VR Investing: Just the Beginning
- Delayed gratification: Where’s our damn virtual reality headset?
- How VR headset “tear-downs” might turn up even more VR investing possibilities
- Weak start to earnings season, IMF downgrades its outlook again: Why stock traders don’t care
- Small-business owners still glum… Saudi Arabia downgraded… an update on the “Shanghai Accord” and the dollar
- Who knew? Feds have authority over names of beer
- Virtual reality mailbag: Two movie suggestions and a skeptic who might be turning into a believer
We figured we’d have to wait a bit to see up close and personal what virtual reality is all about… but this is ridiculous.
Back at the start of the year, our publisher, Joe Schriefer, had the foresight to recognize VR would be one of the big investing themes of 2016… and he wanted an Oculus Rift for us here in the office, so we could convey to you the reader — in a tangible way — what VR’s all about.
Oculus began taking pre-orders on Jan. 6. Its website was down much of that morning, presumably because it couldn’t handle all the traffic. But Joe persisted and got his order in around noon. Folks who pre-ordered were promised a shipment date of March 28.
Alas, on Jan. 16, Oculus announced demand was so intense the first day that shipments were delayed until sometime in July. And as we noted a week ago today, a parts shortage has now cropped up.
Under the circumstances, a late-June arrival as noted in the email to Joe amounts to a small victory!
The longer the wait, the longer it will take to unearth even more juicy VR investing opportunities than already exist.
“There will be Oculus Rift tear-downs on tech websites once people get their hands on them,” says our tech-investing guru Ray Blanco — who’s waiting for his own Rift shipment at his home base in Florida.
“In a tear-down,” he explains, “someone takes a new device apart. Hopefully, it’s done with enough skill to not wreck it. Why would someone tear down their brand-new Rift? In order to find out what the guts are, of course. You can find out what the components are, and who makes them.
“For me, it’s not just a matter of curiosity. Right now, we don’t know who is making some of the parts that go into a Rift. Finding out who is making the components could clue us in to potential investments with exposure to the VR space.
“And that’s a space that’s set to enter the ‘exponential growth phase,’” Ray goes on. ”Oculus Rift and other VR headsets will be the biggest new consumer products of the year.
“As with many new technologies, it’s going to be the early adopters who use them first. That’s the earlier phase of growth for most fresh tech. Then, it matures.”
That’s a concept known as Rogers’ bell curve — named after the scholar Everett Rogers, who described it in his 1962 book Diffusion of Innovations…
“When it comes to investing in new tech,” says Ray, “it pays to be right about what innovation will succeed. However, it is also important to get the timing right. Had you invested in VR tech a decade ago, you’d have waited a long time for a big payoff.
“Right now, VR tech is at the tail end of the early adopter phase after a really long sojourn in the innovator phase,” Ray goes on.
“Before too long, it will go mainstream. This is generally where the really major profits start to roll in.”
When Facebook CEO Mark Zuckerberg bought Oculus in 2014, he paid $2 billion. Sounds like a lot, but by 2020, analysts say VR could be generating $6.6 billion for Facebook every year.
But as we’ve emphasized… the way to profit from VR isn’t with headset makers like Facebook or Samsung or HTC. It’s the niche players furnishing the pieces of the headsets. Some of them, as noted above, are still a mystery… but Ray’s done his homework and identified the best of breed among the known suppliers.
If you want to unlock the full potential of a phenomenon on the verge of 81,000% growth — that’s not a misprint, and Ray has the evidence to back that up — here’s where to start.
The major U.S. stock indexes are in rally mode this morning, despite a rough start to earnings season. At last check, the S&P 500 is up more than two-thirds of a percent, at 2,056.
Per tradition, Alcoa was first to report after the closing bell yesterday. AA delivered a “beat” on profits, but missed on revenue. It’s down more than 4%.
Aside from earnings, trader chatter is focused on the fact the International Monetary Fund has cut its 2016 global economic growth outlook yet again. That’s three cuts going back to last October, if you’re keeping score at home.
But none of that seems to matter: Stocks are again moving in sympathy with crude. As we write, a barrel of West Texas Intermediate is up nearly 4% — only 11 cents shy of the $42 level. Once again, rumors abound that Saudi Arabia and Russia have agreed to freeze oil production. But we’ve heard that before. We’ll know for sure when OPEC and Russian oil ministers meet on Sunday.
Gold is holding its own — essentially flat at $1,257.
Small businesses anticipate weaker earnings as 2016 goes on… and that’s dragged down the monthly Optimism Index from the National Federation of Independent Business.
The March number clocks in at 92.6. That’s two consecutive monthly readings below 93, the first time that’s happened since late 2013.
Half of the small-business owners surveyed say it’s a bad time to expand. Their most frequently cited reasons are weak sales, a weak economy and political uncertainty.
Speaking of weak sales, that’s back in third place as the “single most important problem” identified by respondents to the survey — cited by 13%. Taxes and regulations still have the top positions by a wide margin.
As if on cue after yesterday’s episode of The 5, one of the Big Three rating agencies has cut its rating for the government debt of Saudi Arabia.
Fitch has dropped the kingdom’s rating from AA to AA-. Oil production freezes notwithstanding, the analysts expect crude prices will remain relatively low, with “major negative implications for Saudi Arabia’s fiscal and external balances.”
