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- THE FRIDAY LETTER -
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for friends and subscribers)
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| http://www.gilder.com/ | Issue 348.0/July 18,
2008
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HEADLINES:
- The Week / Andy Kessler: Who Killed Bear Stearns?
- Friday Feature /
David Malpass: Investing, Post-Bush
- Friday Blogger Bonus / Rich Karlgaard: Is the Oil Bubble Hissing?
- Readings /
The
Week / Who Killed Bear Stearns?
Andy KESSLER, speaking at
Gilder/Forbes Telecosm 2008 (downloadable
audio file): I’m sort of the token financial guy here. As George said, I
started as an engineer. I’m fascinated by technology and increasingly
fascinated by all the things it embraces, enhances and destroys.
The Wall Street Journal, the last couple of days, has had this
minute-by-minute account of the demise of Bear Stearns, but nowhere in any of
those accounts do they really go through who killed Bear Stearns. That’s what I
want to know. That’s what everyone wants to know. So, I’ve put a list together
of some of the suspects…
It often helps to take a step back and discover some of the history. And as
some of you know from my previous talks, I love to connect the dots. So I’m
going to connect the dots from Queen Elizabeth I to today…
The message? It was technology again. It’s good and it’s evil. It will elate
you and it will bite you in the ass. You have to understand how to use
technology in your favor without getting so drunk on the benefits of it that
you think you’re invincible… There is this dance that goes on, and it has been
going on for centuries, between technology and finance; between Silicon Valley
and Wall Street. Sometimes it’s a lovers’ embrace and sometimes one partner has
fangs and sucks the blood right out of the other one, and you’re never quite
sure which one it is. But at the end of the day, it’s that dance that drives
Wall Street and finance…
Listen to Andy’s complete
Telecosm 2008 “Who Killed Bear Stearns?” talk: http://www.discovery.org/v/151
_________________________
George GILDER, Gilder Telecosm Forum: Andy Kessler presented an uproarious
investigation of Who Killed Bear Stearns at Telecosm 2008. His answer
pointed not to the usual culprits (though he did politely finger Bob Metcalfe
and me sitting in the front row), but to Bear Stearns' itself. After preparing
a feculent feast of sub-prime pork ("they knew better than anyone else
what was in it"), then packaging it all into putatively succulent AAA delicacies,
they totally lost it and ate their own sausage.
|
The Gilder Telecosm Forum To
learn how to join this powerful network of talented, tech-savvy investors and
thinkers online daily to debate, discuss, and decode new and emerging
technologies and share valuable and actionable investment advice, visit www.Gildertech.com today. |
Friday Feature / Investing, Post-Bush
David MALPASS, Forbes.com “Current Events” (7/17/08): Though hard
to see now, the U.S. will somehow survive the Bush Administration's weak-dollar
malaise. While economic and financial performance in 2009--10 will be shaped
some by immediate concerns--inflation, lower house prices, bank writeoffs and
the likely increase in taxes and interest rates--bigger issues will probably
have more impact on America's economic future.
Much
of the developing world is in a tumult of growth, job creation, innovation and
positive change. The new Administration in Washington will make hundreds of
decisions about how the U.S. will interact with this change: defensively or
confidently, and with either a goal of protecting Old Economy jobs or, better,
inviting the growth of flexible new industries. Even more important than the
government's stance, U.S. companies will commit themselves globally, choosing
regions, countries and partners that will influence our economy for decades.
The
next President's position on the weak-dollar debacle will further set the
investment tone. With the dollar trying to find a bottom after its long,
painful slide, Washington should take the damage-abatement step of restoring a
portion of the dollar's value before the whole price level adjusts upward. A
recent Los Angeles Times/Bloomberg poll showed that 76% of Americans
think the government should do something to stop the dollar's decline. That's
about the same percentage that thinks the country has been on the wrong
economic path.
