Internet picks need more than warm glow
Common wisdom has it that Internet fever is finally abating as the share prices of some of the more ridiculously priced Internet stocks start to come down on stock markets worldwide.
It was inevitable at some point, of course.
When the management of one of the punters' favourites proclaims that it is interested in becoming the biggest new thing in retailing rather than in making profits and proves the point by posting consistent losses, then it has to expect that investors will eventually look for the exits.
What Amazon.com needs is a little reminder that shareholders want payment in kind.
If it seeks to reward them only with warm feelings of retailing achievement, then this is all it should ask them to contribute.
But if it wants them to pay money for their shares, then it should realise that they want money back, too. Retailing is a business, not a social service.
If a share price is not supported by real returns on capital, then the stock will, sooner or later, rank with tulip mania, south sea bubbles and the other historical greats of speculative collapses.
The difficulty is that many investors will miss the point if they see a demise of what are commonly considered Internet stocks to be evidence that this advance in communications is not the big thing it was billed to be.
Time for an example. A friend has just come back from a canoeing trip down the Li river near Guilin.
It is easy enough through any travel agency to arrange a sightseeing trip to this premier beauty spot in the mainland, but, invariably, you find yourself on one of scores of noisy river boats crowded with tourists, all making the trip at the same time.
However, this friend had searched on the Internet to find a Guilin tour agency that could arrange the canoes and all the necessary transport to the right spot - and made the success of his search an argument for buying Internet stocks.
In contrast, one can take the view that it argued for buying into Guilin tourist agencies if any of them were available on the market, or perhaps canoe producers or suppliers of goods that canoe producers might use.
The real investment attraction is not the Internet or the providers of Internet tools but the commercial users who can now more easily reach a wider market for their goods and services and thus become more efficient businesses.
Who are they? Everyone really. There is a school of thought that says the reason the United States economy has remained so strong for so long is partly the efficiency gains that the Internet has made possible.
This also can make it difficult to pick individual investment opportunities that benefit from it, which is one reason so many investors fall back on stocks that have a big Internet ring to them.
It is all somewhat akin to what happened in the Alaska gold rush 100 years ago. Generally, the greatest winners were not the prospectors who found the gold but the saloon keepers who took it from them.
That was where the money went and, difficult as it may be to find the equivalent of those saloon keepers among Internet investment choices, it is probably worth the hunt.
Certainly, retailers of specialty goods will eventually be among them, which is why Amazon.com would not necessarily be a bad choice if only it paid more attention to its immediate profit and loss account instead of asking shareholders to wait forever.
Frustrating as it may be, the choices are almost endless and the biggest cumulative gains may be made through large numbers of companies that each benefit in a small way.
The medium has been the message up to now only because it has been so difficult to read the other messages the medium sends.
However, the medium may not be enough much longer.
