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PLM stocks battered on Wall Street — why?

So everyone knows that the US Congress on Monday failed to vote to pass a $700 billion bill
to bail out the financial markets. Whether you’re for or against the bill is irrelevant; its failure
to pass cost investors $1.1 trillion. Almost twice what the bill would have cost in its entirety,
wiped out in a day. But the panic affected far more than the financial stocks actually under
discussion: PLM stocks lost nearly 10% of their combined value, going from $20.8 billion at
the close of trading on Friday, when a bail-out seemed possible, to $18.8 billion by the close
of the markets on Monday. [Note: this includes ANSYS, Autodesk, Dassault Systémes,
MSC Software and PTC. I simplified the picture to these five because they are by far the
largest and represent the market well.]

Why? Aside from the general "sell and get me out NOW" panic shown on the news, PLM
products are sold to industrial companies that rely on credit to produce their goods — and
PLM suppliers will therefore be indirectly affected until the credit market open back up. Car
companies take out loans to buy materials, pay workers and keep factories running. The
theory goes that if they can’t get credit, they can’t produce; if they can’t produce, they don’t
need engineering tools.

But this theory is flawed. In general, companies invest in tools and methods that enable
them to be more competitive when the belt-tightening eases — as, of course, it always has,
eventually. But with the good folks in my neighborhood Starbucks talking Depression (yes,
capital D, like in 1929), it may take a while this time, unless people far smarter than me can
figure out what to do and do it quickly.

It’s interesting to note that PLM company shares usually fluctuate at twice the rate of the
Nasdaq — if the Nasdaq goes down 2%, PLM shares go down 4%. But this time, the
declines were aligned. On September 29, the Nasdaq fell 9.14%, PLM shares fell 9.66%. I
can’t help but wonder if some investors believe that PLM are a good investment at a time
when many things aren’t?

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