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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets!
LRCX 218.30+8.6%Jan 9 9:30 AM EST
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To: Steve K who wrote (8233)2/15/2000 10:07:00 PM
From: Q.  Read Replies (1) of 10921
 
What precipitated the business decline from Oct. 1997 - Oct. 1998 was a combination of both macro and micro economic factors. And of course stock prices in the sector collapsed horribly.

The macro part was a collapse in the Asian banking system. Liquidity dried up, in part because companies in all sectors got themselves way over-leveraged. Especially in Korea, and that included the DRAM makers.

The micro part was due to over-investment by the semiconductor makers. They built too much capacity. Consequently, selling prices for DRAMs plummeted, so everybody quit building. I think that INTC regularly invests something like 15% of revenues in plant and capital equipment; and that's sustainable. Some of the Korean DRAM makers were investing way more than 15%, maybe 50% or 100% (I've forgotten the exact numbers) and that was not sustainable.

It would be good to know how things stand now, on both the macro and micro sides, but I don't.

What I wonder is whether we are looking at an unsustainable boom in capital investment by the semiconductor makers. And how long before it leads to overcapacity. Maybe it will take a good long while.

If the present boom lasts until about 2002 the way Dataquest now says, then it might be good to hold the stocks at least until 2001. But I suspect Dataquest can't see a bust coming any better than anybody else.

So I just don't know when to sell. I guess none of us do.
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