Electronics Going Gangbusters and Signaling a Coming New Tech Boom (But Not Now)

History does not repeat itself, but it does rhyme - Mark Twain

In spite of the increasing doom & gloom in economic indicators - the market clearly expects a big downward GDP revision tomorrow -  I am hearing of component shortages for consumer electronics being hastily manufactured in China. Apple is still supply constrained on iPads and iPhones, shipping every one they can assemble, and this may be impacting commodity components (like diodes and MOsSETs).  

Spot shortages may seem paradoxical when industry after industry has underutilized productive capacity, housing is in the dumpster and autos are down to under 12M a year in the US (imagine, they crested 8M in the early '50s when we had fewer than half the population). 

Yet this story of booming gadgets and busting everything else rhymes with one of the hit products during the Great Depression: radio!  People wanted to stay in touch, and radio (plus telephone service) boomed in very bad times. So too today in the demand for connected devices. Android tablets are the next big thing, with knock-off Chinese units selling as cheaply as $99 already. The demand for smartphones, iPads and Android tablets appears to be overwhelming the supply chain and causing spot shortages.

This gadget mania probably explains an interesting anomaly in economic indicators: imports are up more than exports (all those gadgets coming in from China for Christmas), and intermodal containers shipped by rail are still increasing - in fact set a record for the year - but truck traffic is flat. Speculation: imports are driving rail traffic, but exports & general economic recovery are not picking up the slack in trucking.

There is no fundamental reason this will end until market demand is saturated, which leads me to speculate that we will see the Nasdaq begin to diverge against the Dow to the upside as the fruits of the current beneficiaries of Moore's Law begin to explode into the new huge global markets for gadgets and the accompanying Cloud services. The question is when.

One spark could be a few high-profile IPOs. Apple went public in 1980 amidst the last double-dip, and Netscape sparked the dot-com boom in 1995 at a time when the market had been considered sluggish since 1987. Google failed to be that spark early in this decade, but then it came out amidst a boom in housing and private equity, right after a horrific tech bust. Poor timing for tech to rebound. 

This time around we have a new revolution brewing, and any one of the current tech darlings - Facebook, Zynga, Twitter - could be the spark to the new tech boom.  In the past, tech booms come on their own schedule, when the ongoing improvements in technology lead to sparkling new applications: PCs, Internet, now connected devices. Tech booms have tended to lead out of bad times. Case in point: the PC boom happened from 1978-83 before the Reagan Revolution and amidst terrible economic indicators.

Rumors circulate on when we will see those IPOs, with Facebook the biggee. Facebook was recently said to delay until 2012. Zynga is said to be at least 18 months from IPO, putting it also into 2012.

For other reasons that may be a good time to begin expecting the next tech boom. The timing between these booms appears to be about 12 years from end to start: 

• the transistor boomlet from 1962-66 was followed 12 years later in 1978 with the PC craze
• the PC craze ended in 1983 and the dot-com mania began 12 years later in 1995 
• the dot-com fever broke in 2000, and 12 years later is 2012 ...

It probably takes something around that timing for (a) Moore's Law to go far enough ahead to create new magical toys and (b) the fund managers who got hurt at the end of the prior bubble to retire and be replaced by green newbies. 

I do not expect it in the near term. The SOX index of semiconductor activity has been rolling over, indicating perhaps a seasonal lag or maybe a longer cyclical drop. When the next tech boom comes, it will show up first in chips, then devices, then software/services, then IPOs!

Comments

[Wave Rust]

big rally if july lows aren't raided.

reeellly beeg. :)

wave rust

[da bear]

2012 or so should be the bottom. That would match up with 1930 = 2010 and 1932 = 2012. Interesting insights. Does history suggest when to buy emerging technology stocks and which ones to buy? Buy them at stock market low or wait awhile? Should we be looking at new names by then?

da bear

P.S. Hoping to cash in on all the vacant store fronts, boarded up Big Boxes, dead malls, and dilapidated McMansions, Apple will soon be unveiling the iSore.

[nspolar]

Based on an email received I can only assume Mr. Neely is going long.

Plus he says the markets are now coming to be more predictable.

Anyone care to comment?

Mrs. Neely or Neo-Mamma?

ns

[Perigee]

Michael

I find it interesting that anytime someone questions your statements that you (after your usual holier than thou attitude and criticism) revert to asking them if they are a full time trader as though anyone other than that has no idea what they are talking about.

Since you asked in a previous post whether I was a fulltime trader I will answer the question. However, it is not a question I believe anyone can answer until you provide your personal definition of what exactly defines "fulltime" and "trader". If, instead, you asked whether my income was totally sourced from financial markets, then the answer is yes. My methods don't require me to be a slave to my computer 5 days a week.

In my view, a successful trader is one who achieves his or her desired rate of return on capital, irrespective of methodology or time spent.

Trading is not about being right - it is about making money - I think there may be a lesson in that for you!

So now I have answered your question, please answer Whitebears about the A/D line as i am sure everyone wishes to be enlightened. And I am also keen to hear more about the surge that was supposed to be starting late last month, just in case I missed it.

[yelnick]

da bear, history says that at the onset of a tech bubble (1978, 1995) you buy the early IPOs of category leader, who will be challenging the prior stars. At the consolidation phase after the bubble (1986, 2004) you buy the winners as they use scale to become dominant. Apple in 1980; Microsoft/Intel in 1986. Netscape in 1995; Amazon/Google in 2004.

