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Archive for the ‘Technology’ Category

Are we in recession? Are we going to be in recession? Does it make any difference? Does it make any difference to me? For most of us, only the last question is important. We are coming up on the end of earnings season and, all things considered, it wasn’t that bad. The Federal Reserve that oscillates between being worried about inflation and unemployment, had a pretty good week with the better than expected employment stats on Friday. Wall Street has been waiting to declare recession, declare the worst is behind us, and then get back to business as usual and the talking heads sure want to proclaim the worst over and encourage everyone to go back paying those commissions.

But, have we just had a shallow downturn and the DJIA is just doing what it does being a leading economic indicator and is forecasting what will happen six months from now? Good question. The large multinationals in the Dow have held up pretty well all through this. The techs have already been rebounding. The financials are still a buying opportunity and it is clear that Benny and the Feds aren’t going to let any of them go under. But will we be seeing a V shaped recovery? Best answer is a firm “maybe”. Benny B. has a few arrows in his quiver but basically, interest rates and printing money are the big ones he has and he has gotten to the point of needing to be very careful with them both going forward. There may be more rate cuts in the future but listening to Benny’s testimony, I think he wants to wait until the third quarter to see what the effect of the stimulus package and the rate cuts will be. Of course, that is barring anything dramatic happening. But Benny doesn’t have as many bullets left in the rate cut revolver as he had some months ago. And the rate cuts are not filtering to the rest of the economy to any great extent. Of course, as they cut, the dollar weakened and commodoties took off. Now if Benny and the Feds are through with rate cuts, the dollar could find a measure of stability but it won’t head back up in value until we start increasing rates and that is going to be a ways off. And of course it takes two to tango when trying to alter exchange rates. The rest of the world decided that inflation was more of an issue than economic growth or unemployment so they have by and large been on the sidelines as we cut interest rates. If we start raising rates will others, particularly Europe, start cutting rates? Doubtful. And in that scenario, the dollar is not in for a big run anytime soon.

What does this mean going forward? Maybe the bad news is behind us. Wall Street really hates to not look like the smartest guys in the room so if they believe that all the bad news is out there, they can go back to pumping and dumping. The important issue is now becoming whether we have seen the worst in the economy and whether there is a possibility of another shoe dropping. A short list of the factors that have not been dealt with would include:

– Real Estate – No quick fix here and the best guesses are now out to 2010 for a return to growth with another down year in 08 and a stagnant one in 09. For all the posturing in DC, there isn’t much that can be done or likely will be done other than to make this issue a political one for the election. There will not be any big increase in home equity to borrow against anytime soon. And the low rates mean that there could be a short respite from the resets. But with the tighter requirements on lending, many people are going to find they will not be able to refinance and the reset is still going to happen over time. So just because Wall Street desperately wants to believe they have seen the light at the end of the tunnel this week, Main Street might not feel so inclined until more aspects of the real estate mess have to be worked through and it will take time.

– Energy – May is typically the weakest month for oil pricing and this one will not be much of an exception. Here in Cali my guess is that we will easily see over $5/gal gasoline this summer. We are sitting at right around $4/gal now and this isn’t a peak month. More worrying for the energy companies is that demand has finally started to fall in the US. As people convert to more fuel efficient vehicles, they tend to stick with them for years so demand may not reappear here. But demand in other parts of the world will increase and that is going to make for a competitive marketplace with a bidding war. No, energy isn’t going to experience a big drop from either a stronger dollar or increased supply. It is just going to take an ever bigger bite out of people’s budget. Will gasoline and then natural gas and heating oil next winter force an inevitable slowdown in the economy going forward? And this one is not going to be a time limited event. People may find it difficult to buy their fifth cell phone in two years as it gets closer and closer to $100 to fill a car up with a tank of gas.

Dollar – A weak dollar is making an attractive environment for exports. Shame we don’t make more here but we don’t and haven’t for years. Whatever bump there is for exports from a weak dollar is about as good as it is going to get right now. If the dollar plateaus or even starts to strengthen, that will be it. There won’t be any opportunity to export our way out of this downturn. Imports are now seeing price increases although in a perverse turn of events, my company purchaser has told us that we are seeing better pricing on such things as office supplies than we have seen in years. Maybe this is just excess inventories working off but if you are interested in big ticket imported goods, sooner rather than later might be a way to save a few bucks. Once the dollar does strengthen, I doubt we will see it return to values we have just been through.

