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The Financial Sector Stock Plunge Causes Investors to Reevaluate Internet Stocks Some of the excitement over Internet stocks cooled off in the first half of 2000, after the NASDAQ index suffered a large decline. Until the downturn, investors had poured money into Internet stocks, whether or not the companies were earning money. The decline in the index, which fell 37 percent between March 10 and May 23, may have changed some investors' attitudes toward dot-coms. "My sense is that some reality has re-entered the market," said Ronald Masulis, professor of finance at Vanderbilt University. "It's not enough to be a dot-com. People are now asking, 'Are these really companies that are going to make money eventually, and are they good investments?'" Stock Markets Merge The globalization of the financial sector continued in 2000, as the London and Frankfurt stock exchanges announced plans to merge. The U.S. NASDAQ exchange may also be considering joining the new exchange, which is known as the iX (international exchange). Under the plan, trading in traditional "blue chip" shares would take place in London, while trading in high-growth, mostly technology companies would take place in Frankfurt. The Milan and Madrid stock exchanges have also expressed an interest in joining the iX. Stock exchanges in Paris, Brussels, and Amsterdam have created their own alliance, known as Euronext. Vietnam Establishes Stock Market As part of the trend toward developing stock and bond markets all over the world, stock trading began in Vietnam in July. The shares of only two companies are listed on the exchange-known as the Ho Chi Minh City Stock Trading Center-and trading is limited to two hours a week. But the fact that a stock market now exists in what was once a hard-line Communist country is remarkable. Day Trading Continues to Attract Investors Lured by the prospect of earning millions of dollars quickly, thousands of Americans are spending some or all of their time day trading stocks over the Internet. Unlike regular investors, who evaluate stocks based on how well they think companies will perform, day traders often know nothing about the stocks they buy. Because they often hold stocks for just minutes or hours, they have little interest in companies' long-term prospects. Most day traders lose money, but well-publicized success stories of people getting rich sitting in front of computer terminals continue to attract would-be millionaires. "When individuals hear that they can make a lot of money doing this, they go for it," said Brett Trueman, a professor at the University of California at Berkeley's Haas School of Business. "There's no reason to believe that anyone who day trades will do well," he said. "But people still tend to focus on the success stories." About 100,000 of the 8 million Americans who trade stocks on line are believed to be full or part-time day traders. Think about It
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