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Technology Stocks : LSI Corporation
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To: jelrod3 who wrote (8157)12/5/1997 6:34:00 PM
From: shane forbes  Read Replies (1) of 25814
 
jelrod:

Depressing guy that Barton fellow. Here's my take on some of his points (I'll refer mainly to the semiconductor sector):

1.) Order growth slowdown to 10% Even if true in a disinflationary enviroment as he foresees that would be fantastic. Where else would investors put their money since other companies would be contracting... But I think we'll see growth a lot higher than 10%. Even if the competitors in other parts of the world chew up some of the growth rate (i.e., the growth rate for an individual company slows down because the gains have to be spread out amongst many new competitors) we still have a semiconductorization and digitalization and communicatization and INTERNETization (all made up words) about to take place in the world. And we have 1.2 billion or at least half that many eager new consumers in China.

2.) Leveraged for growth Presumably he means high fixed costs for the semis. The Koreans are learning what happens when you have excessive debt. Again maybe a Darwinian survival of the fittest. Can't argue against the high fixed costs.

3.) Questioning of techonology investments payback O really and now we have the highest productivity of most nations in the world and one of the highest uses of technology. And now the companies in the States are some of the most competitive companies in the world. Somehow I think this (and the fall of labor) had something to do with this.

4.) Price deflation tricky to argue against this - current DRAM prices (and gold) shows that if you do overbuild they will not come. Hopefully we'll pick up on the monopolistic companies or high IP companies that add value to products. These may have some hope of preserving prices. Remember a few months ago the talk of the Street was the Inflation bugle boy.

5.) The guy's an alarmist. Reminds me of a mirror image of Harry Browne in the '80s who advocated investing in gold because of the high inflationary environment at that time. An inflation hedge he said then. Today we are at a 12 1/2 year low for Au. (Which makes me want to buy a mutual fund in gold stocks - being the perverse nut that I am.) Bond yields of 5% could happen. Heck these days the yield curve looks to be getting ready to invert. But I can't keep my money in bonds / cash. Like reading annual reports and 10-Ks - must be a sickness. Anyway long term I see the glass half full not shattered and destroyed as Mr. Biggs does.

6.) Finally deflation is not necessarily a bad thing. If prices don't hold for chips then maybe they won't hold for semi-equip. Further the companies won't need to raise wages. Also stocks do not get nec. killed in mild deflationary environments. There have been other times when the U.S. has had deflation and stocks have done quite well.

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Which is enough... SO you did not tell us - when was the piece written?
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