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A L S O_ T O D A Y 21st Log New legion in the Net music standard war   T A B L E__T A L K Would an anti-virus software company create new viruses just to prove the value of its product? Check the rumors in Table Talk's Digital Culture area   Search for technology books, software and more at barnesandnoble.com Search by:  Keyword Title Author     ____________________ Technology news from Will Bill Gates testify after Microsoft trial break? ____________________   R E C E N T L Y Crips, Bloods in the Web 'hood By Greg Brouwer Are gang sites for real or for wannabes? (02/26/99) Hotline's civil war By Janelle Brown The company behind a hot program takes its teenage inventor to court -- while devoted users stew. Second in a two-part series (02/25/99) Hotline to the underground By Janelle Brown It was invented by a teenager. It's simple to use. And it can turn anyone's computer into a server of legal or illegal files. First of two parts (02/24/99) The Drudge dynasty By Janelle Brown Matt isn't the only member of his family to stake out a place on the Web (02/23/99) Yay for Yahoo By Andrew Leonard How do I love thee? Let me count the pages (02/22/99) - - - - - - - - - - BROWSE THE 21ST FEATURES ARCHIVES - - - - - - - - - -

•  •  •  •  •  •    In defense of day traders DON'T BLAME THEM FOR NET-STOCK VOLATILITY. THEY'RE JUST DOING THEIR JOB: MAKING THE MARKET MORE EFFICIENT. BY PAUL KEDROSKY When a stock pick doesn't pan out -- as more than half of even the best stock analysts' picks don't -- the analysts need someone to blame, loudly and publicly. Not surprisingly, with livelihoods that depend on artful blame-laying, market observers have assembled a list of oft-cited baddies to rival the collected Brothers Grimm. The plaintive subtext is: It's not my fault. Some villains go in and out of fashion, like Inflation Worries or the Rising Yen. Others are more persistent, like the fell beast Profit Taking, the sneaky Insider Selling and ever-lurking Volatility. All of these villains offer what any good heavy should: scare-power and general applicability. But what happens when the old monsters don't work? Well, you need new monsters. Enter day traders -- those basement-dwelling, underwear-wearing, eTrade-lovers who are now being blamed for the erratic behavior of Internet stocks. From relative obscurity two years ago, day traders have risen to two-headed prominence (along with "turmoil in emerging markets") as the media and investors' villains of choice. Hardly a day goes by that some fund manager, analyst or television host doesn't blame day traders for stock or market malfeasance, or fall back on Calvinist muttering about their eventual comeuppance. But despite all the nattering, day traders aren't altogether new. There have been people who buy and sell stock quickly for as long as there have been stock exchanges. Admittedly, current day traders use computers to trade so fast they would leave their street-corner cousins of the early 20th century in the dust. But the speed of the vehicle matters only if the road can't handle it. And while systems at the online brokerage companies sometimes break down in all the enthusiastic traffic, the underlying markets have fared just fine, thank you very much. So why all the excitement? I'd ordinarily say, follow the money, but in the markets the money is thick on the ground. Say instead that the answer has to do with some fundamental misunderstandings of how markets work, ginned up by bleating from vested interests. How do markets work? They work if they are efficient and orderly. "Efficient" is about the last way that most people would describe the market for Internet stocks. If online auctioneer eBay's stock were a bus on a trip from Seattle to San Diego, it would have driven round and round Seattle for a few months, then bolted for San Diego late one night when everyone was sleeping. But instead of going straight there, now and then the bus would drive halfway back, only to zoom forward again at twice the legal speed limit. Before anyone knew it, the bus would have been packed, more buses would have been added -- and in all the excitement no one would have noticed that the caravan had zoomed right by San Diego and was now somewhere in Chiapas. While exciting and impressive, this hardly seems efficient -- but for stocks, it often is. All that to-ing and fro-ing reflects weighing and valuing varying notions of a company's prospects. When there is uncertainty, different investors' estimates of those prospects differ -- doubly so when the differences are big and the opportunity is vast. With the Internet's vertiginously large and uncertain prospects, it should be unsurprising that Net stocks bolt around like overamped sprinters. You and I may wish they didn't, but their doing so is simply a sign that the market is straining to reconcile wildly disparate views of a big and very uncertain future. N E X T_ P A G E .|. When large-investor elephants splash into small-stock ponds