Mark Hulbert in the Wall Street Journal has a very powerful argument for a possible correction in the Stock Market.
HULBERT ON INVESTING: Lofty Profit Margins Hint at Pain to Come for Stocks - WSJ.com: I tend to believe what he's saying!
His primary recommendation is to move to cash. Maybe put a little into "high quality" stocks and maybe some into emerging markets.
Friday, August 30, 2013
Thursday, August 22, 2013
Blackberry? Math Advances Raise the Prospect of an Internet Security Crisis --could it raise BBRY stock price?
The stock of Blackberry (BBRY), (Formerly: Research in Motion) was as high as $230 in 2007, but now is around $10. It's clear that Blackberry made some major strategic errors in management, product development and taking advantage of opportunity. Many people think that the company is "on the ropes" and might not be able to continue. Canada is worried: http://allthingsd.com/20130822/canadas-worried-about-blackberry-and-it-should-be/ Blackberry's sales are down, it's latest products are not all that innovative or desirable, and investors have lost confidence in the management.
However the company does own Certicom which has the patents on an encryption system called Elliptic Curve Cryptography (ECC). This article in MIT Technology Review: Math Advances Raise the Prospect of an Internet Security Crisis | MIT Technology Review: points out that Russia uses ECC for encryption, as well as NSA. The Air Force used Blackberry for mobile communications because of higher confidence in its ECC-based security. While BBRY's hardware business segment has been stagnant or losing ground, its service segment which represents 24% of it's revenue produces most of it's income. Although the net earnings of the company is negative. The value of the company is very difficult to determine, since there are no earnings or dividends and sales are falling.
Even though Blackberry's business seems to be slowing overall, there is a lot of speculation about the value of their patents (see this "blackberryrocks" article.). Some have valued the patents at $5B. Intellectual Asset Management (IAM) in Feburary said it might be worth $2.25B. The current market cap for BBRY is about $5.2B. According to this MIT article, the value of the ECC patent could soar if mathematicians figure out how to break the more popular encryption algorithms (RSA and Diffie-Hellman). Apparently there are potential methods of attacking the RSA and Diffie-Hellman encryption algorithms, however the mathematics has not yet been fully developed. In addition, it appears to me that the "Moores law" advances in computing power will also work against the current algorithms, since the article says that they can now be broken, but only with huge amounts of computer power over a long time.
Most of the world's banks now use the RSA & Diffie-Hellman encryption algorithm. If they fear that these algorithm's are able to be easily cracked, they will be forced to move to a stronger and more secure form of encryption. Currently the only one available is the ECC algorithm which is protected by Certicom's patents. The article says that if that happened, the US Government would simply take over Blackberry and Certicom. However, I believe the Government would end up paying the owners of the intellectual property for the right to use it. According to online articles, NSA has been paying Blackberry for license rights. Why wouldn't they continue to pay? And why wouldn't the banking industry pay for the licenses? On the other hand, there are some who believe that Blackberry has given up a lot of the value in its patent portfolio through existing cross-licensing agreements. See this article, All of this is very difficult to evaluate.
Would that make Blackberry a good, long-term investment? Would the value in Certicom's patents make the stock of Blackberry worth more than it is currently valued? It apears that many of Certicom's ECC patents won't expire until mid-2020s, so the question is: Will RSA Diffie-Hellman algorithm be "cracked" prior to the mid 2020s? If so, those patents could be worth a lot!
However the company does own Certicom which has the patents on an encryption system called Elliptic Curve Cryptography (ECC). This article in MIT Technology Review: Math Advances Raise the Prospect of an Internet Security Crisis | MIT Technology Review: points out that Russia uses ECC for encryption, as well as NSA. The Air Force used Blackberry for mobile communications because of higher confidence in its ECC-based security. While BBRY's hardware business segment has been stagnant or losing ground, its service segment which represents 24% of it's revenue produces most of it's income. Although the net earnings of the company is negative. The value of the company is very difficult to determine, since there are no earnings or dividends and sales are falling.
Even though Blackberry's business seems to be slowing overall, there is a lot of speculation about the value of their patents (see this "blackberryrocks" article.). Some have valued the patents at $5B. Intellectual Asset Management (IAM) in Feburary said it might be worth $2.25B. The current market cap for BBRY is about $5.2B. According to this MIT article, the value of the ECC patent could soar if mathematicians figure out how to break the more popular encryption algorithms (RSA and Diffie-Hellman). Apparently there are potential methods of attacking the RSA and Diffie-Hellman encryption algorithms, however the mathematics has not yet been fully developed. In addition, it appears to me that the "Moores law" advances in computing power will also work against the current algorithms, since the article says that they can now be broken, but only with huge amounts of computer power over a long time.
