Zeev,
In an earlier post, you asked "are we going to admit we are in a down cycle? If we are, the discussion should really start and move to what would be typical parameters to watch for a bottom in the current down cycle," stating that you were defining the cycle based on stock prices. Then in another post, you wrote:
"Right now the BTB is at 1.17 (two months in a row), if that is the trough in the BTB, then around here is the time to buy, but I do not think that we will end this down cycle without the BTB going under 1.00"
I just wanted to point out that although you are defining the cycle based on the stock prices, an underlying assumption seems to be that there will be a one-to-one correspondence between the cycle in stock prices and the cycle in business conditions, though they may be offset in time. Although this has been a good assumption in the past, as can be seen from Gottfried's charts, it is not necessarily going to hold in the future. Right now we are clearly in (or have been in) a down cycle in prices, and looking for a price bottom seems logical. However, we have NOT (yet) entered a down cycle in business conditions. The most recent month's orders were the largest ever. That up cycle may be slowing but we have not yet seen it turn down. Does the crash in prices portend that sales and profits will imminently turn down? Maybe, or then again we could see another major up-leg in prices before it happens. The point is we cannot just assume that we will have exactly one major price cycle during this semiconductor business cycle. We could have two, or 1 1/2, or pi ! Unfortunately, there is no law of nature to guarantee a one-to-one correspondence.
==John C.
P.S. To Scott Jiminez: apropos of all that, I don't think it's quite right to say that "The most recent history of prognostication on SI toward business activity in the equipment industry is poor." In fact, it seems to me to have been pretty correct. I think in fact it is the prognostication of price behavior that has been poor! |
