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To: Lucretius who wrote (4861)	7/20/2000 7:45:20 PM
From: pater tenebrarum	Read Replies (4) \| Respond to of 436258

no prob. Howard Hill on telco debt defaults and the consequences for big cap high tech wonders: <<Defaults are rising in telecom junk bonds. I estimate that company-by-company projections in the telecom/networking arena add up to 5 to 10 times the possible total for these segments. You're probably not aware that much of CSCO and the other suppliers' sales are often funded by the vendors, who will be taking the hit when the fallout comes. I can't recall whether it was on LW or the side group, but last year I was picking the telecom complex as the biggest credit risk in the "new economy". A few days ago, five formerly investment-grade CBOs were downgraded due to defaults in the underlying portfolios of corporate bonds. Moodys is projecting defaults this year to equal or exceed the peak default rate during the last recession. Much more to come if the economy actually slows down, right? I suppose CSCO, Northern Telecom and the other suppliers will figure out how to call the inevitable write-downs "one-time charges" on two-year old equipment that comes back off defaulted seven-year leases or loans, but the reality is that a significant portion of what was previously booked as sales will not be paid. Keep this in mind when you get tempted to buy these exponential growth manufacturers. There's a very strange double-think going on when the market can project a slowdown for the economy, yet not realize that "growth" companies are completely dependent on all those mainstream "old economy" companies' health for their sales. I would add that for most companies, deferring new technology spending is one ot the easiest choices to make when times get tough -- much easier than paying for leases on empty space, or paying severance packages. hh>> i'd like to comment that in view of this, paying a 190 p/e and 25 times sales for a company with 7 billion shares outstanding is eminently sensible....lol...