Previous Columns
8:30 AM EST, Friday, April 27: The good news it that, finally, the 23rd edition of Newton's Telecom Dictionary is off the presses. With this run, I'll be over 750,000 books sold -- a lot for one book. That makes me a telecom "expert" of sorts. The bad news is that since I sold out in 2000-2001, I've never figured how to make any money buying telecom stocks. This may have been smart. I sold all my Cisco at a price then which much higher than where it is even today -- seven years later.

Lately, some telecom shares have been on somewhat of a tear:

There are several problems with telecom:

1. Management is not always overly bright or overly creative. This applies to telephone companies, especially, who exhibit zero marketing skills.

2. Capital investment necessary to upgrade their networks to is horrendous. Look at Verizon's investment in its brilliant FiOS service.

3. The view to telecom's future in the sky is always brighter than the reality on the ground.

I don't have any brilliant conclusions, yet. I'm still mulling. What got me started were three things: my latest outrageous $150 a month bill to Time Warner Cable, Comcast's huge 80% profit increase and this weekend's Economist, which has a must-read survey of telecoms, Here's their leader:

When everything connects. Information technology has nothing to lose but its cables

THE wireless was once a big, wood-panelled machine glowing faintly in the corner of the living-room. Today's wireless device is the sleek mobile phone nestling in your pocket. In coming years wireless will vanish entirely from view, as communications chips are embedded in a host of everyday objects. Such chips, and the networks that link them together, could yet prove to be the most potent wireless of them all.

Just as microprocessors have been built into everything in the past few decades, so wireless communications will become part of objects big and small. The possibilities are legion. Gizmos and gadgets will talk to other devices—and be serviced and upgraded from afar. Sensors on buildings and bridges will run them efficiently and ensure they are safe. Wireless systems on farmland will measure temperature and humidity and control irrigation systems. Tags will certify the origins and distribution of food and the authenticity of medicines. Tiny chips on or in people's bodies will send vital signs to clinics to help keep them healthy.

The computing revolution was about information—digitising documents, photographs and records so that they could more easily be manipulated. The wireless-communications revolution is about making digital information about anything available anywhere at almost no cost. No longer tied down by wires and cables, more information about more things will get to the place where it is most valuable.

For the moment, the mobile phone is stealing the show. It is evolving from a simple phone into a wallet, keychain, health monitor and navigation device. But as mobile-phone technology matures, even more innovation is taking place in areas of wireless that link things only metres or millimetres apart.

For that, thank the cross-breeding of Marconi's radio and the microprocessor. Etched into silicon, the radio is starting to benefit from the dramatic decreases in size and cost and the huge increase in performance that have recently propelled computing. Satellite-navigation chips today cost as little as a dollar apiece. Radio-frequency identification (RFID) tags can be made so tiny that they fit into the groove of a thumb-print. When power can be wirelessly routed to such devices, something that is not far off, all the pieces will be in place.

Wireless brings countless benefits, as our special report in this issue describes. Devices and objects can be monitored or controlled at a distance. Huge amounts of data that were once impossible or too expensive to collect will become the backbone of entirely new services. Wireless communications should boost productivity just as information technology has.

Imagine how wireless communications could change motoring. Carmakers are starting to monitor vehicles so that they know when to replace parts before they fail, based on changes in vibration or temperature. If there is a crash, wireless chips could tell the emergency services where to come, what has happened and if anyone is hurt. Traffic information can be instantaneous and perfectly accurate. They administer tolls based on precise routes. One American firm leases cars to people with bad credit who cannot get a loan, knowing that if payments are missed it can block the ignition and find the car to repossess it. British insurers offer policies with premiums based on precisely when and where a person drives.

Of course, plenty of work will be needed before wireless communications can realise their promise. The first obstacle is novelty. As is usual in the early days of a new industry, all kinds of proprietary systems abound, many of them built from scratch—rather as early computer hackers fiddled with their Altairs in the mid-1970s. Until common standards and protocols emerge for machine-to-machine and wireless sensor communications, costs will be a problem.

It is not yet clear who will bang heads together to set standards. Today's mobile-phone businesses may be too busy getting people to talk to bother much about talking machines. Sony Ericsson and Nokia, two giants of the mobile-phone industry, have in recent years sold their machine-to-machine divisions. Mobile operators see the new field as such a small part of their overall business that it gets relegated to the back-burner. That has left an opening for fleet-footed firms from computing, as well as industrial conglomerates, such as Samsung, Philips, Honeywell and Hitachi. Just this week, General Electric's sensing division said it wanted to use wireless sensors in industries as diverse as drugs and petrochemicals.

