Wednesday, May 28, 2008

Old Tech, New Tech. Crap.

Cramer is continuing to sing his siren song about "New Tech". Donny Deutsch joined him today on "Mad Money" and they sang duet. It's becoming funny. Couple more sirens, to form quartet, and it's pathetic.

I have nothing against the idea itself. There are companies that solve (or pretend to solve) some of the world's problems. But lumping them all together and calling them bigger than "Old Tech"? Come on. I'd rather believe in South Sea Company. Or Panama.

Cramer calls all high-tech and internet companies "Old Tech" now. Yeah, right. They only changed the world completely in the last 30 years. Just that and nothing more. Even 15 years ago it would be impossible for me to have this blog, and Cramer's "Mad Money" wouldn't have a chance to exist. "Old Tech" also completely changed the way companies do business. Just take a look at India. Or imagine how current Just-in-Time methods would work without computers. Or just try to build modern car without computers. Or modern anything for that matter.

And what is the "New Tech"? Company producing pumps and filters. Companies related to wind power, which still depends on government subsidies. Agribusiness companies. Mining equipment companies. And they all depend on a new bubble: commodities. If anybody thinks that era of bubbles ended with real estate crash, think again. Parabolic chart never ends up good. Doesn't matter if it's gold (in 1980), or internet stocks (in 2000) or real estate in hot markets (in 2005). Now we have similar charts in many commodities. Oil, grains, steel, you name it. It will go down. It always does. And "New Tech", at least most of it, will go down with commodities. It's just money jumped from real estate and mortgages to commodities. Herd mentality at its worst: almost everybody predicts inflation (they lived through it and it still scares shit out of them), and they think that commodities are protection from inflation. Did anybody hear about commodities inflation?

Cramer easily gets enthusiastic. And he's got a point: you can really make money in these companies. He himself made money in internet stocks and sold them close to peak. But. You need to be like Jim to be successful in this game. You need eat, breath and sleep stock market. You need to be able to turn on a dime, and feel the exact moment when to do that. Parabolic charts and how they end up tell me that most people, even professional investors, can't.

"New Cramer Tech" will work. Short term. Maybe. But be ready to sell everything when you hear of commodities crunch. When tankers start to be used as floating storage (there are rumors already). Wheat prices are already down 30% from the peak, they are below Jan 1 price (look at this beautiful chart. Rice down more that 20% (here). Others will follow, sooner or later.

Commodities can't grow in price forever. Not even for a long time. Once price is high, production picks up, and prices will stabilize. Or crash, if enthusiasts overestimated demand and increased production beyond any reason. Oil is a little bit different, because of OPEC. But long term, price will go down anyway. At current price, most oil sands and most chalets are profitable. Insanely profitable. Almost any deep sea extraction is profitable. They will come online. It takes more time, but it's doable.

For a long term, we need real new tech. Technology which will solve next big shortage: shortage of labor. I wrote about the end of cheap labor already: here and here. This is a real problem, not an artificial one. And it needs real solutions. Company which will develop technologies to automate labor intensive industries will be real New Tech. There isn't much money there yet. Businesses are still mostly under impression that you just have to publish "Wanted" ad and they will come. But even China is running out of cheap labor now. Birthrate is falling all over the world, they just don't make many new workers anymore.

I don't see such companies. Yet. I will be looking for them. They will come.

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