Trends I'm Watching

The Wilshire 5000 drops slightly for the week ending 8/25/2006

Trend: The daily line moved down for the week but stayed above the 50-day moving average and the 200-day moving average. The 50-day moving average, still below the  200-day moving average, continued to move up slightly.

Here's a 12-month chart of the Wilshire 5000 (a proxy for the stock market as a whole), showing the 50 and 200 day moving averages.

Investopia says:

*The Wilshire 5000 is sometimes called the "total stock market index" or "total market index" because it includes more than 7,000 of the 10,000-plus securities that are publicly traded in the United States. All publicly-traded companies with headquarters in the U.S. that have readily available price data are included in the Wilshire 5000. Finalized in 1974, this index is extremely diverse, including stocks from every industry. Although it's a near-perfect measure of the entire U.S. market, the Wilshire 5000 is referred to less often than the less comprehensive S&P 500 when people talk about the entire market.

The Link Between Peak Oil and Climate Change.

Trend: Global warming and burning fossil fuels are highly correlated. The cause-and-effect may be the most important question of this century.

Here's a timeline from a presentation at the Association for the Study of Peak Oil (ASPO) by Jeremy Leggett, who worked in the oil industry until 1996.

Link: Transition Culture » ASPO 5. Jeremy Leggett Intertwines Peak Oil and Climate Change.

1859. Man drills oil for the first time, in Pennsylvania.
1914. World by this stage is already running on oil.
1930. Peak year of discovery in US48, although no-one knew it at the time.
1956. Hubbert predicts that world oil production will peak in 1971.
1965. Peak of world oil discovery.
1973. The first oil crisis hit, a huge shock despite being only a 9% drop, by then we also knew that Hubbert was right.
1978. The second oil crisis, triggered by the Iranian Revolution. Led to a real fear of depression, but 3 things came to our rescue, fresh oil supplies coming in, new reserves and no long food supply chains, none of which we have to fall back on this time round.
1981. The crisis was over and it was a peak year for the construction of refineries, rigs and pipelines.
1985. Doubts begin. You mean we’re not sure? The OPEC upwards revisions.
1989. Jim Hansen, climate scientist of NASA tells a Congressional committee “it is time to say that global warming is here”. It was a year of droughts and fires, but he was vilified and got no support. Also in this year the IPCC released its first authoritative report. Margaret Thatcher said “this is a report that will change our lives, instead of crying out for oil it will one day be crying out for water”.
1990. World Climate Change conference, every daily paper carried headlines relating to the subject, such as “Race to Save our World”.
1992. The energy around climate change had largely dissipated by now. At the Rio Summit 160 world leaders discussed climate change but produced a climate convention with no teeth. They concluded “we must stabilise them at levels that pose no threat and be able to feed ourselves, our ecosystems, our economies”. The US was the only nation that didn’t want legally binding targets.
1995. The second IPCC report revealed horrific temperature curves. The majority of climate scientists agreed. All the major research centres and academics, hundreds of people agree a consensus.
1996. BP quit the Carbon Club (a cabal of oil companies who worked together to derail the climate negotiations). Lord Browne of BP gave a speech in which he recognised climate change and BPs role in sorting it out. Ironically, without BP there would be no Kyoto Protocol. Shell also quit the Carbon Club. The main one to still resist is Exxon Mobil, who are guilty of grotesque corporate irresponsibility. The Kyoto negotiations attract more journalists than the Gulf War.
1997. Colin Campbell and Jean Laherrere publish their article “The End of the Age of Oil” in Scientific American.
2001. The suicide machine grinds on. Time cover “Exxon Unleashed” the same year as the third IPCC report.
2003. The hottest summer on record. The climate change negotiations fall apart. Kyoto is only just signed despite George Bush taking the US out of the agreement. The heatwave summer beganto turn around public opinion in relation to climate change. Many thousands of people die in the French heatwave.
2004. A notable turn around in the media. We can see it as the year that the media started to take climate change seriously. It was also the year that business started to take it seriously. It was also the year that Shell was caught telling lies and had to downgrade its reserves by a quarter. It did this because it was under tremendous pressure to replace reserves. The G8 met to discuss two key issues, climate change and Third World debt.
2005. Hurricane Katrina had a huge effect. It was fed by unusually warm waters in the Mexican Gulf. Time magazine cover read “Global Warming – be worried, be very worried”. If Time Magazine is telling you to be worried….
2006. Expections of future production are that oil will peak in 2008 plus or minus 2 years. Will the unconventional reserves come to our rescue, but really they won’t help. Oil has now reached a high of $78 a barrel. Climate change is increasing rapidly.