Government will play a crucial role, not least because radio spectrum will be in short supply. That makes it more important than ever that the airwaves are sensibly allocated according to the ability to pay. Special “reserves” and unlicensed spectrum could be put aside for emerging technologies that lack financial or political clout. And politicians and business people would do well to keep an eye on the health risks of electromagnetic radiation. No serious evidence yet suggests it is a danger—but the nonsense over genetically modified foods shows how much a new technology needs popular approval.

A greater concern in the long term is privacy. Today's laws often assume that privacy is guaranteed by a pact between consumer and company, or citizen and state. In a world where many networks interconnect on the fly and information is widely shared, that will not work. At a minimum, wireless networks should let users know when they are being monitored.

But for the moment the danger is surely too much regulation, not too little. It is hard for anyone—politicians most of all—to picture how wireless will be used, just as it was with electric motors and microprocessors, two earlier stand-alone technologies that have been built into a plethora of devices. Wireless technology will become a part of objects in the next 50 years rather as electric motors appeared in everything from eggbeaters to elevators in the first half of the 20th century and computers colonised all kinds of machinery from cars to coffee machines in the second half. Occasionally, the results will be frightening; more often, they will be amazingly useful.

Condé Nast got sucked in by Tom Wolfe: I received my premier issue yesterday. It contained five cheap subscription cards -- $12 for 12 issues. I'm generous. I offered a subscription to Dennis Mykytyn, my favorite hedge fund manager. He emailed back:

Thanks, but I already subscribed, despite the bogus article by Tom Wolfe. He wrote about hedge fund managers without ever talking to one or attending any of the events he describes.

For instance, the Robin Hood Foundation benefit (which I am attending next Wednesday) specifically says “no black tie” on the invites, yet he describes it as full of black tie wearing hedge fund managers.

Robin Hood Foundation? Yup, one of the most successful charities around. Dennis sent me a link to a really fascinating Fortune Magazine story on "How the leaders of the hedge fund world have banded together to fight poverty -- taking gobs of money from the rich, applying strict financial metrics in giving it away, and making philanthropy cool among the business elite." Read The Legend of Robin Hood, please.

The stockmarket is booming. But will it last?... The Wall Street Journal had a piece yesterday on Why Market Strength And Economic Growth Don't Always Line Up by Greg Ip.

The stock market has been a lousy barometer of the economy.

From the beginning of 2004 through the first quarter of 2006, economic growth averaged an impressive 3.4%. The Dow Jones Industrial Average rose just 6%. Since then, economic growth has slowed to a little more than 2%, yet the blue-chip index has leapt 18%, ending yesterday's session at a record 13089.89, the first time it has closed above 13000.

So, is the stock market providing reassurance? Or is it out of touch?

Economists differ. David Rosenberg, chief North American economist at Merrill Lynch & Co., thinks the market is misleadingly optimistic. He says there is a "disconnect between how the economy is doing and the way the equity market is doing." The U.S. economy has just completed four quarters of annualized growth below 3%, which, he says, has never happened in 60 years without being followed by recession. While he doesn't forecast one, he puts the risks higher than generally realized.

But Ed Hyman, chief economist at ISI Group, a New York investment dealer, says the market has it right. Just as in 1985 and 1995, the Federal Reserve has raised interest rates enough to slow the economy and bring inflation under control. That reassures investors that even higher rates won't be needed later that could tip the economy into recession.

Mr. Hyman expects economic growth to slow further -- to an annual rate of 1.5% in the last nine months of this year -- and the Fed to cut short-term interest rates by three-quarters of a percentage point. The boost to stocks from lower rates should more than offset the drag from weaker growth and profits, he says.
[History Lessons]

At present, the stock market isn't responding to recent profit growth. In fact, profit growth has fallen sharply, and the outlook is clouded by slowing U.S. productivity growth, high fuel prices and the specter of protectionism that could interrupt the pace of globalization, which has boosted U.S. companies' profits from overseas. Rather, the rally that began last summer has been principally driven by the Fed's decision to stop raising interest rates.

The stock market has long been regarded as a leading economic indicator, though it sometimes sends the wrong signals. It reflects the collective judgment of millions of investors on the prospects for corporate profits, which are highly sensitive to economic fluctuations. However, other things also affect stocks: interest rates, the flow of money into and out of shares and investors' appetite for risk. That is why experts often disagree on how to interpret the market.

