If You Missed the First Tech Boom…
- Cisco’s phenomenal growth story…
- … and a tiny company on the verge of replicating it
- Breaking the last barrier to a truly wireless world
- Another job number hinting at a recession
- Selling cars with virtual reality goggles?
- Is VR an incremental or a revolutionary breakthrough?… the tiresome wait for another Janet Yellen speech… if The 5 worked like Snapchat… and more!
The date was Feb. 16, 1990. Nelson Mandela had been released from a South African prison days earlier. Driving Miss Daisy was tops at the box office. And a little company called Cisco went public on the Nasdaq, its market cap only $226 million.
By the time the tech bubble reached its most insane proportions a decade later, Cisco’s value had grown a staggering 162,000%.
What we’re about to describe this morning doesn’t have quite so much growth potential. All the same, we don’t think you’ll turn up your nose at it.
Indeed, the technological breakthrough we have in mind is analogous to what Cisco pulled off a quarter century ago.
Most of us, if pressed, couldn’t even describe what it was Cisco did. We knew what Microsoft and Intel and Dell did. But Cisco wasn’t as visible on the desktop.
Our tech maven Ray Blanco, however, was intimately familiar with Cisco’s work. “I used to head IT infrastructure projects where we had to make sure all the cabling at a site met new specs as we switched from one networking standard to another.”
Ethernet was just coming into its own, replacing an older technology called Token Ring. “Token Ring networking equipment,” Ray recalls, “all got pulled and sold off, to be replaced with shiny new Cisco switching equipment.
“The smell of a new Cisco Catalyst core switch as it was unboxed in the morning meant network speeds would get bumped from a paltry 16 megabits to the seemingly unbelievable speeds of 100 megabits… just as soon as I got it all installed and configured.”
No, it wasn’t sexy. Retail consumers didn’t line up around the block for Cisco switches the way they did for a shrink-wrapped box of Microsoft’s Windows 95. (Remember that?) But it was just as critical a part of America’s technological build-out in those days.
“You could see the relief on users’ faces,” Ray recalls, “as their network applications loaded faster when they fired up their PCs in the morning. By the time Token Ring was dead, I’d transitioned dozens of sites with many thousands of computers.
“By the late 1990s, however, something else was afoot in the networking world,” says Ray. “It was computing untethered.
“The trigger was a new wireless standard called 802.11. It specified how computers and devices could talk to each other over the air at speeds of 2 megabits per second. By 1999, the 802.11b standard bumped that up to 11 megabits.
“Wi-Fi was born.”
Today, Wi-Fi is everywhere. And it changed everything. “If you wanted to set up a computer in your game room to stream off a music service while you shot some pool,” says Ray, “you didn’t have to hire a cable guy to put in a new run (or, in my case, do it yourself).
“Wireless Internet made new products possible. With wireless high-speed networking, you could now kick back on the couch with your iPad while your kids watched cartoons. In fact, so many electronic devices automatically connect and sync with other devices today that you rarely need to worry about any cables at all.
“Of course, there is one notable exception,” says Ray — “a big hurdle between us and 100% cable-free devices.”
We discussed it here three weeks ago. You still have to plug into a power outlet to charge the battery of your phone, your tablet, your laptop. “Every networked device on the planet,” Ray declares, “has the same fatal flaw.”
But Ray has his eye on companies aiming to do for power what Cisco did for data.
“Imagine never having to change a battery in your remote or having to charge a wearable item like fitness electronics. Imagine just leaving your phone around the house and having the battery constantly charged. Imagine installing new intelligent devices making your home ‘smart’ and not having to worry about putting in outlets or running unsightly cables.”
Many companies are trying to compete in this space. Ray has identified one that’s developed a proven technology to charge devices from the next room — up to 15 feet away. It’s already validated by Underwriters Laboratories.
