Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Seagate Technology -- Ignore unavailable to you. Want to Upgrade?

To: Robert Douglas who wrote (5138)	6/19/1998 9:36:00 PM
From: Pierre-X	Read Replies (1) \| Respond to of 7841

Re: Inventories; Policy Error; PC Worldwide demand Mr. Douglas said: And please feel free to tear apart anything you see me write. Egos and capital gains do not mix. I commend you on your advanced attitude. I am of the same view -- far better to suffer humiliation here than to suffer BK. I'll be sure to cite this if I ever need to disagree violently with you. <g> - - - Inventories I did a bit of desultory poking about for historical numbers but there turned out to be a signal-to-noise problem, so I desisted (for now). On the PC front, there's nothing mysterious going on (except in the way our beloved companies measure these things.) Change in Inventories = Total Production - Total Consumption What we have going on now is Production growing faster than Consumption => rising inventories. It is furthermore evident that a slowdown in Consumption is responsible for the imbalance . . . I believe we are all in agreement about that. The economic data represents such growth as "Inventory Investment" which is a horrible term (in a discipline abundant with horrible terms -- I mean, who the hell would ever guess that "rent" = excess profits.) Anyway, "Inventory Investment" makes it sound like a good thing, when any student of process control could tell you than inventories should be as lean as possible. In sum the correlation between inventories and economic cycles is unsurprising. Mr. Douglas said: You will notice what a disproportionate effect that inventories have in the business cycle. Then later Mr. Douglas said: I am not attempting to establish cause here Are you saying that inventories are a primary driver of economic cycles? I would venture to say that the converse is true. Inventories are the result of misalignment between production and consumption => a trailing indicator rather than a leading one. Trailing indicators are good for telling you where you've been but no use to investors scrying into the future. - - - Economic errors Clearly U.S. policymakers have erred grievously in many noteworthy cases throughout the history of domestic economic policy. But a great part of the reason we are able to recover from such errors lies in our good fortune to live in one of the best-architected and best-maintained political-economic systems ever devised by man. Amongst the thousands of nations in the world, the only others to have legitimate claim to such status might be independent Hong Kong and Singapore. (As I understand it. Never been there myself.) The emerging economies will continue to suffer extremes in booms and busts until their political and economic infrastructure evolves (or revolves) into such as can sustain stable long term growth. Autocracies and barely-concealed martial rule hardly lend themselves to stability. I'm not making a case for Asian economic depression -- the world is too tightly bound, now, for their various trading partners to allow it without intervention; indeed intervention has already begun spearheaded by the IMF, rightly or wrongly. - - - PC demand Thus, worldwide PC demand will continue to limp along, not falling down completely, until the next killer app comes along. One cannot discount, however, the disturbing possibility (disturbing to current PC sector investors) that the killer app may take the form of some kind of handheld device or specialized appliance. Not likely, in my opinion -- indeed the entirety of PC history (now approaching a respectable 20 years) argues against specialization and device divergence -- but the hypesters have adopted these as their shill-du-jour. God bless, PX