Mike and gang:
Been gone a long while but finally caught up with a bunch of work and expect to have some spare time at my disposal. And what better place to spend some of it than in "the zone"? (g)
Have completed several field trips since I last posted.... (most for research but some for other purposes). A few observations (which are probably redundant to what you folks have no doubt been discussing).
Whether it's PCs, servers, routers, cell phones, optical switches or just about any other "end user" of semi products, sales are worse than lethargic and pricing is simply ugly. The only good news is that the distributors have learned from the past and have not allowed the manufacturers to "stuff them" this year. Why semi stocks haven't been cratered amazes (and delights) me, as there just are no profits discernible in the foreseeable future.
Car dealers refuse to talk about the huge corporate lease bubble coming their way this spring. They of course are simply stealing sales from next year with the current zero percent financing game.
The big malls are not experiencing the loss of clients yet but the smaller malls are. I noted many peripheral malls that have up to 35% of their windows "white-washed". Mall managers to a man all speak of powerful pressure on lease/rental rates. Some have already negotiated rates that just cover costs.
Middle America (where still employed) is just beginning to respond to the massive lay-offs. The purchasing is not yet being "down sized" but it sure is being "down-scaled". Good bye to Bed, Bath and Beyond,.... and hello Walmart and Home Depot. Check out the vacancies in the malls.... it is the upscale stores that are being whacked.
There is a boat, motorcycle, SUV, trailer car, truck or rec vehicle for sale in every third driveway in rural America. I intend to go long printing companies that create "for sale" signs. Liquidity problems are us.
Trucking continues to really hurt and it will get worse after the new year. The lower fuel prices help, but the loads (especially "back loads")are simply not there. I feel for these guys and gals. A lot of tractor keys are being tossed to the banks these days (mortgage not payable).
Commercial aircraft sales suck, but upper level general aviation sales, which had really started to fall earlier in the year, have rebounded a bit since Sept 11. This one is hard to call. Looks like some folks might be deciding to buy a plane and forsake the airlines. Personally, this makes good sense to me (but of course I am biased on this topic), I don't expect this to continue, as the economy continues to spiral down.
The glut of cell phones that will be carried into 2002 is staggering. And forget the "next gen" internet phones,.... as I had forecast last year, no one cares.
Global fibre optic back bone capacity continues to swell even as useage tapers. There is no rainbow visible for these guys and their debts continue to eat them alive.
Three of the four ways in which consumers borrow are down, but the fourth, household "refinancing" continues at a torrid pace. Earlier, I thought we were watching it peak, but I was "early" in this observation. When this monster finally rolls over, the last supporting leg of the economy will have been kicked out, so it behooves us all to pay attention to this insane game. It sure looks like the one thing that stands between us and serious deflationary ugliness.
As I pointed out in September, most retailers ordered "on the light side" for this selling season. Even so, most are very worried about inventory carry-over into the new year. It will be more than consequential this year in spite of the "boxing day" sales environment that has been in progress for the last few weeks.
Real estate continues to weaken, but still just in pockets and generally is noticeable primarily at the upper end of the scale. I expect this to spread as we get into the spring and as the horrific lay-offs start to be felt.
I have stayed clear of the short side of the game for quite a while now. My reason for this is because the war on terrorism has gone much better than the wildest hopes of the administration, which has engendered a powerful surge of optimism. I had decided to stay out until after the worst of the terrorists had been found (which would perhaps see a final spike rally) but the dreary post-Christmas period is at hand and we will see many nasty revelations as it unfolds. I intend to quietly start to rebuild short positions once we get through the holidays.
It is going to be a long cold winter before it is over.
Best, Earlie |
