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Strategies & Market Trends : Ask DrBob -- Ignore unavailable to you. Want to Upgrade?

To: iowamann, Spam Queen who wrote (33951)	5/21/2001 12:15:33 PM
From: kleht	Read Replies (1) \| Respond to of 100058

Iowamann: I was not online for almost 2 days. Was at an accounting seminar. Your question was "Will energy rate hikes drain techs?" In response to a report by Lisa M. Bowman. -- No. The biggest drain on techs is declining stock prices. Even so, things are really being exaggerated, which is not surprising. This happens whenever there is a lot of uncertainty as is now the case. Certainly there are serious problems ahead - venture capital tightening and lagging business technology spending. Earnings are going to be hurt (pretty evident), but most major companies will hold their own. Job growth has slowed down to about 2.5% from 3.8% last year - about the slowest since 1995. California still outperforms the nation in that area - U.S. job growth is somewhere below 1% I understand. Laid-off workers are being almost immediately hired by competitors. It's extremely difficult even now to get qualified help. I have personally seen this in several cases in the past month alone. Electricity increases are simply not going to have an enormous impact - despite the screaming (much of which is self-serving). Much of the increases are occurring in the future. Bowman says business' electricity cost will rise 37-49%. (More like 25-60% I hear). There will be some cutbacks and layoffs, but retail spending shows no signs of letup. Defense spending is coming back. Nontech manufacturing is doing fine - food processing and furniture. Housing is still doing fine - lower interest rates. However, blackouts really could hurt. The worst-case scenerio is 35-40 days of outages. Lots of businesses and people would be hurt. Businesses would certainly stop moving to California and some would pull out. Offsetting this is the possibility of the blackouts spreading elsewhere in the U.S., especially in the East. Iowa, you and I don't really disagree that much. It's just that there are some areas where we see differently. I learn a lot by showing some disagreement. Forces me to write down what I think and see how it bounces off someone else. I rarely learn anything when everyone seems in agreement. It's sorta like learning from one's own (or someone else's) mistakes. Also, as far as talking about a looming recession, for example, such talk could easily be self-fulfilling. It's happened before. You see what is happening in Japan. It happened here in the Depression. People become extremely hesitant to assume risk, to take chances. "Why buy? Save it, we can't afford it. We may need the $$ in case things don't turn around." Pays to be realistic, of course, without getting unduly pessimistic (fear) or optimistic (greedy). There is also the unknown side to crises and some silver linings that can be overlooked in a full-blown crisis. I mean bear markets can be horrible. But for long-term investors (which most investors are, at least in part) who are using dollar-cost averaging, they are picking up new investments at cheaper prices. (They could be doing better with TA, but most investors don't have the time nor inclination for it) There is also the possibility of massive lawsuits by California and others due to energy price manipulation. An excellent article on price manipulation appeared over the weekend. (Also see JoanP's post # 34125). In today's WSJ there is the example of Northwest Aluminum in the northwest being shut down because of the energy crisis. Aluminum prices had been expected to drop because of the anticipated recession. Instead the shut down has buoyed prices and further increases are expected. Elsewhere in the U.S. smelters are operating at full capacity. I'm not a pollyanna, but sometimes I find it best to stand back from the negative screaming and try to get a different perspective. It's like going from looking at a cup of coffee half empty to looking at it as half full. And...............I'm still not convinced a recession is just around the corner. :>) -- yet! I just read your post #34158. Seems to confirm what I am saying. When we talk about something long enough, the talk itself simply exacerbates the problem and has a great tendency to become exaggerated and then finally self-fulfilling. The danger is there. It's real. Everyone can see it. But the real danger is "fear", which is just as dangerous and powerful as "greed".