PC:
As I've noted in earlier posts, I spend a lot of time in the field. We're all susceptible to being dazzled by technology, and in my earlier years, I lost far too much dough to just this syndrome. For several years, I've depended on knowing exactly how well a company's products are selling WHERE IT COUNTS, which is at the end of the sales chain, based on the premise that if it doesn't sell there, the channel gets plugged up. Retail chains cut back on their orders, the wholesalers then curtail purchases as their warehouses fill up, then the producing companies' inventories start to rise and finally the producing companies are forced to cut back. It all reminds me of a plugged toilet and the results always get messier the longer it takes to spot the problem.
Keeping track of retail usually provides a six to twelve month lead on what to expect from a producing company's reported results. Sometimes, especially if the company plays accounting games, the lead time is even greater. In a normal market, increasing retail inventories, or a shrinking demand (retail sales guys and gals are the first to smell this) would be quickly discounted in the producing company's stock price, but not in this tulip. I first started writing about the supply-demand ratios showing signs of reversing almost three years ago. Now, it is an avalanche.
My advice to anyone playing in the tech sector is to visit the stores (or wholesalers or Vars) from time to time, and ignore the pure drivel emanating from most Wall Street analysts. For a variety of reasons, most don't do any grunt work, and fewer still understand technology cycles or how they work. They are also under intense pressure to write positively even when an economic collapse is occurring.
I've always admired Apple's products from a technical point of view. They've always been elegant. Unfortunately, the company just doesn't have the financial muscle or retail sales clout to go the distance. Dumb fund managers will continue for a while yet to throw dollars at it to keep it alive,... as hope is a powerful emotion. In the end though, it will prove fruitless. There are too many players and the weak will fall by the wayside, Apple among them.
One thing that is of immense concern to me is the acceleration in the deterioration. It is now endemic right across the board in the tech sector. This whole deflationary wave has picked up a great deal of impetus in this last year, and there will be no turning this one back through blatant money printing. The lay-offs we've seen this quarter are truly frightening, as they represent big wage earners.
I just locked my mortgage in for a lengthy period. I think interest rates will start to climb shortly, propelled primarily by Greenspan's desperate need to keep that wall of treasuries from flooding back home to "Mother America". The Euro cometh and Asia has to sell. Some things don't need to be written on the wall in neon.
Can you imagine what the history books will say about this madness, once it breaks?
Best, Earlie |
