The Internet-Enabled Coffeepot

August 7, 2014

  • From the perfect cup of espresso to the self-driving car… one lucrative technology that makes it all possible
  • A 10-cent stock grows to $79: The next big thing that could replicate Cisco in the 1990s
  • Russian hacker story overblown? Say it ain’t so!
  • But the Russian “de-dollarization” plan is gathering speed…
  • An oily milestone.. the “free market” versus regulating Monsanto… Occupy the Boardroom, continued… and more!

   “Five decades after its debut, not a day goes by that someone isn’t using The Jetsons as a way to talk about the fantastic technological advancements we’re seeing today.”

So wrote Matt Novak at Smithsonian magazine’s website in 2012 — 50 years after the show’s 1962 debut and 50 years before the show’s 2062 setting. Novak proceeded to analyze all 24 of the original episodes from 1962-63 — examining which techno-marvels have come to be and which are still fantasy.

On the one hand, we’re agog that Smithsonian paid someone to perform that task. On the other hand, the undertaking sheds light on an opportunity that could make you at least eight times richer.

Intrigued? Let’s jump in…

   Perhaps the most prescient Jetsons invention was the videophone…

See the antennas? It’s wi-fi enabled!

“Unlike its most common household use today — as a mere application within a computer or phone — the Jetsonian videophone is its own piece of dedicated hardware,” writes Novak.

No matter if the details were off: Between webcams and Skype, it’s reality now.

   The company that did the most to make the “videophone” happen was Cisco.

“Cisco’s historical specialty is computer networking equipment,” explains Ray Blanco of our tech team, “and the 1990s were a great time to enter that business, since that’s when this small market took off.”

The Internet as we know it wouldn’t have happened without Cisco: “By becoming the leading supplier of the technology needed to connect computers — and the world itself — Cisco not only profited from the trend; it also helped enable it.

“Back in 1991,” Ray goes on, “Cisco Systems was trading at just 10 cents per share. But by early 2000, the company’s share price had zoomed to $79, making many early investors fabulously wealthy.”

Which raises the obvious question…

   Where is “the next Cisco”? And what futuristic technology will it perfect?

“We’re going to leverage the Internet in ways we never have before,” Ray predicts, “and it’s going to change everything while driving new growth and profits.”

The next big thing is sometimes called “the Internet of Things.” The techie in-term is “IoT.” Maybe you’ve heard of it. Or at least you’ve heard the example nearly every tech maven cites when describing the IoT — the “smart refrigerator” that knows when you’re running low on milk and places an order for more.

“This Internet of Things,” says Ray, “will add the kind of intelligence we associate with traditional computers to just about everything we use, and it will do so by connecting them to that network of networks, the Internet. In doing so, it will improve our ability to interact with and manage everything we own — from our homes and appliances to our cars and much more.”

   Consider something as trivial as the coffee maker. “Coffee machines,” Ray explains, “are now being connected to the Internet via a modem like the one in your smartphone.”

Case in point: Some of Nestle’s Nespresso models. “The coffee machine’s connection allows Nestle to tune it so that it can match a customer’s taste.

“Thanks to that little embedded computer and modem, Nestle knows exactly how you like your coffee, from the temperature to the water pressure used to spew the brew. It also knows what kind of coffee you like to drink, and it automatically reorders supplies so you aren’t out on a Monday morning when you really need your caffeine kick.”

   “The Internet of Things will also improve the energy-efficiency of our products,” says Ray, “as well as the quality of service they provide for us.

“Internet-connected streetlights, for example, will be more efficient than the traditional dumb ones. They can stay off at night, saving electricity, turning on when they sense cars coming down the road. We’ll reduce waste and pollution at the same time.”

Speaking of cars, “they’re getting smarter all the time. Cars are being connected to maintenance services, in order to help improve vehicle reliability. Tesla famously connects all of its amazing electric cars through a cellular modem, using it to alert drivers if something is wrong.

“Even now, our automobiles are connecting to entertainment and information services to improve the experience for drivers and passengers. But eventually, we’ll all be passengers, and the car itself will be the driver. Increased embedded intelligence and connectivity are enabling self-driving cars. The Internet of Things means you’ll be able to always have a designated driver when you’ve had a few drinks after work on a Friday night.”

