David Todtman,Todtman, seeing your gloomy outlook on JDSU and bandwidth, I thought
of cheering you up a little.
So here is an article on bandwidth and photonics as it will apply to JDSU
As early as 2 months from now, GG.
Key phrases:
" demand ( for bandwidth )along some domestic routes is doubling
every two or three months "
" The Internet is rapidly becoming the principal communication tool of
the world economy, Franks said. As the world becomes dependent on
e-commerce, the availability of bandwidth becomes critical for business
revenue. "Bandwidth has the potential to become the currency of the new
Internet economy."
cheers
TA
APRIL 24, 2000
Trading Bandwidth
The Internet commodity
debutshttp://interactive.wsj.com/articles/SB956358714203757761.htm
By Michael Rieke
Momentum is building for the trading of telecommunications bandwidth, the commodity underlying the Internet economy. Bandwidth -- the capacity to move data at a certain speed between two points on a telecommunications network -- has been traded for years, mostly between telecom carriers. Each trade is negotiated to cover issues like price, term length and quality of service. Deals take months to complete and lock in terms for as long as 20 years.Last year, Enron proposed that bandwidth be traded like a commodity under standard terms and conditions covering quality of service, price and term length. The proposal called for financial penalties if either party to a deal failed to perform. Enron officials predicted that the market would grow enough to attract commodity funds, insurance companies and Wall Street firms that now trade other commodities.In December, Enron announced what it said was the first bandwidth commodity deal. It bought DS3 bandwidth from Global Crossing from New York to Los Angeles in monthly increments for delivery in 2000. A DS3 line has the capacity to move data at 45 million bits per second. More advanced technology moves data at speeds as fast as 9,952 Mbps.In February, Williams Communications announced that it would be a leader in developing a market for bandwidth. Other energy trading companies including Dynegy, El Paso Energy and Reliant Energy jumped on the bandwidth bandwagon.At a conference this month on trading telecom capacity, carriers moved closer to accepting the idea. Representatives from Level 3 Communications, US West and Concert Communications -- a joint venture between AT&T and British Telecom said the idea would be accepted if certain hurdles could be overcome.Ken Epps, Williams senior vice president, said his company is working on one hurdle with other carriers -- developing standards for quality of service. Volatility is also being debated. The wholesale price of bandwidth on domestic routes declines at least 10%-15% a year, says Sanjay Mewada, telecom analyst for the Yankee Group. Advances in technology can accelerate the decline by increasing supply.For example, early fiberoptic lines used one color of light to transmit data. Now as many as seven colors can be used, and each color has been split into as many as 20 channels, giving carriers 140 channels for transmitting data. On the other hand, demand along some domestic routes is doubling every two or three months, says Mewada. As companies get into e-commerce, they want more bandwidth to handle data-intensive applications.Bandwidth trading as a commodity has attracted the attention of futures exchanges. The New York Mercantile Exchange is "keeping an eye on" the activity but isn't currently developing a futures contract, said a Nymex spokeswoman.At least two European commodity exchanges are also interested. An active OTC market in bandwidth could preclude a futures contract. The OTC market in electric power, for example, is much bigger than the futures market for electric power.Mewada of the Yankee Group predicted that the U.S. data-services sector, which serves e-commerce, would be about $34 billion this year. The sector is growing 25%-30% a year, he said. A recent report by Schroeder & Co. said the global market for bandwidth could surpass $1.5 trillion by 2010. Bandwidth trading isn't just for telecommunications and energy companies, said Lin Franks, a bandwidth trading consultant with Andersen Consulting in Houston. The Internet is rapidly becoming the principal communication tool of the world economy, Franks said. As the world becomes dependent on e-commerce, the availability of bandwidth becomes critical for business revenue. "Bandwidth has the potential to become the currency of the new Internet economy."
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Message #9346 from David Todtman at Apr 21 2000 9:39AM
On assumption that this is not simply an intermediate term correction:
We have a very long way to go yet--bear markets take a long time (12 to 36 months are not unusual; sometimes more) to play out.
1. Sentiment. As I listen to the news and read the threads on SI and elsewhere, I see very little discussion of "bear market." Instead, I notice the present theme is 'don't buy stocks without earnings, go for the ones with strong growth present and future and real earnings.' The implication is that stocks will rise again, if you just get the flavour of the week right. Yes, there is concern and vexation. But, no, this is still a NO FEAR (tm) market. For us to even remotely approach the area of a bottom, this has to go and be replaced with wholesale nashing and negativity. In a market top, the general theme is 'you can't help but make money, buy on dips' whereas public knowledge at a bottom is 'the stock market is dangerous and will never come back.' I know it seems impossible, given how long we've been thrilled by our gains but, try to imagine 'everybody, everywhere' trash-talking the stock markets; try to imagine that the viewership (numbers) of CNBC is way down and the number of posts on SI is way down and what posts there are, are completely without faith. When Stewart is singing that tune, we'll be approaching the bottom; right now, he still has too much faith in wall street. At bottom, there will be an actual recession or talk everwhere of impending recession and potential depression. Seem impossible? It does to me and that, I think, is one reason why sentiment is too high. No fear. (What's really awful about writing this is that you only get that kind of horrible sentiment, after millions of people like you and me have actually been seriously hurt by the grinding down of our investment accounts. First we see our paper gains evaporate, then we see our principle value--the money we saved from our jobs! go away too. Its the shattering of dreams that is most destructive, I think.)
2. Valuations. What's the average p/e of the S&P 500 at present? It's still approx 40% above its historical average. When Stewart reaches psychological bottom, he will sell out at prices that are as unreasonably low as they were unreasonably high when he bought; Mr. "D" will fire him. Therefore, we should expect that the mean p/e of the S&P 500 at the bottom will be well below the historical mean. We're a very long way from that.
There is no relish in this for me.
With regard,
David Todtman
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