Tuesday, November 04, 2008

What a Beautiful Day the Lord Has Made!

Marilyn and I just took a walk around the neighborhood and it could not have been a nicer day for a walk. A gentle wind blew billowing clouds over our heads without spilling a drop and the leaves have never been more beautiful. The local leaves are beautiful and required no travel to see.

Back in the office, I noticed that Circuit City is up 5.5% while Best Buy is down 2.5%. Circuit City is up to 38 cents per share and BBY is down to $27 dollars per share. Which is the better buy?

Circuit City is down more than 80% in price this year and BBY is down about 50%. The question at hand is not where they have been but where they are going. The chances are better than 50/50 that CC will go bankrupt just when consumers are about to be flush with their annual $4,000 "inflation rebates". BBY will be around to help consumers spend some of their extra cash.

It is notable that the Kindle is sold direct by Amazon and that the Android and the i-Phone are sold where cell phones are sold, including at BBY. More importantly, billions of newspapers, blogs, books, songs, TV shows and movies will be sold directly through these devices. The percentage of "stuff" being sold over the airways is about to take a great leap forward. Who really wants to spend time, effort, travel expense and $27 for a best seller that can be instantly downloaded for $10? Who would not enjoy the diversion of a favorite TV show while engaged in life's hurry up and wait routine?

One of many neat tricks available on the i-Phone is the ability to search for a song by humming a few notes. The ability to preview a few scenes from a movie before making the purchase and sending it to ones big screen TV is revolutionizing movie shopping. Pricing packages for every day viewing and reading will be cheaper than tiered cable service for light users but it will result in high volume relatively low cost entertainment by others.

In other words, I would not take the chance on CC shares. While I do believe BBY will get a fair share of consumer spending on big screen TVs, computers and set-up services, I also believe the biggest revenue growth will be captured by firms such as Apple, Google and Amazon. My family has not bought a lot of "stuff" from Amazon, but instant delivery of books, TV and movies has not been available in the past. The capacity to stream high definition services to hand held devices is spreading around the globe. Apple was slow to allow free WiFi access to i-Phone users but the number of hot spots is growing rapidly. If the FCC follows through with plans to offer free use of white space, WiFi service should spread rapidly all over the country. Baltimore and other cities are now saturated with high speed wireless access. It took a while to find the business model that works but the combination of cell phone fees with merchandising of downloaded products has begun to work well.

Environmental extremist continue to harp on saving the planet through silly pseudo science. They continue to commit waste by over spending to recycle trash, by subsidizing environmentally harmful products like ethanol or extremely capital intensive wind mills. All the while, progress is being made to dramatically reduce newsprint, paper books, packaging and delivery expenses. The reduction in the number of trees chopped up to make paper is already substantial. Leaving trees to grow is the kind of carbon sequestration I can fully support. Forget about cap and trade, instead, allow free trade with low cost producers. We have placed tariffs on sugar cane from Brazil and all sorts of goods from Columbia. It is time for us to stop wasting our resources when Columbia has low cost goods to offer.

It is also time to stop saddling kids with 50 pound book bags. Textbooks should be loaded onto Kindle style devices. A child should never hold a book reader without also holding a dictionary and thesaurus. Same for adults. Instead of suppressing text messaging, teachers should encourage WiFi communications. When I was a child, we learned to write with pencil and paper, today, children learn by typing on key boards. Teenagers today put forth 10 times the writing effort. This is a great teaching opportunity.

Life is good. It is a beautiful day. By using our own common sense, we can avoid the brain washing done by politicians and media pundits. We should us our resources wisely instead of subsidizing the use of poor substitutes. The Good Lord has provided and He will provide.