   The advent of the IoT promises to be bigger than the advent of the personal computer 30 years ago… or even the smartphone five years ago.

“Once this tech trend runs its course,” says Ray, “it will dwarf both of these markets combined… and there are huge fortunes yet to be made in enabling it.”

Cisco’s CEO John Chambers — who, as you’ve already seen, knows a thing or two about connecting devices — says the IoT will become a $19 trillion market by 2020… with 50 billion connected devices.

“That makes the current Internet, with its 6 billion connected devices, puny by comparison,” Ray goes on. “Eventually, every device that can benefit from an Internet connection will become an Internet-connected device. It’s that simple — and the number of newly connected devices will be simply staggering.

“The investment opportunity,” Ray adds, “is correspondingly enormous.”

Ray has identified “the next Cisco,” that is, the company best positioned to make the IoT happen. “Its products go inside, or connect to, customer devices, allowing them to connect to the Internet wirelessly via a cellular link.”

Its technology might already be in your car, or your home, or even the vending machine outside your nearest convenience store. “Buying this company today,” says Ray, “is like buying Cisco when the original Internet took off in the 1990s.”

Curious? Ray tells you much more about the IoT’s profit potential at this link.

   As we write, stocks and gold both sit where they did about 24 hours ago. The Dow is barely in the red, at 16,425. Gold is up a buck or so, to $1,306.

Crude has retreated below $97 for the first time in six months. It’s now down $11 from its year-to-date peak in late June.

   “No one was going to pay $120 a year just to find out if their Twitter might get hacked,” reads a snarky post at the techie website The Verge.

We led off yesterday’s episode with Russian hackers who’d purloined 1.2 billion username-password combinations and 500 million email addresses. The revelation — if that’s what you can call it — came from a cybersecurity firm called Hold Security and was published in The New York Times.

We also expressed our skepticism about the motives of cybersecurity firms making big splashy claims to credulous reporters.

   This morning, we see our skepticism affirmed. Both Forbes and The Wall Street Journal point out Hold Security is happy to charge you $120 a year if you want to check whether your username/password or email address is on its hacked list.

What’s more, Hold Security’s numbers are suspect. More from The Verge: “If the idea of hacking 1.2 billion usernames sounds incredible, it should. There are just a handful of services with over a billion users — Facebook, Google Search and Microsoft Office lead the pack — and if any of those were involved, Hold wouldn’t be shy about saying so.”

But the real “tell” is that the hackers sell few of their purloined records online. For the most part, they just spam Twitter. Not exactly a high-value cybercrime like, say, identity theft.

That’s because the hackers use a crude technique called “SQL injection.” We won’t make you glaze over with a description of how it works; suffice it to know most big companies have robust defenses against it.

And as The Verge explains, “Many of the passwords could have been old data from someone else’s hack” — i.e., useful only for spam if the passwords have been changed in the last, say, 18 months. Bottom line: “The Russian ‘hack of the century’ doesn’t add up.”

Good thing your editor is such a cynical bastard, eh?

[Ed. note: Still, as we said yesterday, cybersecurity is a hot topic… and a money magnet. Every headline, however dubious, brings more attention to the sector and more investment dollars.

It pays big to invest in the real deal — companies that provide genuine defenses against genuine threats. How do you separate the wheat from the chaff? Check this out…]

   The elite media are finally picking up on Russia’s “de-dollarization” scheme — three months after we tipped you off.

“U.S. and European Union sanctions against Russia threaten to hasten a move away from the dollar that’s been stirring since the global financial crisis,” reports Bloomberg News.

Among the evidence it cites — huge flows of Russian cash into Hong Kong, so much that Hong Kong’s central bank has had to buy more than $9.5 billion in the last six weeks to prevent the Hong Kong dollar from rallying.

The newswire quotes Joseph Quinlan, chief market strategist at Bank of America’s U.S. Trust — which manages about $380 billion. “The [2008] crisis created a rethink of the dollar-denominated world that we live in…This nasty turn between Russia and the West related to sanctions, that can be an accelerator toward a more multicurrency world.”

