NEW YORK (Real Money) -- We were all rookies once. Rookies are people not experienced enough to understand or interpret the patterns before them. They get confused because they have never seen them and they make mistakes. They make rookie mistakes when they fail to heed the patterns. At that point they can either get discouraged and go home or learn from them and play at a higher level.
Now, the difficult thing for most rookies to accept is that there is something they don't know. They have tended to know only success to the point when they are promoted to the new, more difficult level, so they might react with horror or shock when advice given to them doesn't immediately pay off, particularly advice meant to cut off high-risk plays that otherwise don't seem that risky.
So, they lash out when the advice, which is typically based on empirical evidence or well-known tendencies not otherwise visible to a rookie, doesn't pay off.
Such is the case with my advice and Micron (MU), the DRAM and flash memory maker that has done such an amazing job in the last two years of trying to both consolidate its industries and remain price disciplined so pricing doesn't fall apart (as it almost always has in the 24 years that I have followed the sector).Here's the setup. DRAMs and flash memory are both commodities. You get blueprints, you get funding, you build the plants, you produce DRAMs and flash. I wish it were more difficult than that. But it isn't. In times of high demand you can charge a lot for these kinds of chips, until, alas, one of the manufacturers of them says, "You know what, we can build a couple of plants and take advantage of the better pricing to reap big margins." Pricing stays firm until these plants open and then once they start putting out lots of DRAMs or flash memory then pricing begins to erode as the new supply is absorbed by the market. It's the law of supply and demand. The law of supply and demand is brutal and applies to everything from uncoated free sheet paper to gypsum wall board to coal, polyethylene, cardboard, fertilizer, disk drives, DRAMs and flash. If you are a customer of DRAMs you know the drill. You keep waiting for those new plants to come on line so the average selling price drops, helping your margins, which has been the case for many years in this market and is a main reason why personal computer assemblers could, at times, make so much money.
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