Water Crisis Hitting Rich Countries

Trend: Effective management of water resources will be a high priority for some cities and regions as the weather patterns shift.

GreenBiz News describes a WWF report detailing how rich countries have been mismanaging their water resources and what measures can be taken to improve water management.

Link: GreenBiz News | Water Crisis Hits Rich Countries, Says Report

Water crises, long seen as a problem of only the poorest, are increasingly affecting some of the world's wealthiest nations, warns WWF ahead of World Water Week.

The global conservation organization's report, Rich Countries, Poor Water (PDF), is one of the first comprehensive overviews of water issues in the developed world.

The report shows that a combination of climate change and drought and loss of wetlands that store water, along with poorly thought out water infrastructure and resource mismanagement, is making this crisis truly global. The report highlights impacts of water problems in countries such as Australia, Spain, Japan, and the UK, and the US.

In Europe, countries on the Atlantic are suffering recurring droughts, while water-intensive tourism and irrigated agriculture are endangering water resources in the Mediterranean. In Australia, the world’s driest continent, salinity is a major threat to a large proportion of its key agricultural areas.

Despite high rainfall in Japan, contamination of water supplies is an extremely serious issue in many areas. In the United States, large areas are already using substantially more water than can be naturally replenished. This situation will only be exacerbated as global warming brings lower rainfall, increased evaporation and changed snowmelt patterns.

Some of the world’s thirstiest cities, such as Houston and Sydney, are using more water than can be replenished. In London, leakage and loss is estimated at 300 Olympic-size swimming pools daily due to ageing water mains. It is however notable that cities with less severe water issues such as New York tend to have a longer tradition of conserving catchment areas and expansive green areas within their boundaries.

In Brazil, despite leading the world with its national water resources plan, concerns remain over some existing dam proposals. In India, much of its agriculture is under threat from rampant overexploitation of water resources. Elsewhere, China has raised international concerns over the scale and possible ecological and human costs of some of its massive water infrastructure plans.

The water problems affecting rich and poor countries alike are a wake-up call to return to protecting nature as the source of water. ...governments must find solutions for both rich and poor, which include repairing ageing infrastructure, reducing contaminants, and changing irrigation practices in the way we grow crops.

The Wilshire 5000 jumps higher

Trend: The daily line moved above the 50-day moving average and the 200-day moving average last week as the market move up. The 50-day moving average, still below the  200-day moving average, leveled off and started to move up.

Here's a 12-month chart of the Wilshire 5000 (a proxy for the stock market as a whole), showing the 50 and 200 day moving averages.

Investopia says:

*The Wilshire 5000 is sometimes called the "total stock market index" or "total market index" because it includes more than 7,000 of the 10,000-plus securities that are publicly traded in the United States. All publicly-traded companies with headquarters in the U.S. that have readily available price data are included in the Wilshire 5000. Finalized in 1974, this index is extremely diverse, including stocks from every industry. Although it's a near-perfect measure of the entire U.S. market, the Wilshire 5000 is referred to less often than the less comprehensive S&P 500 when people talk about the entire market.

Sprint Nextel's Hidden Advantage

Trend: WiMax implemented on a large-scale cellular network promises to bring broadband speeds to cell phones, PDAs, and rural areas.

Robert X.Cringely explains why Sprint Nextel has the infrastructure to overcome the weaknesses and leverage the strengths of WiMax. Excerpts below.

Source: PBS | I, Cringely . August 18, 2006 - Sprint Nextel's Hidden Advantage

Get ready for the REAL WiMax, now that Sprint Nextel has finally revealed its plans for deploying the new wireless networking technology in the United States.

I'm not saying that WiMax is bad, just that it isn't all that it has been promoted to be.

So what makes Sprint Nextel different? Everything.

I have long predicted that Sprint Nextel would come to dominate the U.S. WiMax business, primarily because the company has the largest portfolio of licensed frequencies usable for WiMax -- most of those acquired in an early-90's buying spree that cost Sprint more than $1 billion.

