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« Near Term Market Levels | Main | Buy The Dip? »

Sunday, February 20, 2011

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KRG

Y: Thanks for the explanation on EWI on Gold. What I like best about your site is what it stands for !!

"all forecasters will eventually be hoist by their own petard"

Vipul: You were on target not just in S&P, but also in Crude, Gold & Nifty. And in couple of cases totally opposite of Neely whose methods you follow...

So pls
(a) do write more on your blog
(b) do mention the neowave logic for the benefit of novices and
(c) be conscious of the Yelnick effect as above and always look out for points of non-confirmation

Cheers

Account Deleted

Pincus is totally peaking.

Mobile has years to run, however.

Jose

Bernie and The Crown Prince call it off.

http://en.espnf1.com/bahrain/motorsport/story/41504.html

What is next in the ME?

Will oil crash? Or explode?


Jose

Wave Rust

yel,
O'Driscoll's chart opens the question about what 1949 to 1966 period showed for returns (if there was a quantified VC sector then). But I'm even more curious about the periods between the '66 high and the '74 and '82 lows. Were there a couple of important booms or busts back then?

With the 1972 to 1985 (O'Driscoll's first chart entry also omitted the period 1982 to 1985), the 'birth' of the PC and consumer tech, the consumer began to adopt digital things faster and faster.

My thought is that if there is a "new tech boom" focused in social media adoption and usage, then looking at births of tech booms would serve as a good reference.

My thought is that tech booms of the past versus future have to be looked at in a different context with the early ones being U.S. centric while devices were manufactured by the developing economies, but not adopted by them.

Now, we have China and Asia manufacturing and adopting. The nascient tech booms of last quarter of the 20th century were fueled by a largely No. American and European 'baby boom' population that is now aging, yet still adopting tech.

The smaller in size US generations are even more rabid adopters. But it's no longer a US phenom. Any tech innovation now becomes globally ubiquitous so fast (Twitter/FB in impoverished northern Africa turmoil), it's hard to remember a seam in the fabric of a recent tech cycle, to say nothing of a break in tech development. And, as I see it, global adoption is much bigger and much much faster than what the 'boomers' provided. That global availability and speed should make the cycle speed up, and burnout much faster, if it does actually burnout. It may just morph into the next technology in the pipeline, or combine technologies, like social media and Ebay spawning a Groupon.

So, the fact that VC money returns and VC money available shrinks and suffers during tough economic times (big surprise?), may not be as good of an indicator of whether we have a tech boom underway. Maybe VC's only show up halfway through the cycle to make their 'vote' on what will possibly be a profitable enterprise with staying power.

Maybe VC's miss some of the early boom because the tech of the last boom is still trickling down the industrial side applications, while rising in new below the radar micro-niches. Micro niches are out there taking tech for an unrelated thing and applying it to a real need.

I remember not too long ago the huge machine used to develop film. Now it's about the size of a large copier and it does 10x as much as the huge one. Or, the tech is replacing older tech, like batteries/fuel cells, or tech is cleaning up dirty industries like coal and crude, or, sanitation/sterilization methods in medical facilities, or hi-tech battlefield applications from protective equipment to the I Spy stuff of lasers, cameras etc.

Then there's the 'Ooops' factor for the category of accidental discoveries ,,,, like the one showing no hair loss on mice while testing a drug for another purpose. Those scientists dropped everything to look at a hair loss cure. :) Follow the money, eh.

wave rust

Mamma Boom Boom

Get Ready to Party Like it is 2007

Mamma Boom Boom

>I led a local panel two weeks ago, with VCs squaring off against Angels and SuperAngels.<

I think this might be a problem area, for you. You hang out with these 'west coast wise guys' who couldn't feed themselves if it weren't for cheap labor abroad. They set around and dream up gadgets that they can sell to the unsuspecting public at a big profit, because the slave labor.

Try spending some time in the midwest, particularly the industrial sectors such as Tennessee, N. Carolina, or Michigan. You might get a different take on the world. It's not all sugar and candy.

And if our country keeps moving the way I see it, that cheap labor might disappear. Your 'west coast wise guys' would be put on a sever diet.

Make sense?