Politics – In a bad economy, the party in power is historically tossed out. Not a good sign for the Republicans. Whether the Republicans can keep the WH or not might be a pyrrhic victory. The Dems will almost certainly keep or even consolidate control of Congress. If the Dems take the WH, as the odds say they most likely should, then it is yet another factor for the economy to handle. I wouldn’t invest anywhere in healthcare with either the Clintons or Obama in the WH. And, to paraphrase Dan Rostenkowski, the Dems haven’t met a tax they didn’t like. Whether you feel we need to raise taxes or not, doing so with a fragile economy is the worst sort of folly. The Republicans are a party that has lost its way and cannot claim to be the party of reduced government size and spending as they should have been doing so people may not view them as an alternative. Whatever the outcome, the closer we get to November, the more focus will shift to the political side and its potential impact on the economy. The recovery that may appear to be underway this week could quickly be forgotten as the markets hedge the bets on the election outcome. That alone can induce a second dip. And, just as we have seen with the corn/ethanol debacle, if both parties try to outbid each other with a feel good economic package, the long term effects could be far worse than any short term bounce to get votes.

These matters are great fodder to academics to write books on or for the greedy on cable TV to once again look for ways to prey upon the unwary investor. But if it is your own money for your own lifestyle or retirement, these matters are more than just mental exercises. Have we seen the worst of the recession? Are we now going to be in recovery? Are we seeing a “head fake” that is just going to allow some minor portfolio rebalancing or have we seen the worst? Is the economy in the US still slowing with more fundamental issues yet to be addressed or potentially a “double dip” downturn yet to happen? I wish I knew. But being invited to share thoughts and perspectives that I have access to on this blog is a privilege and I will certainly take advantage of it. Guerilla economics is nothing to look down on. One thing I have seen is that the supposed experts on Wall Street or in DC normally haven’t a clue what is going on in this country. The internet is a great way to solicit input or be exposed to other views. Of course, most of it is worth what you pay for to get it. These are unique times in the economy and the financial world in general. Getting a handle on what is going on, and maybe finding a way to profit from it, is the name of the game for me.

 

Ron

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Microsofts newest Operating system (Vista) has been getting lukewarm responses from many. Myself included. I tried it our and it really didn’t flow right with me. Seemed so much more geared to aesthetics then operation. Making it all pretty but loosing the simplicity of the power of XP.

That may be the reason why Apple has been kicking some major ass in its Computer sales this last quarter. Apple posted a AWESOME quarter despite the slow economy and rising costs globally for plastics, copper, cobalt etc.

Microsofts CEO hinted today that XP may not be going into tech heaven just yet:

Microsoft Corp. CEO Steve Ballmer offered a glimmer of hope on Thursday to fans of the company’s XP operating system, saying the company may reconsider its decision to stop selling XP soon.

But Ballmer was adamant that “most people who buy PCs today buy them with Vista.”

“That’s the statistical truth,” he told reporters at a news conference at Louvain-La-Neuve University. “If customer feedback varies, we can always wake up smarter.”

Fans of the six-year-old operating system set to be pulled off store shelves by June 30 have plastered the Internet with blog posts, cartoons and petitions recently. They trumpet its superiority to Windows Vista, Microsoft’s latest PC operating system, whose consumer launch in January was greeted with lukewarm reviews.

Ballmer said the customers buying PCs with XP are IT departments who are having trouble shifting old machines to newer technology.

Some 160,000 people already have signed an online Save XP Web petition who want Microsoft to keep selling it until the next version of Windows is released, currently targeted for 2010.

Might be in Microsoft’s best interest to keep XP sales going.
I myself am due up for a computer upgrade and more than likely and going to install a fresh copy of XP onto my system and hold off on a Vista update.

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So you are minding your own business, taking out the trash at night, or checking some suspicious noise outside in the middle of the night. Don’t forget this little handy tool.

The Magpul FMG9 could be a nasty surprise for that carload of gangbangers you meet on your way to the garbage can. Nice technical exercise, getting an automatic weapon down to pocket size, but you gotta wonder about the state of paranoia that drives these inventions.

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