As promised, a “ future tech edition” of The 5… but first, a new rule of capitalism
Obama’s first decrees… and three techs that will profit
The one good byproduct of the 2009 election… Patrick Cox on the growth of “new media”
Byron King with a word of tech caution… the fall is always furthest from the top
Plus, the housing dive deepens… the latest (record-setting) home price index
“New Rule: neomercantilists, neoconservatives and statists are no longer allowed to call themselves ‘free marketers’,” Briggs Armstrong wrote on the Mises.org site this morning, “People who call themselves free marketers such as Bush, Paulson, Greenspan and Bernanke are the primary threat capitalism faces. These false prophets of capitalism are the greatest friends that proponents of socialism have.”
In the battle between socialism and capitalism, the New Dealers, beginning with Franklin Delano Roosevelt and John Maynard Keynes in the 1930s, have always maintained that massive government intervention in markets is the only way to save capitalism from itself and preserve it for the next generation.
It’s no secret with the Obama administration that we’re in the throes of a whole new set of New New Dealer intervention. Chris Mayer outlined some winners in the game for “infrastructure spending” in this morning’s Rude Awakening. Today in The 5, we look at the first major technological decree from our 44th president.
"I want to be clear from the beginning of this administration,” President Obama promised yesterday, “that we have made our choice: America will not be held hostage to dwindling resources, hostile regimes and a warming planet."
The old-timers will tell you, “Don’t fight the Fed,” and we don’t plan to go against the Feds either.
But we’re going to try something a little different. We’re going to try to play this trend like the philosopher in Plato’s Republic. In The Republic, the philosopher recognizes he’s in a cave and the images he sees around him are flickering shadows on a wall. His goal is to get out of the cave and see the world as it really is. Then go back into the cave and help his fellow men see the images for what they really are: an illusion.
Here’s our first image:
The first African-American president has enormous popularity and a mandate by at least 2 million Mall-going inauguration attendees to “do something” about the economic crisis.
Here’s our second image:
The outgoing white guy is perceived to be the source of all the ailments of today’s economy. At least, from a policy perspective. So…
Obama reversed a Bush policy that prohibited states from raising vehicle emission standards , much to the delight of clean air enthusiasts like Arnold Schwarzenegger… and the dismay of automaking states like Michigan.
The Transportation Dept. must prepare for drastically higher auto fuel-efficiency standards in time for the 2011 model year. Obama set a goal to improve fuel-efficiency in new cars by 40%, to a minimum of 35 mpg by 2020.
“Personal transportation stands to undergo a dramatic shift over the next several years,” writes our small-cap analyst Greg Guenthner. “Auto sales will probably remain in the gutter for the entire calendar year — but this might not be entirely due to the economic climate. Consumers are demanding better cars and trucks with superior fuel economy — and right now, most car companies are not delivering. In fact, average fuel mileage of American cars hasn’t changed much at all in the past 25-30 years… An old Dodge Colt will get you better mileage than a brand-new Honda Accord. But there is a fix coming (even if it is long overdue).
“What we’ll see next is second-generation hybrids. What does this mean? Better batteries, for starters. Hybrids not only get better mileage because of their electric power — it’s also a weight issue. But the old-school nickel batteries are really heavy. That’s why car companies are seeking out the newer, smaller lithium-ion batteries. They produce more power and can be a lot lighter, since they don’t run as hot (they won’t need a big, heavy cooing system).
“One small battery developer has been introducing new developments to the market that could forever change hybrids. In fact, it threw one of its battery designs into a regular old Toyota Prius last spring and was able to achieve more than 75 miles per gallon in city driving tests… It’s also heavily involved in plug-in electric vehicles for municipal use over in Europe.”
Naturally, Gunner has this battery developer in his Bulletin Board Elite portfolio. You can access it by subscribing, here.
