You want to be even more spooked? Read this:
latimes.com
An L.A. Times article about how the collapsing wealth effect will affect the economy (not benignly). This isn't from the Big Bad Bear website or anything, it's centerline mainstream journalism. The recession ball is no longer rolling down the alley. The pocket has been hit, the pins are falling, and next year President Dubya will find himself presiding over a 7-10 split. I'm not counting on any magic rallies for SUNW or anything else, not sustainable ones, not for a while.
Long term investors don't need to be as concerned (depending on what we mean by "long-term"), but I'm not sure this is a great time to be highly concentrated.
Here's an excerpt:
But investment does not just slow down when excess capacity appears. It stops. The capacity embodied in new capital equipment cannot be laid off. It has been bought and paid for, probably through borrowing. If too much information-technology equipment is on hand, IT orders are eliminated. That is why investment-led booms end suddenly.
If IT investment, which has accounted for virtually all investment and productivity growth since 1996, drops to zero, total U.S. growth will be cut by 1.5% to 2%. Productivity growth also would drop sharply, perhaps back to 1%. Real labor costs would rise, and a combination of rising labor costs and reduced pricing power (weakened by excess capacity) would depress profits. Stock prices would fall rapidly, especially in the face of dashed hopes of earnings of 30% a year or higher.
--QS |
