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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Steve Robinett who wrote (13723)	12/21/1997 4:23:00 PM
From: davesd	Read Replies (1) \| Respond to of 70976

Steve, lets say the other farmer finds a machine that allows him to produce 20 spuds. This puts the other guy in a losing position....so does he dump this newly bought machine and buys a new one that yeilds him 25 potatoes....and how long does this go on for....sooner or later they both will run out of money....meanwhile with all this new productivity the profit in potatoes has crashed...supply has gotten ahead of demand while the farmers were duking it out to beat the other guy....and they have tons of debt due to the new machines. And the banks won't loan them any more money...plus the small incremetnal productivity gain from the next upgrade again won't pay for the new technology. Now they are up to 30 potatoes each....but 25 of them go to pay for the new machines...so the net is a loss. Glad I didn't get into the potato business..... dave

To: Steve Robinett who wrote (13723)	12/21/1997 5:14:00 PM
From: davesd	Read Replies (1) \| Respond to of 70976

Steve, It's interesting that you use the farmer example. My dad's a farmer and he survived the late 80's when farm aid concerts were being hosted by Wille Nelson. In the mid 80's a couple of the neighbouring farms spent alot of money on new John Deere tractors, new spray rigs and drip irrigation. They sure cut the cost of production. Their cost of production was lower than my dad's and others in the area....but they took on alot of debt to get there...unfortunately, for them the farming recession hit and the price of produce fell and the price of land followed. It wasn't long before the banks were knocking on their door. Since the equity in the farms was apporaching zero, they could not get anyone to loan them money to continue farming. During this time, some farmers like my dad cut spending and made due with what they had to conserve the cash on hand waiting for the the maket to turn. Over the last few years the market has turned for the better, those guys who put in the fancy stuff are long gone and my dad and others now owns their land. Many big name farmers disappeared in the late 80's cause they over expended themselves. Unfortunately, how were they to know that the downturn in farming was going to last for over 5 years. I think the same can apply to chip making....look at MU for example...as the market turned down...MU put the brakes on spending...they still have cash in the bank to survive the downturn.And buy the latest new tools when the upturn starts. Those who are still investing on tool in a downturn may over extend themselves and not make it to the next upturn or have cash to buy the latest tools at the start of the upturn. dave

To: Steve Robinett who wrote (13723)	12/21/1997 7:02:00 PM
From: ratan lal	Read Replies (1) \| Respond to of 70976

Steve << If one of the farmers buys a machine that lets him produce 15 potatoes per acre for an hour's work, he can spread the cost of the machine over many seasons and sell his potatoes cheaper >> Simple is right. You forget the cost of depreciation, repair and replacement. If it depreciates faster than the # of years of additional 5 lbs per acre generated, then he is essentially losing money. This is exactly what happens in Semis. before teh m/c is fully depreciated, it needs to be replaced to stay competetive. ratan