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Monday, November 5th, 2012
electronic graveyard

To see the creative destruction in the world of electronics, take a gander at these iconic Japanese names.

The top panel shows how brutal the stocks of Sharp, Panasonic, and Sony have been.  The very first week of 2000 they got hammered and, while Sharp and Panasonic rallied back nicely for a time, they all are a fraction of where they were back then.

At bottom you can see the five-year credit default swaps for each.  They were all in the mid-double digits not that long ago.  Without the astounding rise in Sharp distorting the chart axis, the move higher in the other two would look shocking as well.  According to the CDS pricing, the odds of Sharp defaulting are now extremely high, and in the 30% range for the other two.

Who would have thought on the eve of the millennium that we’d see this evaporation of value?  What aren’t we imagining today that will come to pass?  The electronic graveyard beckons.  (Chart:  Bloomberg terminal.  In the great-minds category:  Between the writing and the posting of this I saw that the same stocks — with a different graphic — had been covered by Barry Ritholtz’s The Big Picture.  Check it out.)

Posted over the weekend:  Hurricane Sandy, climate change, insurance, and the process of investment analysis.