The company Ray has in mind brings in about $2.5 million in annual revenue. Now let’s do some back-of-the-envelope math…
Tech industry experts figure about 50 billion smart devices will be online by 2020. Not just smartphones and laptops but all those other newly connected devices like thermostats, coffeemakers and baby monitors — to say nothing of virtual-reality headsets.
“Even if this company makes just $1 per device,” says Ray, “it will rake in $2 billion — an incredible growth rate of 79,900%!”
No, not a Cisco-in-the-’90s rate of growth. But as we say, you probably wouldn’t turn up your nose at it, no?
What’s more, the company says it’s working with an undisclosed “key strategic partner.”
“I believe that player is Apple,” says Ray.
Apple’s quest for wireless charging of the next-generation iPhone is no secret. Ray has pieced together information from conference calls, patent applications, third-party recording of private corporate presentations, SEC filings, a Bloomberg terminal… You get the idea. He’s convinced all roads lead to this one company.
As it happens, Apple opens its Worldwide Developers Conference one week from today. “That’s where Apple shares details of its upcoming products with software engineers,” says Ray. “If Apple announces it has a device that never needs to be plugged in, it will be a huge blow to major competitors such as Samsung and HTC.”
As you can imagine, an announcement next Monday could prove immensely lucrative. No, that 79,900% won’t materialize in one fell swoop. But it’ll be a good running start.
Ray lays out a comprehensive case — no long video to watch, either — when you follow this link.
To the markets, where, God help us, all eyes are on Janet Yellen again.
When we left you on Friday afternoon, the major U.S. stock indexes were tanking after a terrible jobs number, the worst since September 2010. By day’s end, however, most of those losses had been erased. As we write this morning, everything is solidly in the green.
Heck, the S&P 500 is knocking on the door of 2,110 — territory last seen seven months ago. Gold is holding onto Friday’s gains at $1,245. Crude is up more than 2%, within shooting distance of $50 again.
Federal Reserve chairwoman Janet Yellen delivers not one but two speeches this afternoon in Philadelphia. (At least no one in the establishment media is playing it up as “her first speech since an unexpectedly weak job number on Friday,” heh.)
We’re not privy to an advance draft of the text, but we’re reasonably certain she’ll say any interest rate increases this year are contingent on the economic numbers — the old “data dependent” thing.
In other words, nothing new. But that won’t stop traders from watching her body language for hints of something new and exciting and dramatic. Oy…
Here’s a data point that argues against a rate increase for months to come…
This is the “Labor Market Conditions Index” compiled by the Federal Reserve, crunching 19 job indicators. As with the temporary employment figures we shared on Friday, numbers below zero can be a harbinger of recession.
Yes, there’ve been false alarms over the decades — the mid-’80s and the mid-’90s — but with the latest figure out this morning, the index has been below zero five straight months. Indeed, the current reading of minus 4.8 is the lowest since May 2009.
As we check our screens, traders in fed funds futures still see a 52% probability of a Fed rate increase by September. But not with a number like this — which we understand Janet Yellen & co. watch closely. “We see no Fed rate hikes until December,” Jim Rickards wrote his Strategic Intelligence readers this morning.
Is virtual reality so powerful a technology that it can sell luxury cars? We might be about to find out.
This morning’s Wall Street Journal informs us General Motors is looking to VR to help move Cadillacs. Cadillac President Johan de Nysschen is hatching a plan to convert some of the brand’s 925 showrooms into those of the virtual variety — strap on a VR headset, and away you go.
GM executives will solicit feedback from dealers during a road show this month. They’ve got to do something radical, and soon: Cadillac has nearly three times as many U.S. dealers as the likes of Mercedes and Lexus, but it sells only about half the volume.
“They can still sell the same volume,” says Will Churchill of the VR notion. He’s the head of Cadillac’s dealer council. “They don’t have to stock the 15 cars and hope that they have the right one… the data show they probably don’t.”
Hmmm… We’ll see. Stories like this remind us not every VR experiment will succeed. But they don’t all have to succeed for you to make big money from VR’s emergence.
