Robots are the New Dot Coms - Before Destroying Humanity
Richard is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Analysts sit like civilian generals in their ivory towers waiting for reports from the battlefields to pour in. When all data is received, they come to a collective consensus, the distribution of which, taken as gospel by most investors, often causing seismic activity in stock charts. However, most of these Wall Street number crunchers don't see the permutations of the game as it is being played. It is the soldiers in the trenches that see the fight as it evolves.
While Enron was robbing citizens of California, and falsifying their figures to meet Wall Street expectations, "experts" on the street screamed "Buy! Buy! Buy!" based on their so called "exhaustive research," publishing glowing reports filled with spreadsheets and projections, sending many lemmings over the cliff and to their doom.
The company was a house of cards. When you ignored the hype, and took an objective look at what they actually produced (nothing), and why anyone would wish to invest in them (hopefully you didn't) it became a very simple equation. Yes, there were reporters that actually did serious investigation and unearthed the fraud, but where were the analysts during all this? Drinking the Kool-Aid and passing on cups to their clients, who trustingly drank down the poisoned spreadsheets.
Look, don't get me wrong, I'm not saying that number crunching, and analytics aren't necessary. I'm not advocating purchasing a stock just because you and your friends use the product; more investigation is needed. You can have a great company, with wonderful offerings, and be paying way too much for your shares without analyzing what's a fair price. Case in point, Microsoft (NASDAQ: MSFT) in 2000 was a great company, with bright prospects, but overpriced. Steve Ballmer, while certainly no Steve jobs, has increased revenues, profits, and created value, but investors have been clamoring for his head because the stock still is nowhere near its all time high, but whose fault is it that investors had bid the price up to the moon? (not his) Today, Microsoft is at a turning point, if Windows 8 is a hit, on computers and in mobiles, Softy might even get back to levels seen way back, well ... in 2000.
My point, most huge trends and huge price movements are so obvious in retrospect, but few people take advantage because they can't see them, their heads are buried in the numbers, collective consciousness, and the premise that the analysts know all.
Let's take a look at some examples of some situations that we can see clearly with 20/20 hindsight
In the mid 1990s, newspapers (do they still exist?) were yelling about the information superhighway that was coming. The term snail mail was invented; a radical, new, disruptive technology was coming into being, creating real value for society, and yet there was a several year delay before Internet stocks shot into the stratosphere.
And then, when everybody got on board, dot-coms overshot the moon, and become vastly overvalued. "Earnings are not necessary" stated many an analyst, "the world will be adjusting to a new paradigm." Warren Buffett was in fact criticized for failing to keep up with the major returns being earned by those playing the Ponzi game.
Five years ago, my friends begin making fun of me because I am the lone holdout from our group who still owned a PC instead of the ubiquitous Apple computers seen throughout Hollywood. Apple was the rage. People lined up around the block for a new IPhone, and the Universe couldn't have been beaten me on the head any harder in an attempt to get me to purchase this stock, yet when I mentioned my observations to a Wall Street analyst he laughed in the same condescending manner a negligent parent does when their child receives an A in 7th grade geography and sarcastically stating, "Yeah, that will get you into Harvard."
A few months later, my brother, who makes good money, bought an expensive house, certain that he could live there a couple years and sell it at a big profit. Both me and my Grandfather state the obvious to him: "Truckers making $30,000 a year are getting $500,000 loans to buy real estate. Their entire income is needed just to pay the interest expenses. How can real estate not be in a bubble?"
Six months later he sells at a small loss, fortunate to get out when he did. Now Wall Street crashes as the massive housing bubble explodes, Apple with it, and my Wall Street analyst chum calls me and asks, "How's your Apple stock doing?"
Predictably, few Wall Street Investment Banks wanted to accept any blame for losing everybody's money. Au contraire, they needed a bail out for circumstances "few saw coming."
So where does that leave us today? What's the point in writing all this. To give you a background, and a justification in my adamant vision of the future (I'd rather 20/50 foresight than 20/20 hindsight) which is simply this: the robots are coming.
How many robots do you see today that you're aware of. Not that many, the super market self-check out lanes, maybe a couple of people with IRobot's Roomba vaccuum cleaner (I just bought one as a gift for my neat freak Mom, and she's having a hard time finding things to do with her time, instead of vaccuuming every 20 minutes) but robots still aren't that prevelent. It reminds of the Internet at the outset, with maybe 1/20 households having any type of access.
To me, the robotic movement is as obvious a prediction as any I have mentioned above. In China, Foxconn (who produce the IPhone for Apple) plans to deploy 1 million robots in the next 3 years, and Amazon (NASDAQ: AMZN) has recently purchased robotics maker Kiva Systems for 775 million, to make their warehouses more effiecient. The Pentagon of course is buying unmanned aeriel drones, and sees a huge future in outsourcing dangerous jobs as it has IED removal in Iraq and Afghanistan to our silicone chip powered friends.
Are they twins?
There is no doubt in my mind that stocks of robotics companies will be rapidly rising when the public begins to see and experience robots around them, adding value to their lives, making their lives more efficient and saving us time.
Over the next couple weeks, my plan is to analyze and discuss the prospects of various robotics makers, plus seeing what role Google will be playing; is it random they bought a company named Android?
So let me leave you with the following thoughts to whet your appetite: I look forward to the IRobot Roomba gift I gave my Mom to allow her enough time away from cleaning so she might actually read my column. I look forward to my future robot chef preparing me a wondrous gourmet meal, and then doing my dishes. I look forward to owning stock in the company who produces my ex-girlfriend's humming bird like aeriel spy drone, which I have every intention of blasting out of the sky (she'll re-buy,) and most of all, I look forward to the development of Skynet and the subsequent destruction of the human race. At least I won't have to listen to whiny analysts drone on about numbers and balance sheets, or anybody's jealous accusations.
Feel free to imagine a world where robots do all the tasks you don't enjoy, and share with me in the comment section. Five years time, most of these sci-fi dreams will be realized, and we're going to make some money off this trend. Stay thirsty my friends.
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