..the cash thing is a joke imo. They are paid to invest in stocks, 5% extra cash ain't gunna do much besides pay off the people cashing in their chips.
Right. Not only that but they are required by law to invest in the field their fund is targeting. It is also true, however, that they can move to cash for short periods of time, buy protective puts, etc. It all depends on the fund.
Tell me...do you think they will warn again like the rest in their sector have?
Possibly. IMHO, there are only a few analyst I like. Dan Niles is one. He is hard on the sector right now but thinks the first back will be consumer driven businesses like PCs. After listening to him and a few others, I get the following picture:
1) A few years ago it became obvious that the US consumer loved broadband and would buy it if you built it.
2) There was a gold rush to lay fiber and broadband nets. The small guys figured that they would build a net, get a few customers and then sell what they had built to a big guy like T or WCOM. There was no other way they could justify the large debt.
3) At the same time the big guys were trying to do the same thing.
4) Everyone's business plan has to have some assumptions. The main assumption of everyone was that the equity and interest market would remain stable.
5) Then the FED decided, for purely academic reasons, to jack interest rates up until and it crushed the economy.
6) Banks, naturally, stopped giving any loans. So you are a smaller telcom player in the middle of laying fiber and you go to the bank for your next funding to find out you can't have any money. You still have all the debt but now you have no way to pay it off. You are like a contractor with a building half built and the bank freezes your account. The last straw was when fall 2000 came and the FED refused to lower rates for Christmas. Add the election problems and this assured we would have major economic problems. So then the banks really slammed the door shut.
7) Also during all this whole time long distance rates dropped like a rock - much faster than expected - further squeezing the big guys.
That brings us to today.
The bears - In the brains of "bear minded" analysts, the small telcom players have been so damaged by the FED action that they will never recover. We are faced with extremely slow growth and lots of bankrupt telcom players. The bigger players can't handle their debt load plus they have 3G demanding funds. Super bears declare this will be a 3 year slow down while we bankrupt/merge telcom businesses. Some major research firms have declared a recession is unavoidable at this point and we passed the point of no return in Feb. The FED was simply not agressive enough inlowering rates. Every recession we have had has been engineered by the FED. Also, they are always a day late and a dollar short in the recovery phase.
The bulls - If you beleive the FED fucked it up by choking off the money supply, then you gotta believe that unchoking the money supply will eventually return us to the former state. Note also that the desire for broadband is still there. So we do have a driving force from the consumer to cause a recovery. Some analyst are reporting that lots of money was created in recent bond offerings and borrowing is going up. So is refinancig of business loans. It is now time for the leaders to start placing orders.
Personally, I think the market will spring back to life as soon as we can see some significant orders coming down the pike. The market always asks the fundamental question: "Does there exist a driving force to push the market up over the next 2-3 quarters?" The answer is yes - it is broadband internet deployment. In a bigger way, it is the change from electronics to photonics which saves businesses tremendous amounts of money.
Next year it will be the very beginning of the move from oil to hydrogen for all our energy needs. That will be a monster. |
