Q. Any signs that lead you to think the trend will be different six to 12 months from here? That excess capacity will be wrung out?
A. ...What we are looking at now and seeing six months from now is a black hole. The semiconductor space is like the Space Moutnain ride where you are on a roller coaster in the dark. People talk about a V shaped recovery or a U shaped recovery or an L shaped recovery. We're still in the very steep first part of the V and we are not even thinking about whether or not it is a V or a U or an L. We're in the dark and we are accelerating down and we don't know where the bottom is. But it doesn't feel like it's anytime soon. That's a very different feeling than we had at the top, when we were expecting the beginnings of the unwinding. One of our investors is a very large distributor of motherboards. He has a good view into overall business trends across a lot of different sectors. We check in with him frequently and he was saying that November was just terrible, business fell off a cliff. December was even worse. January made December look like a picnic and February is worst of all. The last two weeks have been the worst he has ever seen. Not only is business deteriorating, it seems to be deteriorating at an accelerating rate.
Q. Have your business contacts seen these conditions before?
A. No. Uniformly, they say it is the worst enivronment they've ever experienced. Everybody understands things are deteriorating. All we are looking for is the first hint that maybe the rate of acceleration in the deterioration is slowing. All we need to hear is that things are leveling out, that finally the last two weeks weren't as bad as the previous two. Or maybe order rates or bookings have flattened out, or customers are paying faster than we thought they would. We have the antennae up looking for any sign of potential improvement. Stocks might bounce around and you might get tremendous volatility as people hope for bottoms because valuations look reasonable. But until we hear things have either stabilized or maybe even improved a little bit, it is hard for us to get bullish.
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Keep in mind that the former commentary is focused on tech, precisely where the capital overinvestment has taken place. The reverberations throughout the larger economy are hard to predict. (Though note the deterioration in the Dow last week.) In that space there is the lurking danger of consumer debt and of the current political climate which favors tighter money and more takeaways from the working class, both tendencies serving to exacerbate whatever recessionary forces have now come into play.
Without an organized working class, it looks grim. (I know that sounds like some commie refrain, but it's true.)
Joanna