''Hype Machine''--or New Tool for the Smart Investor?

I read with interest your assessment of how the media contribute to clouding Wall Street's performance (''Wall Street's hype machine,'' Cover Story, Apr. 3). I closely monitor international market news, and I concur with your critique. But I wonder how the media feel, now that they are in the hot seat--with your article slicing through their performance, much like they do on a daily basis.

Prince Alwaleed Bin Talal Bin
Abdul Aziz Alsaud
Riyadh, Saudi Arabia

Your story banks on the notion that most investors are idiots and that the rise of the individual investor has been fueled by nothing more than media sensationalism and biased, fame-hungry analysts. What about the upside of the story? More than ever before, investors are using sophisticated diagnostic tools, culling comprehensive information, and engaging in intelligent discussions with fellow investors. And where does the article mention the independent analysts building followings who provide balanced buy and sell recommendations?

The Web has given individual investors access to resources formerly available only to Wall Street--the people this article claims are running away with sacks of money while the average investor gets fleeced. From reading the message boards on the site I founded two years ago, ClearStation Inc., I see that our members were big-time buyers as the Nasdaq sell-off slowed down. Our members are ''playing it.'' There is no sense of victimization or panic.

You can always find someone who has gotten soaked and make that the basis of an article. And it makes sense: At the nadir of the panic, the worst human impulses surface. But there are two sides to the story, and there are a lot of investors on the upside, thanks to a whole new generation of investor resources that cut through the hype.

Doug Fairclough
Mill Valley, Calif.

To imply that individual investors are stupid and incapable of making decisions is ridiculous. The story you should be writing is about how the Internet has led to a democratization of investing. No longer is investing the domain of professional investors or the rich. The Internet has brought Wall Street tools to Main Street, giving small investors access to multiple perspectives. Individual investors can even ''virtually'' attend investment-banking conferences, which they never had access to before. Investing is by no means a sure thing, and there are inherent risks resulting in winners and losers. Highlighting some of the inevitable losers does not reflect the positive side of investing online.

Sharat Sharan
San Francisco

CNBC is to investing what professional wrestling is to sport. It's entertainment, not research. A novice investor hoping for returns should quit watching television and start reading. Then the approach should be to ''get rich slowly.'' I've been investing for 16 years and the only thing I've seen happen quickly is people losing money. Over that time, I have turned my initial $5,000 investment into more than $1 million, mostly buying out-of-favor stocks and holding them until they are back in favor.

The dot-coms say earnings are not important; they are going for market share. Any third-grade lemonade stand operator knows better than this. Ever heard lemonade-stand operators say they're in it for market share, not profits? You are investing in a company to make a profit on your money, so why should you invest in a company with goals different from yours? They are using your money to accomplish their goals, and they get a salary from it.

The small investor can make money in the market, but not by watching CNBC or following brokerage house recommendations. Learn to do your own research using facts and independent opinions. Know 10 companies very well and invest in the best five.

James P. Ardrey
Moscow

Your article was correct in identifying the abuses but failed to offer some effective remedies. Here are some suggestions: (a) all commentators should have their personal portfolios displayed whenever they are on screen and commenting on a stock, since tone and body language are often used to promote or punish stocks; (b) all analysts should have a box displaying their holdings and whether or not they have been buying or selling in the past 10 days; (c) all persons making market predictions should have a box showing their last three forecasts, when they were made, and the accuracy. If major league sports have the ability to display such information instantaneously, it shouldn't be too much of a burden for financial programs to do the same. Or don't they want us to know?

James Gardner, CEO
Planet Press
Newport Beach, Calif.

The Feds Shouldn't Have Strong-Armed Smith & Wesson

In ''The gun deal is half-cocked'' (News: Analysis & Commentary, Apr. 3), William C. Symonds came close but missed a chance to make a persuasive point about the agreement reached between Smith & Wesson and the federal government. Symonds mentions the ''form of blackmail'' used by the feds but didn't explore the full ramifications. This abuse of federal power, in the form of endless lawsuits, to force businesses into submission should frighten the business community to its roots. This tactic places every business at risk at the whim of whoever is in the White House with an ax to grind.

John Bowden
Clearwater, Minn.

Doctors Aren't to Blame for the Health-Care Mess

''The weak link in the drug safety chain'' (News: Analysis & Commentary, Apr. 10) indicated that physicians were the weak link. My experience is that some patients routinely dismiss accountability and responsibility for diabetes management by failing to follow diets, exercise, take appropriate medications, return for physician visits, or obtain blood tests when indicated by physicians.

