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Technology Stocks : Ascend Communications (ASND)
ASND 202.23-4.2%Dec 2 3:59 PM EST
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To: craig crawford who wrote (7860)8/1/1997 12:54:00 PM
From: Chuzzlewit   of 61433
 
Craig, the question is who are the customers and what is the impact on them for higher interest rates. The market makes the general assumption that increasing interest rates dampen sales. Telephone companies are generally leveraged. The funny thing here, though, is that increased jobs and increased wages in the absence of inflation increase demand for goods and services, so it's a balancing act. Whether the impact on sales or earnings is real is immaterial. The market simply reacts this way whenever interest rates rise.

The other point, of course, is wage inflation which raises the costs of goods and services. Since companies don't seem to have the pricing power they did in the past (witness Ford's decision to hold the price line, and Toyota's to decrease prices) this could result in decreased profit margins.

I'm certainly not predicting these outcomes. All I'm trying to do is to place the market's reaction in its economic context.

Regards,

Paul
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