re: The turning point will be when the Powers That Be get together and take a stand against the rampant downside speculation.
A few questions:
Were you complaining about the rampant upside speculation in 1999 and 2000? At that time, would you have thought it appropriate for those Powers to "take a stand against it" (sounds like market manipulation to me), and lower the value of your portfolio? Or it it just the downside speculation that bothers you, and it's OK for the upside to be given free rein? That is, do you think markets should be allowed to set prices, without paternalistic Protection from the Powers That Be.......but only if it benefits you. Are you familiar with the concept of Moral Hazard, and how many 100s of billions it has cost, to fix problems caused when the Powers That Be try to protect us from our own stupidity?
re: "Capital is not available and borrowing power has been destroyed." That's just not true. There was a credit shutdown at the end of 2000. Then the Fed began lowering rates, very fast and very far, and the credit markets (selectively) opened up again. Recently, WCOM was able to float it's largest bond offering ever. With mortgage interest rates down, refinancing is happening at a record pace, and ample capital is available for homeowners to continue getting more leveraged, taking equity out of their homes, freeing up cash to buy vacations in Mexico and Palm Pilots and, in general, propping up consumer spending.
re: "Technology in general was driving the economy...... the companies building the internet, companies using the ......using technology to increase productivity and profits....." This is just the Mythology of the Bubble.
The Productivity Myth: Productivity increases during economic expansions (as capacity is fully utilized), and declines during recessions. If productivity holds up during the impending recession, then it will be proven that the productivity increases of the 1990s were due to technology, rather than just the business cycle. As of now, this is an open question.
The Profit Myth: Companies building or using the internet have yet to show that it increases profits. In fact, the evidence so far is the exact opposite. A vast amount of speculative capital was thrown at the internet, and most of the business plans on which that speculation was based, have proven untenable. In fact, by putting real-time info in the hands of consumers, by giving them choices, it destroys the pricing power of a lot of companies, and erodes profits. The decline in profits in businesses over the last year, has been concentrated in those companies that are net-related. That is, the closer your business is to the internet, the more your profits have gone down. In some cases, like JDSU and CSCO and LU, they have had to take immense "special charges", writing off failed acquisitions or inventory or vendor financing that went bad. If the Profit Myth was true, it should have been exactly those companies whose profits held up in this downturn. |
