Saturday, February 12, 2005


Fierce Wireless ( issued the following report yesterday.

"Wireless VoIP (wVOIP) is beginning to take off with the business market, according to a new report from In-Stat. A recent survey of more than 300 midsize businesses and large enterprises found that 23 percent of decision makers had already deployed wireless VoIP in some manner. Another 30 percent said that they were planning or evaluating some form of wVOIP in the next six to 12 months. The greatest area of interest by respondents was in having the ability to make phone calls from laptops. Companies also want to allow employees to make phone calls from PDAs and to take advantage of unified messaging. In-Stat predicts that by 2009 the number of subscribers using WLAN for voice and data is expected to exceed those using WLAN for just data."

Businesses have cash and are spending it. Businesses can get a high return on their investment by buying equipment that will increase productivity and lower phone bills. Unified messaging is a neat trick. One can send a single voice mail to any group saved in ones phone list or one send a single voice mail while purposely not ringing the receivers phone. One can instantly set up a conference call by clicking on a group listing and the conference button. The list goes on. "Computer phones" offer many more features and the cost to benefit ratio is very small.

Businesses need bandwidth and equipment to take advantage of these new technologies. Businesses and consumers need new wireless phones that have as many as four bands. Phones are much like radios that get one, two or three and now four stations. Most of the time, if you are in roaming mode, it is because the "station" you normally use does not offer coverage from where you are calling. Roaming is expensive only because your service provider has to pay another provider for the time on his system. Wireless is the cheapest call because it does not use radio towers. If you are near a wireless router, included the one in your home and the one in your office, your call goes through the internet and you use no minutes. You only need one phone number because you carry your phone with you. Wireless calls are less than cheap to provide. The wireless service provider can handle many more cell phone customers if many of its customers are calling through the internet. In other words, if all your cell calls go through the internet, the wireless phone company charges you $39.95 per month for a service that cost the company almost nothing.


Please understand what has happened in just a few days. The long bond, after rallying for 7 months had a blow off rally. The thirty year got way ahead of the 10 year and 5 year but then the rally worked its way down the curve. The bond market rallied so hard that it caused great confusion. Traders heads were spinning. They did not know what to think and the bond rally was so strong that it sucked the air out of the stock market. But why? The employment report was strong and the export numbers surged. Traders asked, is the economy weak or is it strong?

The worm turned mid week. By the end of the week, the Dow and S&P were up and the NASDAQ survived a ferocious dip and was almost back to even. The bond market was hammered on Thursday and took another hit on Friday. The market said, "Oops, the economy is not weak; it is strong!" When one considers the seven month rally in bonds, it is clear that stocks have gotten very cheap. Yes, it is true that all assets have been bid up over the years as rates have come down. Price to earnings ratios are at historically high levels. However, there is not going to be a dramatic deflation until bond rates move much higher or until it is clear that inflation is so high that rates must go up.

Money poured into stocks and the market rallied Thursday and Friday. Economically sensitive stocks such as energy, transports and semi-conductor stocks including TXN lead the way. Interest sensitve stocks such as retailers, utilities and banks performed relatively poorly. In light of these circumstances one must look around the tech sector to see what is happening.

For months, Nokia, Motorola, QCOM, TXN and others have been making deals. VZ, SBC, FON, BLS and others have been buying equipment and/or whole companies. FON and NXTL are just two of many companies to have made major equipment decisions. In the case of FON and NXTL, they are moving hard and fast to offer 3G level phone services as quickly as possible. QCOM will benefit and Motorola may lose a little market share as the NXTL iDen system will be scrapped by 2008. The new PoC QCOM based system is almost as good as PTT (push to talk) and it will be used by many service providers. Don't count MOT out. This company is focused by new management. MOT is selling TV set top boxes (Dual tuner PVR's with many TIVO features) and has introduced well received new phone models.

NOK the biggest phone maker has announced TV ready phones using TXN chips (QCOM and TXN compete directly in the phone market). NOK has announced numerous deals including a deal with RNWK to use the Real Player as the standard media player in their phones! As you may know, when my monitored accounts sold SIRI, we put the money into RNWK. Soon subscribers will get music through cell phones cheaper than through SIRI satellite radios. Cell phones will offer TV weather, sports, news and mini shows. Should phone-TV be as big as I believe it will be, a lot of new equipment is going to be bought.

In the mean-time, IBM, ADM, and INTC have all announced new higher speed computer chips. MSFT is almost ready to release the next "Windows" and the IPTV protocol has gained acceptance. Consumers will soon need new media TV's or sophisticated set top distribution hubs. Video over the internet is ripe and ready. I have been looking for a clue about the survival of TIVO. I received a blessing today. One news service has started a TIVO death watch!

I have never owned Juniper Networks but Cody Wyoming (a frequent guest on CNBC's Kudlow and Cramer) has recommended it a number of times including a few days ago. I plan to give it a good look. Cody says it will be one of the big winners when internet upgrades are made.