Reason number one, then, why Sprint Nextel's WiMax service is different from its competitors is that the company already owns the frequencies, so the effective cost of acquiring them is nothing. Most competing WiMax operations that intend to use licensed frequencies have to pay for those frequencies, which constitute a large part of their network budget. Meanwhile, Sprint Nextel can just move forward and build its network.

...Where any new WiMax player would have to build towers or buy space on them and install or purchase network connections to those towers, Sprint Nextel already has a national cellular network in place with thousands of towers in hundreds of cities, all connected through an existing fiber-optic network. Again, they have more money to spend yet less to accomplish.

And here's an important distinction. Sprint's core cellular network is based on Personal Communications System (PCS) technology, which uses less power and therefore shorter ranges than other cellphone systems. This meant that when Sprint built its PCS network in the 1990s, it had to have proportionally more cells with towers closer to end-users. More towers closer to users works well with the weaknesses of WiMax as described at the beginning of this column.

This disadvantage of PCS turns out to be an advantage for deploying WiMax.

Compared to an ab initio national WiMax network, then, Sprint Nextel's job is a lot easier. Rather than building a new network, they can adapt an older one. Rather than buy new frequencies, they can use licenses bought long ago and feared worthless. Even the multipath interference problems of MMDS are handled by the fact that WiMax is specifically designed to work in multipath environments and even to derive greater range from the interference.

Even the way Sprint Nextel announced its WiMax service was different. They positioned it as the company's 4G wireless data service -- a MOBILE WiMax service -- making it a simple upgrade for millions of existing voice and data customers.

It is a lot easier to up-sell an existing customer base (Sprint Nextel already has 51 million customers) than to create a new customer base from scratch.

Why, then, if it appears to have every advantage, does Sprint Nextel still have to spend $2-3 billion? Because for all the company's advantages WiMax is still difficult to do well. Thousands of towers need to be upgraded along with beefing up the supporting network that will have to carry 10 or more times as much data as before.

This is Sprint Nextel turning lemons into lemonade. It plays to all the company's strengths. Unlike other 3G wireless data providers, Sprint Nextel won't be afraid of people actually using its WiMax system, so they can aggressively market the service. While Sprint Nextel is talking about WiMax as a mobile service, there is no reason why they can't also compete for fixed wireless customers. You don't see Verizon or Cingular, for example, trying to sell their 3G products for use in fixed home or office applications. Some 3G operators, in fact, specifically prohibit using their equipment in that way, because while the network is fast, its total aggregate data capacity is a lot less than you'd expect.

Not so with Sprint Nextel, or at least that's the way it looks from here. With smaller cells and a robust backbone, there is no reason why the company's 4G (WiMax) network can't compete directly with cable modems and DSL, which was the original vision of WiMax , whether it was really practical or not. And as an existing landline voice provider operating now primarily in the backyards of its competitors, Sprint Nextel could mount a devastating VoIP telephony sales campaign using its WiMax network.

Nasdaq 100 moving average trend update

Trend: The Nasdaq 100 ($NDX) 10-day simple moving average crossed over the 30-day simple moving average on 8-15-2006.

The last time the 10-day moving average touched the 30-day moving average was in early May (see chart below). The 10-day MA crossed under the 30-day MA at just over the 1700 level. Yesterday's cross-over occurred at the 1500 level. Between the May cross-under and the August cross-over, the Nasdaq 100 dropped about 200 points.

The Nasdaq 100 one-year chart below shows the 10, 30, 60, and 90-day simple moving averages. The indicator below the chart shows the Average True Range.

The Wilshire 5000 moves lower

Trend: The daily line moved below the 200-day moving average to the 50-day moving average last week as the market declined.

Here's a 12-month chart of the Wilshire 5000 (a proxy for the stock market as a whole), showing the 50 and 200 day moving averages.

Investopia says:

*The Wilshire 5000 is sometimes called the "total stock market index" or "total market index" because it includes more than 7,000 of the 10,000-plus securities that are publicly traded in the United States. All publicly-traded companies with headquarters in the U.S. that have readily available price data are included in the Wilshire 5000. Finalized in 1974, this index is extremely diverse, including stocks from every industry. Although it's a near-perfect measure of the entire U.S. market, the Wilshire 5000 is referred to less often than the less comprehensive S&P 500 when people talk about the entire market.

