I share your views that things are on the mending. But I am not sure there it will way up in a sort of bubble The Sequel. See the chart of Siemens -which I'm long on it- for illustration's sake:
ftmarketwatch.com.
Will it go all the way up to bubble level? Or will it find a post-bubble level and will stay there? That's what I keep trying to know.
People tend to scrutinize much more closer a situation on the down side but do not look very careful on the going is good. That's why we job losses on a bust, but we don't have about job gains in the boom.
The fact a bust is more scrutinized, can distort our views and make the things look much more gloomier in a down side. So we may predict a total collapse but very few predict a Santorini Cataclysmic, Big Bang-sized boom.
The things that are being 'digested in this downturn are:
Jobs, inventory and vendor financing gone sour.
I stick to a sector that I have some understanding: Telecoms.
JOBS
One thing that most people don't think about is that most of these job losses caused by the burst were created by the bubble itself. There was a bubble of jobs too.
Companies hired like crazy and at the onset of the crisis the first job "losses" were just positions that no longer would be fulfilled. So the bubble left many firms overmanned and the natural course of action would be to have job losses. No surprise there. 'Digestion' working.
INVENTORY
During the bubble the market projections were only up. Regardless much value in the telecom sector is software, there is still a lot of 'iron' that is sold. The car industry have embedded 'just-in-time' and learned how to deal with that. The tech sector has to learn it now. There was and perhaps still is a lot of unsold inventory. Unsold inventory that was written down. Written off, being sold at deep discount or returning via gray market. 'Digestion' again.
VENDOR FINANCING
The biggest consumer of telecoms gear are the incumbents (SBC, Verizon etc in the US and KPN, DT, FT, BT Telecom Italia and so on.
The competition that came after their markets -as a result of deregulation and the Telecom Act of 1996, bought through vendor financing. Those are now bankrupt because once the bubble burst, vendors cut financing and they went belly up. This is being now digested too. Both the debts and the assets being sold at loss.
Once digestion is completed, there will be a next purchasing cycle. Slowly picking up during this year and returning to the historic rate of growth by 2003.
Of curse if one look make some projection for other sectors: energy, airtravel and associated industries, banking will reach different conclusions. |
