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   PoliticsFormerly About Applied Materials


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To: StanX Long who wrote (60884)2/22/2002 6:03:16 AM
From: Sam Citron
   of 70976
 
Fascinating '96 Fed meeting minutes at federalreserve.gov

Wish we could get them to join our thread. <g>

Excerpt: Lawrence Lindsey 9/24/96

...But that is not where I am most worried. What worries me
more is that our luck is about to run out in the financial markets
because of what I would consider a gambler's curse: We have won this
long, let us keep the money on the table. You can see early signs of
this. It includes real estate appreciation in the Hamptons,
Connecticut, and Manhattan. BMW and Mercedes both had their best
summer in history in the United States. The IBES earnings
expectations survey for 5-year projected earnings hit a 12-year high
in August. It indicates that earnings are expected to grow at a rate
of a little over 11-1/2 percent per year. Now, if we assume nominal
GDP growth of 5-1/2 percent over the same period, this means that NIPA
profits will rise from 10.7 percent of national income to 14.3 percent
of national income in 2001. Readers of this transcript five years
from now can check this fearless prediction: Profits will fall short
of this expectation. Unfortunately, optimism is ripe in the markets.
Excessive optimism is also necessary to justify current levels of IPO
activity and valuations of highly speculative stocks. While it is not
so large as to exert undue pressure on the real side of the U.S.
economy, this emerging bubble is nonetheless real. AS a survivor of
the so-called Massachusetts miracle to which Cathy Minehan referred
earlier, I can attest that everyone enjoys an economic party. But the
long-term costs of a bubble to the economy and society are potentially
great. They include a reduction in the long-term saving rate, a
seemingly random redistribution of wealth, and the diversion of scarce
financial human capital into the acquisition of wealth. As in the
United States in the late 1920s and Japan in the late 1980s. the case
for a central bank ultimately to burst that bubble becomes
overwhelming. I think it is far better that we do so while the bubble
still resembles surface froth and before the bubble carries the
economy to stratospheric heights. Whenever we do it, it is going to
be painful, however...

federalreserve.gov

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To: Sam Citron who wrote (60890)2/22/2002 8:15:24 AM
From: Sam Citron
   of 70976
 
George Gilder on C-Span Washington Journal now. eom

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To: Jacob Snyder who wrote (60840)2/22/2002 8:22:08 AM
From: Katherine Derbyshire
   of 70976
 
>>At the bottom, capital should not be available. Corporations should not be able to raise money (by selling stock, bonds, anything) to buildout infrastructure to serve any unproven market. <<

Maybe Alan Greenspan really is a genius?

That is, maybe by tightening interest rates when he did and then loosening them dramatically and rapidly, he managed to engineer a relatively soft landing. By doing that, he kept capital scarcity from becoming so severe that it strangled the recovery in its cradle.

Describing this as a soft landing is sort of a scary thought. But I think when the last speculative bubble of this magnitude broke they called it the Great Depression.

Katherine

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To: Katherine Derbyshire who wrote (60892)2/22/2002 9:10:26 AM
From: michael97123
   of 70976
 
Katherine,
Good point. Nasdaq is only down 3300 points. Unemployment is in the 5's, not the 7's and so on. Now we have to digest and get thru the effect of enron on the value of stated earnings going forward. mike

PS A question. When does an inventory correction end or can one go on forever? With business what it is now, how can this glut still be there? I realize that there are special situations(eg fiber) with explanations but i think most folks have gotten lean and mean at every level and the first sign of robust business will have wonderful bottom line results. Go to the store--no winter goods left and so on.

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To: Jacob Snyder who wrote (60841)2/22/2002 11:44:44 AM
From: Kirk ©
   of 70976
 
I'm driving through Montana on a family vacation. A Country radio station is on, volume turned up to drown out the sound of the 6 and 8-old fighting over Legos in the back seat. I ask "where is the nearest pizza place?" The car answers, "12 miles up the road, in Livingston". The 10-year-old says, "I want pineapple and bacon pizza". The car says, "You'll have to go to Billings for that, and it'll cost you 7$ more. Want directions?"

you spoil your kids. :)

When I go on trips with my lady friend with kids, we pack our own food to save money and time as well as to eat healthier. Now if we had a Star Trek replicator in the Suburban... (btw, with the money saved, we eat a nice restaurant dinner in the evenings).

Wireless web access... useful for the business professional who is on the road often and wants broadband in a $3,000 notebook PC.

Kirk

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To: StanX Long who wrote (60863)2/22/2002 1:16:55 PM
From: Proud_Infidel
   of 70976
 
StanX/All,

I would appreciate posts to a new thread I started. There are many very intelligent people here, who could contribute much to this.

Subject 52456

Brian

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To: Katherine Derbyshire who wrote (60892)2/22/2002 1:22:01 PM
From: StanX Long
   of 70976
 
Your posted, Describing this as a soft landing is sort of a scary thought.

