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

To: RobertHChaney who wrote (46417)	9/10/2001 5:05:27 PM
From: Robert Scott Diver	Read Replies (1) \| Respond to of 54805

The growth rates for energy demand growth is likely much smaller that the current demand growth for processing power, storage, bandwidth, .... JMHO, Scott Also, megawatts don't become obsolete.

To: RobertHChaney who wrote (46417)	9/11/2001 12:56:04 AM
From: Bruce Brown	Respond to of 54805

Consider the overcapacity issue further. We all have to consider it further because it is a huge issue. 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. Ah, the alphabet. It seems unlikely to most that a "V" is anywhere near being in the cards. On the other hand, we cannot label all of technology in the same manner. In other words, demand will be higher in some specific areas than others. Yet, the general recovery will need a lengthy amount of time - whatever letter one assigns it. 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". Isn't that the truth. In the 70's, my mother went to work for an oil and gas drilling company that specialized in pretty deep drilling in the plains. Her work was all involved in the paper work and legal work of mineral rights. Anyway, a percentage of my classmates actually dropped out of high school to go to work in the oil fields, survey crews, etc... because the money was so enticing. Real estate shot up. Population increased as the influx of oil field workers moved to town and companies set up shop. New restaurants and stores were built. Euphoria. All was well as long as the price of oil stayed high which made the cost of drilling so deep profitable. Once the price of oil dropped, the cost of drilling so deep was a non profit exercise and the boom was over as quickly as it started. I moved to Houston at the end of the 80's and saw the left over results of the oil boom in that town. Real estate projects stopped in mid construction all over town. Vacant strip malls. Unfinished this and that. Everywhere. Thank goodness they had finished the opera house with money raised during the boom years. All of the above is much the same in Silicon Valley and other technology enclaves throughout the globe. Massive build up, speculation and overcapacity. 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. Very good comparison. Although price wars are nothing new in technology, we know that the wars are now not just about grabbing market share, but are about the overcapacity issues with too many players fighting for too little pie to survive. The good news is - just as in the oil boom - they don't all have the resources (bad pun) to fight out a lengthy war. So the pebbles will quickly be distinguished from the stones and the boulders who have more resources. One would like to add the twist of category leaders with proprietary solutions that solve mission critical problems as having a leg up provided their products are in an attractive product adoption cycle. Of course, that's what this board is about. We know the 'winners' of previous games that have moved into a more mature portion of the product adoption life cycle and have generated nice cash positions with little or no debt. One has to like their chances of survival in a protracted bubble burn off when it comes time for seeing what is left in the aftermath carnage. One also has to realize, unlike the much more mature industry of extracting minerals out of the earth, that new problems continue to arise and need to be addressed with solutions that fix those problems in technology. That's almost a never ending cycle in technology which does not appear in the oil and gas industries. The extraction process is quite mature and the industry is very tied to global political issues which can fluctuate heavily based on the supply/demand issues of reserves. Yet, the ongoing developments for alternative and hybrid types of energy sources will continue as time unfolds and quite possibly will expose new overcapacity issues within that industry. 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 think the market is telling you that you are not wrong and it is helping you factor in that "U" shaped recovery. It will also help factor in the big rocks from the little pebbles as the survival war unfolds. BB