Bloomberg’s conclusion: “While no one’s suggesting the dollar will lose its status as the main currency of business anytime soon, its dominance is ebbing… Such a transformation may take as long as 25 years…”

Au contraire, tweets our friend Jim Rickards, author of The Death of Money…

Not unlike Hemingway’s description of bankruptcy. Heh…

We’re fortunate to have the chance to pick Mr. Rickards’ brain on this and many other topics later today. He’ll join your editor here in our Baltimore offices along with The Daily Reckoning’s Peter Coyne and our executive publisher and 5 founder Addison Wiggin.

This will be an afternoon-long, no-holds-barred, “the world according to Jim Rickards” debriefing. We suspect it will give us weeks of ideas to process and tease out, so stay tuned…

   “Your response on GMO labels emphasizes my point that government already interferes too much,” a reader writes.

The reader wrote in on Monday questioning the proposals to require labels on food with genetically modified organisms (GMOs). We cited the flip side — the FDA forbidding some foodmakers from labeling their products as GMO-free.

“Is the solution,” our reader goes on, “to invite even more government regulation? Doesn’t seem to be the laissez faire way.”

The 5: A thoughtful question deserving a thoughtful answer.

Consider the too-big-to-fail banks. Should they be regulated less? Two years ago, we spoke with an Austrian School economist named Frank Shostak — who offered up a nuanced answer. “What we have at present,” he said, “is a banking system within the framework of the central bank, which promotes monetary inflation and the destruction of the process of real wealth generation through fractional reserve banking.

“In the framework of the present monetary system, in order to reduce a further weakening of the real wealth-generation processes,” he concluded, “it is necessary to introduce tighter controls on banks.”

It was for that reason Rep. Ron Paul voted in 1999 against repeal of the Depression-era Glass-Steagall Act, which separated commercial banking and investment banking.

Now, Monsanto doesn’t have a too-big-to-fail guarantee from the Treasury and the Federal Reserve. But we wonder — just wonder — if Monsanto’s influence in Washington isn’t so extensive and pernicious that it might be worth cheering on the state-level initiatives to require GMO labeling.

   “First,” a reader writes on two recent subjects, “I loved my fellow reader’s musings about artificially suppressed interest rates and their effect on entrepreneurial forecasting. I’d happily read more of this ‘hypothetical’ stuff.

“But I’m not so upbeat on the ‘Everybody buy one share’ and do some Occupy the Boardroom maneuvers. For it to work, all those single shareholders would have to act in concert. Also, the board of directors of a company can, and often does, ignore stockholder requests unless the requester holds a certain number of shares.

“Finally, the cost of maintaining the stockholder records and just notifying all those stockholders of upcoming meetings and the availability of proxy materials could make a company uncompetitive against its peers.

“I’d suggest that the threat of a ‘single shareholder’ revolt might be more effective than the actuality.”

   “Your reader who harped on about everyone buying just one share of a blue chip company may be on to something,” suggests another reader. “It really IS a wonderful way to take over! Occupy the Boardroom is born.”

   “Interesting thought,” writes our final correspondent, “millions buying a share of a company to take control of a public company.

“Monsanto’s market cap is $60.9 billion. Maybe we can get Mr. Buffett on the board for about $30 billion of the cash he has lying around.”

The 5: Hmmm…. Buffett’s son Howard, who’s on the Berkshire board, said in 2011 that GMO seeds aren’t the be-all-end-all to fight hunger in developing countries.

Small farmers, he said, don’t have the income or training to use them. “We need to be intelligent enough and humble enough to admit that we don’t know everything and that we certainly don’t know some things in other parts of the world that need to happen.”

Well, it’s a start…

Best regards,

Dave Gonigam
The 5 Min. Forecast

P.S. For as much as we bemoan the 2008-09 bank bailouts, they did generate a unique investment possibility — one that Wall Street ignores.

It won’t double your money in two weeks… but it could multiply your money fivefold over the next four years. If you can afford to be patient for that kind of payoff, you really need to check this out.


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