Yep, TJ, them's the ones
to clarify, I think the equipment stocks are both more cyclical, and more richly valued. later this year I may very well be long some semi names and short some equipment names.
for now though, yes, I think the CSFB guy and the other couple pessimists quoted in the SS piece have got it wrong. if you want to stack up the credibility of the CSFB guy against Morris Chang, it's no contest - in terms of experience, and particularly in terms of current insight into order books and the tone of business and demand. Although I will say, however foolish the CSFB guy may be for thinking he sees the industry better than Chang, he certainly doesn't lack for chutzpah.
The problem with some of the more pessimistic guys is they're just working theoretical numbers and trying to match them against previous cycles -- as though it was purely a quantitative exercise that required no interpretation.
It reminds me of the kid who knows how to mimic the words the adults are saying, but has no idea what they really mean. When trying to then use them in sentences without real understanding of meaning, final language output is bound to get mangled and screwed up.
Historically, rapidly rising prices and maximum capacity utilization has come within 3-6 months of the cycle peak. But the characteristics of this cycle are different than past cycles, most specifically because capacity hasn't been added on with the reckless abandon of past cycles. More importantly, the demand side of the equation simply doesn't exhibit the characteristics it would near a peak. We don't see accelerated and exaggerated end-demand projections being used to drive parabolic increases in orders. The price increases are more the product of starved production and relatively slower rate of changeover from 200 mm to 300 mm (and .18 to .13 and .13 to .09).
I think we'll see this cycle last well into 2005, likely second half. So perhaps Chang is a bit optimistic. But I also think this cycle will be notable for its lack of amplitude relative to past cycles. I expect the relative peak to be lower, but also the "fall back" to be less devastating.
FWIW, just one man's opinion. But I would pay more attention the metrics and assumptions used by these analysts to come up with their pronouncements, than the pronouncements themselves, then make your own judgement based on what you think are the reasonable metrics.
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