Formerly About Applied Materials Message Board

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Politics : Formerly About Applied Materials

AMAT 223.95

+1.7%

Nov 21 9:30 AM EST

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To: Ian@SI who wrote (45955)	4/27/2001 5:25:13 PM
From: advocatedevil	Read Replies (2) of 70976

RE: "Given that the burn has been sudden and sharp, I believe that increases the probability that the recovery could be equally sudden and sharp." I obviously have some difficulty buying into that view. There are two key factors that occurred simultaneously to cause the rapid drop: massive chip-making capacity increases coupled with a significant chip demand slowdown. I think that in order for there to be a "sudden and sharp" recovery, both conditions would have to reverse at more or less the same time. I can't see that happening. I believe that we're near the end of the first phase of the bottoming where chip inventory is burning off and demand is stabilizing. After the excess is depleted and growth begins to turn up a bit, we'll move into the second phase where existing over-capacity will be available to take care of requirements for some time to come. I think it's worth noting that capacity continues to grow given that much of what is still being purchased is 300mm. The whole process could drag out for awhile prompting folks to become more aggressive with their pricing. Add to this the increases in energy costs and margins are likely to move lower in the process, thus making it even more difficult for the semis to justify any major capex purchases over the near term. This all leads back to my view that existing fundamental valuations are high and downside risk is greater than upside risk in the short-term. Given this scenario, I feel relatively safe in focusing my swing trades on the short side. Of course as Katherine pointed out, "If the Internet bubble taught us anything, it was that stocks can be driven to stratospheric heights by little more than the hot air generated by analysts," and I'll probably end up reporting those "3 consecutive losses" you'd "hate" to see me incur. ;) AdvocateDevil

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