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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: techreports who wrote (33551)	10/22/2000 9:42:42 PM
From: Rick	Read Replies (1) \| Respond to of 54805

October 22, 2000, NYT RECKONINGS Unsound Bytes? By PAUL KRUGMAN One consequence of the changed nature of investment is a strong tendency for markets to develop into temporary monopolies. Why monopolies? Because when the required size of investment doesn't depend on how much you sell, a bigger market share is definitely better. Why temporary? Because sooner or later, and usually sooner, new technology makes your old investment worthless. The inevitability of monopolies in a knowledge economy — indeed, the hope of achieving such monopolies becomes the main driver of investment — creates new puzzles for antitrust policy. The Microsoft case poses real dilemmas, and it is surely only the first of many. Meanwhile, the intangibility of a company's most important assets makes it extremely hard to figure out what that company is really worth. That may partly explain the nauseating volatility of stock prices, though it's still hard to believe that enough real news arrives on any given day to justify these 7 percent or 8 percent swings in the Nasdaq. Michael Mandel, the economics editor at Business Week, argues in his new book "The Coming Internet Depression" that this financial instability is more than speculative froth. He warns of a sort of New Age- economic tailspin in which declining confidence crimps technology investments, which depresses productivity growth, which makes such investments even less profitable, and so on. In principle, he could be right; something like that scenario has been batted around for years by academic economists. (The possibility arises naturally in "endogenous growth theory." Aren't you sorry you asked?) If Mr. Mandel is right in practice — which I doubt, but who knows? — the next president could face novel economic challenges that defy conventional solutions. nytimes.com - Fred

To: techreports who wrote (33551)	10/22/2000 11:30:18 PM
From: LLCF	Read Replies (3) \| Respond to of 54805

<I agree that there isn't much we can do, but that still doesn't mean we shouldn't talk about these issues.> Yes, don't shoot the mailman right?? For one thing the economy being 1/2 as dependant on oil as before just means the negative hit will be about 1/2 as big... still a negative right? I would also argue that with the economy more than twice as leveraged as it was back then, that ANY bumps in the road might be twice as big... perhaps MUCH bigger in some sectors. IMO the economy is an eco-system, everything is connected to everything else and those relationships are everchanging as some species die out and others come to prominance. Normally prominance brings it's own problems eventually as unforseen and previously unknown problems arise. As we know, weakness, no matter how they are created also have a nasty tendancy to uncover all sorts of other weakness' [ship wrecks] that had been covered up by the rising tide. <1. Actual "inflation" existed then, i.e. the governments operated in the red and printed paper to make up the deficit. (It's more complicated, first they sell bonds then they print the money for banks to buy them etc. etc.) Now the governments are paying off their debts. Any "inflation" is just the rise in price of some suddenly scarce item, e.g. oil. If this commodity sinks in price it should also not be termed deflation.> It is as fact that the deficit has and continues to be way underestimated because of the 'internal' debt being racked up by the entitlements. Even the deficit numbers sighted by the government hardly matter as we went surplus, what 6 months ago?? This is decades into the greatest expansion in history... not exactly a good sign IMO. Another 'fact': Credit in the economy has exploded government, corporate, private... IMO this is the WORST possible time for a recession in most of our lifetimes. As for the supposed 'tame inflation', see the argument below. <<Companies whose main task is to revolutionize the means of communication and production are much more important in the economy. I don't say capitalism has ended recessions. I'm just saying that 2000 is markedly better than 1990.>> While interesting, it is unclear, IMO, that this is bullish at this point. In times gone buy the same could have been said about Railroads, electricity, or 'the tractor'. While all these created productivity gains, it is far from clear that the current rush into telecom will end up any more fruitfull than past attempts to cash in on the latest hottest thing. For instance I saw something the other day that the tractor/combine eliminated the work of several men and many more animals to run it as well as opening up millions of acres that were previously used to feed them. Compare that to Guilders claim of infinite productivity gains from the 'petabits' of info flowing around. [Worse... the government is on board with 'hedonic' pricing that goes into all it's productivity and inflation numbers... ie. CPI. I've seen estimates that the government is underestimating inflation by 100 or more basis points]. While no one would disagree that most of the new technologies create real qualitative good it is far from clear that this should be estimated by some government bureau and pumped into the CPI reducing government payments on contracts based on this number! What about the qualitative degredations?? No one is trying to estimate the negatives of car emissions, two working parents, elimination of openspace in urban sprawl, or any of the other negatives corresponding to modern life and subract them from GDP. Yet, reformulated gas, "better autos", and "better computers" have their added value estimates used to reduce the prices of these products [and there are others of course] for the purposes of estimating the CPI. Note that this is ON TOP of the 'real' gains in productivity gained by say people working at home and there fore cancelling their office lease. The government is telling me that the new computer I bought [example] is 25% better than my old one, which costs the same and therefore CPI for that componant declined by 25%.... problem is, our trading desk at the bank I work for still runs the same expenses as last year and is making the same amount of money with the new upgrades.... hmmmm.. the faster I-net connection, new flat screens, faster point and click trading and all the new investment websites didn't help either! Enough on this subject, the hidden part of the above statement... [that communications is such a large part of the economy]... you know what else is a huge part of the economy now??? The stock market, enough said? No, did you know that the turnover in JDSU in one day this month was equal to the entire GDP of the nation for that day? The turnover [#shrs x price] in financial instruments/GDP dwarfs what's been going on at any other time in recorded history surpassing 1929 sometime in the past year. In other words, transactions in stocks this year is running at a rate making it 3X as large as the production, distribution and consumptions of goods in the entire country. Historical norm is about 20-30% of GDP. Now, don't get me wrong, I'm actually a Gorilla Game follower and holder [QCOM], but I'm also very bearish on the market as a whole, and believe my QCOM holdings will take a further beating as well, and hold very little in other equities. Lot's of cash... oh yes, and by the way, IMO historical statistics showing how cash underperforms may be very skewed by RegQ and other government controls in the past. In todays free markets cash should do much better... early 80's show t-bill rates hitting 20% durning inflation after the roll back of regQ. Is this controversial enough? DAK