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Technology Stocks : All About Sun Microsystems
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To: Charles Tutt who wrote (42408)3/26/2001 7:41:31 PM
From: fuzzymath  Read Replies (2) of 64865
 
If recent articles in The Economist are right, the gloom may continue. For the past 3-4 years they talked about the U.S. "bubble", noting our increasingly negative savings rate and a host of other frightening statistical anomalies.

In an article 2 weeks ago they gave a pretty believable explanation of how the "bubble" occurred:

1. Money was available to any start-up that had an idea.
2. The start-ups immediately went out and spent it on the best technology they could find.
3. Earnings at established high-tech companies (like SUNW and EMC) soared.
4. A "new economy" was proclaimed.
5. All investors in the NASDAQ felt themselves getting rich as share prices soared. All you needed to do was buy shares and you'd soon be rich!
6. Companies that had never made a profit had valuations higher than those of 80-year old giants of our economy.
7. Old Economy companies finally began to believe it was possible that they were indeed dinosaurs, and so they rapidly expanded their expenditures on technology.
8. The NASDAQ soared.
9. Extensive technology infrastructure was built even where there was no customer base.
10. No customer base meant no revenues.
11. No revenues meant falling share prices of start-ups.
12. Falling share prices of start-ups made venture capital dry up.
13. Drying up of venture capital meant substantially decreased corporate spending on technology.
14. Decreased spending on technology meant decreased revenue for established high-tech companies like SUNW and EMC and CISCO.
15. Decreased revenue for established high-tech companies resulted in horrific selling of their shares.
16. Established "Old Economy" companies realized they were still going to be around, after all, and so they reduced their expenditures on high technology...

That's where we are today...

Today the Economist recommends that Congress pass Bush's huge tax cut. Before the election the Economist thought the tax cut was too big...

fuzzymath
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