Most of the world's banks now use the RSA & Diffie-Hellman encryption algorithm. If they fear that these algorithm's are able to be easily cracked, they will be forced to move to a stronger and more secure form of encryption. Currently the only one available is the ECC algorithm which is protected by Certicom's patents. The article says that if that happened, the US Government would simply take over Blackberry and Certicom. However, I believe the Government would end up paying the owners of the intellectual property for the right to use it. According to online articles, NSA has been paying Blackberry for license rights. Why wouldn't they continue to pay? And why wouldn't the banking industry pay for the licenses? On the other hand, there are some who believe that Blackberry has given up a lot of the value in its patent portfolio through existing cross-licensing agreements. See this article, All of this is very difficult to evaluate.
Would that make Blackberry a good, long-term investment? Would the value in Certicom's patents make the stock of Blackberry worth more than it is currently valued? It apears that many of Certicom's ECC patents won't expire until mid-2020s, so the question is: Will RSA Diffie-Hellman algorithm be "cracked" prior to the mid 2020s? If so, those patents could be worth a lot!
Sunday, August 18, 2013
Is it time to go global when investing?
The Union Tribune today published in the business section an article written by Carolyn Geer of Wall Street Journal ( Diversify your Portfolio with International Stocks ) that suggests that investors put more of their money into overseas companies and funds.
She suggests putting 20-40% of our portfolio into international stocks, and she suggests some ETFs and Funds that she believes would be good.
I'm concerned about US bonds -- Interest rates are certain to rise as QE "tapers off" by the Fed. As rates go up, both short and long term bonds are also certain to drop in price. As rates go up, US investors will look at buying CDs at higher rates, rather than investing in stocks. Margin rates will go up, so speculative investors will have higher costs, and possibly will buy fewer stocks. Rising interest rates will also affect corporations investments in plant and equipment, and risk-taking new ventures. We also expect that rising interest rates could affect the housing industry. First time homebuyers will find higher rates, and higher payments, so may defer buying, or buy smaller homes. Builders will have to pay higher rates for construction loans.
So is Overseas investing going to protect us from that effect? It's possible that higher rates in US will attract capital from other countries and raise the rates there too? So foreign bonds will also fall in price. So many corporations are multi-national that if the business slows down in the US, it will likely affect businesses in other countries as well.
Recommended Funds:
Vanguard Total World ETF (VT) which tracks the FTSE Global All Cap Index
TRowe Price Global Allocation Fund (RPGX)
Also VEURX, EWA (Australia), PRASX (New Asia Fund), MAPTX (Pacific Tiger) and PRLAX (Latin America)
She suggests putting 20-40% of our portfolio into international stocks, and she suggests some ETFs and Funds that she believes would be good.
I'm concerned about US bonds -- Interest rates are certain to rise as QE "tapers off" by the Fed. As rates go up, both short and long term bonds are also certain to drop in price. As rates go up, US investors will look at buying CDs at higher rates, rather than investing in stocks. Margin rates will go up, so speculative investors will have higher costs, and possibly will buy fewer stocks. Rising interest rates will also affect corporations investments in plant and equipment, and risk-taking new ventures. We also expect that rising interest rates could affect the housing industry. First time homebuyers will find higher rates, and higher payments, so may defer buying, or buy smaller homes. Builders will have to pay higher rates for construction loans.
So is Overseas investing going to protect us from that effect? It's possible that higher rates in US will attract capital from other countries and raise the rates there too? So foreign bonds will also fall in price. So many corporations are multi-national that if the business slows down in the US, it will likely affect businesses in other countries as well.
Recommended Funds:
Vanguard Total World ETF (VT) which tracks the FTSE Global All Cap Index
TRowe Price Global Allocation Fund (RPGX)
Also VEURX, EWA (Australia), PRASX (New Asia Fund), MAPTX (Pacific Tiger) and PRLAX (Latin America)
Wednesday, January 16, 2013
Nanoparticle Enables World Record for Energy Storage in Batteries - IEEE Spectrum
Sean sent me a link to this news article about an amazing break through in battery storage using nano particles
Nanoparticle Enables World Record for Energy Storage in Batteries - IEEE Spectrum:
If they are able to scale this up and get it into production, this breakthrough will allow 5 times the amount of energy to be stored in a battery. That will mean that car batteries will allow a car to travel 5 times as far between charging, and all of our hand held devices will last longer before needing to be plugged in. I think it could dramatically change how we use devices. It will make all other batteries obsolete!
Right now it is just Stanford University, SLAC and a scientist named Yi Cui. However what ever company gets the first licenses for this new technology may be a good investment.
Nanoparticle Enables World Record for Energy Storage in Batteries - IEEE Spectrum:
If they are able to scale this up and get it into production, this breakthrough will allow 5 times the amount of energy to be stored in a battery. That will mean that car batteries will allow a car to travel 5 times as far between charging, and all of our hand held devices will last longer before needing to be plugged in. I think it could dramatically change how we use devices. It will make all other batteries obsolete!
Right now it is just Stanford University, SLAC and a scientist named Yi Cui. However what ever company gets the first licenses for this new technology may be a good investment.
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