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

To: Bruce Brown who wrote (46413)	9/10/2001 3:09:01 PM
From: RobertHChaney	Read Replies (2) \| Respond to of 54805

Consider the overcapacity issue further. Let's say we get lucky. And, the recent posts by you, me and Paul Philp turn out to be basically correct in this analysis, and we finally see a bottoming of the tech stocks at some more reasonable level than the the 1970's/early 80's recessions. The next big issue becomes the shape of the recovery in the general economy and in tech stocks specifically - "V", "U", "L" shaped, or whatever. I'll pass for now on the general economy, because it does not seem clear to me now, until I can get a better handle of the true magnitude of the debt crises we may ultimately face. Regarding tech stocks, a "V" shaped recovery seems very unlikely to me at this point, primarily because of the massive overcapacity build-up you mentioned. The last time we saw an industry speculative bubble remotely like this one, was in energy in the 1970's/early 80's. I got to see this one first hand, and witness the awesome power of the subsequent "bursting". What was amazing in hindsight was that once inventories of oil, gas, equipment and services finally moderated, and demand finally bottomed and began to recover, it still wasn't anywhere near over for the "beatings" on profitability. Why - because the massive overcapacity that remained, continued to place strong downward pressure on gross margins for an extended period of time. It was just impossible to truly imagine the incredible amount of excess capacity everywhere, that could be generated in an industry where the world decides to place a huge part of its capital for an extended period of time. And companies invest ultra-aggressively on these unprecedented circumstances continuing for some time. Hope I am wrong. But, I am current thinking about factoring in a "U" shaped recovery in trying to decide when tech stocks reach fair value. I look forward to your further thoughts. Robert