Thursday, July 23, 2009

Yes. The Recession is Over.

The current bull market began on March 9; it has a long way to run. Even after average gains of about 40%, stocks are still very cheap. The wet blanket of fear that covered the market and the economy is drying quickly.

Throughout the recession, the Internet sector has surged. The Internet has been climbing the second phase sigmoid curve at an accelerating rate. Facebook has added 50 million users in only a few months! Amazon just purchased a $900 million Internet shoe company. Apple sold 7 times as many iPhones this past quarter as it did the year before!

Several previously dead economic sectors are rapidly returning to health and the market is beginning to have hope that the most burdensome of the Obama program will never be enacted. Housing sales are up 3 months in a row; bidding wars have broken out for low priced houses. The mad rush of young couples leaving apartments are bying houses to pick up the $8,000 government housing giveaway. Before this program expires in November, it will cause a spike in low home price buying that will in turn cause a subsequent wave in medium home price buying, etc. As they say, a healthy housing market is like a ladder, you can't get to step two unless the first step is available.

Looking ahead, one can see a huge investment wave developing. What is so neat about this wave is that the incentives to invest begin with the word FREE. For example, the Pandora music service, basic account is FREE. After years of legal dispute, Pandora and other music streaming services have the legal right to offer large amounts of music FREE of charge. As you may recall, Napster was at the forefront of the first surge in Internet use. Android and Pandora just made a deal. This means that "FREE" music streaming will be available on cell phones and other portable devices. Of course, the big difference this go round is that the "FREE" service will be provided by providers that "meter" usage.

There has not been a recession in Internet traffic, but there is an explosion of usage on the way. While individuals switch to "smart phones", providers will switch to 4G speed. Today, users of "smart phones" are kind of like the man who bought a Corvette to drive to work even though the speed limit on his road to work is 20 miles per hour; he enjoys the nice ride and the neat amenities in the car but he can't wait to get on the Interstate. Over the next couple of years, "Interstate Speed" is coming to the mobile Internet.

Huge investments will be made on the consumer side and the business side. The consumer who signs-up to pay $60 per month for 24 months for a data plan signs-up to "invest" $1,440 into the mobile Internet business. Companies will have to spend far more than $1,440 to install all the structure needed to handle this traffic. A huge investment boom is just getting underway. In most businesses, the recession is already over. It will take many businesses time to recover back to prior business levels but climbing back out of a whole is not nearly as terrifying as falling in and not feeling the bottom.