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Microcap & Penny Stocks : ABTX - Agribiotech -- Ignore unavailable to you. Want to Upgrade?

To: Franklin M. Humphreys who wrote (1002)	11/27/1997 4:30:00 PM
From: Jim Lang	Read Replies (1) \| Respond to of 8359

Franklin, I am no macroeconomist, so take anything I say with a grain (or bucket) of salt. Here is my simplistic explanation, much of which is probably bulls**t. Others should step in to correct me. If we go into a period of serious global deflation, i.e., several percent per year, the prices of almost everything will drop. This occurred during the Great Depression when prices eroded by over 10%/yr for several years, leading to huge operating losses by business, plant closures, unemployment, etc. In contrast, as I understand it, if deflation is modest the effect will be most pronounced and direct for commodity producers such as mining, energy and farming (check out the chart on the Bridge Futures Index lately). The effect on manufacturing, and probably high tech as well, is less clearcut; prices for raw materials will drop and lower cost of goods sold, but companies may not be able to raise prices, thereby affecting their margins. Service industries to the manu/tech sector will be hit by decreasing demand as capital improvements are delayed, etc. If deflation is restricted to certain regions, such as SE Asia in the current situation, the effects are even less obvious, and might be specific only to certain industries. The reason I believe that ABTX will not be substantially affected by modest deflation is that they would receive the benefits of lower fertilizer and energy costs, for example, but they would feel little pressure on their ability to set prices. This is largely because of the limited options forage producers have for source of seed and because, intuitively at least, demand for forage and turf grass may not be particularly sensitive to overall economic conditions even if the price of baled alfafa falls. Of course, the effect on the stock price might still be dramatic, as deflation could cause earnings growth to slow or even disappear, dragging the entire market down in flames. FWIW, Jim L.