The Tattletale Toothbrush... and an Excuse to Sell

Posted On Oct 15, 2014 By Dave Gonigam

  • The toothbrush that tattles on your brushing habits to the dentist
  • Mainstream discovers the “Internet of Things”… Fortunately, it’s not too late to profit
  • Lousy economic numbers beget lousy stock market numbers
  • Why quantitative easing/money printing might resume as soon as it ends
  • Treasuries reach a milestone… How Apple wrecked the Finnish economy… Reader identifies something to fear more than Ebola… and more!

   Here it comes — the Internet-connected toothbrush.

Yeah, we know, the markets are in another minor tizzy today. We warned you as much, and we’ll bring you up to speed on this morning’s events shortly. But as always, we try to stay a step ahead of the herd. Today, we alert you to an unstoppable opportunity that stands to thrive no matter what happens, bad or good, in the wider world.

So take a deep breath. Let’s go.

   “The world’s first of its kind with Bluetooth connectivity, the Oral-B SmartSeries electric toothbrush will be available in the U.S. in October 2014,” promises Oral-B.

That’s this month, so it should arrive any day now.

It doesn’t look much different from an ordinary electric toothbrush, but it logs things like the time you spend and the pressure you apply. “It records brushing activity as data that you can chart on your own and share with dental professionals,” the Oral-B website gushes. Put your smartphone next to the toothbrush on your vanity and the Internet does the rest.

Although we have to say the screengrabs on the website make it look as if the product is targeted toward, if the phrase isn’t too impolite for a family e-letter, the anal-retentive…


Brushing your teeth as a “goal-oriented” activity: Who knew?

Understand the toothbrush itself is not the investment opportunity. Oral-B is one of many products from that bluest of blue chips, Procter & Gamble.

   Rather, the toothbrush spotlights how the “Internet of Things” has arrived.

We brought the IoT to your attention in depth during early August — a host of ordinary devices acquiring Wi-Fi capability — like toothbrushes. Now the elite media are playing catch-up.

“These connected things span industries,” said an article last weekend in Barron’s. “They include automobiles with built-in Internet connections, packaged goods on store shelves that can have wireless transceivers in their labels and fleets of trucks on the road connected to networks that track their progress.”

   Barron’s did catch on to one eye-opening phenomenon: What makes the IoT unstoppable is how it makes mundane business activities far more efficient — and far less costly.

“Consider the maintenance of GE jet engines,” says the article. “When an airline such as United needs a part for a plane already at a gate, it usually barters with another carrier with a nearby plane, causing delays.” But with the IoT, GE computers can monitor the engine at all times… detect when the part is on the verge of failure… and deliver a replacement.”

“There is no sector of the economy where there aren’t billions of dollars trapped in inefficiencies,” Harbor Research analyst Glen Allmendinger tells the paper. “Look at the way PCs in the 1990s improved office productivity. The impact of IoT will be many times greater.”

How to play it? “The explosion of connected things offers opportunities for technology companies across the spectrum,” says Barron’s, “including chipmakers such as Qualcomm and Thin Film Electronics, traditional networking firms such as Cisco Systems, software vendors such as PTC and Splunk and cloud-computing service providers such as Amazon and Salesforce.com.”

   As usual, the mainstream is looking in the wrong places.

As Ray Blanco of our tech team explained here more than two months ago, the real opportunity in the IoT lies in two facts:

  • The number of Wi-Fi-connected devices is set to explode to 50 billion devices by 2020. “That makes the current Internet, with its 6 billion connected devices, puny by comparison”
  • “Since the Internet boom of the 1990s,” adds Ray, “Internet infrastructure has not had a major upgrade in carrying capacity.”

So the key to profiting from the IoT lies within the companies building out Internet capacity — making the IoT possible in the first place. To say nothing of the efficiencies that will follow. Says Dan Amoss, editor of The 5’s daily PRO edition, “From an investor’s perspective, the ultimate dominator of type in an efficiency/cost savings market is a phenomenal business to own — regardless of the economy.”

Indeed. And with that in mind, Ray has identified one player set to soar the same way Intel did from 1996 until its peak in 2000. That’s a 732% gain. Curious? You can find Ray’s detailed briefing at this link.

   To the markets — and the aforementioned minor freakout.

For the first time since the stock market’s swoon got underway last Thursday, traders got a chance this morning to chew on a bunch of economic numbers.

None of them was encouraging — especially if you’re conventionally minded and believe 1) the economy is driven by consumers buying junk they don’t need and 2) to encourage consumers to spend, we need more inflation…

  • Retail sales: Down 0.3% in September, says the Commerce Department — a bigger drop than the “expert consensus” was counting on. Even after you factor out falling gasoline prices, the number is, in Bloomberg’s words, “weaker than expected”
  • Wholesale prices: The producer price index slipped 0.1% in September, the first monthly drop in a year. But even factoring out energy and food prices (because they’re “volatile,” dontcha know), the year-over-year increase is now 1.6%, down from 1.8% in August. The Federal Reserve, as a reminder, aims for 2%
  • Empire State Manufacturing Survey: This number, a Federal Reserve measure of factory activity in New York state, is intriguing because it’s an early read on the month of October. The number still shows growth, but it’s the weakest growth in six months.

   Numbers like that, released an hour before the open this morning, gave traders an excuse to hit the sell button.

