Hi Mike,
I think there are a lot of companies that will report very good earnings this quarter.We are currently being overweighted by news from the sectors that have been poorly managed and overbuilt.
It is no secret that telecom has been over built and incurred too much debt.Back in February I attended a Bank One investment seminar and they warned about the huge debt load incurred by the industry.The debt load approaches the level of annual revenue!!
As a result of this lenders backed off extending credit.That is the mystery of the "Sudden Downturn" - the banks shut off the credit source.For companies to then start lending credit to their buyers and on top of that, keep building products to the point of a bloated inventory , that requires 200-225 million dollar write off. Well all I can say is :if you didn't see it coming ,then you were blinded by greed.
I believe there are many companies that will do quite well.Heck interest rates have been getting cheaper all along and are very close to historical lows.The monthly floor plan bill at my dealership has gone down from 70-75 thousand dollars to 45-50 thousand dollars on the same level in inventory. It HAS GREATLY IMPROVED MY PROFITABILITY ALREADY.I'm just one of thousands of companies benefiting from reduced business expenses (that falls straight to the bottom line).
As this next quarter evolves, cash flows will improve and plans involving expansion,building ,remodeling will once again will begin.
People will have their witholding tables adjusted for the tax cut in July and consumers will not only get a small check(which I think the typical American will immediately spend) but they'll get a raise in every check with a smaller tax bite coming out.
I think this very negative environment is exciting.There is so much good just around the corner,that not taking some additional risk here[with a 6 month window of a recovery (on the long side)] is to be short sighted.Perhaps one of the great failings of many investors is their inability to adopt a longer view.
I view all investments as having to be AT LEAST a 12 month hold.If you don't hold it that long, you give too much of it to the govt.It just isn't woth the risk - better off putting in treasuries and not having risk. JMHO
I think we go higher from here much quicker than anybody expects.
I'm unable to buy into the doom and gloom that dominates the news about" this recovery may not happen".
The telecom industry has shot its wad - there's a lot of debt out there.Every body needs bandwidth.There are going to be some bankruptcies ,many more mergers and those with the right markets,proper cash flow,less debt, will end up being one of the next new utility-like industries that are able to have more debt cause everybody needs it.
Many Ipo's will have failed business models,cause the big boys will squeeze their margins, until they prevail and then slowly raise rates till they are comfortably overcharging us.ggg They can then get fat like AT&T did for years.
This creative destruction is putting competition into a government sponsored monopoly and some weak sisters going belly up is healthy. Lucent just can't react to a competitive world - bad genes from AT&T days. This telecom growth halt is truly a good development.It is very parallel to what happened when deregulation hit the airlines.Many went broke but averyone is flying more for less. It's good - just too hyped up and not kept in perspective.
Many other industries will do very well this H2 of 01.
Remember where you heard it !!! gggg
Thanks for your positive perspective. It is refreshing and I ramble too long sometimes.
Bob |
