Hi Bernard,
Let me amplify my concerns about India and Pakistan and the potential to develop that region for Internet access. Your view of population is something I won't attempt to dispute. However, neither of us have mentioned the state of bureaucracy in that part of the world. I'm reminded of Desh Deshpande of Sycamore Networks who, before founding this commpany with Dan Smith, had decided to leave the U.S. with his considerable fortune from Cascade Networks. He spent over a year in his homeland, India, attempting to create networking startup companies there. He was frustrated in his efforts and returned to the U.S. India offered immense stumbling blocks of red tape and little entreprenuerial spirit. The mere fact of having a large middle class may well be a necessary antecedent to the creation of an Internet culture, but it is by no means determinative that the Internet culture will blossom.
The present bear market is more a psychological
phenomenon than an objective phenomenon.
The most difficult point that I try to make with retail investors, and the one you are not addressing here, is that we are at the end of a stock market mania. This isn't a bear market in the traditional sense that I feel you mean. This is more akin to the Amsterdam "Grand Duchy" futures market in 1634, the Mississippi and South Seas Bubbles in 1720, the canal stock market in 1810, the railroad stock panic of 1873 or the steel panic of 1907. What I'm suggesting is that the bloom is off the rose, and humpty dumpty has just fallen off the wall, never to be put back together again.
I'm not suggesting I'm a gloomster discussing a bear market. I'm suggesting we just witnessed a stock market mania of historical proportions. There is a slight difference. Investors recover from bear markets. :)
For example,
looking 10 years out, is it reasonable that Schlumberger
should have 2 to 3 times the P/E of Intel, and 5 to 6
times the P/E of WCOM? We'll need oil, but it's hardly
a fast growth business.
Markets are fickle. In a brave new world scenario with fast technological change, growth is what investors put a premium on. In a different world, when the rate of technological change is lower, profitability is a more rational basis for valuation. I see no reason that SLB couldn't be much more highly valued in 10 years than INTC, for example. The prospect is that SLB will be providing an increasingly scarce commodity that will afford the company the opportunity to expand margins. INTC, OTOH, is now producing 1.5GHz processors as the main profit center. I will suggest that no mere mortals are in need of such a thing and the company is vulnerable to the risks described in "The Innovator's Dilemma", with Transmeta now joining AMD at nipping at the heels of INTC.
I'm not attempting to be simply negative. I'm attempting to view the events of the last 24 months in a historical perspective.
Best, Ray |