This time around the defining technology is what I call the Era of Cheap: cloud-based services built on open source and using social networks for very cheap customer acquisition. Buy the emerging leaders. Then about 10 years after buy the surviving winners as they consolidate.

[Daniel - Taz]

"big rally if july lows aren't raided."

I think a big rally is coming regardless of whether we breach the July lows. The internals will be the key.

[Dsquare]

Yelnick, just to get the record straight about an extended 5th wave: that is Neely's view.
Question:
How does your analysis differ from orthodox Elliott Wave analyst's who, once again, are predicting a depression and a Dow down to 400?
Answer:
NEoWave has been telling me the same thing for more than 2 decades...an impulsive advance began in 1982. Wave-4 (down) of that impulsion commenced September 2000 and will last about 20 years, maybe more. Wave-5 of this 70-80 year bull market will start around the year 2020 and produce the most powerful advance in history. The DOW will easily exceed 100,000 (potentially 200,000) by or before the year 2065! If you look in the back of MASTERING ELLIOTT WAVE, there is an article written for CYCLES magazine in the summer of 1988 which maps out this exact, same scenario. In other words, I've had the same, long-term perspective on the U.S. stock market for 22 years!
http://www.neowave.com/qow/qow-archive-961.asp

[Hank Wernicki]

Rally today if the ES holds at 1042 at 8:30am EDT

Hank

[Hank Wernicki]

Perigee AMEN !

[Account Deleted]

Dow Jones futures before opening bell
http://niftychartsandpatterns.blogspot.com/2010/08/dow-jones-futures-before-opening-bell_27.html

[Mamma Boom Boom]

>Based on an email received I can only assume Mr. Neely is going long.

Plus he says the markets are now coming to be more predictable.

Anyone care to comment?

Mrs. Neely or Neo-Mamma?

ns<

I had a series of shorter term, buy signals this week. Therefore, I assume Neely is correct. Also, I mentioned several months back that wave counting would start to become more reliable, but nobody questioned me.

Neo-Mamma

[JT]

GDP at 1.6%
So much for all of the "Gloom & Doom".

Gee, I wonder what will happen to the markets when Bernanke stops paying 0.25% interest on bank reserves, or starts buying corporate bonds, syndicate paper, and small business loans in QE-2 . . . Prechter and all of his "followers" will be CRUSHED again!

[Michael]

"So now I have answered your question, please answer Whitebears about the A/D line as i am sure everyone wishes to be enlightened."

I already did.

Unfortunately, your reading comprehension is quite poor. Second only to your 500 word "essay" about whether or not your sole source of income comes from trading. A "yes" or "no" would suffice, but your grandiose sense of self and need to spend 500 words answering whether or not you are a "full-time" trader is quite telling.
Good Luck to you.

[GlennLoserNeely]

"As a result, on both a shorter- and longer-term timeframe, the S&P has passed the deep center of multiple, complex corrections."

[nspolar]

Mamma, I recall you also saying that within a few years wave theory will have accrued such a bad reputation it will cease to be used or exist (or something like that).

I think I tend to agree with you on that one.

Yesterday's stick on GLD looks right nice!

ns

[Michael]

NS,

I heard that Hochberg gave up on his short on Gold day before yesterday. Did you hear the same?

[Hank Wernicki]

Kaboom

Just the Facts ... Please

Hank

[nspolar]

Michael, no I am not a subscriber of anything, and have not read it anywhere else.

I think we may think alike on that one, imagine that. And that is most of these yahoos are more than half the time contrarian indicators. Maybe the key is to look for it and know when.

I did subscribe to Neely for a spell quite some time back, to try and learn more about Neowave. Decided it was crap, but his outfit still sends me emails to rejoin. He rejoined me once without my permission, really ticked me off. Probably never again will I ever subscribe to anything. I have looked at Gary Shilling a time or two ... but refrained.

My style is more of IT term swing. I still have a 50 hour per week job and sometimes more.

ns

[Michael]

Thanks NS for your reply.

Yes, at one time I have subscribed to the likes of Prechter ( 1987 and 1993 ) and one of his commodity analysts who covered the Energy Markets back in 2008. They were both completely worthless, especially the energy market analyst.

The last time that I subscribed to someone was Charles Nenner last year. I found his "parameters" to be so big that you could drive a truck through them, hence his calls were rendered virtually worthless too.

On another note, I see that Copper is trading $3.36 today and FCX appears to be rallying hard and trying to close a "gap". The entire commodity complex (coal, iron ore, etc.) appears to be rebounding strongly today, including PTEN even with NG trading at new lows.

[Trader123]

Dow +100 and Bears getting shredded again, not understanding why... Those that sold the 10AM Bernanke reactionary "dip" got killed. S&P now 18 points off the low!

[nspolar]

Michael, is it all in the dollar here as to the IT commodity future?

Gotta head out for a long one. Be checking in a bit.

ns

[Les]

The selloff was linked to Intel announcement.

FCX is in a nice downtrending channel on the weekly charts.

[Mamma Boom Boom]

ns, it's a short term long term thing. Short term, I expect Neely to get it together. Long term, I expect counters to get so whipsawed that nobody pays anymore attention to them.