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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 660.08

-0.8%

Nov 18 4:00 PM EST

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To: DukeCrow who wrote (71581)	3/9/2001 6:13:02 PM
From: Rob S.	Read Replies (1) of 99985

For instance, the tellcos, including many new companies built out long-lines fiber optic networks to service the long distance market. The trouble was that they built 200% of the capacity needed for the next few years for a commodity product market. Several CLECs and ISPs are near or have already run out of money to do any capital expansion. This "excess inventory" of supply impacts the CISCOs, LU, NT, etc. While the end customer demand for long distance minutes is growing marginally, the price continues to decline. Similar analysis can be seen in many other segments: a build up of product channels that occurred at an incredible pace over the past couple of years was not entirely justified by the rate of end user demand for products. While electronics end use is growing at a steady-state rate of, say 25% per year, the pump in front end build out and inventory builds occurred at 40%-60%. When demand appears particularly robust suppliers are able to charge "full list price" or pretty near it. When the market for most electronic goods slackens marginally, prices tend to decline precipitously as the buyer gains advantage. Take the flying pig CISCO for example: as predicted a few weeks ago, the supply of nearly new CISCO products on the aftermarket has swelled dramatically. A recent article in Information Week (or was it some other trade journal) discussed this issue: companies were quoted as being able to buy up default dot bombs and other companies for 10c-20c on the dollar. They sometimes hired away people in the old IT departments to adapt the gear and software; All at a steal. The market for this stuff has changed and the worst is far from over imo. Many stocks are at or near short-term technical buys but it is like buying hand grenades with the pins already pulled.

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