Constructing a Power Revolution

Imagine driving your car from San Fransisco to New York City without stopping for gas. Or even better, imagine a car that doesn't break down even after driving 200k miles. Prototype cars exist that can achieve this feat, and they're about to become commonplace.

These cars eliminate gas stops because they draw all their power from batteries. They don't break down because they have fewer moving parts. The key to this technology is the batteries.

Tesla Motors produces 100% battery powered cars today. However, these babies are meant for the high-end green-snob driver who wants to go 0-60 in four seconds and doesn't mind parting with $92K. Phoenix Motor Cars are developing a more reasonably priced model (around $40,000) for the common man. It only goes 0-60 in 10 seconds, but the battery lasts for 250,000 miles. Yahoo has written an excellent article along the lines of the bird/electric-car-concept that comes back from the ashes of oblivion.

Other inferior technologies promise to beat the energy storage problem, but they will fail.

Oil Companies and Car companies have put a lot of money into hydrogen technology in order to preserve the oil business. However, they ignore the original problem: "what is the best way to store energy for a car". Instead they force the answer to be an oil product. They invest billions of dollars on a hydrogen based car since the hydrogen would come from oil. Hydrogen is dangerous. One small leak in the hydrogen car easily spells doom. In the worst case, your car becomes engulfed in highly flammable gas that's easily ignited. In other words, you'll be playing chords on your heavenly harp before you realized your car malfunctioned. Ignoring the complete lack of ubiquitous hydrogen, the inherent dangers of using it ensure that the technology will never go mainstream.

The safest route for hydrogen is not to use it. The second safest route is to store it as "gasoline" converting it to hydrogen on demand inside your car. The technology for doing this does not exist and will likely remain distant. The newer, safer, longer-lasting, and more powerful battery technology is winning because it already works today.

In addition to cars, batteries have the potential to save money on your energy bill. They can store energy at night when its cheap in order for you to use during the day when the energy is expensive.

The tech industry in general requires good batteries to ensure computing systems stay up when the power grid fails. Wireless communication companies like Verizon and AT&T need better batteries for their Cell Towers. The data centers that power your favorite web site need better batteries. The company with the best battery has a huge market waiting for them.

The companies that promise to develop better batteries are A123 Systems, Altairnano (ticker ALTI), and 3M (ticker MMM). For now, you can only invest in last two.

A123 Systems and Altairnano use nano-technology to make lithium batteries safer, and last longer. On the other hand, 3M is working to increase the amount of energy a lithium battery can store. I'd like to see these companies form a partnership to mass-produce the ultimate lithium battery.

Interactive Brokers IPO'ing

Interactive Brokers will be allowing anyone to bid on it's raw-deal IPO. See their special site. I used to be a customer of theirs and they had the best commissions at the time. This company makes money hand over fist. Last year they made a whopping $1 mill per employee. They know how to use technology.

That said, this deal initially excited me, and their doing their IPO Google-style with a dutch auction so anyone can bid! That excited me more until I read the prospectus...

That was a cold shower. Their only selling 5.1% of the company which entitles you the investor to 5.1% of the dividend. And this amount is capped at $50 mill. Factoring in the details, this works out to be a measly 12 cents per share. At their estimated bidding price of $25 per share that's a unspectacular maximum 2% return (assuming four dividend payouts over the year).

I'm bullish on the company, but after reading the prospectus, it's a raw deal.

What made the shower even colder was that most of the money generated by the IPO would go the CEO of Interactive Brokers. None of the proceeds would go into business use. The company is basically using it's street reputation to make the CEO more wealthy while throwing the investor a bone or at least a piece of bone.

Fear Cripples Future Growth

Why have companies cut capital spending more money on buying their own stock back? It makes no sense! Cutting back on capital spending implies that executives expect recession. Yet, buying their own stock back reflects confidence that the company's price will somehow improve during said recession. It's like "Jack and the Bean Stock" except after the adventure in the clouds Jack comes back with jack. In this case Jack should have invested in beans that grow into food instead.

Anyway, the reason that companies have spent record amounts of money on stock buy-backs is due to fear. Executives fear losing control. Private equities' amazing success thunders like barbarians at the gates. Each win for private equity increases their buying power. Like a game of risk where each territory yields more buying power to conquer with, each company that a hedge fund buys yields it more buying power in two ways. The privatized company's equity is drained into the hedge fund's war chest and the press from the successful campaign brings more cash from folks excited to ride the winning streak.

Even companies that are poor targets for privatization are still susceptible to the activist hedge fund. Carl Icahn's spoils are legendary in Business Week.

So here's my tech advice: go with tech stocks where the executives have a mandate of power. Stocks like Google and Apple have special ramparts that defend against barbarians. In Google's charter founders have stock that has 10 times the voting power. These stocks were able to IPO without offering control of the company because they previously achieved great success or generated a lot of press before the IPO or both. These are the companies where CEO's can focus on their business instead of their power.

Blog Manifesto

People often find themselves blindsided by technology trends. They appear to happen before there's any time to invest in them. I'd like to help change that by saying: "here's a company that gets it and is bringing it". It's like I am a male Cassandra except that I see successes instead of disasters. I'm like good fortune teller, except that I rely on insight instead of magical dragons and crystal balls.

My past success has been with my own picks. When RedHat IPO'd, I was telling everyone to "hit that!" When Google was doing it's dutch auction for it's IPO, I was wishing real bad for some dough to bid with. When non-gamers were buying Wii(s), I knew that Nintendo won the console wars. I knew that Apple got its mojo back, when I recommended that my dad switch to using a Mac. I knew that Microsoft would rule the desktop when Bill Gates was born. OK, maybe I exaggerate.

But, if I had a little money I'd be rich; or maybe I am rich; or maybe I'm just not bragging about the craptacular investments that I made in the past. Hmmm which one is true?

I got the tech vision. And generally, investments that I've made on my technology insights have done well.