But in fact, most of those costs they would pass on to their customers were they able to. But they can't because this disinflation is being caused by rapid advances in productivity and efficiency, as well as foreign competition for commoditized items. Only those companies who are able to execute without inefficiencies and excess costs will prosper. Many old economy companies are enduring this painful process now.
Well, I'd view that part of the rapid advances in productivity and efficiency as just another way of saying that decisions are made quicker and the decision makers are better informed, dammaging the value (pricing power) of many of the smokestack industrial suppliers (steel, chemicals, resellers and those in the value chain that can't control their markets). The strength of the USA's tech sector is keeping rates and $$$ value up further erroding competitiveness of basic manufacturing firms in the US. With oil, labor and the cost of money headed up and the economy eventually slowing I not too optimistic.
Most interesting is the reliance of many in the tech sector on capital as compared to earnings. Should the investing community change their appetite and decide they've had enough sector rotation without return of shareholder capital and opt for a healthier dose of earnings/dividends the tech sector could be ravaged with reckless abandon. Without a doubt valuations in the tech sector are being driven by technical factors (float, supply, demand, and a generally optimistic of what the future can be) as compared to fundamental.
Anyway, I've got a very healthy portion of my capital in cash with a few select positions in what I believe will be a couple up and commers in the tech area (with limited downside).
I do feel the tech bubble will end when investors percive AG's job has been accomplished, the economy will at that point look troubling going forward, old economy stocks will be in a shambles (might even look cheap even in a shrinking economic environment as MO does now) and bonds will emerge as a no brainer.
I half heartedly think that the Fed secretly has been lobbying OPEC to drive up the price of oil, as without oil putting a drag on the economy we'd be speculating that all commodities would eventually go to zero, enabling americans and whoever else migrates here could retire and become stock speculators:?)
Best Regards,
Mad2 |