Another boom we’re expecting: “New media.” Obama, and our friend Ron Paul, helped highlight new media last year with their respective presidential campaigns. The candidates used social Internet tools — e-mail, Facebook, MySpace, YouTube, Web sites, etc. — to raise much more money than anyone thought possible.
“It is an interesting modern phenomenon,” notes our tech adviser Patrick Cox, “that there are people who find their purpose in life freely distributing (often copyrighted) media. This has been the case since the Internet arose, and it is now an unstoppable force.
“There are, for example, many Web sites that provide YouTube and Google Video playlists for everything from the latest movies to hit TV shows to albums. If you’re not already able to stream these on your television, you will be soon. You might not want to, though, since hi-rez computer screens and broadband are more and more common. Those with a little more Web savvy can download DVD-quality movies with little trouble — sometimes before they’re released in theaters. A $10 USB memory stick holds five or six DVDs these days.
“It’s no surprise, therefore, that auditor Deloitte Touche Tohmatsu has just released a study showing that traditional TV viewing is down significantly, especially among younger audiences. There is evidence that cable and satellite providers are also losing TV subscribers to the Web. Networks are, of course, tightening belts and cutting back on programming. Money, though, is streaming to independent and often accidental content producers who share revenue with YouTube and other sites. As I’ve said, my kids are far more interested in their favorite YouTube subscriptions than they are in network fare. If they watch TV at all, it’s usually on their computers.
“The bottom line is this is not the time to own traditional media companies. If you’ve got stock in the networks, dump them like you did newspapers when I told you to. Silicon Valley or its equivalent will eventually own Hollywood, and I’m looking at some of the likely players now.”
“The regulatory treatment of stem cell therapies,” Patrick continues in another tech vein, “is set to change quickly with the Obama administration. That change will accelerate even further when these therapies are offered offshore and the American public begins to understand what is possible. And what is possible is simply amazing.
“Of all the incredible medical breakthroughs taking place right now, regenerative medicine is the most exciting. Only stem cell and telomerase therapies offer the ability to reboot the very cells of our body and extend maximum life spans. I can’t even estimate the value of that market. Even die-hard Republicans should see a brilliant silver lining in the Obama administration’s intention to encourage stem cell therapies. Stem cell and other developments that are just around the corner will provide you with more than ample opportunity to earn truly historic returns.”
For more on investing in the stem cell techonologies about to be advanced by the Obama administration, you’ve got to check out Patrick’s latest report.
One last piece of advice from Patrick as we enter this new new administration: “ I spend a lot of time talking about the big game-changing breakthroughs of the last few years. That list includes advances in stem cells, the decoding of the human genome, genetic engineering, accelerating microprocessor technologies, robotics and nanotech advances.
“They are each revolutionary in their own right, with no historical precedent to adequately compare them. As a result, people tend to think of them as separate developments.
“We shouldn’t. Usually, seemingly unrelated technologies propel one another forward in unexpected ways. This has always been the case. It is the synergism of scientific progress. The exponential rate of discovery we are experiencing now is due largely, in fact, to the convergence of a broad range of technologies. In the process, extraordinarily profitable opportunities for investors are emerging.”
We also expect to see more cool things like this:
That’s inside a new dorm at Drew University in New Jersey. It’s got all the typical cliche “green” additions, but here’s the kicker… it’s heated and cooled entirely by geothermal energy. The building sits atop a network of piping that extends 420 feet into the ground, where geothermal deposits remain at a constant 55 degrees.
But let’s not kid ourselves: This investment boom will largely be driven by government stimulus. Once that stimulus is removed, many of these companies will not survive. Likewise, we’ll continue to be wary of the government’s penchant for overprinting.
“Societies develop layers of complexity to solve problems,” says Byron King, fresh back from a trip to Manhattan, where he happened to witness the extraction of the US Airways plane that crashed into the Hudson last week.
