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Strategies & Market Trends : Gorilla and King Portfolio Candidates

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To: Mike Buckley who wrote (44633)	7/18/2001 10:22:47 AM
From: Stock Farmer	Read Replies (2) of 54805

Hear Hear!! Mike, as usual a well articulated and reasoned post. I would only add that it seems to me that the bubble valuations were pinned on growth. Growth driven because the customers of our fab few (or customers of theirs, transitively) were flush with capital and spending wildly. Nothing to do with the businesses themselves, everything to do with the upstream food chain and the capital multiplier effect!!! When the source of such cash flows is examined we see at its root an unbelievably massive infusion of almost a trillion dollars of DEBT into a handful of players in the telecom space over a period of a few years. The likes of which we have never seen. A few scratches of a dull pencil on the back of an envelope will show that servicing a trillion dollars of debt is a smidgen larger than the telecom industry can support through reasonably margined services. Particularly given the parallel tendency for them to deliver services at prices rapidly approaching free! Good grief. Rubbing only a few neurons together one must wonder at the probability of maintaining this level of spending. Let along growing it at even 10% for the forseeable future, let alone doubling it next year! Now, to be fair, this tributary effect was not obvious except to those who were students of macro capital flows. Those who just looked at a specific business would have no insight at the upstream effects. Particularly because so much was also flowing into, through and from those "old economy" dinosaur companies that were becoming increasingly ignored!! So what was inevitable (in hindsight) was that trillions of dollars of evanescent market capitalization were doomed to evaporate as slowly or as quickly as the market realized it's error. Whether or not it was AG or someone else who shouted "The Emperor Has No Clothes"! The evaporation was not overnight. It was not sudden. It took place over a period of many months and it may not even be finished at this point. Who is to say that it would not have occurred much faster or slower if the Fed had stood aside? Seems to me that fiscal gravity has been doing an ample job of fighting the Fed, despite snappy sound-bite wisdom to the contrary. Our Public Enemy #1 candidate, Mr. Alan Greenspan just happens to be standing in a convenient spot while all those who claimed brilliance from capital "gains" on the way up are crying "foul" on the way down. I think it's also worth noting that his responsibility is to the financial system and to keep it working, not to make sure that every Tom, Dick and Harry makes a profit. Some would say that by the mere continued existence of our financial system, it is hard to criticize his performance. At least against his job description. John.

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