Fixed Effects Dummy Variables _Omitted and Best Model

Hi Stata Intellectuals,

I have one more quick question on fixed effect. I have a panel data with firm level characteristics over 10 years. I am currently running a code, but all fixed effect control dummies for year and industry are collinear (all of them are omitted). What is the reason for that? I found some previous discussions in this forum for one (witch is normal) or two omitted dummy variables, but not for all.

Here is the code:
(1)
xtset firm year
xtreg y x1 x2 x3 i.year i.industry, fe

in this case all dummies for year and industry are all omitted

When I run (as suggested in a previous discussion) :
(2)
xtreg y x1 x2 x3 i.year i.industry

the variables are not omitted, but if I don't specify fixed effect or random effect what is Stata running when I use xtreg?

An alternatively suggested model is the following:
(3)
egen both= group(year indu)
xtreg y x1 x2 x3 i.both, fe

or finally
(4)
xtreg y x1 x2 x3 , i(both) fe


In summery: when I use #(1) all dummies are omitted, why? What is xtreg running without specifying fe or re? What is the difference between 3 and 4? What is the recommended approach?


Thank you

Marco