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Strategies & Market Trends : Sharck Soup -- Ignore unavailable to you. Want to Upgrade?

To: Softechie who wrote (15737)	4/11/2001 12:44:52 PM
From: Frederick Langford	Read Replies (2) \| Respond to of 37746

Live Headline 11-Apr-01 Analyst Wars : Niles is negative on semis. Joseph is positive on semis. Crespi sees a turn in telecom capex spending. Milunovich says telecom/tech downswings typically last at least two years. In judging these conflicting arguments, investors often rely on past success being an indication of future performance. That was certainly the case with this morning's reaction to Salomon analyst Jon Joseph's semi call (see 10:38 ET story). But it's important to consider the basis of these calls. In the pre-regulation FD (fair disclosure) era, analysts could get an early read on business from companies. Post-reg FD, analysts have no such inside edge. They, like you, are relying solely on their ability to predict the future. In our view, many of the optimistic predictions are based on dubious analogies. Not one of the bullish tech calls that we have seen has noted any change in the demand environment. They have been based primarily on assumptions about cycle timing and inventory levels, both of which rely on the belief that this cycle is no different than past cycles, whether you're talking about the overall economy or a specific sector. But there are many reasons to believe that this cycle is different. The US economy has not seen an investment bubble like that of the late 1990s for generations. As we have detailed in past Stock Briefs, the level of investment relative to GDP rose to unprecedented levels by early 2000. The return to more normal investment levels could mean that many tech industries see revenues slide to 1998 levels or worse, and contrary to many bullish industry calls, there is no reason to believe that a quick recovery from that trough is the best bet. It is more likely that companies could be waiting one, two, or even three years for demand to catch up with capacity. In short, no new investment may be needed to meet demand. That "U" scenario is more consistent with an business investment-led downturn than the "V" that characterizes consumer-led downturns. Of course, this Briefing.com opinion is just a prediction like all the rest. We would note, however, that it's a prediction based on the macro-economic environment rather than a simple comparison to recent cycles that bear no resemblance to our current situation. We may be wrong, but would suggest that it's foolhardy to buy stocks now just because inventories in any given sector are lower. The key to recovery is a pick-up in business investment, and we see absolutely no evidence that such a pick-up is imminent. Quite the contrary in fact -- all the recent news has pointed to further declines which will likely be followed by a long period of stagnation. - Greg Jones, Briefing.com Fred