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Technology Stocks : All About Sun Microsystems -- Ignore unavailable to you. Want to Upgrade?

To: Mike M2 who wrote (40778)	1/22/2001 11:31:16 PM
From: Haim R. Branisteanu	Read Replies (4) \| Respond to of 64865

There is not the question if, but by how much. Still that is not the issue and not the explanation for such a drastic change in psychology. Most companies were just shocked into recession, which all of a sudden happen after the election. Anticipating a soft landing they were hit by recession rhetoric from the Bush administration. More interesting is the fact that the shock was originated in the US with some slowdown in Europe due to high oil prices. As to the question of to much debt I will separate liquidity from interest rates. High liquidity does push financial assets higher but do not spur wise investment in the real world. On the other side low interest rates does not necessary push financial assets higher but helps wise investments. The issue of published productivity numbers by the government is very iffy as there is no real measure to actually quantify it, but there is no question that there was a substantial rise in productivity. As to the economic expansion and amount of debt one must take into account also velocity of money which increased tremendously due to technology. If 6 to 8 years ago inventory turns were 4 to 5 times a year and you made 8% on your inventory your return was 32% to 40% a year. Borrowing against this inventory at 8% still left you with a 24% to 32% profit. So it was worthwhile to borrow more you were still ahead if you were able to sell it. For example, DELL and WMT capitalized on inventory turns and therefore their low prices and high sales growth. Now comes the "just in time" scenario in all industries which is a major contribution to productivity of the whole economic system. Which means your inventory turns are 15 to 17 times a year and you still pay the 8% therefore to achieve your previous 24% to 32% yearly profit margin you can markup only 2% to 3% to achieve same profitability as with the previous markup. The velocity of money changing hands grew at the same rate. As such your inventory grows and so your debt and you are even more cash flow positive. So to this point debt is great. Just in time procedures were enabled due to the use of cheap computers, data bases and communication between vendors. I think this and the ease to access information and the ability to make the right and timely decisions was the most important change in the way we do business and a contributor to increase output per employee which many called it productivity, which is a bit misleading. Now as soon as an trigger of uncertainty comes along or some event which artificially slows demand it slows the engine of growth. To make my point the indecisive result of the US election and the discontent that follow did slowed the speed of money in most industries and the psychology sudden changed wen the present administration started to talk the economy down and half of the American felt cheated. The net effect on an economy with profit margin thin information instant the chain effect was like pressing the emergency brakes on the economy. On top of that the disgust of foreign entities with the ongoing dispute in the US the mistrust in Bush and his gang added to the desire to pull out money from US investments and call it home. Few American witnessed the reactions in Europe and Asia to the Bush gang tactics, they induced a deterioration of trust in the US democratic system not to mention fear of dealing with some one with limited intelligence. IMHO the Miami incident was a fatal blow to US credibility abroad. Foreigners do not understand to this day why a democratic society can not appoint their leader by the popular vote. they are not like us ........ then stay away from them is now the mentality in many countries. Further take into account that the economy was already taxed by high energy prices and high interest rates, the stock market was pushed upwards by promises of the present administration to add stocks to social security etc. The net effect resulted in relative high equity markets due to the BS promoted by Bush at a time that real economy started to slow down as a result of high energy prices and low liquidity. After the election the second sin of the Bush administration was to talk down an already weakened economy at a time they actually it needed a bust. It was and still is criminal IMHO. As to the FED under AG his sin is the fact that for political reason and nothing else, the FED refused or failed to lower interest rates in a timely manner regardless of the political situation. The FED knew by August/ September that the economy is cooling of substantially and failed to act. They dragged their feet trough October and November. In my book this is also criminal. Now that physiology has changed dramatically it will be even more difficult to avoid soft landing and the corporate debt market already is priced that way. Bush in his eagerness to seize power was ready to do every thing that will put him on top including to push the US economy into recession. If his intention were different then his slogan would be that.........." wen we will come on board we will bring the stimulus to grow the US GDP by 5% to 6 % a year without inflation" ...... but Bush and his team never uttered those words to this day...... to th econtrary they do not want to pay down th eUS debt and lower long term interest rates which will add a prolonged burden on hte average US citizen. My conclusion is that Bush and AG are to blame for the present recession and anticipated misery and acted in a criminal way ......... to impoverish the US citizen at large to achieve very selfish personal goals to be in power and have the job. As such they make my criminal list. Haim