Neo-Mamma

yelnick

Mamma, no question hanging out in Silicon Valley has put me inside a bubble. We all read Tom Friedman's "the world is flat" thesis, and if you fly from SFO to Shanghai or Bangalore or Dubai, it sure looks flat. But if you go a short distance away from those cities, it looks a lot spikier. I grew up in Oregon among ordinary folk, and spent a fair amount of time in places like Michigan and Colorado. If you step out of the coastal cities in the US, the world looks spiky, not flat here too. 

yelnick

Wave, the modern venture industry really got going after ERISA in 1979, which allowed pension plans to put a mall percent of their investments in riskier categories. Before that it was a cottage industry largely funded by a handful of wealthy families. The industry began in modern form after the semiconductor was invented (1958) and we had a bunch of post-sputnik defense electronics companies (1962-ish). It got a second mini-bubble in 1972, the minicomputer craze, following improvements in semiconductors to the point of large scale integration.  The third and much larger stage was the PC Boom of 1978-1983, driven by the microprocessor. 

In these three cases, the tech boom was somewhat counter-cyclical to the extraneous investment climate. Moore's Law which drives semiconductors marches ahead regardless of market conditions. The PC Boom happened in a double-dip period, and it and the 1972 bubble led to a market aphorism that "small caps lead us out of a recession."


To your point, the VCs led out of each of those periods as well. Rory's point is the big money then flows in near the peak, and suffers the bad returns for the next decade until the tide rolls it out again. In the 1986-94 period, VC returns stayed buoyant not because of the PC bubble continuing but because of the rise of Biotech. This time around, the last decade has had no counter-cyclical venture sector. Biotech and infotech both sucked. Cleantech was the great hope, and it had a brief bubble in 2006, but it is past its peak. 


I see the social/mobile/web as a fourth class of venture, along with traditional infotech, biotech and cleantech. Normal IT is not in a boom, and VCs that have stayed focused on what worked in the 80s or 90s are suffering. 


I agree with your observation that the social/mobile/web boom is global. Probably the most rapid adoption of US technologies by a global audience we have ever seen. Make no mistake, the center of this boom is in the US, with the major smartphones all within 10 miles of each other (Apple, Android/Google, Palm/HP). 

Virgil

>"That global availability and speed should make the cycle speed up, and burnout much faster, if it does actually burnout."

It's called the singularity. There's been a lot of attention lately since that computer won Jeopardy (doesn't anyone remember Deep Blue and Kasparov?)

http://spectrum.ieee.org/robotics/robotics-software/economics-of-the-singularity/0

What he's calling singularity eras midway thru the article were likely 3rd waves. Did they call this one after the peak?


Mamma Boom Boom

>Detroit Schools Closing: Michigan Officials Order Robert Bobb To Shut Half The City's Schools<

Eventhorizon

Mamma, you know I love you, but you can't put the genie back in the bottle viz-a-viz cheap labor!

Would the global standard of living fall or rise if we, for example, sank all the world's ships and grounded all the world's planes to force manufacturing to come home? Would the US standard of living rise or fall if we destroyed all the mechanized forms of production to ensure jobs for all?

I watched a Masterpiece Theater show, Downton Abby, recently. It was set in 1912 - 1913 and opens with a scene of a victorian country mansion "waking up". A staff of 20 or so scurrying around the house opening up drapes, making up fires, grooming the horses, cooking breakfast, ironing the newspaper, preparing for the day. It was striking how many staff one rich family of that era supported. I sometimes wonder if our economy will go full circle and those once employed in manufacturing will spend their lives in service to the winners of the Intellectual Property economy. I find that a depressing thought.

Mamma Boom Boom

>Mamma, you know I love you, but you can't put the genie back in the bottle viz-a-viz cheap labor!<

I wouldn't bet the ranch on that. I guarantee you, our wonderful elected leaders are going to come under intense pressure to create jobs. INTENSE

BTW, I love you too.

ed

ES down 16.25 at 1326.00 I wonder what all the longs are going to say in the morning..ouch. Ben might have some work to do in the am.

Wave Rust

Thanks Yel

virgil thanks for 'singularity' too

This is a President's day short. People outside the U.S. think it's Obama day, so of course, they shorted him. :)

They ripping up some Euro paper.

wave rust

Hockthefarm

Y:

"Then along came the Netscape IPO and the dot-com boom was born. It ran for five more years.