True, health-maintenance organizations make routine blood studies difficult to obtain. Physicians must justify these blood tests through onerous procedures. These justifications may be made to an HMO representative who has little medical knowledge of diabetes but who makes medical decisions about diabetes management. If blood studies are obtained through off-site laboratories, physicians frequently must assume responsibility for gathering the results. Author Paul Raeburn's commentary may be partially correct, but physicians may not be the most important component of that weak link.

John L. Kirkland, M.D.
Pediatrics Dept.
Baylor College of Medicine
Houston

Children's Health Isn't a National Priority

In 17 years of pediatric practice, I have found little psychological therapy that cures or improves attention deficit disorder and have found stimulants often work remarkably well in school-age children ''Turning our toddlers into guinea pigs'' (News: Analysis & Commentary, Apr. 3). Moreover, it's hard to believe that in the Michigan Medicaid claims referred to, adequate funds would be available to treat the children with continuing psychological therapy (even if proven effective), if Michigan is anything like Washington State.

Unfortunately, the use of Ritalin and other drugs will continue, not just because these medications may be effective but also because our society has not placed a priority on children's health--through government health insurance or through support of families trying to survive on a single income or single parents raising children.

Dan Niebrugge, M.D.
Tacoma, Wash.

''Weblining'' Could Sideline Would-Be Entrepreneurs

Bravo for ''Weblining'' (e.biz, Cover Story, Apr. 3). You have grasped the real issue behind the privacy debate--that personal information will be used to discriminate against the less successful, less healthy, or otherwise less commercially desirable among us. When the inevitable errors creep into these databases, there will be obvious injustices --and some nasty lawsuits. But the real problem is diminished social mobility. By making it still harder for outsiders to succeed, we deprive our entire society of the benefits of their talents. How many companies won't be financed on the founder's credit cards because the cards weren't issued in the first place?

David Raab
Chappaqua, N.Y.

There's Plenty of Top-Notch Talent at AT&T

Although you highlight the departure of some executives (''The talent drain at AT&T,'' Information Technology, Mar. 13), the fact is that job-hopping executives are part of a larger industry trend. The lure of making vast fortunes at dot-coms and other startups is too good a deal for many people to pass up. It's a two-way street, though. AT&T also continues to attract top-notch people from other companies.

We have the best executive talent in the industry, and it's no surprise that our people are heavily recruited. We're doing our best to retain executive bench strength by granting stock options to one-third of all managers. We make these awards much more broadly than many other companies and gave 100 stock options (now 150 after our three-for-two stock split) to all 150,000 employees--management and nonmanagement--in 1996.

AT&T has the talent we need to succeed because we've made the right strategic decisions, invested in the right assets, and have the right people to get the job done.

Dick Martin
Executive Vice-President,
Public Relations
AT&T
Basking Ridge, N.J.

More Grist for Greenspan's Mill

I was disturbed by the inflation chart in ''Greenspan's dilemma'' (News: Analysis & Commentary, Apr. 3). It illustrates how far business and government will go to perpetuate the illusion that no matter how bad things are, if the statistics say everything is fine, then everything must be fine.

I am in charge of a food bank in Milwaukie, Ore. At a recent meeting of emergency food agencies in the Portland area, many of these agencies reported that the amount of food they were distributing had increased by more than 20% in the past year. Food banks are being stretched to the limit. I am now getting calls regularly from people seeking help paying rent. We had a couple visit our food bank who are living in a Toyota Celica.

Why don't you try taking off your rose-colored glasses once in while so you can see how real people are doing in this ''booming'' economy?

Bruce Gordon
Portland, Ore.

There is no reason for any more interest-rate increases. In fact, there was no reason for the Fed to have raised interest rates the last five times it has done so. The only justification for tighter credit is a noticeable increase in inflation. A strong economy and a low unemployment rate are not sufficient cause to raise the federal funds rate. This is what I find so troubling about the path Greenspan is taking.

I have never believed in an implicit speed limit on the economy. Higher rates of economic growth invariably lead to higher rates of productivity growth. The reasons for this are: 1) good times encourage businessmen to invest more to increase capacity or update plant and equipment; and 2) if the supply of labor is constrained, then business will substitute capital for labor where appropriate. Since the higher rates of productivity lead to a higher standard of living and lower prices, higher rates of growth will very often result in deflation, not inflation.

