I'm going to speak of two today.
The first is the "tablet" craze. It's over. So is the "desktop PC" in the main.
You will, in the not-so-distant future, carry a mobile device that will have "nearly anywhere" access to fast data connectivity. That device will be able to utilize a display device of virtually any resolution, although the screen in it will be of modest pixel count (E.g. 1024x768 or similar.)
On your desktop there will be a display with much higher resolution (e.g. 1920 x 1080), your TV in your living room and bedroom will have much higher resolution, and you will have small, light devices that all interface with this personal computing device.
Oh, did I say "Personal Computer"? I sure did.
Those "portable" interface devices, which you can easily take from one room to another or even stick in your briefcase (or overnight bag) might look like these.....
Your screen will be whatever happens to be around, whether it be a TV, projector or other device. Connections will be all wireless -- exactly as the above keyboard and mouse are, using standard protocols (bluetooth in the above case, DLNA or similar for displays.)
This won't satisfy gamers and others who demand instant response times and insane pixel counts spread across multiple monitors -- they will still buy desktop machines with big, beefy processors and graphics cards. But for everyone else, including business users, this will become "the standard."
If you're a manufacturer on the wrong side of this you're going to get buried. If you make a product line that precludes you from shooting one of your products in the head because of what you've sold to people over the previous years, you're trapped.
There are a lot of firms that are trapped in yesterday's paradigm in this regard including a couple of really big ones.
I don't know who "wins" in this paradigm shift as of yet for certain, but I know who recognizes it based on their public statements. One of the few firms that does is BlackBerry; their CEO "gets it." What they haven't done, at least not as of yet, is put into their OS the ability to seamlessly connect to said wireless displays and take full advantage of their native resolution. This isn't because they can't, it's because the software doesn't yet do it. But it can, the hardware can, and they damn well ought to enable the capability now in full -- and both warn the application makers that this what they need to support in the future along with enabling the base capability today.
(Yes, I know this means directing display output to the external device means the screen goes blank since there's a resolution mismatch. That's ok -- shut the internal display off when you're running with the external at native res; not only isn't it a problem it dramatically improves battery life because the backlight is such a big part of the power budget.)
Microsoft is getting butt-pounded this morning because they got stuck with a bunch of "Surface" tablets that aren't selling. The next wave of this will show up in the iFeminieProduct and Android tabet space. Bank on it.
The crooners in the media today are all talking about how Google and others should be headed toward tablets.
What ought to be looked at is evolution in the mobile device space generally with much-larger user-exchangable storage (e.g. multiple MicroSD slots that can be "hot swapped") so that I can have a device with me that has 256Gb or more of storage in my pocket, obviating the issue of needing "cloud connections" to be useful, along with improvements in those SSD storage device's levels of performance.
Remember that a couple of years ago 16GB was "a lot" when it comes to capacity for a MicroSD card. Nowdays 64GB cards can be had for $50 each. Stick two slots in the device and give me 128GB of non-volatile storage with more coming as capacity continues to expand and 30MB/sec write performance in today's world (enough to match a 300Mb/sec broadband connection!)
This isn't yet into the realm of desktop SSD performance by any means -- but the just-announced "next generation" is getting close to 100MB/sec for reads and half that for writes. This is getting into the realm of reasonably modern SSDs. Sure, it's half to a quarter of the higher-end devices, but remember -- we're talking about $50 cards the size of a dime, not devices the size of a disk drive that cost twice as much or more. A system using storage based on devices with this level of performance is very credible and will outperform most if not all laptop and desktop machines with rotating disks.
That's secular shift #1 and nobody is paying attention to it on the street. You make your best money by being ahead of everyone else. Ask yourself, if in the tech space as an intermediate-term investor, who has the capability including not having to butcher their current userbase and product line, to succeed when this shift takes place over the next three to five years.
I say when not if -- I'll stick my neck way out on this one and predict it as one of the two big secular shifts that absolutely nobody is concerned with right not but it is one that is going to bankrupt dozens of companies -- and make some others new market leaders.
Next up is a macro level secular shift -- the shift away from debt-leverage and borrowing more and more money at all levels of the economy.
In short, governments, businesses and people are all going to shift away from debt-financing and toward consumption based on economic surplus. This is inevitable because credit quality always eventually wins and the imbalance between quality and interest demanded is at ridiculous levels.
One of the foundational principles of lending money is that losses occur when the bad loan is made, but they are often realized much later -- sometimes years or decades later. However, it is virtually impossible to evade that loss. You can roll a bad loan over into a new loan but then the loss is crystallized and embedded into the new instrument, not avoided. Eventually the ability to do this is exhausted as someone demands to actually be paid as opposed to having the loan rolled, and then you're cooked. Detroit is an extreme example of what happens when you evade recognition of losses that already happened for decades and it all comes down around your ears at once.
But Detroit is not a singular problem in a sea of otherwise-sound loans, just as "subprime" was not a singular problem in home loans. We are in the early stages of a secular shift in monetary flow and evading this outcome is what has kept Bernanke up at night. Recall that Greenspan knew damn well that this was likely to happen and in 2003 he talked about his attempts to evade the longwave credit cycle -- and that if he failed we were screwed.