Ask one of my many friend that was laid off and have yet to find a job, how soft this feels?

Stan

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To: Katherine Derbyshire who wrote (60828)2/22/2002 1:43:03 PM
From: mitch-c
   of 70976
 
OT - Evolution of Communication Speed
I actually wrote a grad-school paper (ca. 1994) on this subject, with an eye on business decisionmaking. In short, we've moved from an environment of fast messages with little content (heliograph, semaphore, etc) and slow messages with large content (couriers, sailing ships) to increasing both speed and payload.

The theory of constraints says *some* limiting factor remains. Until fairly modern times, the limiting factor on "good" decisions was timely information. Therefore, organizations evolved to delegate decision power to the local (geographic) level - viceroys, governors, "factors," and such. Distributed, but uncoordinated.

With the advent of mechanical and electronic communication, the speeds increased the geographic spans of decision power, and organizations responded by becoming more centralized - coordinated, but not distributed. For the first time, *too much* information became available, and it needed to be filtered - thus evolving the clerical functions of "middle management."

Now, much of that filtering can be done electronically, but the challenge of managing data saturation is a concern for *everyone* in a company, not just senior executives. Many line-level employees have to apply the judgement skills (and take the risks) that were reserved to the (now shrinking) middle-management. Conversely, risk-averse managers have a greater temptation to succumb to the sin of micro-management while sacrificing effective people-management.

My conclusion (at the time) was that organizations which emphasized trust and judgement at ALL levels were the ones that would succeed in an "information" economy. Coordination AND distribution were the keys to success.

So, how is this AMAT related? Well, I wrote that paper the year I was working (as a contractor) at Applied's Austin facility, and I was fascinated by the culture. The company basically served as the template for my conclusion. I haven't had any reason to change my assessment of the *culture* since - although the company has endured some fairly traumatic business cycles.

- Mitch

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To: Katherine Derbyshire who wrote (60892)2/22/2002 1:51:26 PM
From: Jacob Snyder
   of 70976
 
re: Maybe Alan Greenspan really is a genius?

Certainly, without the Fed's aggressive action, we would have seen the complete shutdown of the capital markets in late 2000.

In the 1800s, before there was a Fed, with completely unregulated markets, this is what happened, repeatedly. With the railroad buildout, there were repeated booms and busts. In boom times, capital was available to build parallel rail lines out to empty spots on the prairie. In bust times, no one could get any capital for anything. Even the best-run companies, run by honest people, would run out of cash with lines 90% complete.

IMO, the Fed has done little to decrease the excesses of the Bubble. By contrast, they have aggressively lowered rates and increased liquidity, to avoid a (worse) downturn. The problem with this is, it builds up Moral Hazard (rescuing decision-makers when they lose their gambles). I suppose you could argue that we'll see the Bubble deflated in steps, like a balloon with a tiny intermittent pinhole in it. But there is no historical precedent for that. The robust historical pattern, is that BigBooms (rapid buildouts financed with debt) always lead to BigBusts. And the conditions that have existed at the bottom of those BigBusts, has not happened yet. Which is why I think most of the talk about 10/01 being THE Bottom, is wishful thinking.

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To: John Trader who wrote (60849)2/22/2002 2:13:08 PM
From: Jacob Snyder
   of 70976
 
John, Michael, Maurice:

I've been on a roll, since late 2000, and made no big bad calls. But, before that, I've made some really horrible calls. Look at my posts on the WCOM thread in mid-2000. I thought WCOM was a Safe stock, a Value, at 40. I was loaded up by 30, and held all of it, all the way down to 13. So, please, don't think I'm a genius, just because my recent track record is good. I'm not.

I do everything in increments, precisely because I don't think I or anyone can call specific tops and bottoms. My AMAT sell at 50 didn't happen. But I offloaded all my TXN at 30, giving me the cash to buy back now. At some point the Bull Market will resume. Or maybe we get a Bear Rally that lasts a year, and brings the Nas (temporarily) to 3000. I spend a lot of time guessing, and post my guesses, but I am likely to be wrong a significant fraction of the time. And I change my mind a lot.

Where I am now, and Guesses-of-the-Day: At the beginning of this month, I was 35% cash. This week, a lot of buy points have been hit, in EMC, AMAT, CSCO, TXN, and CMH. As of today, I started using margin. Last October, I had posted I wouldn't start using margin until the Nas was tetesting it's October lows (1400). I'm buying more at higher levels (started using margin at Nas 1700, down from intermediate top of 2100) , because I now think we don't retest the October lows. I was very encouraged by the conference calls I listened to this earnings season. IMO, liquidity and a (modest) rebound in the fundamentals will put a floor under stocks. I expect that managements for tech companies will be cautiously guiding analysts to raise forward earnings/sales/margin expectations, and this has to be good for stocks. But war and valuations will put a ceiling on stock prices. In particular, I think our government is committed to overthrowing the Iraqi regime, a job much more difficult than the Afghan war. This can't be good for stocks.

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