This time around our Netscape is Facebook, and it has its own social network of other high-profile IPOs. LinkedIn, Groupon, Twitter and Zynga are expected to go out before Facebook gets forced out by our SEC by April 2012."

When I look back on the 1990's technology boom I think of enabling technologies that industry across all sectors deployed to improve efficiency (SAP being a case in point). For example, when someone places an order today, production schedules automatically account for the order and raw materials are sourced in real time. Invoicing is seamless.

The Social Mobile otoh (facebook Groupon etc) has more of a consumer focus. Are you really expecting this boom to have such a broad based impact on corporations as the last one did? Could this boom actually be net negative for corporate margins?

Thanks,
Hock

Virgil

The world wide web took off when its consumer focus hit critical mass with Netscape. The world-is-flat corporate applications piggybacked on the progress and brought value to the business systems like you said. I remember it back then and at first it seemed silly to me, frankly, but it worked out.

http://advice.cio.com/thomas_wailgum/14887/like_it_or_not_here_comes_the_facebook_ization_of_erp

Now we have another consumer boom and the enterprise systems are trying to do the same thing again. I have to admit I'm skeptical again, but you have to give them credit for not standing still.

Jose

Cuban asks Obama, Google chief for free Internet

http://news.yahoo.com/s/afp/20110222/tc_afp/entertainmentcubaitusgoogledissident

Something for the Angels, Super Angels and the great minds such as good ole boy Rory to discuss.

Financial engineers or societal parasites? And then there is the BAC heritage. How apt.

Wonder how many meetings Steve Jobs has with the Angels, The Super Angels, and Rory?

It is becoming more and more clear why we have been indoctrinated by so much EWI garbage.

Jose


yelnick

Hock, good observation about '90s tech: most of the benefit went to companies like Walmart and SAP who applied the magic new stuff to lower inventories, run more efficiently, etc.  Yet go back in history: the Pc\Cs that were the basis of the client-server tech transformation began as devices which came into enterprise through the back door – departments, individuals. There were ten years or so called "The Year of the LAN" as the central IT departments attempted to get control over these machines, and eventually they succeeded. 

Now fast forward. The new tech toys for consumers, such as smartphones and iPads, are racing into the enterprise thru the back door again – departments, individuals. The core IT departments are to stressed with all those client-server systems to pay much mind.  Hence a huge market opportunity is the consumerization of enterprise apps – make them as easy to install and use as iPhone apps. That is what is happening, with app logic in the Cloud, simple interfaces on the device, and corporate security policies adhered to. 


I expect this boom to have an even bigger impact on corporate productivity. The consumerization of apps makes their adoption easier and much more rapid. The ease with which they can be modified or created accelerates new uses of corporate data. The reach of these apps goes beyond the first generation of computing (back-office systems) as well as he second generation (office productivity) to a third generation of reaching outside the enterprise into customers, suppliers, etc. 

yelnick

Event, the Downtown Abbey show is marvelous, and yes, it shows how far we have come.

The Luddite argument – that new productivity tools will destroy jobs and leave a thin slice of rich on top of a barely employed mass of poor – comes back every generation. The Luddites worried over mechanized production – steam powered machines. Their fears proved groundless, as were the fears of each generation afterwards. Wealth comes from innovation + efficiency (which Adam Smith called division of labor). The more we strive for efficiency, the more wealth we create. The more we promote innovation, the more wealth we create. The jobs have always followed. It is when we short-circuit that process we create problems. 

Wave Rust

My favorite "tech toy" development was/is the Sony Walkman. It's my favorite because it made obsolete those shoulder mounted BOOM BOXES ! As the boomboxes disappeared, so did bell bottoms.

The downside was that the disappearance of bell bottoms fad was quickly followed by the disappearance of the "no-bra" fashion statement. A pity, for sure.

wave rust

yelnick

Wave, but we got the wonderbra! Market went from sagging to uplifting. A double top for sure!

Hockthefarm

Thanks Y, really fascinating stuff.

I'll take a stab at it:

100 companies manufacture product X throughout the world.

Buyers download an app that lets them check delivered pricing for X 24x7x365.

If X is a commodity, the low cost producer/distributor in a given geographic area wins. Distribution becomes critical part of success.