“I think it is useful to distinguish between incremental and revolutionary technological innovations,” writes a reader, winding up to an intriguing take on VR.
“Here are examples, with, at no additional charge, my personal judgment call about the level of societal impact:
“Animal power to steam power… revolutionary; cars and airplanes… revolutionary; radio communication… revolutionary; black-and-white television… revolutionary; color television… incremental; cellphones… revolutionary; smartphones… incremental. 3-D printing… revolutionary
“How about virtual reality headsets? This is really three (probably more) innovations wrapped up in one fancy ball: 1) miniature high-resolution video view screens 2) binocular 3-D digital imaging methods 3) wireless broadband interdevice communication. Any one of these three innovations is incremental. Taken altogether, as a seamlessly performing device… revolutionary. In the years ahead, 3-D imaging on our heads will change how we view information and interact with audio-visual media, just as black-and-white television in days gone by did.
“However, the timeline for full innovation integration into our lives is always much longer than is usually estimated. For example: Steam engine to common train travel: 50 years; Wright brothers to common air travel: 50 years: fixed-base radio communication to WWII walkie-talkie: 50 years; WWII walkie-talkie to common cellphone use: 50 years. You get the idea.”
The 5: Well said. Although we hasten to add it won’t take 50 years to maximize the profit potential.
“What concerns me about VR used for education,” a reader writes after Friday’s episode, “is that it will undoubtedly be skewed to fit a modern-day liberal’s perception of reality.
“To have such an impact on younger learners when doing little more than telling lies and talking BS is a real concern of mine. How can we get around that obstacle? As you have pointed out before, the free market won’t be much help — the government has virtually suffocated the free market.
“And the politically correct crowd will also be hard at work to legitimize its warped take on reality.
The 5: If it makes you feel better, you weren’t the only reader to express that concern.
Every advancement in technology can be used for good or evil in the classroom. We choose to look on the bright side. There will always be a remnant of parents opting for private school, parochial school, home school… and educators in those settings will in time adopt VR the same way they’ve adopted other contemporary learning tools.
Best of all, a quality VR learning experience involving Shakespeare might encourage a young person to, you know, study the text of a Shakespeare play in old-fashioned book form. Imagine that…
“Gronk, tronc and wonk… all in one day! Monetary mandarins!” writes a reader who got way too enthusiastic after reading Friday’s episode.
“You won’t let me forget why I love The 5. I read it today in about 5:25; that free introductory Evelyn Wood lesson in the ’70s was worth every penny.”
“About the whiners who complain about taking more time than five minutes to read your letter, I say, ‘first-world problems’!” says another reader.
“I mean, seriously, is this all you have to complain about? People are living on borrowed time and finances, others are struggling to make ends meet and still more people around the world don’t know where their next MEAL is coming from. And all these spoiled brats can do is whine about how long it takes to read a letter…WOW, what I wouldn’t do to be in their shoes!
“I was subscribed to The 5 when I subscribed to Jim Rickards’ Currency Wars Alert. Even if I never make a penny using Jim’s letter, yours more than makes up for that!”
“To assist those who take more than five minutes to read The 5,” writes our final correspondent, “I suggest offering a Snapchat-style app where the day’s 5 self-destructs five minutes after opening it.
“Readers who choose this option (instead of delivery via email) have no risk of spending more than five minutes of their day reading your take.
“In fact, if they’re racing against the clock to get through the whole thing, it might encourage them to speed up their reading. After several years of practice, it will feel like a major accomplishment to one day get through the whole thing before time runs out.”
The 5: Some of our readers have vivid imaginations…
The 5 Min. Forecast
P.S. “I laughed when I saw the note from a reader complaining about the racy video,” writes a reader about our “other” introduction to virtual reality.
“I complained last month that it was not racy enough. Everyone’s a critic!”
Just shows we can’t be all things to all people. All the same, it can’t be too racy; then it would distract from the investment possibilities. In the end, that’s what it’s all about.