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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Joan Osland Graffius who wrote (71458)2/24/2001 4:39:44 PM
From: BigBull  Read Replies (1) of 436258
 
Agreed to a certain extent. There will be a time when pricing, capacity, and demand all come together and a new upcycle can launch. However, I do ask you to consider what usually happens at the bottom of such cycles. Bankruptcies. This is when assets are sold at the "court house steps" for pennies on the dollar. I also would not entirely discount the possibility of the stronger companies prolonging a price war in an effort to eliminate large section of their competition. That one is as old as Andrew Carnegie.

The last 10 year down cycle was 90 - 91. The big area of malinvestment was real estate. It got so bad the FEDs had to step in and bail out the banks with taxpayer funds and wound up selling assets for pennies on the dollar. I'm sure you recall the Resolution Trust Corporation? Wouldn't surprise me a bit to see an another RTC - tech style - come into being. There's lot's of telco debt out there that probably can't and won't be paid. Ditto some semi mfrs, and box makers.

I also think it would be incredibly unwise for OPEC to maintain current oil prices at this point in the economic cycle. The last time they tried that they eventually gave themselves 2 decades of low prices. Bankrupting your best customers for temporary gain is not wise. And while I agree that the world won't soon see $10 oil, I also don't think $18 - $20 is entirely out of the question. That would represent a 30% haircut from current levels.
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