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Politics : High Tolerance Plasticity

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To: Warpfactor who wrote (2757)	4/3/2001 2:17:06 PM
From: cnyndwllr	Read Replies (5) of 23153

I wonder if we sometimes get so caught up in the moment that we fail to ask the right questions with respect to tech. If you follow the analysis on this thread with respect to oil stocks there is a good balance between the longer view and the shorter view. There are many here who hold through short downturns in that sector based on their view of the long term fundamental picture and all of its intricacies. With tech I often see less "big picture" analysis here. Maybe that is because tech is really lots of subsectors all of which are driven by factors which have some commonality and some differences. I also think that fortunes will be made in tech investing long over the next months. One of the reasons why I think this recent nasd plunge is overdone is because of my admittedly simplistic analysis of the basis for the current earnings problems of the tech companies. In the last cyclic downturn in tech the production capacity was frozen while we recoverd from the last cycle and then the asian crisis unfolded. When tech picked up there was demand and an inadequate supply for the components to build the infrastructure and hardware to satisfy the demand. This created a feeding frenzy of ordering and stockpiling components. I was invested in tech companies where the management was blasted for failing to meet its production as a result of component shortages and others where the management was praised for having the foresight to lock up and stockpile components in the face of shortages from anything from earthquakes in Taiwan to extreme demand induced shortages. The business policy that prevailed was seemingly to guarantee there would be no component bottlenecks by stockpiling and locking up production of components. I think the result was that we had the sale of this quarter and the next quarters components occurring in the last quarters. This created an artificial demand that stimulated more production and created the current malaise where now there is not only the cessation of the frantic locking in of supply but also the need to work off excess inventory since there has been some saturation of the market for tech products. This seems to me to be a situation where a normal cyclic correction is amplified greatly by a one time occurrence. It does not seem to me to be the prelude to any type of long term change in the path or direction of tech potential for profits based on any demand or supply problems. When you add in the energy crisis we are currently working through, it makes sense that we are where we are, and that we will work our way out of it as inventories are worked off and energy problems are worked out in terms of supplies and with higher prices incorporated into the tech profits picture. With the economy working along slowly but without signs of a meltdown, this is the picture that I have of where we are heading in tech. Because of this I don't see the "years" of slowdown that I have seen discussed and I don't see the "years" for nasd to recover to the 3-4k level. Of course if you predict war in the middle east or a crisis with China that closes off the Chinese markets, all bets are off. This is just my thinking based upon glimpses of what is going on. I would like to hear if any of you have something to add, or if you disagree and think there is a better model to use in making the decisions on where and when to invest in the tech companies. Ed

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