INTERNET INVESTING: THE NEXT FIVE YEARS.

Christopher Columbus wanted to sail to India and thought he ended up in China. The founding chairman of IBM thought the world had only enough demand for 300 mainframe computers. John D. Rockefeller, the greatest oilman of all time, once pontificated the future of the energy business lay in kerosene. Most Wall Street strategists thought we would see a Dow meltdown to 5000 and a global financial recession in '99. Alexander Graham Bell, the inventor of the telephone, thought his new gizmo would only interest people who wished to listen to music symphonies. My finance professors at Wharton taught me never to buy IPO's of companies with non-existent profits and that the Japanese yen would be the currency of our lifetime. The Club of Rome predicted that the world would run out of oil, that crude oil would hit $100 a barrel and that the planet's wealth would gush into the Arabian Gulf states by the late 1980's.

The moral of these tales? One, crystal balls can blow up in your face with lethal shards of glass. Two, self-styled experts, oracles from ancient Delphi to modern Wall Street are almost always wrong.

The relevance to Internet stock investing in the 1990's? Do your own thing. Take nothing at face value. Reverse - engineer a strategist's assumptions, logic and intellectual processes before you accept his conclusions. This is the reason why I try my best to outline the blueprint of my cerebral paradigm when I recommend a stock or investment theme Forecasts, hunches, opinions, shallow broker "advice" is all too cheap. The only thing that matters is the track record of a strategist's performance, his ability to call the macro-financial zeitgeist of his time. I predicted that the yen would plunge from 140 to 100 in early 1996, "thinking the unthinkable". I predicted that the Asian tigers would turn into pussycats way back in December '95, almost two years before the financial hurricane hit the Orient. I predicted that the Dow would hit 10,000 in '99 in the depths of last summer's correction. I recommended Yahoo at its IPO back in April '96 and it rose more than hundred fold in the next three years. I predicted Citicorp, Sun, Chase and IBM would double in value in 97-98 and they did. I predicted Double Click would rise 100% on New Year's Eve '99 and it is already up 300%. But I also thought that the Pakistan Fund (PKF) was a reasonable value at 4 last May on the eve of Pokhran. I fell in love with Russian stocks before Yeltsin stiffed the Euromarkets with the first major sovereign government default in modern times. Still, better to have loved and tripled your money in eight months and lost than not to have bought Lukoil ADR's at all!

Opinions are like body orifices: everyone has one. But documented, verifiable, successful market calls on dozens of stocks in the last three years? Successful predictions on macro financial themes like the meltdown of Asian stocks/crude oil, trends in internet rates, the historic depreciation of the Japanese yen and the ascent of King Dollar in '96, the takeovers of Lycos and Bankers Trust, the recent blowout in IBM's share price, the unambiguous buy calls on Inktomi at 60, CBS Marketwatch at 58, Chase Manhattan at 35, Nokia at 60 and Telecom Italia at 75? This is true performance. This is the ultimate vindication for a stock market strategist. This is the power to print money with ideas.

The Internet is unquestionably the biggest investment theme for my generation, a crossover between tail end Baby Boomers and Gen X, that demographic never never land between the Beatles and the Spice Girls. We were in liquid form or schoolboy uniforms during the Mainframe Era of the 60's and 70's, when IBM was king of technology. We missed making big money when Microsoft, Compaq and Sun went public in the late 80's because we were penniless college students on an allowance, not investors in our own right. This was the Client/Server Era of distributed computer processing, when the PC revolution swept the world, thanks to Intel's microprocessors and the Wintel Kingdown of Bill Gates. But when we came of age as investors in the early 1990's destiny finally smiled on my generation. Because the Third Wave of technology then began with the Internet. Five years ago, AOL, MCI Worldcom and Cisco barely existed in the popular imagination. Amazon, EBAY, Yahoo, Lycos and Double Click literally did not exist. Plato told the Greeks to thank destiny that they were born in the age of Aristotle. I thank destiny that my generation was born in the age of Yahoo!

The Third Wave of technology, the era of the Internet, will last for at least the next two decades. It will create $3 trillion in new wealth on the stock market or no less than 10% of the world's current GNP! It will be the biggest explosion in wealth in human history in a single decade, bigger than the gold rush after the Spanish conquistadors pillaged the Inca and Mayan empires, bigger than Venice and Florence in the Renaissance, the British Empire at its late Victorian apogee or even Silicon Valley in the past decade.

The Internet will connect a billion human beings worldwide in 2005. It took radio and TV 20 years to get to 50 million users. The Net made it in only 5 years. GE Chairman Jack Welch, arguably the world's most brilliant corporate strategist, said that the Internet was the most seminal event in global business since the Industrial Revolution, with a wealth creating potential greater than autos, electricity or even the personal computer. He is right. Yahoo's mission statement to connect "anyone, anywhere, anytime" will become a global reality of the early 2000's.

Every book ever written, every film ever made, every TV program ever produced, every song or musical score ever recorded will become instantaneously accessible to anyone with a PC, cell-phone, cable TV or even a microwave toaster. The multimedia revolution will make videoconferencing replace phone calls, search engines that will comparison shop in cyber-space at the speed of light, spawn a new global culture of instantaneous knowledge, free market entrepreneuralism and digital media beyond all national borders. Middlemen, brokers, economic parasites in all industries will be virtually squeezed out of existence. The real revolution is coming in B2B commerce and the datacome industry as entire business supply chain models are reinvented online. Internet Protocol will become the global infrastructure standard for the convergence of voice, data, video and graphics. The language of binary mathematics will become the world's ultimate universal standard. This is not Dutch tulips. This is not the Nikkei circa 1989 or Kuwait's Souk al-Manakh bubble or Albania's Ponzi pyramid schemes. It is nothing less than a revolution in global media, retailing, finance, communications, manufacturing and economic reengineering.

So who are the next 100X winners in Silicon Valley? I have no idea - but then nor does any other human being now. But somewhere out there, in an MIT computer lab or a Napa Valley gourmet kitchen, the Bill Gates and Larry Ellisons of my generation are out there…thinking, planning, writing code, dreaming. The Internet will be the platform of their dreams, of the companies they will found, the billions in shareholder value they will create. This is the real beauty of technology investing - you invest in a dream that can change the world, that can turn $10,000 into a million dollars in five years if you are right. I pity the poor souls who gamble in Las Vegas, currency casinos and day trading bucket shops. They might get cheap thrills while they lose their money (almost all do, believe me!) because the odds are so hugely stacked against them. I pity the poor victims of so called "expert" stockbrokers who are only "expert" in high pressure sales to the gullible. If they win, it is only by fluke because most brokers will sacrifice an entire chicken to get at his drumstick! Meanwhile, out there in Silicon Valley, the next Yahoo or Amazon is a private start up that will go IPO on NASDAQ next year, worth a mere $50 million or less now. Luck has very little to do with success in Internet stock investing. Knowledge and vision matters above all else. Because the world is now divided into two types of investors: those who understand Internet finance and those who do not.

MATEIN KHALID
PORTFOLIO MANAGER
GULF AL BARAKA INVESTMENT LLC

The opinions expressed by the writer are his own and not endorsed by Press Release Network.

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