Jacob,
I never understood why the market was paying such outrageous prices for so long yet I hope I can benefit from it happens again. With that perspective, I'll try to make the case that there is a perception problem, though on a wider scale than the perception of a recession.
Intel finding out that demand is much less than expected, for all the various chips they make, that isn't perception.
It's a perception problem because the market is focusing on the short term. Such perceptions almost invariably increase long-term value opportunities.
Moreover, as you point out, the perception problem might be that investors were paying too much for Intel. Intel's own management and analysts might have incorrectly percieved that the investment gains should have been viewed as one-time gains, not recurring gains.
Vast amounts of capital squandered in telecom buildouts, to sell services that nobody wants to buy (Iridium, Globalstar, many others), that's not a perception problem.
In this day and age when liquidity is so vast, I find it difficult to believe that the telecoms won't be able to minimize those problems by selling off assets and merging to take advantage of larger economies of scale and increased efficiency. Certainly the issue won't be eliminated, but on the other hand, the telecom sector is just one sector.
Investors figuring out that Amazon's business plan is to ramp sales by selling commodities at below cost, this is not just a perception problem.
Again, the perception when Amazon went public is more at the crux of the problem than a perception that exists now. Anyone who studied Barnes and Noble or Borders understood the low-margin business Amazon was in. Investors shouldn't have been paying such extreme dollars for the prospect in the future of such low margins when and if the company eventually does become profitable. Even the Motley Fool's Rule Breaker team wasn't making their investment in Amazon with the idea that Amazon would become the next Walmart simply by using the Internet to sell widgets. The potential reward they saw for the risk they were taking was that Amazon would leverage its virtual community in ways that they are disappointed never happened and have less and less reason to think it will ever happen.
All of those are perceptions. Everything about investing (and life) is perception. In the end, truths about our investments are always there to be seen. Investing is all about discovering and properly evaluating all the truths.
--Mike Buckley |
