Dana Blankenhorn

What Tech to Buy

With most tech stocks now down for the year, it’s time to talk about which to buy.

The answer is simple. Buy technology that cuts costs or creates value.

There’s a lot of stuff that does neither. Crypto doesn’t, so Coinbase (COIN) and Robinhood are out (HOOD). The metaverse has yet to get a killer app, so Meta Platforms (META) and Roblox (RBLX) can wait.

The other Cloud Czars are fine. Salesforce (CRM) and ServiceNow (NOW) are fine. Adobe (ADBE) is fine. The cybersecurity stocks like Palo Alto (PANW) are overpriced, but over time they will come good.

Then you want to look at efficient users of technology. On the consumer side this gets you into the retail space. It means you can buy Costco (COST) and Walmart (WMT), Target (TGT) and Lululemon (LULU). On the business side there are a bunch of industrials you can grab, like John Deere (DE) and Johnson Controls (JC).

Tech, Change and the Fed

Even 50 years on, we don’t understand Moore’s Law. 

Moore’s Law accelerates the pace of change in every direction. It’s not just about silicon. It’s not just about technology. It’s about what is enabled.

Two things that are enabled by technology are deflation and change. The first is a subset of the second. Technology lets consumers and businesses adjust to change rapidly. This is true not just because technology is improving, but because its adoption keeps increasing.

Moving technology from a desktop to a smartphone is a step change in its adoption. Smartphones let us compare prices inside a store. They let us route around traffic jams. They bring the office to the job site. You can find whatever you need to know, from anywhere, using a smartphone.

A world of instant answers means a world of instant adjustment. Demand can adjust faster than supply, but supply can adjust too. We all went into lockdown together, we all came out of it together, we all demanded products together, then we demanded services together. There was a lag, but by and large the economy has kept up.

Some changes are permanent. We don’t need offices the way we did. You can appear on TV from your living room, kitchen, or bedroom. What I’ve seen, as a business reporter, is that the economy can now react ahead of policymakers. Even the Federal Reserve, which can adjust policy every month or even within a month, can no longer keep up.

Junk Tech

Imagination is in a constant competition with Moore’s Law.

Imagination often loses.

Moore’s Law makes many things possible. Not all these things are worth doing.

I call things that aren’t worth doing junk tech.

Bitcoin is junk tech. Web3 is junk tech. Blockchain is junk tech. So is the “metaverse,” in the sense that we should all live in a virtual world rather than the real one.

Good applications can come from junk. The home shopping service I supported in 1984 became an Electronic Data Interchange (EDI) format. The map CD-ROM I worked on in 1989 became a format for geographic data. Creating lemonade from lemons is always a great opportunity.

Solving the Housing “Crisis”

There are many problems that, owing to political polarization, seem intractable.

The housing “crisis” is one. Since too many people want to use the “issue” to score “political points,” obvious fixes aren’t tried because they’re complicated.

There is no housing crisis. There are plenty of homes. Everyone should be able to get one.

The problem is that private equity is holding too many of them, as vacation homes, for lease, or for AirBnB. You can get more from a house as a hotel, occupied just a week or two, than you can on a lease.

The answer is straightforward. Change the tax laws. Encourage private equity to increase the supply of housing. Discourage private equity from holding houses for lease or rent. Encourage home ownership. Discourage second home ownership.

This must be done carefully, deliberately. Any sudden change in the tax laws could cause housing prices to crash. Even modest tweaks will get pushback from owners of existing homes, because for houses to become affordable their values must come down.

The Short Game

Shorting is a legitimate investment strategy.

If you think bad news is coming to a company, you borrow a share of stock and “sell” it, then buy it back when the news hits.

The new family fun game, however, is to find stocks that are heavily shorted, buy them, then keep that stock off the market until investors who saw the bad things lose all their investment, and often a lot more.

In this way a garbage stock becomes f’in gold. Hedge funds had played this game for years but, a few years ago, small traders got into it. They organized themselves at discussion sites like Reddit’s WallStreetBets, they looked up short positions on sites like Fintel, they found targets and they pounced. Fortunes were made in crap like Gamestop, AMC Theaters and Bed, Bath & Beyond, bothered, and bewildered (BBBY).

The IBM Car

In my work covering the electric car market for InvestorPlace, I have noticed a big hole in the mid-market.

There is no electric equivalent of a Chevy or Ford. All we have are Cadillacs and Lincolns.

There are two reasons for this.

First, American car companies abandoned the mid-market decades ago. They abandoned sedans and functional cars for overloaded SUVs and pick-ups. It’s what they said their customers wanted. It’s where the profits were. The mid-market was left to the Japanese and Koreans. Most of the sedans in my middle income Atlanta neighborhood are Toyotas or Kias.

Second, everyone wants to be Tesla. Tesla made a luxury product, they got top dollar for it, and they got big profits from it. Every other U.S. and European car company is following that path. You can hardly blame them. GM tried small cars with the Volt and Bolt. Both failed.

The Streaming Winners (And Losers)

This is something I saw coming years ago at Investorplace.

Streaming will be owned by the Cloud Czars.

All the entertainment companies with their lawyers, producers, and lobbyists are going to fade away. Together, they’re worth a fraction of what Amazon or Alphabet are. Amazon and Alphabet are, in turn, worth barely half what Apple is.

It’s game over.

The reason is simple. Think of the cloud as the operating system of our time. Control what’s beneath and you control what’s above. IBM understood this in the 1960s. Microsoft understood it better in the 1980s.

Bad News is Good News

A few weeks ago, I noted how the “bad news” at Snap, Twitter and other social media companies can easily be interpreted as good news.. If people are no longer interested in rage tweeting, they could be becoming more thoughtful. They could be reserving judgment. They could have found real lives.

The same is true, doubly so, with the recent “problems” at chip stocks like Nvidia, Micron and Qualcomm. Prices for commodity chips are falling. The “chip shortage” is easing. In the near term it means lower profits for big chip companies. Sell, sell, sell.

But it also means falling prices and more supply for companies that use chips. It means car prices could start declining. It means the Machine Internet can get a fresh start.

Revenge of the Norms

For months liberals have been screaming at Merrick Garland to DO SOMETHING about Donald Trump.

For months liberals have been expressing disappointment with Joe Biden over a lack of action on his agenda.

Whether you’re of the left or the right, the democratic and societal norms that restrict action are frustrating. I’ve been unhappy about it too.

This week, the norms struck back. Garland approved the search at Mar-a-Lago and offered to justify it with court documents. Biden got at least part of his agenda passed.

WFH

Malcolm Gladwell pulled the latest edition of his Revisionist History podcast, called Confessions of a CEO, after an outcry over his attitude toward working from home.

He’s against it.

I have worked from home for nearly 40 years. My wife has done it full-time since the pandemic started. That doesn’t mean I don’t understand where he’s coming from.

There are many jobs you can’t do from home. Factory jobs. Food jobs. Lab jobs. If you’re the one taking care of the cloud, you must go to the data center.

But for what the 20^th century called “office work,” it’s stupid. We have laptops. We have phones. Who cares where they are? If you must bring people together, for team-building or making decisions, you have an obligation to make it fun, and make it rare. If you want people to come into your store, make sure you deliver personal service and a buying experience they can’t get online.