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Technology Stocks : All About Sun Microsystems

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To: Steve Lee who wrote (47216)	2/5/2002 6:53:10 AM
From: Robert Scott	Read Replies (1) of 64865

You're picking at straws here. Of course there are losses when a company defaults on debt whether its bond or credit debt. The difference is who absorbs the loss. Much of the debt being absorbed is by investors because its bond debt. The banks do have exposure but they are stronger today than they were coming out of the last recession. The debt does go away whether it's absorbed as a loss on investment by bondholders or reserved for and then written off by banks. The crucial issue is whether the banks can absorb the losses. As far as the bondholders, it's the access to capital for the industries suffering that is crucial. In the case of the telecoms, I doubt they will have much access to capital for years. We had a decline of 1.3% in Q3 2001 GDP. Preliminary report of +.2% in Q4. That's an improvement and suggests we bottomed in Q3. I too expect a revision to Q4 and most likely it will be down but not by more than 1.5% which would be needed to suggest that things are getting worse. What is overlooked in this argument about record consumer debt are two very important facts. One, consumer assets have grown more than debt. Two, income is considerably higher. Both of these factors show that while debt is at record levels, it is not as negative a story as many would have you believe. I already mentioned the facts about more money in the pockets of consumers due to tax cuts, drop in oil prices and refinancings. What concerns me more than anything at this time is the psychological factor. We are and will climb out of the recession but unless people are confident of the companies they invest in and the economy in general, it won't mean much. A classic case of perceptions becoming reality if the psychology turns ugly. It's time to turn my attention to something that's really important - the Olympics! It should be a nice break from enronitis, the world whinners conference in NY and the recent gloom and doom in the analysts community.

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