Posts filed under “Technology”
With last night’s announcement from Dell, the streak remains alive. Intel, Microsoft, eBay, AOL, and EMC – big cap tech has not been the place to make money for some time now.
Despite the naked evidence before your eyes, too many traders indulge their rosy memories of days gone by. How many times have we heard over the past 5 years that this will be year for the large cap tech stocks? Sounding like the Verizon commercial – yet another large cap stock to be avoided – more market watchers and stock analysts continue to incorrectly ask: Can we buy them now? How about now? Now?
Alas, it is still not meant to be.
We could merely guess –and all these calls for buying big cap tech stocks in the face of declining stock prices, decreasing P/E multiples, and rapid commoditization of their products have been nothing more than blind guesses. However, we find it is much more advantageous to wait until a given stock, sector, index or market proves itself before leaping into the fray.
This is an admittedly humble approach (surprised?). We acknowledge that the future is unknown, that us Humans are particularly bad at conjecturing what lies ahead, and that most people on Wall Street refuse to acknowledge this.
We confess to having no idea what the hell is going to happen even next year. Will the GOP lose control of Congress? Will bird flu kill millions? Will Iraq get even worse? And what about Katharine McPhee – can she win it all on American Idol? We own up to having no clue about any of these burning issues.
And neither, we must tell you, does anyone else.
So rather than merely speculate, we would rather allow a given sector to develop on its own. When we got bullish on Oil in December 2003, crude had broken out over $30, and was heading higher. Similarly, our calls on US Equities post Tax cut in 2003 wasn’t until the technical picture improved. We got bullish on Japan in 2004 when it was apparent that it had started to work; Those who were merely “guessers” had 15 years to get it wrong. Our bullishness on Gold was for similar technical reasons – after a long period of under performance it was starting to work also.
Regular readers are all too familiar with our expectations for how this bull market ends – an ugly and violent death – but as long as the trend remains up, we are loathe to fight the tape and get short. Indeed, we still are not short any US equities, although we have some in the money VIX options and a few Q puts – as hedges.
While we may wax eloquent and muse about what may come eventually, our investments stay on the same side of the market as the overall trend – or at worst, in cash. Once we see proof positive that a stock, sector or market has shifted direction, then we can jump in.
Until then, big cap tech is best avoided . . .
Back in December 2004, I wrote a column titled "Five Under-the-Radar Trends for 2005". One of the below radar trends I predicted was the acceleration of intellectual property lawsuits. That turned out to be rather prescient.
There are actually two different issues here: The first is, should the USPO
be issuing so many patents, especially those for business methods? Amazon’s One-click buying, and MercExchange’s Buy it now auction are certainly questionable "inventions." That’s an issue for Congress, who needs to adequately fund the Patent Office so they can hire many more patent examiners, rather than merely have an under staffed patent office rubber stamp applications.
The second issue is that once a patent becomes issued, who gets to use it and how? Very often, we see the first issue inappropriately raised as a PR defense in the second. I don’t get the sense that all of the financial media really has a firm grasp on this. There is an entire world of patents, innovation, USPO issues, and large corporate litigants that have not been adequately discussed. Some get it, some don’t. Compare this story: "eBay Takes on the Patent Trolls" with this one "In Patent Case, EBay Tries To Fight Its Way Out of Paper Bag." (For some intercorporate litigation, see Apple against Apple Corps. Ltd., and TiVo’s against EchoStar’s Dish Network).
Incidentally, the term "Patent Troll" was invented by Peter Detkin when he was defending a patent case against Intel. Ironically, Detkin is now managing director with Intellectual Ventures, an intellectual property firm suing patent infringers.
If you recognize the property right inherent in patents, then the term "Patent Troll" is quite meaningless, meant to stir up political opposition to patents. How you use your property is irrelevant to the property right attached to it. What does it matter if you choose to manufacture widgets — or merely license the patent to thos ethat do?
What is actually going on now is a massive land grab underway by large corporations, looking to keep the fruits of entrepreneurs and innovators labor for themselves. These are not meek and vulnerable entities at the mercy of lawyers; rather, these are very astute players seeking to use the patent to further their own goals — often at the expense of innovation.
Take Intel, where Detkin was vice president and assistant general counsel, for example. They are certainly no stranger to patent litigation. As the book Inside Intel makes clear, INTC used its patents as a club to thwart competition in the CPU market for decades. That’s why its taken AMD so long to become a legitimate competitor to the chip giant.
The stealing of entrepreneurial innovation by large firms is fairly common place. My own experience with patent enforcement is that it is an enormously expensive, difficult, time consuming venture, fraught with peril. Consider the case of Robert Kearns, the inventor of the intermittant windshield wiper. In 1967, he received several patents on his design, which he tried to license to the Big 3 in Detroit. They sent him
packing, but later the intermittant windshield wiper somehow found its
way into autos. Long story short, he ended up in litigation for decades before finally winning. Thats decades later.