Business Correspondent Paul Solman of WGBH, Boston, reports on the rise of "day trading" of stocks over the Internet. Then two analysts discuss it's impact on the stock market and the economy.

PAUL SOLMAN: Lynn Harvey plies her trade from her suburban Washington bedroom. For the past year, eight hours every weekday, the former Nieman Marcus manager has been at the computer, monitoring the markets on TV while sharing information via Internet chat with other investors, sopping up data galore.

PAUL SOLMAN: Typical day.

LYNN HARVEY, Day Trader: Yes.

PAUL SOLMAN: Where does it start? What are you doing? Her job: Trading stocks for her own account. Not today, since we were there to distract her, but normally -

LYNN HARVEY: I would go to my quote system that I have and I would pull up this stock -highlight this stock -- Yahoo, and I would look at the chart and see how it's doing that particular day.

PAUL SOLMAN: And if Yahoo seemed on the way up, she'd be tempted to buy. This is a new kind of manual labor made possible by the Internet: So-called day trading.

LYNN HARVEY: I'm watching the trading room right here.

PAUL SOLMAN: No one knows how many day traders are hacking away out there but their ranks are surely swelling. Just as surely, they're helping stoke the current craze for companies connected to the Internet. At first glance, the numbers astound. Yahoo, a gateway to the Web, with 697 employees is worth $30 billion if you bought up all its stock at current prices. That's the same price as Kodak, which employs 97,000. Amazon.com, the Internet bookseller with no stores and, thus far, no profits, sells for ten times the price of Barnes & Noble, with 1,000 stores, $55 million in profits last year alone. Yahoo's stock rose about 1,000 percent in 1998, by the way, ten times its price last January; Amazon was up 1,500 percent. If such prices seem not just astronomical, but downright intergalactic, well, David Forrest of the online investment firm Motley Fool has a down-to-earth way of explaining the Internet investors behind the prices.

DAVID FORREST, Motley Fool: They're investing in the future. I mean, they are looking at what they perceive to be a huge revolution in a brand-new medium and they are saying, "I want to be in as early as possible. I believe that these companies over the next five, ten, twenty years are going to be "the" companies. They are going to be the future Wal-Marts, the future Home Depots, the future Microsofts," and they want to take part in that.

LYNN HARVEY: I happen to like the momentum indicated quite a lot.

PAUL SOLMAN: Momentum.

LYNN HARVEY: Momentum.

PAUL SOLMAN: Day traders like Lynn Harvey are not looking quite so far ahead. For them, five or ten minutes is the long term, as they try to anticipate a stock's momentum, to catch that red roller coaster at the bottom of this chart, the company is Dell Computer, just as it's changing direction.

LYNN HARVEY: Momentum is measuring -- the momentum or the oscillation between buyers and sellers during the day, the sharper the angle it will go up or down. The degree of the angle will indicate the swifter move of the price of the stock in that direction.

PAUL SOLMAN: Day traders typically try to run just ahead of the herd, buying or selling moments before everyone else does. It takes Harvey a mere three seconds or so to execute a trade, versus minutes through a broker, hours with a mutual fund. She pays $55 a month for her stock service, $14.95 in commissions on each trade. She executes between five and a dozen a day. How's she done?

LYNN HARVEY: Well, I have done very well. In the last six months I've doubled our money in our account -- my brokerage is Fidelity -- in fact, more than doubled, and in this last month I've done more than I got in a year's salary last year.

PAUL SOLMAN: Come on, in this last month you made more than your whole year at Nieman Marcus?

LYNN HARVEY: Yes. In January. Yes. Well, not Nieman Marcus. I was at BNA. I was at a publishing company in-between. Yes, I made more in January than I made all year last year.

PAUL SOLMAN: Harvey's best day was an $11,000 gain; her worst, a $6,000 loss. But how have other day traders done? You read estimates that four out of five lose money, but that didn't seem true in Harvey's day trader chat group, where her net name is "Pepper."

PAUL SOLMAN: Okay. So there it is. "Jim Lehrer's news reporter is sitting here with me, on the NewsHour." Question: "What percent have you made this year so far?" So, Scooch says he's made 100 percent so far this year. "None of his damn business, Pepper." Locust is not happy. "Pepper, I made 100 percent," says NNN, THX7, I've made 100 percent return since April 24."

LYNN HARVEY: There's a 50 percent.

PAUL SOLMAN: And there's another 50 percent. 150 percent, somebody says here.

PAUL SOLMAN: Despite such testimony, David Forrest of Motley Fool isn't exactly blown away.

DAVID FORREST: Day traders have done exceptionally well because we are 9500 on the Dow or 9200 on the Dow; the market has done nothing but go up for the last five years. It's pretty tough not to do well in that sort of environment.

PAUL SOLMAN: And even though his own company has soared via the Internet, with nearly a million readers a month visiting Motley Fool Web sites, Forrest can imagine the momentum starting down one day and continuing down and downer.

DAVID FORREST: For every huge volatile period on the up side, there's typically some smash in the face that wakes people up and says "hey, you are not as smart as you think you are and you better think twice about this."

PAUL SOLMAN: Indeed, serious magazines now openly call the Internet stock craze a crash waiting to happen. Investor belief in the Internet has driven up the demand for its stocks, thus driving up their prices. Suppose investors suddenly lost faith? So we chatted up the day traders on Lynn Harvey's computer line.

PAUL SOLMAN: "Another question from Jim Lehrer's reporter, how many of you are worried that this is a bubble that is going to burst? This is a bubble that might burst?" "What bubble?" " Pepper, what bubble?" Let's see. "There's a bubble?"

LYNN HARVEY: The market is always going to have stocks going up and stocks going down. Timing is the key.

PAUL SOLMAN: "Pepper, even if the big bubble bursts, there are always little bubbles inflating and we will find them." And what about Lynn Harvey herself? How bad would you feel if the market was turning against you and you had lost as much in the last month say as you made last year at your job?

LYNN HARVEY: I just don't - I wouldn't let that happen.

PAUL SOLMAN: But, I mean, you might not be able to prevent that from happening.

LYNN HARVEY: The way I trade, I would find that very difficult to do, in fact, next to impossible.

PAUL SOLMAN: That answer prompted one last question, which - for convenience sake -- we posed online via e-mail to Alan Suslow, a San Francisco-based stock analyst at a firm called Mr. Stock. "The day trader we interviewed said she can't lose money because she gets out of positions so quickly. What do you think?" Suslow's reply? "Wrong," he says. "If it sounds too good to be true, it probably is. In volatile securities, whether it's stocks or options, there's always risks, even if a trader can get out within seconds."

PAUL SOLMAN: That's probably right - just the sort of sound advice economists always give. And then it occurred to me: This is the first time, in literally thousands of interviews, that I've done one online -- no travel, no setup time, no money. And yet we wind up using it at the end of this piece. So maybe, just maybe, the Internet stocks have the manic momentum for some pretty good reasons.