Mr. Hyman of ISI says the popular view that a strong stock market requires a strong economy is "just totally wrong." Beginning in the early 1980s, he says, the Fed adopted the practice of raising rates ahead of anticipated inflation pressure, often early in an expansion.

Such "pre-emptive" tightenings slowed growth but prevented an outbreak of higher inflation. During the tightening phase, stocks struggled to advance, even though profits were usually growing, as investors fretted the Fed would go too far and tip the economy into recession. Once the central bank stopped raising rates, investors concluded that with inflation under control, a recession was unlikely, and stocks took off again.

The Fed didn't always succeed: Its tightenings were followed by recession in 1990 and in 2001. Still, Mr. Hyman points to the United Kingdom, Australia and Canada -- which have grown without interruption since the early 1990s -- as proof that long expansions are likely as long as inflation stays tame. "It appears we are still in the tame inflation mode," he says.

Merrill's Mr. Rosenberg, in contrast, says the 1980s and 1990s were the exception, and sees no special factors that will extend the current expansion the way tax cuts and Internet mania did in the two previous expansions.

The Conference Board's index of leading indicators has declined on a year-to-year basis for three consecutive months. That is in spite of the rise in the stock market, which is one of the index's components. Mr. Rosenberg says every time it has done that in the past five decades a recession followed, with one exception: 1967. Among the components of the index recently pointing to a risk of recession are capital-goods orders, building permits and the fact that short-term interest rates are higher than long-term rates.

There also are other signs that the economic expansion is showing its age. One that former Fed Chairman Alan Greenspan has called attention to is profit margins. On an economy-wide basis, they hit a record high in the third quarter of last year before narrowing slightly in the fourth period. Mr. Greenspan's view is that the 1980s and 1990s expansions were helped both by a decline in long-term interest rates as investors adjusted to a low-inflation world, and a surprise acceleration in productivity growth in the 1990s driven by information technology. Neither factor is at work now.

But Steven Wieting, an economist at Citigroup Inc., says stocks have persistently lagged behind the growth in profits since the end of 2001. He figures investors are anticipating economic growth over the long term of just 2% to 2.5%. That is below many economists' estimates that the U.S. economy can grow at about 3% a year on average over time.

"The market, from a long-term context, isn't expecting a great deal out of the U.S. economy," he says.

A friend emailed me the "cause" of global warming. In his photo, the penguin is turning on the spit, the fire is crackling and the polar bear with headphones on is bobbing up and down. It's called an animated gif. But I can't get movement onto my web page.

Mexican Oysters
A big Texan stopped at a local restaurant following a day roaming around in Mexico.

While sipping his tequila, he noticed a sizzling, scrumptious looking platter being served at the next table. Not only did it look good, the smell was wonderful. He asked the waiter, "What is that you just served?"

The waiter replied, "Ah senor, you have excellent taste! Those are called Cojones de Toro, bull's testicles from the bull fight this morning. A delicacy!"

The cowboy said, "What the heck, bring me an order."

The waiter replied, "I am so sorry senor. There is only one serving per day because there is only one bull fight each morning. If you come early and place your order, we will be sure to save you this delicacy."

The next morning, the cowboy returned, placed his order, and that evening was served the one and only special delicacy of the day. After a few bites, inspecting his platter, he called to the waiter and said, "These are delicious, but they are much, much smaller than the ones you served yesterday."

The waiter shrugged his shoulders and replied, "Si,Senor. Sometimes the bull wins."

The answer to an age old question
A chicken and an egg are lying in bed. The chicken is leaning against the headboard smoking a cigarette, with a satisfied smile on its face.

The egg, looking a bit pissed off, grabs the sheet, rolls over, and says, "Well, I guess we finally answered THAT question."

This column is about my personal search for the perfect investment. I don't give investment advice. For that you have to be registered with regulatory authorities, which I am not. I am a reporter and an investor. I make my daily column -- Monday through Friday -- freely available for three reasons: Writing is good for sorting things out in my brain. Second, the column is research for a book I'm writing called "In Search of the Perfect Investment." Third, I encourage my readers to send me their ideas, concerns and experiences. That way we can all learn together. My email address is . You can't click on my email address. You have to re-type it . This protects me from software scanning the Internet for email addresses to spam. I have no role in choosing the Google ads. Thus I cannot endorse any, though some look mighty interesting. If you click on a link, Google may send me money. Please note I'm not suggesting you do. That money, if there is any, may help pay Claire's law school tuition. Read more about Google AdSense, click here and here.
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