Friday, September 07, 2007


The rapid adoption of wifi enabled devices, such as the new Apple iPod, is about to change the "shopping experience". In the near future, when you go into the grocery store, your hand held computer will lead you to the location of the items on your list. It might also mention that P&G is running a buy $10 worth, get a $1 off sale. It might notice that you purchased nutmeg and mention that frozen pie crust are on sale. The utility of a good includes your consciousness that of it. Out of sight, out of mind, but just a gentle nudge will save you a return trip for hot dog buns after you scan in the hot dogs.

Apple has come up with a neat use of the new digital radio frequencies. When you enter a Starbucks, your iPod will pick up the music being played. The service will be free. Of course, should you decide that you like the song you might choose to down load it for a fee. The combination of digital radio and computer is one of the "convergent" technologies. The difference in advertising to a couch potato or to a person who is in the store buying is powerful. Scan in any item and it will give the competitor the opportunity to suggest a deal to try his product--only one freebie per iPod!

Sprint, Nokia, Cisco and many others are gearing up for omnipresent wifi which is a chicken and an egg proposition. Earthlink has back off on offering to install free municipal wifi. Earthlink has started asking cities to become "anchor tenants". After all, city governments can certainly save a lot of money by using this technology. They might read meters, report building inspections, coordinate traffic, communicate in regard to public safety and, of course, libraries and schools would be prime beneficiaries. The savings from wiring government offices for phone and Internet service should be substantial.

Sprint and others will offer a plethora of wifi devices, every thing from digital cameras, to gameboys, to email devices, to laptops and to phones will we live 24/7. Cisco is charging ahead with 802.11 N products. Once these networks are more common, it will make a lot of sense for billions of people to upgrade equipment to this super fast and super strength service.


Hundreds of millions of people are rapidly moving up the acceleration curve. The acceleration curve is the sigmoid curve that traces out the first half of the bell curve. As people earn a little more, they are suddenly able to afford new things. A good example is airline traffic in India. Traffic is growing at about a 30% annual rate as Indians discover they can afford to go places. Because airline fuel is taxed heavily in India, the airlines hope to expand their international routes where fuel cost are lower and where competition is reduced. India has executed an open skies agreement with the USA. Under the deal, Indian airlines and American airlines can add equal numbers of flights. In October, CAL and one of the Indian carriers will each start daily direct flights to and from the USA. This will be the second direct flight for CAL.

The USA continues to benefit from world wide economic growth. Our exports are growing at the phenomenal rate of better than 10% and our service exports are growing at about 13.5%! The huge growth rates are keeping the pressure on interest rates, commodities and inflation. Some central banks continue to raise short interest rates. Developing nations are starting to be pinched. Oh My, Lions and Tigers and Bears, the growth rate in China is likely to drop to to 8 or 9%. Still, the slower growth will help reduce the over heated nature of the commodities market.

Right now, the "big boys" appear to have the speculators caught in an oil short squeeze. The wholesale price of gasoline has remained around $2 per gallon while crude oil prices have soared. They are soaring because the "big boys" are holding back, waiting for the speculators who must cover to come to them to buy. It is really hard to deliver oil if you don't own the wells that produce it.

While the news media continues to report that prices are "skyrocketing", crude is testing the highs made well over a year ago. Even after this latest run up, oil is selling for less than it did at last year's peak. In the mean time, Saudi Arabia will boost capacity by 500,000 barrels this year and its Khurais field will crank up at 1.2 million barrels per year by mid 2009. Qatar is adding about 250,000 barrels, Libya about 300,000, and Iraq is now pumping 400,000 more barrels. Angola is whole 'nother story; it has gone from 750,000 barrels per day in 2001 to 1.75 million per day this year, a million barrel per day increase, and it will add another 200,000 soon. Many other fields, from Uganda to Newfoundland will not come on line for at least another year.


As we draw near to September 11, there is once again chatter about Terrorist plots. Yesterday, Fred Thompson made his opening presidential campaign stump speech. He got one thing exactly right, which is that the American people need to come together with a sense of purpose and show our resolve to end terrorism. Many a war has been prevented or was ended quickly as a result of intimidation and over whelming strength. Alexander concurred the bulk of the civilized world in a few short years by demonstrating massive power. Most of his men were foot soldiers with shields and spears but he knew how to go after an opposing force.

Sanctions were first imposed on Iran in 1979. The heat needs to be turned up two more notches. The recent election of moderates shows that the pressure is having an effect. The Berlin Wall was taken down as a result of unified pressure. Americans need to get behind the war effort and stop giving aid and comfort to the enemy. Stopping the terrorist now will save thousands of lives over the next many years.


In the past, a drop in housing of such great magnitude would have throw the US into recession. Indeed, the steep climb in the price of oil were part and parcel to the big recessions of 1973, 1982 and 1991. The housing market is dragging the US economy down between one half and three quarters of one percent. The GNP is likely to slow this quarter from 4% to around 2.5%. Investors should remember that stocks are the leading indicator. The correction in stock prices in July shows that the economy will slow over the next 6 months or so but the rebound in August shows that the decline in the economy will be modest. Indeed, with the coming build out of wifi services heating up, and with billions of construction projects underway to increase energy capacity, next year we will be talking about the booming economy. Wow, what a surprise, the economy is going to be pretty strong right before the presidential election!