BUSINESSWEEK ONLINE: NOVEMBER 1, 1999 ISSUE

Readers Report

Why Dow 36,000 Is Probably a Fantasy

''Talk about throwing the bull'' (Books, Sept. 27) reserves its harshest criticism for Dow 36,000, by James K. Glassman and Kevin A. Hassett. The authors appear convinced that there is no current stock market overvaluation, and on this point they have considerable support. But their thesis is much broader. They maintain that the risk premium for U.S. equities, which has historically averaged about 7%, has been reduced in the 1990s to 3%, thus causing the surge in equity market valuations. And, since 200 years of historical data show no greater risk in the long term for holding equities than bonds, Glassman and Hassett argue that rational investors will act on this knowledge and, in the aggregate, invest on this basis in the future. That is, they will price equities on the basis of getting the same return as they could achieve from long-term U.S. Treasury bonds. As a result, equity values will soar upward, with the Dow at 36,000 on the horizon.

Would that it were so simple. Yes, there is much compelling evidence in favor of the superior long-term real performance of U.S. equities over alternative investments. But individuals live and spend in the near and medium term. Many will not have the staying power for the equity market--through all the down phases--a staying power that appears to be required in order to make Dow 36,000 a reality.

Angelo Tarallo
Ridgewood, N.J.



Shorten That Long Baseball Season

Baseball should shrink the number of games, not teams (''And then there were 28...,'' Sports Business, Oct. 11). If football teams and fans are doing so well with 16 games per season, why does baseball need 162? Having so many games makes each game insignificant, and the time and energy spent attending, watching, and rooting for the home team somewhat futile. Continuing the baseball season past the start of football season is ridiculous; it just creates competition for fan and media attention and forces many to choose whether they are football or baseball fans, instead of being both.

If you could herd those small crowds that trickle in to the stands during a home series into just one or two big nights at the ball park, the stands would be full of energetic fans. The community as a whole could focus its energies, and people would chat about ''the game'' the following week. The smaller ball parks are a good move, but being a baseball fan still requires a lot of time--a precious commodity these days.

Keith Granger
San Rafael, Calif.



Is Online Reporting Too ''Fast and Loose''?

As Mike France points out in ''Journalism's online credibility gap'' (Media, Oct. 11) much of today's Net reporting seems to play fast and loose with the ethical constraints of their paper-based predecessors. While he correctly observes that even more kinds of conflicts of interest are possible online, he touches only lightly on how to apply effective policies and merely suggests that greater disclosure may be necessary.

He overlooks several methods applied in similar situations by organizations such as investment banks, law firms, and consulting firms. Should ''Chinese walls'' or ''restricted lists'' be maintained in these new online organizations? Should the investing public or readers be able to see the list? Should the site's board of directors regularly review the policy and any transgressions? Are employees of the site personally allowed to buy or short stocks that the site may upgrade or downgrade in its coverage?

Perhaps we would all be better served if these sites were required to add a page that disclosed their specific corporate interests to the public, and if they also implemented internal controls such as a code of ethics.

Mitchel Kraskin
President
Compliance Tools Inc.
New York



One Unhappy Ford Owner

I have a bit of advice for [CEO Jacques A.] Nasser that might help push Ford's price-earnings ratio up to the 30 range that he aspires to and that other successful consumer companies enjoy: Stand behind your products, and consumers will beat a path to your door with repeat business (''Remaking Ford,'' Cover Story, Oct. 11).

Here's what happens if you do not: The automatic transmission on my 1994 Ford Taurus completely gave out after 38,400 miles. I did not expect Ford to replace it for free since it was no longer under warranty. No reasonable person, on the other hand, would expect a transmission to fail with such low mileage. Some sort of good faith gesture seemed appropriate. But representatives throughout Ford hid behind the mantra: It is out of warranty, there is nothing we can do. Something can always be done if an organization values the relationship it has with a customer. Every spectacularly successful company has stood behind its product or service even when not obliged to do so.

The demographics for a household in our income bracket at ages 40 to 45 suggest that a Volvo, Jaguar, or even the new Lincoln LS might be parked in our driveway. Alas, for Ford, that is never going to happen. How can I expect them to stand behind these products if they do not stand behind the Taurus? Attracting new customers is surely more expensive than retaining existing ones. Doesn't it make sense to remake the approach to customer service along with other initiatives?

Gustav A. Fingado IV
Shrewsbury, N.J.



Internet Riches Are An Illusion

The Internet is no revolution (''The Internet economy: The world's next growth engine,'' Cover Story, Oct. 4). It is a useful evolution of existing technology, rather like the fax machine. As a conduit of information, however, it leaves a lot to be desired. Books and newspapers still have the edge for consumers. Million of people will never log on, and many will log off because there are better alternatives.

But enthusiasm for the Internet is creating a massive U.S. share-price bubble that will soon cripple the world economy. The simple fact is that 99% of Internet companies make no profit. And even when this performance improves, profits will fall far short of the level needed to justify their ludicrous market capitalizations.