“There were New York police and firefighters. There were Port Authority cops. There were New York Dept. of Environmental Conservation people and folks from the U.S. Environmental Protection Agency. There were New York City Hazmat people, the Army Corps of Engineers, the U.S. Coast Guard and the Federal Aviation Administration. There were people from the State University of New York scanning the river bottom with sonar.
“There were reps from a multitude of private entities like US Airways (naturally), Airbus (ditto), the crane company employees, diving and salvage people, insurance carriers, environmental testing firms and many others. There were lots of news media there as well. There was even a Salvation Army truck on-site, with pots of hot coffee and sandwiches for the many people who were part of the effort.”
“As societies become more complex, the costs of meeting new challenges increase. Eventually, every society arrives at a point at which devoting extra resources to meeting new challenges produces diminishing returns. Then negative returns. Along comes a systemic shock. The shock might be internal (resource exhaustion, for example) or external (foreign war, for another example). And the shock triggers collapse.
“When collapse occurs, it almost always occurs rapidly. Things fall apart and quickly decay to a much lower state of complexity. Societies become less complex by collapsing into smaller, much less complex subgroups.
“The Western world — certainly, the U.S. — has spent the past century engaged in an arms race of social complexity. And from where we now stand, there’s no gentle ‘build-down.’ The more people who understand that, the better.”
Much of this “build-down” appeared in the U.S. employment scene yesterday. Public companies announced over 71,400 job cuts yesterday alone. Caterpillar, Texas Instruments, Home Depot, Pfizer, Sprint and ING all announced thousands of firings yesterday.
According to CNN’s tally, American companies announced 207,120 job cuts this month alone… and it’s not even over yet. Look for the next BLS jobs report to be big bummer.
Two more multimillion-dollar Ponzi schemes have been uncovered. To paraphrase Warren Buffett, as the great tide of easy credit has pulled away from shore, there’s a whole slew of folks swimming naked out there.
The latest exposed skinny-dippers? Agape World Inc. of Long Island, N.Y., and Carolina Development from Orange County, Calif. The two faux firms fleeced some 2,500 investors for over $430 million.
Major indexes ended just a bit higher yesterday after a slew of earnings reports. In the end, we suspect traders found hope in the Pfizer/Wyeth deal and bought more stocks then they sold… most indexes rose less than 1%.
Gold’s recent rally peaked at $915. The shiny metal backed off most of yesterday as market fears abated. You can get an ounce today for just under $900.
Oil followed suit, down $4 from its recent high, to $44 a barrel today.
The dollar’s been pretty boring over the last few days… just slowly trending down. The dollar index goes for 84 today.
Meanwhile, with the New New Deal Tech initiative as a backdrop, the housing swan dive continues:
S&P/Case-Shiller’s November reading of the home price index showed continued record decline. Its 10-city composite index now registers a 19% annual decline in home prices, while the 20 depicts “only” a 18.2% fall. Both numbers are records.
“Since August 2006,” said David Blitzer of S&P, “the 10-city and 20-city composites have declined every month — a total of 28 consecutive months. Every region was down in excess of 1% for the November/October period, with eight of the regions showing record monthly decline.”
“My wife and I are helping children get by,” writes a reader, agreeing with yesterday’s comments about the true source of contracting consumer spending. “We do not pay their mortgage, but pay for many items knowing they are really struggling to make ends meet — i.e., grandson’s haircut, clothes on sale, baby food, etc.
“This spending has replaced going out to restaurants every week, often taking them with us. Our typical dining out bill was $100-plus per week.
“Also flying big under the radar is ‘work for cash.’ Our other son works jobs and pays his living expenses from legitimate sources, meaning taxes are deducted from his earnings. I happen to know this past weekend he worked for ‘cash,’ which is under the radar. He and his friends do this all the time.
“The underground economy is growing fast, and bad times will only enhance its growth.”
The 5 Min. Forecast
P.S. We’ll have more on Patrick Cox’s vision into the future of the New Tech Deal initiative this afternoon.