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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: elmatador who wrote (59874)	2/2/2005 6:56:32 AM
From: energyplay	Read Replies (1) \| Respond to of 74559

China issues - Might also add rising commodity prices, which work with 2) overcapacity. Overcapacity effects- There is a vast over capacity to make air conditioners. It seems to be easy to start and expand an air conditioner factory. This over capacity push down prices - the profit goes away, and there is pressure on the cost of labor. SO the labor and capital are supplied almost free. With the lower prices, consumers all over the world buy more air conditoners. Air conditioners use LOTS of copper .... The Commodity side - It's pretty hard to start a copper mine. They tend to take 2-5 years even if you know the ore body is there. So more air conditioners push a rising demand for copper, which short term doesn't expand. The air conditioner factor needs t ooutbid other uses of copper - copper pipe for building in the US, Brazil and Shanghai, wire for new resorts in Croatia and rebuilding Phuket, solar heaters in Washiington state, etc. So copper prices go WAY up - They capture more of the profits and cash flow from making air conditioners. ******* Now what are the loans for the air conditioner factory worth ? The factory will need new loans just to buy the copper it needs to keep running. Workers and managers don't get paid, internal deamnd in China drops, people can't pay their rent, real estate drops.... ###### Eventually the air conditoner factory gets sold to some one making windmills for power, or water pumps for agriculture, or maybe even rock drills for taking core samples for ore bodies (like say ...copper) What needs to happen is for the bank loan officers to get a little nervous, and not loan money to the 17th air conditoner factory that asks for a loan this year... Now, how does the bank loan officer get the judgement to do that, especially against the pressure of social connections ? @@@ Good judgement comes from experience. @@@ @@@ Experience comes from bad judgement. @@@ Silicon Valley venture capitalists funded 60 disk drive companies in one decade... There are 3 companies today. Texas over built office space by 50 % - occupancy in Houston and Dallas was under 60% (you need to keep breaking ground for new structures while just completed buildings are empty and unleased. It takes a special fool to persist in folly to this degree...) Shanghai, of course, is nothing like Houston. Weather and food are much better.