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Technology Stocks : LSI Corporation

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To: E. Graphs who wrote (8224)	12/9/1997 1:54:00 PM
From: shane forbes	Read Replies (2) of 25814

E! sounds pretty right to me.. But should ask the macroeconomic TSO and Haim to confirm. There also is another issue indirectly related to the weak currencies there. If a country is "not making money" they cannot build their infrastructure. So that would imply that any large scale projects and the U.S. companies that deal in them are in trouble. This is the capital infrastructure decline argument. (With semis if they don't build they die - so slightly different.) The other issue is the "can't raise prices" argument. When competitors in those countries sell cheap goods to the U.S. and elsewhere then the U.S. companies are forced not to raise prices or risk losing market share. This is the deflation argument. Now depending on how long this situation lasts U.S. companies' income statements will get whacked again because the top-line growth will be constrained. Related to the above 2 is the third argument of "long term foreign company distress". That is their cash flow may improve near term (emphasize may) because of the 2nd reason but because they their capital spending has to decrease (mainly U.S. dollar based) they are long term in trouble. Hence MU arguing vehemently against S.Korean bailout. This you would argue would be good for U.S. producers. And one more - many U.S. companies shifted production there also to be close to their fastest growing end-customer base. If somehow the Asian miracle is taking a long term swan dive (unlikely) then the source of growth for many U.S. companies is in question. Because of the compounding of EPS over long term periods this would mean that many U.S. companies like P&G, if they lose out on that growth, will see their equilibrium P/Es drop like stones. I think the lynch-pin is the strong U.S. economy. The stronger the better at this stage. That's why perhaps the market did not go into a tizzy over the 4.6% jobless rate. Macroeconomics is like a slinky connected to a 1000 other slinkies. At any given time one pulls the other pushes. I think they are all linked in a way way too complicated fashion. It's funny but just today I was thinking that just like the way financial analysis is done looking at pre-tax earnings to put everyone on an equal basis, in the same way we should separate the currency effects. Trying to do that with huge companies is not easy. Yet another reason why I like my small companies. Simple is good. --- Am alternating studying and watching ORCL. Amazing. Over 125 million shares traded. This must be a record... Another funny thing I've noticed about these companies that fall like this - a 30% decrease seems the norm in the first day. Just an observation (OXHP does not count - that was a mix of factors...). I'm amazed at how consistent this is. At least for my 100 or so stocks on the watch list.

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