In the meantime, regular companies will compete by cutting prices, therefore cutting profits and thereby their market caps. This is a classic deflationary downward spiral. Clearly the Internet is a false revolution being used by the financial sector to inflate share prices. No profit, and massive stock market capitalizations is a no-brainer. Your magazine was launched in September, 1929. Remember what happened in October?

Peter Cooper
London



Keep the Feds out of Education

In ''Use the surplus to train tomorrow's workforce'' (Economic Viewpoint, Oct. 11), Robert Kuttner seems to think it's bad that ''Federal education spending has dropped.'' When was the last time he bumped into a ''federal teacher''? The federal bureaucracy can only make things worse. Let the states handle this area, and if the states don't get it right, citizens will decide where to live and bring up their children. Do we really need the federal government to declare ''war on ignorance?'' Every time the government declares war on something it loses; the war on drugs is a perfect example.

Kuttner states that ''public education must be tax-supported'' and includes vouchers. While vouchers sound like a good idea, especially in many urban areas, I bet that if they are the wave of the future, the minority ghetto students will be the last to see any benefits. The white suburban areas will be the first beneficiaries, and if there is any money left, then and only then will the most needy get a piece of this pie.

Ira Gross
Boca Raton, Fla.



The FDA: Underfunded or Just Inept?

'''Incredibly stressed' at the FDA'' (Science & Technology, Oct. 11) raises legitimate issues of whether the Food & Drug Administration's budget is adequate, given the growing list of important tasks it must perform. There is no question that the FDA's program for regulating is not doing an adequate job of keeping up with the rapidly growing industry of dietary supplements. The industry has tried to fill the vacuum by developing good manufacturing practices, guidelines for marketing particular supplement products such as ephedra, and other needed rules while the FDA's Office of Food Safety & Applied Nutrition reorganizes under its new director, Joseph A. Levitt. But it's not true that the supplement industry is unregulated and that the agency needs more money to do the job right.

The dietary-supplement law that Congress passed in 1994 did not tie the FDA's hands. The FDA's new commissioner, Jane Henney, has acknowledged that, with this law, Congress struck ''the right balance'' between permitting greater access to supplements and permitting the FDA ''to take action when necessary.'' But the FDA has repeatedly failed to exercise the authority it has to remove dangerous drug products that masquerade as dietary supplements, even though these products are being marketed to children as substitutes for illicit drugs and, according to the FDA's records, the products have caused serious injuries. Some of these products contain ephedra as well as other ingredients. Removing these products would be applauded by consumers and industry alike.

It is the FDA's own ineptitude that has caused the ephedra process to take four years, not any lack of funding or a a new legal standard, and certainly not any lack of cooperation from industry.


A. Wes Siegner Jr.
Hyman, Phelps & McNamara PC
Washington



Computers Don't Make Good Doctors

I am struck by your prediction that with the more powerful computers of the future, ''medicine will be a snap'' (''21 Ideas for the 21st Century'' Special Double Issue, Aug. 16-30). The increase in computational power in the past 30 years has been tremendous but has had little impact on curing disease. This is because the difficulty in understanding disease does not lie in solving computationally intense math problems. Rather, the difficulty is in knowing what equations to use to describe and simulate the human body.

This is a modeling problem, not a computational one, and it can be solved only with experimental data. This is why government funding for medicine remains to this day almost exclusively for experimental work. The day when medical experiments become obsolete is nowhere in sight.

Ardith El-Kareh
Department of Physiology
University of Arizona
Tucson



''Learning to lead'' and ''The executive MBA your way'' (Special Report: Executive Education, Oct. 18)

In the tables accompanying ''Learning to lead'' and ''The executive MBA your way'' (Special Report: Executive Education, Oct. 18), Cambria Consulting Inc., based in Boston, was inaccurately named Cambria Consulting Group. Also, Center for Creative Leadership offers 244 executive education courses, not 810.



''Prime-rate funds: Ready for prime time'' (BusinessWeek Investor, Oct. 4)

The table in ''Prime-rate funds: Ready for prime time'' (BusinessWeek Investor, Oct. 4) had incorrect data for the 12-month yields on several mutual funds. The correct figures (as of Aug. 31) are: AIM Floating Rate, 6.79%; Eaton Vance Prime Rate Reserves, 6.56%; Franklin Floating Rate, 7.12%; and Van Kampen Prime Rate Income, 5.77%.





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LETTERS:
Why Dow 36,000 Is Probably a Fantasy

Shorten That Long Baseball Season

Is Online Reporting Too ''Fast and Loose''?

One Unhappy Ford Owner

Internet Riches Are An Illusion

Keep the Feds out of Education

The FDA: Underfunded or Just Inept?

Computers Don't Make Good Doctors

CORRECTIONS & CLARIFICATIONS:
''Learning to lead'' and ''The executive MBA your way'' (Special Report: Executive Education, Oct. 18)

''Prime-rate funds: Ready for prime time'' (BusinessWeek Investor, Oct. 4)

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