Early on, the Dow shed a quick 350 points. As we write, the bleeding has been stanched to less than 200, and the big index sits at 16,120.

The S&P 500 is at 1,857. If you’re keeping score, that’s a 7.7% drop from the all-time high set on Sept. 18. Still not in “correction” territory.

Meanwhile, hot money is flowing into Treasuries. At one point this morning, the yield on a 10-year note sank below 2%. At last check, it was back to 2.05%. (Funny, we recall at the first of the year, when the yield was 3%, all the “experts” said this was the year Treasury yields would rise and prices would fall.)

Gold is also perking up, at $1,239.

Crude threatened to fall below $80 a barrel earlier. But now we see it’s recovered to $81.84.

   The economic numbers this morning also suggest we’re getting closer to the Federal Reserve deciding to suspend tapering/resume quantitative easing.

Heck, even before the numbers were released, San Francisco Fed chief John Williams said as much. “If we really get a sustained, disinflationary forecast… then I think moving back to additional asset purchases in a situation like that should be something we should seriously consider,” Williams told Reuters yesterday.

Of course, if you read The 5, you saw this coming more than four months ago: “Look for QE4 in 2015,” Jim Rickards said in this space on June 6. There’s a reason the leadership here at Agora Financial moved heaven and Earth to bring him on board our editorial team.

We closed down the first phase of our Prophesy 2015 project with Jim. But the next phase begins a few short days from now. We’ll keep you posted…

   It’s not unusual for politicians to blame big companies for their problems… and if they’re big foreign companies, all the better… but Finnish Prime Minister Alexander Stubb has surely set an indoor record.

For a long time, Finland was a standout nation in the eurozone. It was one of only three countries to hold a AAA credit rating. (Germany and Luxembourg are the others.) But last Friday, Standard & Poor’s downgraded Finland to AA+. S&P figures the country is stagnating, which will lower tax revenue and swell the budget deficit.

And where does Prime Minister Stubb lay the blame? Apple Inc.

Seriously. He says Apple wrecked two of his country’s biggest exports. “The iPhone killed Nokia, and the iPad killed the Finnish paper industry, but we’ll make a comeback,” Stubb told CNBC on Monday.

Turns out it’s not the first time he’s blamed Apple for Finland’s woes: “Steve Jobs took our jobs,” Stubb complained to a Swedish newspaper in July.

A photo of Finnish Prime Minister Alexander Stubb,
presented without comment…

Heh… According to TechCrunch, Stubb fails to point out Apple has been paying Nokia a pretty penny in licensing fees for years. How much is a trade secret, but former Nokia CEO Stephen Elop said between Apple and other firms, it was pulling in $650 million annually in such fees.

But good politicians never let the facts get in the way of a good story, no?

   “Has anyone attributed Europe’s problems to Russia and the sanctions that we put on it?” a reader writes.

[Matter of fact, we mentioned that in passing one day last week…]

“The European Union just went through refinancing and restructuring of Greece and Spain and Ireland, and Germany is the big engine supporting it all. Is it possible that the sanctions on Russia by the EU are causing a recession to recur? And then it carries over to the USA!

“Could this be the big blowoff like when the banks finally went under? Except now we’ll see a U.S. debt default!”

The 5: Not just yet. Looking at a bond screen right now, we see a 10-year German bond yields 0.83%… while the 10-year debt of France yields 1.20%.

With numbers like that, it’s no wonder hot money is flooding into U.S. debt, where you still get 2% for 10 years. (That’s as much as you can get from Spain right now, and wouldn’t you say that Uncle Sam is, uh, a somewhat better risk than Spain?)

As with the big euro scare in 2011, U.S. Treasuries are ironically a “safe haven”… at least for now.

   “With regard to your newsletter editors’ hair-on-fire attempts to sell subscriptions,” a reader writes of Ebola, “can we at least try to bring a wee bit of perspective to this ‘outbreak’?

“Influenza infects millions upon millions of Americans every single year, and somewhere around 30,000 die from it. Additionally, Ebola is passed along solely by contact with bodily fluids of the infected, while the flu is transmitted in various ways, including through the air. Historically, the flu has killed tens of millions more people than have died from Ebola, and the possibility of a virulent strain arising is always present.

“So it seems clear, at least to me, that the real deadly threat to Americans right now is not Ebola but the approaching ‘flu season,’ which will bring with it the death of 30,000 or more Americans. Yet the punditry class, the news media, scientifically illiterate GOP politicians and, yes, Agora Financial lose their collective minds over Ebola. Dudes, get a grip.”

The 5: We’ve lost our collective minds over Ebola?

From Monday morning’s New York Times, dateline Dallas: “Carleen and Ed Guerrero were asleep when two police officers rapped on their door at 5 a.m. on Sunday to tell them that the Ebola virus had come to their leafy neighborhood just north of downtown.

“One of their neighbors, a nurse from the beige-brick apartment building just down the street, had tested positive for Ebola, and hazardous-materials crews were cleaning her apartment building, officials told the couple.”

So we have cops going door to door at 5:00 on a Sunday morning to tell people someone in their neighborhood’s been diagnosed. As if there’s anything they can do about it at that ungodly hour other than freak out. If it’s fear-mongering you’re concerned about, go talk to the Dallas Police.

Best regards,

Dave Gonigam
The 5 Min. Forecast

P.S. Oh, and you say there’s reason to be concerned about the flu? More about that tomorrow…


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