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  • #496
    Sten,

    If you’re talking about the money European telco’s spend on 3G licences I’d agree, this was an almost pure capital transfer, with relatively little costs attached to it. (like auction costs’, market studies, promotion etc) Of course, if they spend dozens of billions building the networks and it turns out people are just sticking to GSM we’ve got a real waste.

    But the TMT bubble in US constituted plenty of real waste as well IMO. You’ve to think of opportunity costs, billions are tied into telco networks that won’t be used for many years to come and the capital could have been used for pressing needs, like improving and expanding the electricity grid or expanding oil refinery capacity. Lots of capital was also invested into man-hours that have been wasted, as many IT-workers, managers, consultants and financiers (some of the best) invested their time and energy into internet-projects that were doomed to fail.

    It’s not just that there was such waste, but also that money was lend for it and the borrowers have to repay it, so there’s less capital left for other (hopefully more worthwhile) projects.

    I also think you’re far too optimistic about consumers, because the financial situation of households hardly improved during the downturn. How much more debt can they run up before they hit a concrete wall?
    DISCLAIMER: the author of the above written texts does not warrant or assume any legal liability or responsibility for any offence and insult; disrespect, arrogance and related forms of demeaning behaviour; discrimination based on race, gender, age, income class, body mass, living area, political voting-record, football fan-ship and musical preference; insensitivity towards material, emotional or spiritual distress; and attempted emotional or financial black-mailing, skirt-chasing or death-threats perceived by the reader of the said written texts.

    Comment

    • #497
      To me, the tragedy of the .com boom was not the Ponzi scheme wealth transfer (although that wasn't GOOD), it was the waste of labor time, equipment, executive attention, etc. on BS trendy ideas.

      Imagine if those resources had been put against some projects with higher payoffs.

      Pchang, of course there is a continuum. Becuase projects have a continuum of returns. I can still use the terms wasteful or productive.

      Comment

      • #498
        "Imagine if those resources had been put against some projects with higher payoffs."

        GP: What did you have in mind?

        "You’ve to think of opportunty costs, billions are tied into telco networks that won’t be used for many years to come and the capital could have been used for pressing needs, like improving and expanding the electricity grid or expanding oil refinery capacity."

        What makes you think that these projects were affected by the .com craze? Those have different risk profiles than dot coms.

        edit: btw, I think it was more of a wealth transfer than you guys give it credit. For instance, hyped up IPOs did little for the company (indeed, it starved them for capital now when they most need it), but a lot for Wall Street.
        Last edited by DanS; April 11, 2002, 12:29.
        I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

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        • #499
          Dan (flippant response): Paying me a couple hundred K to be a lab monkey.

          (serious response): standard stuff...improved efficiency for heavy industry (better steel-making machines, etc.), new pharmacueaticals, new thin film deposition methods for the electronics industry, blablabla.

          Comment

          • #500
            AAAAGGHHH!!!

            Dan you are DanSing again!!

            Comment

            • #501
              Dan,

              Capital is a scarce resource and if it hadn’t been invested it in a telco network or an internet retailer, capital-costs (like interest rates) would have been lower for other projects.

              It’s not the IPO itself that isn’t a capital transfer and constitutes waste (even though organising the whole deal has its costs), it’s the fact the money was used in projects that were worthless that constitutes waste, regardless of the question something physical resulted out of it.
              DISCLAIMER: the author of the above written texts does not warrant or assume any legal liability or responsibility for any offence and insult; disrespect, arrogance and related forms of demeaning behaviour; discrimination based on race, gender, age, income class, body mass, living area, political voting-record, football fan-ship and musical preference; insensitivity towards material, emotional or spiritual distress; and attempted emotional or financial black-mailing, skirt-chasing or death-threats perceived by the reader of the said written texts.

              Comment

              • #502
                "capital-costs (like interest rates) would have been lower for other projects"

                Isn't it true that capital costs were low across the board?
                I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

                Comment

                • #503
                  Low relative to what?
                  DISCLAIMER: the author of the above written texts does not warrant or assume any legal liability or responsibility for any offence and insult; disrespect, arrogance and related forms of demeaning behaviour; discrimination based on race, gender, age, income class, body mass, living area, political voting-record, football fan-ship and musical preference; insensitivity towards material, emotional or spiritual distress; and attempted emotional or financial black-mailing, skirt-chasing or death-threats perceived by the reader of the said written texts.

                  Comment

                  • #504
                    Originally posted by DanS
                    ...more of a wealth transfer than you guys give it credit. For instance, hyped up IPOs did little for the company...but a lot for Wall Street.
                    Both the IPO firms involved and Wall Street were/are primarily human capital, so the IPO money that Wall Street took a cut of got paid out in salaries and bonuses, and the bulk of the IPO money went into wages as well. Both were pretty pure wealth transfers relative to other types of industrial activities.

                    Part of the reason the boom was so strong is the wage factor... a lot of the money went from investment accounts to wages. That doesn't happen with transportation systems, mining, real estate, etc.
                    Be the bid!

                    Comment

                    • #505
                      Anyone who wishes to comment on GE's plunge yesterday?
                      DISCLAIMER: the author of the above written texts does not warrant or assume any legal liability or responsibility for any offence and insult; disrespect, arrogance and related forms of demeaning behaviour; discrimination based on race, gender, age, income class, body mass, living area, political voting-record, football fan-ship and musical preference; insensitivity towards material, emotional or spiritual distress; and attempted emotional or financial black-mailing, skirt-chasing or death-threats perceived by the reader of the said written texts.

                      Comment

                      • #506
                        Originally posted by DanS

                        Isn't it true that capital costs were low across the board?

                        Yup. In this case, too low - ie, the interest rate (or capital returns in general) did not balance savings with investments. For a while you can paper over that by importing capital and inciting savings through the promise of speculative gains. But in the end, government price fixing does not work.

                        Comment

                        • #507
                          "Anyone who wishes to comment on GE's plunge yesterday?"

                          About time.

                          Comment

                          • #508
                            The recent plunge is small compared to the drop over the last year or so.

                            So is GE fairly priced now? Or would you buy or sell if you were a trader?

                            Comment

                            • #509
                              Double Dip? Short Best Buy!

                              Anecdotally and from personal experience, the mid to high end home theater market is in a funk. It's a boutique market to be sure, but I can't help but think that other consumer markets are experiencing similar slowdowns...

                              Colon: Quite low in comparison to what these companies were able to obtain capital only three or four years ago. If anybody has Ibbottson's, I would be quite interested to see the average cost of capital for '95 through '01, for instance...
                              I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

                              Comment

                              • #510
                                Originally posted by GP
                                The recent plunge is small compared to the drop over the last year or so.

                                So is GE fairly priced now? Or would you buy or sell if you were a trader?
                                scratch the trader remark. Insert investor.

                                Comment

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