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Aridian,

as you correctly pointed out, the exit strategy is becoming the crucial part of this game.

In years gone by, you could have bought a stock like Cisco, and if they grew 30% then fine, if they grew 50% even better - it would drive the stock up.

Nowadays it seems, you buy a stock that's priced for maximum growth already and after that it can only be a matter of matching or failing expectations - hardly exceeding them.

I've been caught twice now:
One example is BEAS. In autumn 98 they warned that Y2K might slow things down a bit and the stock halved more or less over night. Thankfully :-))), that spike is hard to detect on the chart nowadays but that's only because BEAS didn't have the sexy E-Commerce tag in those days. What happened is that all the growth investors jumped ship and the stock tanked. Now BEAS was priced very reasonably in those days - I shudder at the thought what the same announcement would mean at today's valuations. Incidentally, BEAS still managed a 74% and 61% growth rate in 98 and 99.

Second example is DELL which I bought a year ago and which hardly moved since then. Granted, they had an earning problem off late, but essentially it's the same story: What, only 30% growth now, after the 40% we're used to? Dump that old-economy stuff!

As we move to buying on HOPE instead of reality, we may have to start selling on FEAR instead of reality, too. I'm not very happy about that development and the one question I keep asking myself is where to draw the line between gambling and investing. Suddenly I feel like a conservative investor when I buy Cisco at today's prices, because they may be expensive, but they've shown they can do it.

Eckhard

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