More or Less Weekly Message From iTulip.com


August 12, 1999

iTulip.com started in November 1998 as a parody of an Internet company and financial mania information site.  iTulip.com gets its name from the tulipmania that occurred in the Netherlands in the 1600s.  Perfectly normal Dutch citizens bought tulip bulbs for thousands of dollars then the way perfectly normal Americans buy iTulips -- over-priced stocks in over-valued Internet companies -- today.

iTulip.com is a stereotype of a poorly managed  Internet company.  It has a goofy and inexperienced management team with dreams of quick riches, a silly product and an absurdly unprofitable business model.  That's the fun part.  iTulip.com is also a site devoted to historical information about financial manias for anyone who cares to learn how closely the mania in Internet stocks was tracking past financial manias.  The idea behind the site is to educate with humor.  No one likes to be lectured.

In spite of the bearish outward appearance of iTulip.com, we have always held that the Internet is the greatest technological innovation in history.  After all, the creators of iTulip.com have been working at Internet start-up companies since 1988 (that's "88" not "98") so we ought to know.  The Internet will fulfill the promise that past technologies failed to deliver.  It will make corporations and entire markets more efficient.  The Internet we now know as a sea of data we use a browser to access with varying degrees of success will be transformed into a ubiquitous data network that ties together myriad exotic and mundane devices in ways that are hard to imagine now and that will have completely unexpected and, we think, positive economic, social, and political effects globally.  But that does not mean that any bunch of yahoos (excuse the pun) can start a .com and make millions for investors in the long term.

Building a profitable business is still a very, very hard thing to do.  The enormous effort merely starts a new phase with an IPO, it doesn't end there.  The point of iTulip.com is to highlight the difference between companies poised to take part in fulfilling the Internet's promise from those that are little more than get rich quick schemes, although the founders of many of these companies may not see it that way.  Hope springs eternal.

Especially during an investment mania, investors need consistent and reasonably high quality information to interrupts the steady stream of unqualified euphoric press that attends every financial mania.   We want to encourage investors to think carefully before making investments that rely on a greater fool buying a stock at a higher price later rather than on a careful consideration of the true potential of any particular business.  Our belief has been that the time will come when the Internet stock mania will end and investors are likely to overcompensate and oversell, dumping the good with the bad at depressed prices.  We don't want investors throwing the baby out with the bath water, although that's inevitable at the end of any mania.  Our unabashedly bearish stance was intended from the start to help inoculate investors from the disease of irrational exuberance.

Much has happened since iTulip.com opened last year.  The iTulip.com Stock Index has fallen over 64%, a serious correction by any standard.  Investors have gotten extremely picky about which IPOs they back.  They choose excellent investments such as Red Hat over marginal ones like HotJobs.com.  Does the world need another OS to compete with NT and Solaris?  Yes it does, especially from a well run company like Red Hat.  Does the world need yet another online job bank?  We like Monster Board a lot.  We sure wouldn't want to compete with them.

Back when we started, our bearish stance toward Internet company stocks was highly unpopular and contrary.  We got hundreds of e-mails from individual investors, Wall Street fund managers and others deriding our bearish stance.  The mania was in full sing.  Now, after the correction, throw a beer can out any window and you'll hit a reporter covering "The Correction in Internet Stocks."  What was once radical has become popular.  We have recently received letters from folks thanking us for giving them information that helped them decide to stay out of the mania and save their money for better investments.

iTulip.com has achieved its original goal. But now with so much Internet stock bearishness prevailing, it's time to change our tune.  We're starting to turn bullish on Internet stocks.

This doesn't mean the equity markets are not in for some serious challenges or that some Internet companies with market caps bigger than Boeing's will not see significant further losses in stock price.  In fact we still hold to our November 1998 prediction that the average internet stock will lose 87% of peak price.  We will continue to point out fundamental weaknesses in the US economy -- especially over-extended individuals and corporations wallowing in debt, a negative savings rate not seen since The Great Depression, an unprecedented current account deficit, extreme sovereign indebtedness to foreigners, and an over-valued dollar.  But make no mistake.  The Internet is here to stay.  It will continue to evolve rapidly no matter what.  From now on we plan to focus more on telling our visitors about the real opportunities we see on the Internet to help distinguish opportunities from opportunists and weed out the iTulips.  Stay tuned!

-EJ