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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Ilaine who wrote (32929)	9/26/1998 11:08:00 AM
From: Knighty Tin	Respond to of 132070

CB, I am suggesting the natural hangover of capacity that one gets from easy credit policies and the business cycle. Nothing sinister. Just fear and greed in action. It is not lack of demand as consumer spending is still roaring, one reason why we have no savings rate. But you give easy credit to Southeast Asia, for example, and they look around and say, "what is hot where we can make money?" Chips, computers and other electronic products were the answer. But, once all that capacity jumps in, the area cools rapidly. Prices decline, which spurs some demand, but how many computers do we want? Of course, to finance this credit, the natural resources side of the economies produce full out, causing a glut there. Food, oil, gold, etc. decline. And, since they are basically the collateral for the mfg. crapola, the whole thing is a house of cards. This question about businessmen being idiots was asked of me back in 1995. Several ungracious folks on Prodigy disagreed with my projection of a disastrous chip glut on the horizon with notes like, "all these top CEOs are stupid and Mike Burke is the only one who knows what is going on. That makes sense. -vbg-" Well, they were only partially wrong. I wasn't the only one who knew what was going on. There were at least a dozen of us who read the news and travel to foreign countries. -g- But they were sure right about the CEOs. Some of these guys were on CNBS making outrageous statements, which they believed. TJ Rogers, the Stalinesque CEO of Cypress told us his co. was recession-proof, basically because the CEO was a genius. -g- And the CEO of C-Cube told us that there was no chance of a turndown in his co's profit margins right before Intel and IBM set up shop across the street from his products. -vbg- These guys are not really stupid. But they do have a vision problem. They can only see what is happening now and then they project that out in time forever. The chip cos. are just a good example. They are hardly alone. The biotech industry didn't think much about what happens when 15 cos. come up with Aids products all at once. What happened was, nobody made any money. The banks never asked, what happens when the collateral declines in value and our debtors no longer have cash flow. The farm equipment cos. expanded in the face of falling farm product prices. Easy credit makes brave men of natural cowards, and once they take lots of stupid risks and realize that they are walking in Central Park alone at night, they panic fairly quickly. This time around, stuff like options scams and stock buyback shell games have simply exaccerbated the situation. They didn't cause it. They just made it worse. MUCH worse. MB