Therefore, we should encourage the fastest rate of economic growth and try to achieve the lowest rate of unemployment humanly possible.

David R. Furlong
Ravena, N.Y.

Historically when the Federal Reserve increases interest rates, stock prices have fallen because discounted profit and cash-flow streams have reduced present values. Higher costs of capital result in a squeeze of profit margins, with lower growth rates expected for corporate revenues as well as overall economic activity. If inflation is expected to worsen, higher rates contribute to a slowdown but always with the risk of going too far and precipitating a recession.

During the past eight months, the Federal Reserve has engineered a rising trend of interest rates, at least in the short end of the yield curve. Five one-quarter-point rate increases have now been implemented, as of Mar. 21. During most of this time, stock prices, as measured by the major averages, have generally risen, with the Nasdaq in the lead.

What could be the reason for this seemingly contradictory pattern in the relationship between interest rates and stock prices? We surmise that equity investors are expressing their belief that Fed Chairman Alan Greenspan's efforts to slow down gross domestic product growth from the 6% levels of the last few quarters to more sustainable levels of 3.5% to 4% will be successful. They also believe that any slowdown will not also result in a recession, and thus the economy will continue its performance of the 1990s for at least another few years. With U.S. corporations as leaders of global economic performance in most industries, where else should investors place their funds for solid performance on a long-term basis?

Robert R. Cangemi, Professor of Management
James S. Gould, Professor of Marketing
Raymond H. Lopez, Professor of Finance
Pace University
White Plains, N.Y.

Unethical Reasons for Legalizing Drugs

Robert Barro's suggestion that we legalize drugs in order to tax them is not surprising from a writer who also recommends that Colombia ''temporarily suspend rights and democratic practices'' because the country supposedly has ''too much democracy'' and needs to ''reimpose law and order'' (''To beat Colombia's guerrillas, legalize drugs in the U.S.,'' Economic Viewpoint, Mar. 13). Exacerbating misery to make money from it is unethical and illogical.

As Robert L. Dupont, a clinical professor of psychiatry at Georgetown University's School of Medicine, explains in his book, The Selfish Brain: Learning From Addiction: ''It does not require an economic genius to recognize that prohibition is now working effectively to reduce the total costs generated by such drugs as marijuana, cocaine, and heroin. Furthermore, the human suffering reflected in the health-care costs would rise dramatically if those drugs were legally available, as alcohol and tobacco are now, because the number of users would increase from the current 12 million [1997] to a number similar to the 50 million tobacco users or even the 103 million users of alcohol.''

Dr. Dupont also notes that U.S. taxes at all levels came to $13 billion for alcohol in 1992. By comparison, that same year, alcohol abuse cost the U.S. $148 billion, in terms of the health burden and other expenses, according to the National Institute on Drug Abuse. Trading sickness and death for government revenues is as financially spurious as it is morally bankrupt.

On a purely economic level, tax revenues derived from drugs wouldn't offset the increased costs generated by greater abuse. If high taxes were levied on drugs to discourage use, the illicit drug traffic would persist in an attempt to evade the high taxes. Alcohol and tobacco are much more widely used than illegal drugs not because they are ''superior'' drugs but because they are legal and widely available. Legalization would raise the number of drug users and the harm caused by drugs. For this reason, the majority of Americans support keeping dangerous drugs against the law.

Linda Bayer
Strategic Analyst
White House Office of
National Drug Control Policy
Washington

To read a letter to the editor about this letter, click here.

Alaska's North Slope: ''We're Talking Serious Gas Here''

I read with interest ''Unnatural demand for natural gas'' (News: Analysis & Commentary, Apr. 3). About 30 to 50 trillion cubic feet (TCF) of natural gas is lying in wait on Alaska's North Slope, lacking only a means of transport to market. This is gas that is already tapped, ready to be used, in existing fields being produced for oil and gas liquids. Estimates on other, as yet unconfirmed, gas reserves are as high as 100 TCF or 0.1 quadrillion cubic feet. We're talking serious gas here--American gas. What has been lacking is the market valuation and long-term demand; the issue of your article. Now for financing. Anybody ready to take a piece of the latest initial public offering, Alaskangas.com?

Michael R. Pollen, President
Northern Testing Laboratories Inc.
Fairbanks, Alaska