What You Need to Know to Avoid the Coming Shakeout [Hardcover]

Anthony B. Perkins (Author), Michael C. Perkins (Author)

Book Description

Publication Date: November 1999

The spectacular Bull Market in high-tech stocks is the investment story of the decade.

The numbers are astonishing. The Internet boom has created new household names such as Yahoo, Amazon, and America Online -- companies that today command billions in market value. Internet startups like Healtheon and eBay have seen their stocks sky-rocket over 3000 percent since their IPOs, and dozens of other Internet stocks have doubled, tripled, and even quadrupled on their first day of trading.

Here is a market where:

entrepreneurs like the thirty-something founders of Yahoo and Amazon become global billionaires overnight;

money-losing startups command market valuations that make the captains of traditional industry cry their hearts out and tremble with competitive fear;

and venture capitalists and investment bankers cash in big on companies barely out of the cradle.

But individual retail investors -- the outsiders in this turn of the century roulette game -- are left to foot the bill, paying exorbitant prices for stocks that will end up diving off a cliff.

TheInternet Bubble is the story of the turbulent world ofhigh-tech stocks, a place where fortunes aremade and lost in a day. This book uncovers the innerworkingsof an industry that increasingly thrives ongreed and hype. It shows who is really getting rich, and how they use small investors to finance their empires.

Silicon Valley insiders Anthony and Michael Perkins provide a behind-the-scenes look at the forces -- and the people -- stoking the money engine in the technology stock market. They show how the allure of fast-paced innovation and overnight success has driven an ongoing market frenzy around Internetstocks, creating what they call an "Internet Bubble." Most important, the authors show that, when the Bubble inevitably bursts, Main Street -- not Wall Street -- will take the big hit, unless individual investors take steps to protect themselves now.

This is a book that will make every investor in America think twice before chasing the latest "hot" Internet stock.

Editorial Reviews

Amazon.com Review

Canals. Railroads. Automobiles. Computers. The Internet. Each represented revolutionary shifts in the way Americans would live and do business. Each saw a corresponding rush of investors to get in on this great new investment opportunity. Each saw a lot of investors go broke. In The Internet Bubble, Anthony Perkins and Michael Perkins, founding editors of The Red Herring, look at it this way: In the early 20th century, there were more than 500 automobile companies in the U.S. Now how many are there? Same with the new Internet companies, the Perkinses predict. A few will grow into profitable businesses in 10 or 20 years, but even then, their stocks may not be worth much more than their 1999 prices. They argue that buying an Internet stock today is really nothing more than gambling that someone else will come along and buy it from you for more money.

The book includes an overview of the biggest players in the Internet explosion, the market mania for Internet stocks, and profiles of companies such as Amazon.com, Yahoo! and At Home. The authors also interview venture capitalists who help new companies get off the ground and the investment bankers who help them go public. And while they don't pretend that they know when the Internet bubble will burst, or what the damage will be, they are convinced that most .com companies will never make a dime. The book concludes with some thoughts about investing in this climate, and argues that ignoring the Internet may be as dangerous to your portfolio as investing too much. Some guidelines about product cycles and diversification appear, but the biggest rule seems to be: Don't be the one holding the hot potato at the end of the game. --Lou Schuler

From Publishers Weekly

With all the talk about the Dow riding technology stocks to new highs (e.g., James K. Glassman's and Kevin A. Hassett's Dow 36,000, Forecasts, Aug. 30), count the Perkinses, founders of the technology business magazine Red Herring, among the naysayers. Not that they're bearish about the future of the Internet itself. They assume the technology will improve and will change the way ordinary people live, and that there will be an increase in transactions, revenues and profits. But they argue that, even with rapid growth, the current high prices of Internet and related technology stocks are unjustified. The technology and the business models are fine, but they believe that too many companies are being rushed to public securities markets before they are ready, and investors are all too willing to buy anything that is going up in price. The result, they argue, is a classic investment mania, in which higher prices generate more excitement and even higher pricesAuntil the bubble bursts. Not that all Internet stocks are bad investments. The Perkinses figure that one in 20 will take off. But current stock prices only make sense if 20 out of 20 companies soar. The authors' prescription for investors is sobriety. As they lucidly explain the thinking of venture capitalists, investment bankers and analysts who shape the market for technology stocks, they demonstrate a thorough knowledge of the industry that makes their analysis extremely convincing. (Nov.)
Copyright 1999 Reed Business Information, Inc.

