What happened to Nortel (NT:NYSE - news - boards) and Lucent (LU:NYSE - news - boards) and Cisco (CSCO:Nasdaq - news - boards)? What really went wrong? This multipart piece is designed to help you understand what the term "secular" is -- as in "secular decline" -- because that's what I see going on here.

First of all, there are two kinds of declines: secular and cyclical. A cyclical decline is usually an inventory decline. A secular decline is something longer-lasting that doesn't reverse. We saw a cyclical decline in oil for several years as OPEC pumped too much. When that inventory glut wore off, we had a cyclical snapback, which exists today.

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A secular decline is quite different. There was a secular decline in buggy whips after the combustible engine came onto the scene. There was a secular decline in black-and-white televisions after color televisions got cheap. There was a secular decline in train use after cheap trucks and cheap highways came into use. You can still make money with trains.

You can't make much with black-and-white televisions. You can't make anything with buggy whips. Now, let's compare these nonidentical twin declines to telecommunications spending.

For many years, the equity and debt markets were incredibly receptive to different phone companies that chose to raise money. If you were a financial whiz, you could snare an AT&T (T:NYSE - news - boards) guy (heaven knows there were enough of those around), go to an investment bank and raise equity, bonds and convertible bonds (bonds that convert into equity if the stock moves up) at very advantageous prices.

You could do that for several reasons. One was that the demand for telecommunications seemed unlimited. Second was that the telecommunications industry was allegedly deregulated by the Feds in 1996, giving anybody a chance at competing against the old regional bell operating companies. And third was WorldCom (WCOM:Nasdaq - news - boards). We forget now, because WorldCom has been such a dog, but there was a time when this stock was the greatest wealth creator of all time. People wanted to get long the next WorldCom in the worst way.

So dozens of worst ways were created.

More than $300 billion got raised by this one industry alone. That is much, much more than the amount of money that the dot-coms raised. Much more. We began to believe that it was possible that we could have as many as 14 different telephone companies in this country. Plus, all of the phone companies in Europe went through a similar explosion.

Every one of these companies had to raise money to buy equipment. Now we all know that the dot-coms had to go buy Sun Microsystems (SUNW:Nasdaq - news - boards) servers and Vignette (VIGN:Nasdaq - news - boards) and Art Technology Group (ARTG:Nasdaq - news - boards) software, and they had to pay Exodus (EXDS:Nasdaq - news - boards) and a couple of other toll-takers.

When these phone companies raised money, they had to pay Lucent, Nortel and Cisco, as those companies made the giant systems that these phone companies needed to compete with each other. Remember, every one of these phone companies was competing for the same business. Some of them could afford to buy quicker, better equipment than others. But for the most part they needed stuff from these three (as well as Corning (GLW:NYSE - news - boards) and JDS Uniphase (JDSU:Nasdaq - news - boards)).