Friday, September 26, 2008


Once the financial stocks have bounced, consumers will feast and then tech stocks will have a great run. A study done by ABI Research concluded that there will be 200 million "ultra-mobile devices" in use within 5 years, up from 10 million today.

What is an "ultra-mobile device"?

At the Gigom web site we find: Dell computer believes that the ultra-mobile device is a ultra small computer with a cellular data plan attached. Intel believes it is an ultra small computer with VoIP capacity. Qualcomm believes it is a large, feature rich cell phone.

While my personal belief is that the 200 million figure will prove to be low, a survey shows that most people do not see the big shift that is in the making. Those who dreamed of the electronic future back in 2000 were burned, now they are cautious. Most people see little utility in computers and cell phones over and above email and standard telephone calls. The deal that Visa just struck with Google and Nokia shows there is much more coming.

Visa has written software that allows bills to be delivered to cell phones and for payments to be authorized by cell phone. The skeptical will see yet another Armageddon in the works, but this is the type of software that will change your life. It is productivity in action. Millions of people sit down once each month to write checks and mail payments. Send these electronically to a persons hand held computer and much work will be done on the run; many will allow standard bills like utilities to be drafted automatically. After years of movement toward paperless money, a great leap forward is in the works. The savings from making change at the check out counter will be significant, but this system is more than a fancy debit card. It is a debit card with a GPS enabled computer attached. This is not a recommendation to buy credit card companies. Credit card companies did well as the see-saw to banks during the down phase.

The roll over from commodity plays to financial plays is keeping the spot light off technology. The focus on financial stocks will last a good while but technology is going to be on the same "hike", a few paces behind consumer cyclical shares. In October, odds are high that consumers will buy gasoline for less than $3 per gallon. Consumers will not buy an ultra-mobile device with their savings from the first tank of gasoline, but they might from their savings on their first winter fuel purchase.

Of course, from the Google point of view, the ultra-mobile device is all about advertising. Google and Visa will offer maps of where the specials are located. Even the little mom and pop store is likely to accept Visa. Visa would be happy to become the interface between the store and Google advertisements. A lot of steps will be saved by people who use their GPS enabled ultra-mobile device to find the nearest Starbucks or Dunkin Doughnuts. In many instances, the consumers will not use cell phone minutes to find these locations.

For me, the ultra-mobile device will be one that uses free WiFi as its first data communication option, paid WiFi as its second data option and cell phone minutes as a last resort. This seems to be the model being developed by Google and T-Mobile.

As I have painfully admitted, I was very slow to come to the realization that the administration was willing to engineer an economic slowdown just before the election. The mid-cycle correction was converted into the end of a business cycle. I was lost for a while but I am now back on the trail. The turn we are going through is not fun but it is real. Right now, there is great pessimism about the prospects of a deal. The markets are going to open lower. If there is evidence of progress during the day, the market will turn during the day. Chances are that a deal will be completed over the weekend. Tech will be strong relative to the S&P over the coming weeks. Financial shares will be strong relative to basic materials and energy.

The average world wide interest rate is going to decline in the months ahead as commodity prices continue to fall. Ironically, the departure of Russia from the UN 5+1 talks has allowed the USA to go into a "rope a dope" strategy in regard to Iran. Iran had a lot to win by making a deal and Russia had a lot to win by working with the USA but the USA loses less than Iran or Russia if deals are not done. While there is evidence that Iran is trying to make nuclear bombs, there is also evidence that they are having trouble mastering the technology. If they succeed, Russia and Iran's Middle Eastern Neighbors will be more at risk than will the USA. The USA would still like to "make a deal" but our team has shown a willingness to throw balls into the courts of Iran and Russia and to wait for them to make the next move.

Under these circumstances, the fear factor will continue to seep out of the price of gold and oil. Iran is not likely to let the trillions of dollars worth of deals available to wither on the vine.