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Product Details

• Hardcover: 283 pages
• Publisher: Harperbusiness; 1ST edition (November 1999)
• Language: English
• ISBN-10: 0066640008
• ISBN-13: 978-0066640006
• Product Dimensions: 9.3 x 6.2 x 1.2 inches
• Shipping Weight: 1.2 pounds
• Average Customer Review: 4.0 out of 5 stars  See all reviews (22 customer reviews)
• Amazon Best Sellers Rank: #1,996,538 in Books (See Top 100 in Books)

Customer Reviews

Most Helpful Customer Reviews

43 of 44 people found the following review helpful:

5.0 out of 5 stars Inside the Internet Stock Mania Machine, December 7, 1999

By 

Eric Janszen (Boston, MA) - See all my reviews

This review is from: The Internet Bubble: Inside the Overvalued World of High-Tech Stocks--And What You Need to Know to Avoid the Coming Shakeout (Hardcover)

Some in clandestine companies combine; Erect new stocks to trade beyond the line; With air and empty names beguile the town, And raise new credits first, then cry 'em down; Divide the empty nothing into shares, And set the crowd together by the ears. - Daniel Defoe (1660 - 1731)

The Internet Bubble documents the latest incarnation of the world's second oldest profession: separating gullible investors from their money. Not since the 1920s has the US seen such a highly evolved stock mania machine involving media outlets, market pundits, bankers, brokers, pension funds, venture capitalists, and legion uniformed investors taking it all in -- and getting taken in. This has been going on for years without much notice. At last we have in Anthony and Michael Perkins, founders of The Red Herring, working as investigative journalists who use their insider contacts to go out and get the story.

As the founder of iTulip.com in November 1998, a parody of an Internet company created to draw attention to the Internet stock mania game, I take a special interest in the Perkins' excellent new book. Just as we do on iTulip.com, Anthony and Michael Perkins believe that the Internet offers tons of valid investment opportunities. But over time as the mania machine evolved, a perfectly good investment opportunity has turned into a circus for suckers.

What is not explained in the book is how such a financial mania starts in the first place. So let's back up a bit. Nearly every mania was sparked by the convergence of four events:

1) The nation hosting the mania survives a traumatic crisis such as a war or depression -- in the current instance, the Cold War ended. Optimism rules the day. 2) Following the crisis, tensions among nations decrease and international trade booms. 3) A discovery, new invention or technology offers unmeasurable benefits, creating a sense of limitless possibility. Without precident, the market has no guideposts to help investors set a fair market value for securities issued by corporations that manufacture the new technology. Hundreds of businesses crop up to capitalize on the flood of money available to fund the new businesses. Some of the optimism is justified. Imagine what the first railroads meant to commerce? Suddenly goods could be shipped inexpensively over long distances in a set time period at relatively low cost. A huge boon to the economy, but in 1857 a bust to investors. The benefits of the new technology turned out to be great but not infinite. 4) Interest rates fall in the rapidly expanding and deflationary economic environment -- deflation driven by global competition and rising productive capacity. The money supply is permitted to increase rapidly in the absense of apparent inflationary pressures. The excess liquidity does not show up in the so-called real economy as higher priced goods and services, instead inflation arises in the asset prices. Why? Because increased competition and rising capacity lower profitability. Financial assets become the only profit game in town. Speculation ensues. Starting in 1996, the money supply in the US began a precipitous climb, and with it the stock market in general and Internet stocks in particular.

Which brings us back to Anthony and Michael Perkins. They explain the actual workings of the mania machine from the inside through interviews with key players. They explain where the mania started and how it evolved, the participation of venture capitalists and investment banks, and they lucidly compare the Internet bubble to the Biotech bubble that popped in 1992. They debunk the New Economy. Finally, they tell you where to look for real value in Internet investing.

This is an important book if you're in the stock market and especially if you own Internet stocks. Buy it.

12 of 12 people found the following review helpful:

5.0 out of 5 stars Timely warning, but how many will heed it?, January 17, 2000

By 

S. Sudhindranath "sudhi" (California, USA) - See all my reviews
(REAL NAME)   

This review is from: The Internet Bubble: Inside the Overvalued World of High-Tech Stocks--And What You Need to Know to Avoid the Coming Shakeout (Hardcover)

The authors make a convincing case why internet stocks are enormously overvalued right now. They also provide insight into the machinations and manipulations that happen in the background, far away from the centerstage where the stocks are paraded in the limelight and small investors are convinced to part with their money.

While the authors are confident that the internet is here to stay (and grow), they are concerned about the insane valuations of internet stocks. On reading this book, any rational investor will go back convinced that the internet stocks are the tulip bulbs of the current era. One wishes small investors will heed this warning. But knowing the previous outbreaks of stock-market mania, not many will escape the ruinous effects of this one either.

9 of 9 people found the following review helpful:

5.0 out of 5 stars Very compelling, January 14, 2000

By A Customer

This review is from: The Internet Bubble: Inside the Overvalued World of High-Tech Stocks--And What You Need to Know to Avoid the Coming Shakeout (Hardcover)

I was skeptical when I first picked up a copy of this book. But the authors present their facts clearly, write concisely, and definitely know their stuff. I particularly liked the historical perspective: the Internet is for real, but the overvalued stocks of Internet companies are just part of a historical cycle, and they will drop. This book is a must read if you own any Internet stock.