Predicting the Future: Trends for Success

Start-up CEO lists some trends that will affect business in the coming few years. Click on the link below for more detail.

Link: Start-up CEO » Predicting the Future: Trends for Success

Positive Trends:

1. Cost of starting a business plummet

2. International Consumption Soars

3. The emergence of the Hispanic demographic

Negative Trends:

1. The housing slowdown will halt consumer spending to a crawl and drive the economy into a recession.

2. Iran and N. Korea build a nuclear arsenal

3. Poor get poorer

MIT's Energy 'Manhattan Project'

Trend: A top research university makes a major commitment to advancing alternative energy technologies.

Wired News reports that MIT has started a Manhattan Project-style research effort for new energy technologies. Click on the link below to see examples.

Link: Wired News: MIT's Energy 'Manhattan Project'

Scientists at MIT are undertaking a big, ambitious, university-wide program to develop innovative energy tech under the auspices of the school's Energy Research Council.

"The urgent challenge of our time (is) clean, affordable energy to power the world," said MIT President Susan Hockfield.

Inaugurated last year, the project is likened by Hockfield to MIT's contribution to radar -- a key technology that helped win World War II.

"As the example of radar suggests, when MIT arrays its capabilities against an important problem ... we can make an important contribution," said Hockfield in an e-mail.

David Jhirad, a former deputy assistant secretary of energy and current VP for science and research at the World Resources Institute, said no other institution or government anywhere has taken on such an intensive, creative, broad-based, and wide-ranging energy research initiative.

"MIT is stepping into a vacuum, because there is no policy, vision or leadership at the top of our nation," he said. "It's uniquely matched. MIT has tremendous strengths across the board -- from science and engineering to management to architecture to the humanities. From that point of view, it's hugely significant."

VoIP Over WiFi WILL Disrupt the Cellular Industry

Trend: WiFi and WiMax could undercut the current celluar infrastructure for wireless communications.

Tom Evslin at Fractals of Change provides reasons for more disruptive change in the telecommuncations industry. Excerpts below.

Link: Fractals of Change: VoIP Over WiFi WILL Disrupt the Cellular Industry.

The next generation of cell phones have WiFi access built into them. Although there are some nasty non-technical details to be worked out, these phones can go online via a hotspot as easily as they connect to a cell tower.

But, here’s the rub for the cellular industry: when these phones log on in a hotspot, they can become VoIP phones as in free or very cheap calling, as in Skype. Telco have invested their typical borrowed billions in wireless frequency auctions and in so-called 3G services. These investments were made on the premise that wireless prices for voice and some services would stay astronomically high compared to landline and Internet connections.

Here’s a bunch of specific predictions:

• WiFi support in mobile phones will wipe out the distinction between the mobile phone and the home phone (about time!).  When you are in your house, your phone will be logged into your home WiFi and become your home phone.
• WiFi support in mobile phones will shift the balance of power from the big wireless operators to the cellphone hardware and software makers. Phones will be purchased independently of calling plans just as computers are purchased independent of Internet connectivity arrangements.  Coupons for access may be included with phones instead of phones being included with calling plans.  Why? Because voice calling will be too cheap to meter and hardware will still cost something.
• The about-to-happen incredible growth of the WiFi mesh will benefit from the savings in cellular costs it enables; and the incredible growth in WiFi availability will hasten the day when traditional expensive cellular connections (an the price paid for them) are obsolete. A true virtuous circle.
• Existing cellular infrastructure will be used as LOW-COST wireless access to the Internet (EVDO does this today at a fairly high price). This is exactly analogous to the use of today’s legacy copper network to carry DSL over which VoIP functions. Problem for the owners of this infrastructure (at least owners of the frequencies and radios – towers will be good) is that the rates they’ll be able to charge in competition with WiFi and WiMax won’t pay the interest on the debt incurred to build those networks. So bankruptcies will be required to lower the cost basis of these assets and make them affordable.

The telcos are afflicted with the incumbent’s dilemma:  they could embrace the new technology and hasten the death of their traditional wireless cash cow. They might survive better that way.  But they’ll be worse off next quarter and the quarter after that. And might have to write-off the assets currently on their books if they recognize the disruption.

That’s why upstarts who enable the disruption won’t have to worry about marketplace competition from the incumbents early on. Regulatory “competition”, of course, is another story.

via Emergic