If X is a specialty (say with technical services included), the actual sale is made by a group of buyers in a chat room. Producer has no part in actual sale.

The producer makes things and services them. They no longer have a sales force. Except maybe a "Watson" to comb the chat rooms and evaluate perceptions.

Two bones to pick with you. In the short term, the luddites were correct. Second, as we move up the worker evolutionary chain, some segments become unemployable. We may be talking 25% of the population. The housing bubble happened because huge segments of the population could not analyze and draw meaningful conclusions from mortgage applications. In the past, gubmint protected these folks by limiting their access to funds. Good luck getting these folks to do more. Look what happens to species on the Galapogos conveyor belt (moving at an inch per year). Then compare it to the change you see coming in the next decade.

Hock

Virgil

Hock I agree with you that a lot of people will get caught in the lag between productivity innovations and employment gains. It gets worse with each jump forward because technology improvements are moving faster than people can react and change.

Yelnick pointed out in a previous post about the hands on labor required for electronics fabrication and assembly. As the technology gets better and mass customization grows, the need for unskilled labor will grow also. It just won't be in the US, at least for the foreseeable future. Combine that with the commoditization of knowledge skills, and you have a recipe for a long drag on prosperity.

The cycle of consumer applications leading to enterprise applications is repeating. That's what worries me. It lead into a crash last time.

Mamma Boom Boom

>Now we have another consumer boom
Posted by: Virgil<

Strange how people can look at the data and not see it.

Virgil

Mamma, 500 million Facebook users spending 700 million minutes a year on it. Did I miss something?

Virgil

My mistake - that's 700 million minutes a month.

Mamma Boom Boom

Virgil, maybe I misunderstood. Are you talking about a consumer boom in just one segment of the economy?

Virgil

The technology boom in the above article. The FREE technology boom.
My personal favorite, Pandora has had a tepid response to its IPO because it actually wants to charge money. This is really an advertising boom isn't it?

Mamma I see property values in Detroit, Cleveland, and Vegas are now back below Jan 2000 levels.

Mamma Boom Boom

>Mamma I see property values in Detroit, Cleveland, and Vegas are now back below Jan 2000 levels.<

Yes, they're dropping like a rock. If you factor in how long it takes to sell a property it's much uglier.

Also, reflected in consumer confidence.

http://www.screencast.com/users/MammaB/folders/Default/media/d8cadbe4-aca6-48b3-aa62-c2673080f94c

yelnick

Hock, good stuff. You give great examples of how the Internet can flatten the transaction costs of distribution. In some markets, we are getting close to what you describe. In others, sales becomes business development, to work deals with partners (ie. For the producer to add value beyond the product). "Sales" becomes higher-value-add busdev. Order takers and order entry get mechanized. Efficiency.

The short-term Luddite problem is really a Forgotten Man problem. As the formerly employed Luddites (in your example, order taking sales staff) go away, they are visible and unemployed. The efficiency results in new jobs elsewhere who are hidden and employed at higher wages. In these technology spurts the new jobs increase faster than the old jobs, but the political fickle finger of fate focuses on the visible unemployed. The Luddites get their 15 minutes while the freshly employed ignore the noise and happily work away invisibly.  


Hence the problem across an economy is NOT an overall drop in employment but a structural issue for the recently unemployed. Their skills are stale, their locale may be suffering (ie the new jobs are elsewhere), and the new jobs may not even be visible to them. 


Projecting the structural problem onto 25% of the workforce is a huge leap. Sure, the agricultural transition eventually lowered 40% of the workforce in farming to 2%, but it took decades for this to occur, and the new jobs were the incentive to leave the farm and seek fortune in the River Rouge assembly line of Henry Ford for example. 


Then the issue was unskilled labor off farms into factories, and it worked. This time it is underemployed college grads out of sales and into knowledge worker jobs. By having a huge percent of our workforce college educated, we can work this transition.  


