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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Cary Salsberg who wrote (35174)	5/11/2000 7:26:00 AM
From: Pink Minion	Respond to of 70976

The internet is great, but tremendous technological advances in the 20th century did not eliminate economic cycles. More important - "Humans haven't changed that much". We run on fear and greed. When things are great we get sloppy. Then the pointy hairs get promoted. It happens in sports and also in business. MH

To: Cary Salsberg who wrote (35174)	5/11/2000 9:02:00 AM
From: Ian@SI	Respond to of 70976

Cary, Welcome back, I always enjoy your much too infrequent posts. Re Interest rates and inflation: The Fed injected massive amounts of liquidity during the LTCM fiasco; and again, prior to Y2K based on completely unfounded Y2K concerns. As Milton Friedman has pointed out, every time the fed or any other government substantially increased money supply, inflation has followed. More certainly than Love and Marriage, or even a Horse and Carriage. ;^) So Greenspan took an inflationary action; then lo and behold, we're now seeing the result of it. Since Y2K fizzled, liquidity is being withdrawn from the system. And just as certainly, the inklings of inflation will disappear within 6 months or so of the excess money being drained - regardless of what the Fed does to interest rates. IMO, the biggest risk to the overall economy probably comes from an inadvertent Fed error. ... which isn't much different from past disruptions. Finally, RE the Equipment Sector Outlook. I interpreted Bronson's comments as clear evidence that the 3 Waves described by Morgan are ALL NOW UNDERWAY concurrently. i.e. - Smaller feature sizes have been happening and continues; Cu is rapidly moving into mainstream production lines; and 300mm buildout will be underway in earnest within the next 1/2 year or so with several greenfield 300mm fabs built during 2001. I think this is outstanding news for several of the leading equipment makers - AMAT, PRIA (and of course my favourite, MTSN), amongst them. Thus, I fully expect at least another 3-5 years of exceptional revenues and earnings growth with price continuing to grow substantially in excess of the market returns. Hope all remains well with you, Ian.

To: Cary Salsberg who wrote (35174)	5/11/2000 3:25:00 PM
From: willcousa	Read Replies (1) \| Respond to of 70976

Those tremendous technological advances did not produce the productivity gains that distributed computing, communications and the net are and will provide. That is the difference. Other factors cited, like higher interest rates, I agree with.

To: Cary Salsberg who wrote (35174)	5/11/2000 10:41:00 PM
From: Mark Adams	Respond to of 70976

Thanks for taking the time to express your voice of reason. I happen to be at 55% cash, but left the semi/semiequip sector long ago. All I can say, is well done! You played your plan well and deserve the rewards. Perhaps you'll speak up again, when we near the bottom of the downcycle.

To: Cary Salsberg who wrote (35174)	5/11/2000 10:43:00 PM
From: Jacob Snyder	Read Replies (2) \| Respond to of 70976

some more comments: 1. the risk, for AMAT, is market risk, not industry or company risk. That is, AMAT will go down if the market goes down, not because AMAT does poorly relative to its peers. 2. Forward earnings forecasts in this industry are constantly changing, and never reliable. As best as can be discerned in this zero-visibility industry, 2000 and 2001 look like up-cycle years. Beyond the next 18 months, who can say. 3. In 1999, valuations for all the quality tech stocks moved far above their usual historical ranges. We've never seen investors paying this much for future earnings. For instance, AMAT usually trades at a P/S of 1-6. At its peak recently, it hit a P/S of 15. This is an anomaly, that begs for correction, and a Return To The Mean. 4. The market risk is due to inflation and interest rates. As long as unemployment is 4% and consumption is high, the Fed will keep on tightening, and there will be downward pressure on stock valuation levels. My guess is that we still have 3 to 5 more 1/4-point hikes in front of us. 5. the techs, with their high valuations, are more sensitive to interest rate hikes than other sectors. In addition to the direct effect on stock valuations, higher interest rates will eventually slow the economy. Since chips are now in most consumer products (toys, cars, kitchen appliances, and all the other "old economy" products, not just in PCs) a slowdown in the economy means lower demand for chips, which means lower demand for chip equipment. That is, demand for chips (and then chip equipment) is (going forward) going to be more closely tied to the general economic cycle. 6. my portfolio went to 70% cash in January. It is now down to 30% cash, as quality companies (MSFT, WCOM, several others) are now reasonably valued and I have been buying them. Investors seem to be willing to pay very different amounts for a dollar of future earnings in different industries. This can be exploited by rational investors. 7. The only times when many investors take seriously the idea that there will never be another recession, is right before a recession. Recessions are rooted in our tendency to assume the near future will mimic the near past, so we overshoot in optimism and pessimism when planning. Technology does nothing to change this. 8. If I've read your posts on the Blood thread, you will be buying more AMAT when the price hits about 70. Is this correct? More importantly, I'd like to hear your reasoning for this buy-in price. I don't think we can expect to see the 1996 and 1998 types of valuations, because the semi-equip cycle is still on the upswing. But I think we can (continue) to see some valuation compression, no matter how good the industry news. Semi and semi-equip are about the only sectors left that haven't corrected. Two of the biggest software companies in the world (MSFT and SAP) have seen their stocks chopped in half. Investor's reaction (non-reaction, I should say) to AMAT's stellar earnings report just released, is a sign that the good news (and a whole lot more) is in the stock. I'm looking for a buy-back price, and would like to hear your reasoning.