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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 675.02

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Nov 25 4:00 PM EST

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To: Mama Bear who wrote (59354)	9/25/2000 8:45:23 AM
From: Zeev Hed	Read Replies (1) of 99985

Barb, I am not sure about that "capacity" thing. I had a short stint in the steel industry in my "youth", and there we were supposed to review new "projects" according to internally set "standards". The hurdle rate set by HQ always struck me as "bizzare" and a formula for financial disaster. The hurdle was set at an internal rate of return of 6% when operating at 110% of capacity. Of course, that company is no longer around (and I left long before it went down the drain, in great part because of these strange "standards"), but that 110% always struck me as strange, and every time I see report of "capacity utilization", I ask myself what it means. Maybe someone on the thread has access to data such as what was refinery utilization rate when crude was selling at $10/barrel and gas was just under a buck at the pump, just a short 18 months ago. Since these commodities are priced at the margins, I could conceive of a situation where 93% capacity utilization is a situation where the market is flooded with products, and 96% is a market as tight as you know what. It would be helpful if some on this thread familiar with these historical data could help us get a better handle of what these "capacity" numbers really mean. Zeev

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