Gotta be the first time I ever agreed with Cramer...
Inventory Reduction Myth
Cramer says Demand is Down -
Debunking the Inventory-Reduction Myth
By James J. Cramer
10/09/2001 09:58 AM EDT
Here we go again with this inventory-reduction rap.
You hear it from all these tech companies that refuse
to accept that there might be a secular retrenchment
in tech, not an inventory reduction.
We have been stuck with this thesis for some time, a belief that there is simply a
big stock of tech inventory out there, and once it has been worked off, everything
will be hunky-dory again.
How can people still believe this Pollyanna tale?
If revenues for the industry are fighting to get back to 1998 levels, how can we
possibly believe the problem is one of inventory?
I will tell you what the problem is: There were 14 phone companies frantically
building out worldwide networks. There were 2,000 dot-com companies frantically
building out their infrastructures. There were thousands of bricks-and-mortar
companies building out their dot-com units.
Now that's all history. Sure, we have some innate demand as an economy for
information technology, but it wasn't a supply bubble that caused the problems. It
was a demand bubble.
The fact that we are still debating this inventory issue tells me that we can't trust
this tech rally. We can only trust tech stocks that have vanquished foes -- Dell,
Cisco, IBM -- and even then, the stocks may be too high.
Fred |
