6 ms·

Eventually maybe but the Capitol investment is high and only a few firms are in the market place who are capable of playing. If they enter they expand they will

Eventually maybe but the Capitol investment is high and only a few firms are in the market place who are capable of playing. If they enter they expand they will decrease their own margins and that’s generally not desirable. Why take risks if you don’t have to and you can live out your tenure as ceo collect big bucks and Retire without any. Everyone wants to run their business slowly into the ground US steel and K-mart style

pixl97 2y ago
This here. We see this cycle quite often. Some economic crisis in a product hits and the price shoots up. Other entrants raise capital for the rather expensive factories required to make the product in its modern form. By the time the factories come on line, the entrenched interests fat with profits plunge prices very low and for some time driving out the new players and then you see prices rise back to higher levels and maintain that price. It seems to many people don't realize it's not about making and selling the product. It's about the economic/money game. It's not about selling a car, it's about being a bank giving financing. It's not about selling a retail product, it's about credit cards. It's not about refining mined products, it's about controlling the willingness to invest in the sector.
creer 2y ago
Not saying it's wrong but that seems a strange. Around here there are still small mills - some with strange strategies where they will drive lumber large distances. Although they do specialize in this or that product. And seem profitable even though they are small. Meaning that the market can perhaps be entered with a small mill. But in many economic fields there are unstable states where all producers can be worried but happy not to expand and just raise prices - as long as nobody else expands. "Eventually" can be a long time.
- throwup238 2y ago
  It's not about the size of the mill, but the capital cost to build a new one. No one is willing to invest the capital in building new mills because the old ones can always undercut their prices and kill them long before they turn a profit. It's the economic equivalent of a prisoner's dilemma.
  - creer 2y ago
    That works against a large new entrant. No industry is going to lower their massive collective profit just to shoo away a small new entrant.
    - throwup238 2y ago
      Lumbermills are a local industry since transportation is a very significant fraction of the final cost. No one is shipping wood from Oregon to a mill on the East coast to sell to a construction company in California, so every mill is very much sensitive to local competitors. Ironically it's the larger mills that are insensitive to this dynamic, since they supply huge national customers like the big box stores or export to international markets. If Home Depot or Lowes decide their suppliers need a new mill, they finance it and it gets built.
      - creer 2y ago
        This is what suprised me when I did a (very cursory) look in there. It seems some mills do ship back and forth quite a ways along the West Coast. And I don't know that Home Depot and Lowes have that much of the market. They are not the ones that serve large construction projects. But if they did, it would be enough of a long term market that they could influence prices by funding new mills in exchange for more say into the price, a share of any profit, both, whatever. If they had this capacity, they could solve this funding issue.
    - deleted 2y ago
      [deleted]
    - jmalicki 2y ago
      Natural monopolies due to high capital costs are businesses like TSMC and ASML - you're not going to get a "small new entrant" with 4nm lithography for making high-end microchips.
      - creer 2y ago
        TSMC, ASML are as extreme as it gets. You might as well ignore them completely in this thread.
WalterBright 2y ago
Investment capital for large projects is why the stock market was invented.

pixl97 2y ago

This here. We see this cycle quite often. Some economic crisis in a product hits and the price shoots up. Other entrants raise capital for the rather expensive factories required to make the product in its modern form. By the time the factories come on line, the entrenched interests fat with profits plunge prices very low and for some time driving out the new players and then you see prices rise back to higher levels and maintain that price. It seems to many people don't realize it's not about making and selling the product. It's about the economic/money game. It's not about selling a car, it's about being a bank giving financing. It's not about selling a retail product, it's about credit cards. It's not about refining mined products, it's about controlling the willingness to invest in the sector.

creer 2y ago

Not saying it's wrong but that seems a strange. Around here there are still small mills - some with strange strategies where they will drive lumber large distances. Although they do specialize in this or that product. And seem profitable even though they are small. Meaning that the market can perhaps be entered with a small mill. But in many economic fields there are unstable states where all producers can be worried but happy not to expand and just raise prices - as long as nobody else expands. "Eventually" can be a long time.

throwup238 2y ago
It's not about the size of the mill, but the capital cost to build a new one. No one is willing to invest the capital in building new mills because the old ones can always undercut their prices and kill them long before they turn a profit. It's the economic equivalent of a prisoner's dilemma.
- creer 2y ago
  That works against a large new entrant. No industry is going to lower their massive collective profit just to shoo away a small new entrant.
  - throwup238 2y ago
    Lumbermills are a local industry since transportation is a very significant fraction of the final cost. No one is shipping wood from Oregon to a mill on the East coast to sell to a construction company in California, so every mill is very much sensitive to local competitors. Ironically it's the larger mills that are insensitive to this dynamic, since they supply huge national customers like the big box stores or export to international markets. If Home Depot or Lowes decide their suppliers need a new mill, they finance it and it gets built.
    - creer 2y ago
      This is what suprised me when I did a (very cursory) look in there. It seems some mills do ship back and forth quite a ways along the West Coast. And I don't know that Home Depot and Lowes have that much of the market. They are not the ones that serve large construction projects. But if they did, it would be enough of a long term market that they could influence prices by funding new mills in exchange for more say into the price, a share of any profit, both, whatever. If they had this capacity, they could solve this funding issue.
  - deleted 2y ago
    [deleted]
  - jmalicki 2y ago
    Natural monopolies due to high capital costs are businesses like TSMC and ASML - you're not going to get a "small new entrant" with 4nm lithography for making high-end microchips.
    - creer 2y ago
      TSMC, ASML are as extreme as it gets. You might as well ignore them completely in this thread.

WalterBright 2y ago

Investment capital for large projects is why the stock market was invented.