It also suggests that we should change immigration policy. The gubmint is always late to act and almost always fights the last war. Ted Kennedy in 1965 changed immigration policy to reward the unskilled and the dependents (parents, kids) over the skilled and educated just as our economy was ended the migration-off-the-farm stage and entering the global-knowledge-worker stage. We need to change that to making it much easier for the best & brightest to emigrate to the US and stay here, and to make hauling over the dependents less attractive.  

yelnick

Virgil, no, it is not an ad boom this time. Way premature to characterize its IPO as tepid since it is months away from testing the waters - Pandora is preparing to go out since it has 80M members, making it one of the largest social communities (LinkedIn is at 90M, Twitter 100M, Facebook 600M). Pandora has subscription. LinkedIn has fee income, Twitter needs to figure this out but has something like $200M of fee income (not ads). Zynga is all payments for virtual currency. Groupon is rev share of group coupons. Etc.

The fist social IPO out, Demand Media, is more of the anomaly, being ad based. 

da bear

Possible five waves in for SLV off the late 2008 low.
I would count this as a completed Primary C of Cycle B up.

link: http://bigcharts.marketwatch.com/print/print.asp?frames=0&symb=slv&unused=0&o_symb=slv&freq=2&time=20&style=320&default=true&backurl=%2Fquickchart%2Fquickchart.asp&prms=qcd&sid=2305869

if the mid 2009 low was the wave ii low, then the run-up to $30 was iii. The recent low was iv, and the last move up into yesterday's high was v.

da bear

P.S. Apple (AAPL) has finished a HUGE five wave move and is headed back down.

link: http://bigcharts.marketwatch.com/print/print.asp?frames=0&symb=aapl&unused=0&o_symb=aapl&freq=2&time=20&style=320&default=true&backurl=%2Fquickchart%2Fquickchart.asp&prms=qcd&sid=609

Mamma Boom Boom

Today is the first day of the rest of my life. It's also the day the 'big bad bear', that I've been telling you about, came to town. IMO

Neo-Mamma

Bill Gross

Where is Roger? Is it realy the top because he didn't show up...and JT is not bashing top pickers...OMG!

Mamma Boom Boom

Bill, Roger OD'd on bull droppings.

------------------------------------------

Despite all the puff, the XAU is down.

Bill Gross

Mamma, I heard a rumor that Roger the mountaineer never made it to any top because he is still stuck at the bottom of 2009. There is a film, called 7 years in Tibet...

joe

Yelnik - maybe you could do a post about if or not this was the end of a 5 wave from July?

Joe

Mamma Boom Boom

I wonder where those two 'PUKES' are that always come around when the market goes up.

yelnick

Joe, good suggestion. Not a peep from EWI but a special bulletin from Neely. Let me scan the punditry first

Virgil

>"Zynga is all payments for virtual currency"

I keep hearing about this type of thing. Didn't Prechter cover digital currencies a few months back? Someone sent this link to me recently:

http://thesuperfluid.com/

It reminds me of Second Life hype. Businesses were all going to go come up with virtual B2B solutions and sims were going to replace real meetings.

Chico

Neely went short at the close Friday. Great entry so far...

DG

That 1340 area sure did turn out to be something. The main thing the bears have to watch for is this thing to turn into a one-day wonder.

Still a ways to go before anything major is confirmed.

yelnick

Virgil, social game players buy  cheats and extras to continue the game; this has been around for a while. Think of it like putting more quarters in to beat the game. Zynga started with its own virtual currency, and now uses Facebook's (after being leveraged to do so by Facebook). People pay real money to cover their virtual currency. Zynga has tremendous expertise in "game mechanics", which is really human psychology to get you to pump in those quarters. 

Over in China the online community QQ has a huge virtual currency business. 

Jacques DeMolay

What a bubblicious little article. A lot of bell ringing going on lately. On top of that the NYSE was taken over last week and we had Obama visiting the tech wunderkinds with Steve Jobs and Zuckerberg getting the honor of sitting next to Obama at their little power luncheon. Poor Larry Ellison had to sit on the other side of the table. He's so nineties.

And the market topped out Friday, 7years 14days (77)from Facebook day (2-4,2004) and 714days from the 3-6-9 low. Beware of the next Miami Thrice Day. One of the non-Thrice, James Jones,#22, won the NBA 3 point contest over the weekend. And lo we had quite a turnaround on 2-22-11, predicted in Social Network no less. (The Winklevoss twin says he's 6-5-220lbs-and there are 2of him (2-22-11(56flashcrash#in reverse),42days after their meeting with Facebook founder Jesse Eisenberg on 1-11.))

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