On
June 3 Federal Reserve Chairman Ben Bernanke floated a "strong and
stable" dollar standard, probably the first use of this growth-maximizing
currency vision by a U.S. official since Ronald Reagan (though several foreign
economies, including China and the euro zone, rely on it). For the moment
Bernanke's support of the dollar has been undercut by the limp G8 communiqué of
June 14. The eight finance ministers of the major industrialized countries
complained idly about high commodity prices but didn't link them to the weak
dollar or, presumably blocked by the Bush Administration, address the dollar
crisis itself.
The
economic stakes in the dollar crisis are high: The new Administration will be
deciding not only the value of the dollar and the corresponding price of commodities
but also whether diminished U.S. wealth and global influence caused by the
dollar's devaluation are temporary or permanent.
A
third issue, technological advance, is also likely to have more impact on our
economic prospects than the current woes. Technology has taken a backseat to
the financial crisis, yet it remains a key shaper of the economy and U.S. value
creation.
Which was more important to the 1990s, the savings-and-loan crisis or the
expansion of the Internet? Clearly, the latter. Similarly, today's mortgage
crisis will more than likely be overshadowed in the next decade by a technology
that doesn't yet have a popular following.
Read More Malpass:
http://www.forbes.com/columnists/forbes/2008/0721/025.html
__________________________________________
Friday Blogger Bonus / Is the Oil
Bubble Hissing?
Rich KARLGAARD, Forbes.com “Digital Rules” (7/16/08):
Readers of this
blog know that I’m always looking for silver linings in any cloud. Still, let
me ask: Is this week's oil drop the start of a good trend?
Oil prices had started to drop last week. Then came news of
Iranian missile tests, and oil quickly shot up again. Visions of Armageddon and
$200 oil loomed for a couple of days. Then came analysis indicating that the Iranian tests were
largely faked.
Why
would Iran fake the tests? To wave a squirt gun and invite an Israeli/American
strike, possibly nuclear, would be suicidal, wouldn't it? This makes sense only
if you think Iran’s ruling mullahs truly are suicidal. Some think they are.
Another more rational explanation is that Iran threatened missile strikes only to keep oil prices high. Iran desperately needs high oil prices. Its economy is in the dumper.
Iran
may very well be a long-term threat. I'll leave that debate to others more
knowledgeable. But today Iran looks less like a short-term threat than
it did a week ago, or a year ago, when the oil bubble began inflating.
In
August 2007, oil was $70 a barrel. Supply and demand can’t explain oil’s
doubling, because the rate of demand is slowing: The global economy has braked
from 5% growth during 2003-2006, to 3.7% growth in 2007, to a projected 2.7%
growth this year.
The
weak dollar and ensuing inflation-caused speculation explain some of oil’s
11-month rise, but not all of it. How much is anyone’s guess. I would say $30 a
barrel owes to pure inflation-caused speculation.
The
leftover speculation has owed to Iran’s sword-waving. That sword looks a bit
shorter and duller today.
I
would not bet the ranch that oil is headed to below $100 a barrel. But it seems
to me that the oil bubble is beginning to hiss. That would be good news the
economy and stocks need now.
Check out Rich’s Digital
Rules blog:
http://blogs.forbes.com/digitalrules/
__________________________________________
Readings /
Why Most Online
Communities Fail
http://blogs.wsj.com/biztech/2008/07/16/why-most-online-communities-fail/?mod=mod
MIT's Guru of Low-Tech Engineering
Fixes the World on $2 a Day
http://www.popularmechanics.com/technology/upgrade/4273674.html
Apple Now 3rd Largest US PC Vendor
http://www.appleinsider.com/articles/08/07/16/apple_passes_acer_to_become_third_largest_u_s_pc_vendor.html
Restructuring
Costs Weigh on Nokia
http://online.wsj.com/article/SB121628945706261627.html?mod=2_1571_topbox
Machinima's
Movie Moguls
http://www.spectrum.ieee.org/jul08/6383
Quantum Leap: Researchers have controlled the position of a single electron in
a silicon circuit.
http://www.technologyreview.com/Infotech/21086/?a=f
__________________________________________
Friday Letter Editor: Mary Collins George / mcollins@gilder.com
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