The Fed and government did not succeed -- they deferred. But that deferment made the problem worse, and we still must go through the inevitable secular change. It is coming and is as inevitable as the Sun rising in the morning sky.
For governments this means they will have to tax what they want to spend first. Those firms that supply governments and are dependent on deficit and "pulled forward" financing are either going to be severely hurt or go out of business entirely.
For suppliers to businesses and consumer products manufacturers, whether durable goods or consumables and services, identify those firms that can meet needs at a price that can be purchased with economic surplus, not debt financing.
Over the next decade they will be the relative winners and those reliant on debt-financing will be the relative losers. Those corporations with "financing" arms will get hammered and the larger and more-important to the business those financing arms are the worse the damage will be while those firms that operate on the premise that customers pay with economic surplus in the present tense will be the ones growing their business free from that headwind and will, on a relative basis, be the ones that prosper.
Invest for the longer run accordingly.
So let's assume you're not silly enough to think that arithmetic has not been repealed.
What do you do in light of my previous post today, assuming you buy the premise and you're looking for equity investments (stocks.)
That's pretty simple, really.
First, you analyze the opportunity for the business in question. That is, you apply your knowledge of the industry, the firm itself, its products and services, and come to a conclusion on whether the firm has an ongoing business that can turn a profit.
Then you apply the following filter and exclude the firm if:
That's the new filter to apply, all other analysis being equal, and if you violate it, you're asking for trouble.
Don't do it.
None of this may matter for a while yet, but when it does, and it will, it's going to matter fast, hard and dry.
President Obama’s budget, to be released next week, will limit how much wealthy individuals – like Mitt Romney – can keep in IRAs and other retirement accounts.
Under the plan, a taxpayer’s tax-preferred retirement account, like an IRA, could not finance more than $205,000 per year of retirement – or right around $3 million this year.
You can bet this won't be indexed to anything approaching an actual cost-of-living adjustment.
This sounds like it will only attack the "rich" today, but don't bet on it. Note that "other retirement accounts" is likely to mean aggregation of all retirement assets, including the actuarial value of pensions and similar.
Oh, all those people who thought they had done so well by screwing the taxpayer (like, for instance, Superintendents in Chicago area schools with massively-bloated pensions)?
"Your" funds will be stolen for the federal government's use too.
As with all such views, you may need professional tax advice on any of these moves. Your situation is unique -- everyone's is. With that said, here are some things to consider in the closing days of 2012:
In short the year is almost over but the considerations just got very real for most Americans, especially those in high-tax states. Once January 1st rolls it's too late to do any of the things you can do that will help, so consider them now, once the eggnog wears off.
The incessant pumping by CNBC claiming "Rise Above" as a mantra along with other foolishness reminds me of what happened in 2008, and prompts me to issue a stern caution to anyone in the markets -- it can happen again.
Let's remember 2008, shall we?
The original TARP vote failed and the DOW plunged ~770 points. That much "everyone" knows.
What is not talked about is that just a couple of days later it was passed, as Congress "interpreted" the collapse in the market as a demand to pass the bill, helped along by Hank Paulson, CNBC and everyone else in the "punditry." The Senate passed the bill on October 1st overnight, with the House following on the 3rd.
But the market did not want TARP passed. It wanted an actual solution to the problem, and TARP was not that solution -- it was a SCAM.
When TARP passed the DOW initiated a 3,000 point collapse over a bit more than a week's time.
The market, in fact, was not done going down until the spring of 2009, when balance sheet fraud via mark-to-fantasy was officially made legal through the bludgeoning FASB took in a Congressional hearing room.
The issue today is that the actual problem is a roughly 8% intentional overstatement of economic demand in the form of GDP financed with government deficit spending. A "half-ass solution" that makes a $100 billion annual dent in a $1,200 billion deficit will probably be looked at exactly as was TARP by the markets -- that is, it will not be greeted with a big rally, but rather with a collapse as the market will (correctly) read this move by Congress as an unsuccessful can-kick and not a solution!
The government has backed itself into a corner over the last four years. The time available to actually resolve the deficit spending problems along with forcing the insolvent into the open and reorganizing them has been squandered.
Now the market is once again stomping its feet. But unlike the spring of 2009 there is no fraud game that can be played this time around. Deficit spending and false economic demand is the problem and the only solution is to take it on. The bad news is that where we had to take a roughly 10% adjustment in the amount of federal spending in 2000, and 20% in 2008, it is now approximately 40%.
There is nobody in Washington seriously talking about even 1/4 of that amount in spending reductions -- even going off the "fiscal cliff" full-bore would only impose about 1/2 of the necessary correction between spending cuts and tax increases.
And let's not forget that the sequester and tax increases, half of what would be required to simply stop the deficit spending this next year (not doing anything about the debt or acceleration in medical spending over time), is being called "Armageddon" by virtually everyone.
I expect the market will give the politicians a couple of weeks -- maybe -- before it starts to demand an actual answer. And, as in 2008, I also expect that what Congress will cough up will not be an answer, but rather, as it was in 2008, another attempt to run a scam and will be far less than the sequester and tax increases would be.
We shall soon see if the market again pukes up 3,000 DOW points in response.
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