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Technology Stocks : Applied Materials No-Politics Thread (AMAT) -- Ignore unavailable to you. Want to Upgrade?

To: Proud_Infidel who wrote (6379)	7/4/2003 12:44:19 PM
From: runes	Read Replies (1) \| Respond to of 25522

<<inventory whose value decays very rapidly>> Actually, right now DRAM is appreciating. In the short term it's a supply and demand game. When demand starts rising, you just can't get enough supply (ala Kirk's opportunity cost). Which is why, at the first sign of spot shortages, the distributors/OEMs start hitting the "double order" button. But in the longer run, you are right - the inventory value decays - frequently all the way to zero. Which means that the distributors/OEMs try to keep inventory at a bare minimum. ----> Which just amplifies the need to hit the order button quickly and with a vengence. THere is a very good thought experiment on this in Peter Senge's "The Fifth Discipline" in Chapter 3. It deals with the dynamics between a beer retailer and a beer distributor and how the time lag between demand and supply destabilizes the whole process (resulting in overordering and inventories out of whack).