This Week in Barrons – 5-12-2013
A Game Changing Experience:
First and most important – Happy Mother’s Day. The job of being a mother is the most important, and often the most underappreciated – and certainly deserves its day of recognition!
Personally, the “Internet” has been one of the single, biggest, “game changing” events that I have ever witnessed. Then came the smart device – for not only it’s informational abilities but also it’s GPS / locational accuracy. But not long ago, a technology morphed into something (that while not completely a stand-alone concept) is a game changer. That technology is 3-D printing. Basically what happens is that you pour a powder into a machine, and then feed the machine's computer a 3-Dimensional drawing. The computer then goes to work "laying" that powder down in the same exact places that the drawing says it should go. When a layer of the material is laid down, a laser or a heat source hits the material and solidifies it. Then the machine makes the next pass over the item, depositing more plastic or powder where it's supposed to go. Add another shot from the laser for solidification, and so on. Layer by layer a real 3-Dimensional, tangible item is produced.
In the beginning of its very short history, 3-D printers were able to make simple things like toys, army men, and game pieces. Then came the first "wrench", and then onto the first moving parts like gears, cogs, cranks and fan blades. Next medicine got involved by creating model limbs, bones and jaws. In very rapid fashion the amount of things that people were making were pretty amazing. But there was (and to some extent still is) a problem. Most of the media used in the process is some form of plastic. So even a wrench made from your local 3-D printer, although it looks perfect, just can't take the stresses of being used like a “Craftsman” wrench from Sears. The material just isn’t strong enough.
Now, let’s suppose there is a material that will allow a dot matrix layering – that when heated (or lasered) becomes as strong as steel. What if an element like Graphene (or some alloy of it) makes things that are actually stronger than steel? Suddenly the entire manufacturing process for small items is completely disrupted. You would never need to go to a Home Depot for a screw or a screwdriver again. Did you break the wheel on your desk chair? Print one. Do you need a new case for your iPhone? Print one.
Well, the news was buzzing this week about the 3-D gun that was successfully printed and fired. A handful of people were working on creating a gun out of a printer that could hold up to the pressures created inside a gun when the chamber is fired. Previously, the plastic would fail due to those excessive pressures. Well, this week it worked. A working, functional firearm was created from nothing but plastic powder and a $2,000 printer. And then the plans were put ‘on-line’ for the world to see and use. The plans were in a CAD (Computer-Aided Design) format; therefore, anyone could take the plans, feed them into a 3-D printer, and produce a functioning firearm. Now that’s a game changer in many ways.
Mayor Bloomberg (of New York City) is currently pushing legislation through that would make it a crime to own a 3-D printed gun. This week the State department demanded that the plans be taken down (off the Internet). Factually – the plans have been downloaded over 100,000 times and reside on servers all around the world, so the technology and solution are out there. But that isn't the real point. The point is that as materials get stronger, anyone with a CAD program and a printer can (and will) produce everything – even elements as sophisticated as a firearm.
3-D printing could truly be one of the most disruptive technologies of our time. Not only does it eliminate entire classes of machinists that turn metal on lathes; it changes the entire landscape of small parts manufacturing. It (obviously) opens up a black market in the weapons industry. While it might not be feasible or economical to make many of the elements with these printers (even if we had the ingredients that would work) – but there’s little doubt that 3-D printing is a game changer! Linking this to investments, look at companies that exist in the space like: DDD, XONE, and PRLB.
Friday was a funny day. All day the averages seemed tired, and sorely in need of a rest. But as usual, in the last 40 minutes the buying started and pushed the averages up to end another record week. I remember when setting a record was exciting. Now that we set one daily – it’s becoming mundane.
So the music is still playing and there are still musical chairs available on the deck of the Titanic. How long this can last is anyone's guess. But it seems to me that when they do decide to yank the rug on the government funding, it's going to be faster and sharper than most will imagine.
I sold some half positions on Friday. We had really nice short-term gains on several names and I wanted to lock in some of that profit. By selling half positions, I get to lock in a good gain, but still keep some “skin in the game”. While I'm not against picking up more stocks if they look ready to make a move, let's all remember we're in a bubble, and bubbles are irrational.
In the meantime, gold was beaten down again – but the attempt wasn’t nearly as successful as it was a few weeks back. While it was down $50/ounce at mid-day, it rallied back to close down just $24/ounce. I see signs that ‘potentially’ they're going to let gold and silver run a bit here. If that's correct, we'll want to jump on some gold and silver stock plays. ABX over $22 sounds reasonable as a decent short-term trade.
I received some emails asking about "penny" stocks. I don't really play penny stocks – simply due to the risk involved. While I may dream of buying a stock at 70 cents and having it go to $20, the number of them that actually do – is pretty small. More times than not, the penny stocks are the domain of the day-traders – the gents that buy 20K shares at 10 am and sell them at 10:50 for a two cent gain. Normally my investing line is $5, but (I must admit) when I first bought SLW it was $3 and ended at $46 – so there are exceptions to every rule.
If you’re into penny stocks, look at MJNA. It’s a ‘medical marijuana’ stock that ran from 4 cents to 35 cents recently. I honestly find picking penny stocks a ‘stretch’ for my skill set. For example: There is a tiny company with the ticker symbol APDN, trading around 20 cents. They have a very interesting security application that marks elements for identification using your DNA. Your DNA is unique, and therefore if your Rolex watch gets stolen – your DNA could identify it as being yours. In Europe, where all the exit doors of jewelry exchanges have "DNA Sprays" above them, it works very nicely. And, in the stores that use it, crime has become "non existent". But guessing whether a company like that could make the same impact over in the US – that’s beyond my comfort level.
A shout out to DS a reader that introduced us to the following chart for Median Household Income – showing a steady decline from 2000 thru 2013:
We learned last week that the average workweek declined in the number of hours worked, and it was the largest decline since April 2009. Often companies reduce hours at the early stages of economic contractions, prior to laying-off workers. Not to mention that the quality of the jobs created by this economy continues to be horrible. At the current rate, the majority of Americans are going to be tending bar, waiting tables or holding multiple temp jobs to make ends meet. Salaried positions with benefits are becoming a dying breed. Even the banks, which are the recipients of the Fed's generosity, are laying-off workers – such as JP Morgan just shedding 17,000 positions.
Unfortunately, wealth disparity (which has grown demonstrably over the past decade) is distorting the personal income figures that are often used to measure the health of the US economy. As shown above, the median family income has declined over the past 10 years. Median household income declined 1.1% in the month of February, and it is down 5.6% since the recovery began in June 2009. So the devil is (once again) in the details.
We made some trades this week and our short-term account is listed below.
My current short-term holds are currently:
- ANF – in at 52.59 (currently 53.84) – stop at 53.10
- CAT – in at 87.12 (currently 88.62) – stop at 88.25
- SBUX – in at 60.70 (currently 63.09) – stop at 62.00
- TJX – in at 48.77 (currently 50.95) – stop at 49.25
- NSC – in at 77.03 (currently 79.01) – stop at 77.90
- SLB – in at 75.18 (currently 76.29) – stop at 75.20
- SIL – in at 24.51 (currently 14.30) – no stop yet
- GLD (ETF for Gold) – in at 158.28, (currently 139.96) – no stop ($1,436.80 per physical ounce), AND
- SLV (ETF for Silver) – in at 28.3 (currently 22.98) – no stop ($23.63 per physical ounce).
To follow me on Twitter and get my daily thoughts and trades – my handle is: taylorpamm.
Please be safe out there!
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Until next week – be safe.