Buy the ETFs; buy the equipment companies; buy selected services, it looks like a break-out is in the works. Tech rallies can be spectacular. I was a witness to the enormous emotion in brokerage houses in the 60s, 80s and 90s. You do not want to miss one of these parties. If you have no exposure to tech and if you must sell Pepsi or other consumer staples I have talked about in recent months, then sell at least one of those stocks and buy at least some tech! As usual, don't put all your eggs in one basket. If you need help let me know.

Warning: The above report implies that paying for a business line or even a home phone line through SBC, BLS, VZ or any other phone company will become folly sooner rather than later. Avoid the big phone companies. The dividends are sweet and safe but the revenue declines on the land-line side of the business are happening quickly. The reason AT&T and MCIP have each sought to sell apparently is because the long-distance business is going to shrink quickly. Why pay for a phone line if you are already paying for a high speed internet line? Several equipment makers are now offering multiple line internet phones for home and small business.

I currently plan to continue to hold FON and NXTL. FON is spinning off the land line business to leave a pure wireless play. FON has decided to sell its radio towers under a lease back deal. Further evidence that companies need cash to accelerate spending on upgrades. Wireless will continue to grow through the addition of new services such as radio and TV. Holding these gives me heart-burn because the per month fee for unlimited calls is going to shrink. However, more and more families will add another cell phone or two and do away with a "home" phone. There is plenty of cell phone growth in units and in total monthly charges per phone.

Corning Glass (GLW) has broken out. Homes and businesses will switch from Cable TV to Phone Company service or vise versa to get low cost ultra high speed internet. Extra speed and bandwidth will be necessary to carry multiple phone lines, high speed video and data. Once the high speed fibre-optic cable is to the home, it will be relatively easy to boost the speed as equipment is added. The reason VZ, SBC and BLS are spending so heavily on fibre to the home is they must get into the "cable TV" business quickly or lose the whole package including phone service to the cable companies. Businesses are adding cable from one office or factory to the next. Also LCD TV screens are at adoption level price points. I ordered extra pickles on my Sheets Brothers sandwich today by touching the LCD order screen. The company did not have to pay a waitress to take my order and it sure was convenient to put in the order while pumping my gas. By the time I was finished pumping my order was ready. (The sandwiches, coffee and Krispy Kreemes are excellent.)

Video conferencing will become routine when most schools, businesses, organizations and homes get wired. Would the parents of three children prefer to take about three hours driving to three schools to meet with teachers or would they prefer three ten minute parent-teacher face to face conferences over a big screen TV from the comfort of their home? How much money does a business save on one meeting if 10 managers from 10 stores can conference from their office rather than drive across town or fly across the country?

Those who invested during the industrial revolution made millions. Along the way, many investors over committed to one industry and got wiped out. For example, canal companies made fortunes for many who were then wiped out by railroads. Those who bought canal shares and railroad shares made millions.

Please note; calling the market consistently is impossible! Study after study shows that market timing does not work! I am an amateur investor who gets no pay for telling anybody anything! I wrote this article for education and entertainment only! Any money you invest is at risk of total loss!

It is funny to need to write the above paragraph. There was a good article somewhere today titled the Name Game (it might have been in CBS, MarketWatch). It talked about the different names Smith Barney and other brokerage companies call their sales people. It went on to say that professional investment advisors can be sued easily because they are professionals, whereas, no matter what they are called, the "account executives" are just salesmen and are therefore largely exempt from law suits. In other words, since the customer should know the broker is only a salesman and has no fiduciary duty to help the customer make money, the customer is an idiot if he takes the brokers advice!

My practice is to reduce transaction costs 90% or better by buying through BrownCo, by avoiding high fee mutual funds, by avoiding trustee and account fees, and by holding core positions long-term. I buy mostly individual stocks or bonds and take advantage of tax losses; I plant and weed; I tend to let the winners run and to cut the losers short. I put a little money into many different stocks so that a bad selection does not kill my total performance (I reduce the selectivity risk). I concentrate my positions more than many investors, but even then I do so in a conservative way. For example, I happen to think the big legacy air lines are going to make the turn around by 2006 but I have spread my investment over four carriers, AMR, DAL, NWAC and CAL. These companies all have high debt loads, stiff competition and generally weak financial ratios. My families total investment is substantial but any one of these companies can go through bankruptcy and liquidation without putting my families financial safety at risk. If one is liquidated, the other three will likely turn profitable quickly. I may buy bonds when yields are equal to or higher than stock earnings yields. I may not buy bonds at high yields if the yield curve is still very steep or if the price of gold has climbed the past year. I own no bonds but will buy bonds heavily if the the yield is higher than the stock market earnings yield and the yield curve is inverted, flat or perhaps if it is close to being flat. I offer assistance to those seek it and ask only a small favor in return. If you enjoy reading my work or if you would like assistance, please send an article or two to few friends.

I could write a fifty page paper on why now is not the time to buy tech stocks. However, when working on a complex problem, it is human nature to over confident and less accurate the more information one considers (David Dreman, et. al.). The above is a repetition of what I have written before but it includes my key reasons to say buy, buy, buy. I have put my thoughts on the line for you. Use the information cautiously and wisely.


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