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

To: akidron who wrote (23556)	8/28/1998 6:15:00 PM
From: derek cao	Read Replies (2) \| Respond to of 70976

Re: once we'd munched through Asian overproduction IMHO, Asian overproduction should be munched by Asian themselves. AG has already doing enough by allowing the money supply grow. Derek

To: akidron who wrote (23556)	8/28/1998 7:03:00 PM
From: Duker	Read Replies (2) \| Respond to of 70976

Akidron, Fed intervention is always a bit interesting. First, 1/2 of the discount rate. [Without getting all requisite quotes] I think that would really be only a token gesture at this point. Overnight, the long end ticked into the 5.2x%'s. Fed Funds and Eurodollar rates are already below the discount rate -- do not have the exact spread. In essence, the market has already lowered rates for the Fed. I really do not know what would happen with a 200Bpt drop, but I would guess that financial panic would ensue. I know you did not mean 200Bpts literally, and I see where you are going with it ... can not stop the market. Agreed. As far as inflation. That is really sticky. Wages and the job market continue robust in the US. Except for certain sectors [SemiCaps, Footware,...]. Tough to know. I just do not know anyone with pricing power [except, Anheuser Busch who thinks they can raise prices in selected markets ... Miller (MO) would probably welcome such a move to garner more share for its less than stellar brands]. Competition is really fierce. Owners of Class A office space in CBDs of in selected cities seem to exhibit some pricing power ... but the cranes are up and the concrete is being poured...so that will not last. Again, competition is tough. On the demand side. I would be scared to work through the Asian overproduction too quickly ... unless Asia itself was turning around ... because that could mean that the US and Europe were probably overheating. Then there is global deflation. That is no prize. I think the next couple of quarter are really going to be telling. I am actually interested to hear from INTC [not Tom K. or M. Edlestone] how their business is doing. It is not out of the realm of possibility that there may actually be some uptick in there business. Obviously, it could easily go the other way. Just a whole bunch of strange data points floating about. Difficult to connect the dots in the short-run. I would have to say that it is really interesting, but not altogether useful. It would seem to me that you have to be comfortable with the companies you buy and the price at which you buy them. Sounds so simple. I think it is. It is easier for me to look at AMAT and say that I am starting to feel more comfortable building a position here at these levels. With LRCX, I am beyond comfort -- ecstasy? But, I will be the first to tell you that there is real downside in both names. [IMHO, there is more downside in AMAT than LRCX (please, no need to respond to that).] Still, I believe that the macro ills will work themselves out. This is still a pretty good business (SemiCap). Over time, one can see that it earns above average returns. There are periods where the returns stink, and there always is the chance that you do not return to "normal." (i.e., in essence, there is a structural change in the industry). But, nothing is a sure thing. This holds for more than just AMAT. Look at NKE. If, on Monday moring, Warren Buffet were to disclose that he had taken a large position in Nike (over and above the stake that Lou Simpson has accumulated at GEICO), I (for one) would kick myself for not having owned it. I've read the annuals/quarterlys/releases religiously. I have walked through the numbers on a normalized basis. I have a squishy feeling how much the brand is worth. I do not have to work too hard to come up with a "more normal" EBITDA of $1.8bn. With ~$350mm in net debt on 298mm shares. I come up with roughly 6 x's normalized EBITDA. Not exactly a "brand premium" multiple. I can hear myself: I always buy the product; it is so clearly a Buffett stock; I should have seen this coming; I knew that the CapEx will drop significantly in FY00; I could see the inventories improving; I DO NOT KNOW WHY I DID NOT BUY IT (as you can tell, I have bought some ... but the story is for illustrative purposes only). Do you think that the market would be a bit more generous with its valuation if BRK had a stake? Yes. But that is not really the point. As a LT investor, I want to think in terms of buying the business. Buffett may never own Horace Mann, but that does not mean that it is not a great PC company, with great returns and a great model. The same holds with an AMAT. If you have the patience to wait to buy where you are comfortable, the market volatility is a help not a hinderence. And if the market becomes completely illogical (LRCX, IMHO), you add to the position -- understanding that there are still another $13+ in downside. I am a big boy and am comfortable with market gyrations. I have proven in the past that I am not always right. But, I want to try to stick to my discipline just the same. --Duker Sorry for the twaddle (to borrow a phrase from C. Munger). Akidron, I agree with you on that INTC thread. Strange stuff.