AR:
Sector problems work their way backwards,....... from the retail consumer sale, through the distribution channel, through the producer's inventory, then to his actual production, and finally appear in the producer's quarterly reports. The "lag" ensures that it takes many months before the investing public is fully aware of problems. This accounts for my interest in events in the field.
PC purchasers, both corporate and consumer, have long since evidenced saturation. The channel is bloated. Inventories of several producers are bulging. The recent results of most PC producers have evidenced declines in growth rates.
For whatever reason, the analysts and the investing public prefer to focus on the actual reported results of the producers. Given that most have been using every accounting trick in the book to mask the emerging problems, the divergence between stock prices and reality has continued to widen. Q1 will evidence this in spades. It will be difficult for the market to ignore dramatically reduced shipments and revenues for long. The analysts have pushed the idea that "growth" is first seen in revenues and that growth of profits will follow. This is not a given (in fact the correlation approaches zero), but it is a certainty that when growth of revenues disappears, even the lambs understand. Look for an accelerating decline in producers' shipments/revenues.
Best, Earlie |
