Hi, Mike - Sorry for the late response; heck, you can't leave this thread for a night or two without gaining three hours of reading!
Catching up on the trialogue between you, Ray and Bernard, a few thoughts.
First, as to the general economic indicators, and an overview of 'What's really happening': I think we are, to some extent, reflecting the self-confessed inability of even Mr. Greenspan to accurately assess the state of the economy. We are necessarily working from trailing indicators.
A subjective corollary to that is the fact that whatever is happening, it certainly eludes the old classic definitions of the economic cycle from recession to boom. That definition was based on an approximate 60 month cycle, and contained within it certain classic signs and steps, including the rise of unemployment, rise of interest rates, peaking of stock prices, etc.
However, I think the intervention of central bankers in economies, and the tinkering that allows the so-called 'soft landing' has caused a fuzzier picture to emerge, with corresponding uncertainties.
I recently posted a tongue-in-cheek question to Ray: if you can manufacture a 'soft landing', why not manufacture a 'soft recession', to wring some of the (perceived) excesses out of the markets?
While I don't believe that is the case, it certainly is true that the Fed's return to a tight money policy is affecting many industries, and we are seeing the preliminary stages of many of the phenomena that are indicative of a recession, in the old model: deflating values on the markets, increasing bankruptcies, tightening of credit, etc; again, we all know the signs. Again, though, employment remains stubbornly high, as does capacity utilization. A lot of contradictory evidence.
Personally, I sit somewhere between Ray and Bernard in my outlook. I certainly agree with you, Mike, that psychology has played a major role in the plunge of telecomm valuations; OTOH, both the markets and the sector had reached unsustainable valuations.
But Bernard's comments and Ray's have this in common: that the eventual re-injection of liquidity by the Fed will be the first sign that an upturn can begin. The question will be whether the pilot has begun the landing flare-out too late.
In the meantime, expect some failures, some serious consolidation, and the triumph of those players who have good, viable plans, access to cash, or both. Concurrently, the development of many of the models for the future of both the internet and telecomms will proceed, albeit more slowly.
I think it will be a year before we'll get new bets on who the winners will be, and those winners will be dictated as much by prudent business plans as by technological wizardry. Assuming that we are holding stocks with some promise, the choices will be to hold, or sell at a loss: the sector is unlikely to regain strength soon.
The bloom is very much off the rose.
Regards,
Jim
PS - If you can (I've lost the URL) check into the figures on Fidelity's rotation out of high-tech: it's astonishing |