As we said yesterday, every day the clock ticks closer to the inevitable devaluation of the Saudi riyal. Will you be ready?
The “Shanghai Accord” thesis is growing stronger.
In this space on March 24, Jim Rickards described growing evidence of a secret deal struck during a meeting of G-20 finance ministers and central bankers in Shanghai — effectively weakening the U.S. dollar.
“The goal is to give China some relief in the currency wars without sinking U.S. stock markets,” says Jim. “The last two times China devalued (August 2015 and January 2016), U.S. stock markets tanked.
“Now the effort is to keep the China-U.S. exchange rate steady but cause the euro and yen to get stronger, while easing in the U.S. The result is China gets a weaker currency, but no one notices because the exchange rate to the dollar remains the same.”
Everything that happened in the month after that meeting affirmed the thesis. Two more emerged last week, says Jim: “On Wednesday, Christine Lagarde, head of the IMF, delivered a major speech warning about ‘spillovers’ from emerging markets such as China, and the need to give China some relief. The next day, the release of the Fed’s (FOMC) minutes showed no appetite for hiking rates in April — that’s another form of ease relative to expectations.
“And as expected, the yen and euro are getting much stronger and the dollar is weakening.”
Indeed, the euro sits on the cusp of $1.14 this morning, the highest in nearly six months. And the yen relative to the dollar remains near a 17-month high.
“All indications to me are that the dollar’s five-year strong trend is ending,” affirms Chuck Butler from EverBank Global Markets. “Not without a fight, but that’s how these things usually end, with the strong asset fighting to remain relevant, and having good days sprinkled in that become fewer and further in when they appear, until Puff the Magic Dragon ceases to roar.”
Stupid federal bureaucrat tricks: A Minneapolis-based microbrew will have to change its name now that it’s being distributed in other states.
Indeed Brewing has met with success selling a beer called Lavender, Sunflower Honey, Dates Honey Ale — or LSD Ale for short.
That was fine with Minnesota state regulators… but once Indeed Brewing decided to sell in Wisconsin and North Dakota, it became subject to the feds as well.
“The feds did not like the name LSD,” Indeed co-founder Thomas Whisenand tells the St. Paul Pioneer Press. “They made that clear very quickly.
Oooh, trippy: At the risk of belaboring the obvious, there’s no LSD in LSD Ale…
“We tried to find a way we could keep it on the label, like could we spell out the words and just bold the first letters,” he added. “But unfortunately, we sell a regulated product, and there’s not much you can do when the feds say no.”
As a “compromise,” now the words are being spelled out and there’s no bolding on the first letters.
By the way, what is it with cross-state beer distribution between Minnesota and Wisconsin? It’s not the first time we’ve written about it this year.
“What are you complaining about in the U.S.?” a reader writes after noted Tax Freedom Day is April 24 this year — earlier in many states, later in others.
“Have a look at the tax liberation days in Europe in 2015. Belgium is the champion, with Aug. 6.” The reader sends along this chart in French…
The 5: So Cyprus and Malta are the only eurozone members with a Tax Freedom Day earlier than America’s? Cyprus? The country where bank depositors were subject to “bail-ins” three years ago?
Guess if they don’t get you one way, they get you another…
“You want virtual reality, check out the 1983 movie Brainstorm,” says a short email from a reader.
The 5: Hmmm… Natalie Wood’s last movie before her untimely death, according to TCM.
Here’s another recommendation: 1992’s The Lawnmower Man, “where VR headset-wearing test subjects are turned into evil geniuses,” says the aforementioned Ray Blanco.
“The director, Brett Leonard, isn’t looking into making movies about virtual reality anymore. He’s looking into making them in virtual reality: ‘I made a movie about it over 20 years ago. Now it’s at a point where it truly can become real… which is ironic, given that it’s virtual reality.’”
“Cool… Can I now say I am a published author re the skeptical reader at 4:30 yesterday?” writes the fellow who shares a few qualms about VR’s investing potential.
“I followed the link provided to Ray’s pitch page. Yes, I see we are basically on the same theme. I am an Agora Financial Reserve Member, so I will take a look at the companies Ray is talking about.”
“I run the tech at the Vancouver Convention Centre, and we do a different spin on VR — virtual presence with Beam robots from Suitable Technologies. The robots have the advantage of being mobile. You don’t need to sense and interpret the environment. Put a swivel head on the robot with stereoscopic cameras and bingo, you would have an immersive 3-D environment that would be pretty wild.
“Even with the robots, the strange part is how we humans interact with them. The people interacting with the robots seem to be a little freaked out that they are talking with a robot. ‘Surrogates’ may be closer than we think.
“If someone wants a good laugh and just to see how it works, let me know and I can have you guys ‘Beam’ in and virtually visit the Vancouver Convention Centre. Send Jim Rickards here and we can have him chased away by robots instead of the Japanese police.”
The 5: Oh, you have to bring that up… Heh.
The 5 Min. Forecast
P.S. Based on our research, we predict virtual reality could grow as much as 81,000%. Fortune said it could be a $30 billion-a-year industry by 2020. For you, the potential payoffs run so much deeper than just huge new wealth.
Imagine going anyplace you want… speaking any language… essentially knowing everything… “living” forever… and having in-person experiences that first took place centuries ago.
It’s big. Maybe the biggest thing ever.