Jobs

Jobs have been shipped overseas because it is cheaper for US and especially Silicon Valley corporations to employ folks there. If there is hiring to be done, it will be done overseas.  Do not expect the US jobs picture to improve.

Best sign of deflation? Silicon Valley corporations laid off the excess in 2008 and also reduced wages/salaries because they could do it at the time. Nothing has changed. Those employees remain with lower pay and new hires are overseas.

You need to get on board the deflationary ship. The enlightened profit ships are leaving the harbor. Don’t get left standing on the dock with some kind of concerned inflation view.

Cloud Computing?

It really means back to the basics of computing.  Everything cannot be housed on your own hard drive in the closet anymore.  Everyone in Silicon Valley knew that two years ago.

Since your PC has been nothing more than an internet tool, it makes sense that your data no longer needs to be stored on your little hard drive at home; instead, it needs to be housed (by rent) in larger coffers, e.g. the same thing losers like AOL and winners like Google and others have done for many years.

Other Takeovers

M&A is not healthy for the economy at this point and will only serve to continue the deflationary cycle, nevertheless; there could be some synergy for certain acquisitions. We are looking for very large cash balance companies in this case to pursue some medium caps. TI and Google would be logical buyers along with the higher cash foreign holding companies.

3PAR Tug of War Between HP and Dell

Excellent for 3PAR, this is exactly why we invest in equities. Not so good for Dell or HP, especially after a bidding war. Data storage and tech small caps in general can be takeover targets in this environment. We saw the 3PAR deal as an options trade but did not buy the 3PAR stock outright. We may have missed some of this one, but we also do not expect storage additions to help technically savvy companies. We also do not consider Dell as a technically savvy company.


We in fact heard on TV that Oracle had a lot of cash and could be a potential bidder for 3PAR. Hello? Oracle IS a data storage company with already great IP. Don’t plan on that scenario.

Our Opinion is the Deflationary Opinion

Consider an airfare from San Jose, CA to Austin, TX. The fare is huge, 20-50%+ higher than a year ago. Higher price = sign of inflation or at least non-deflation? NO it’s definitely a sign of deflation. About 50% of the US airline fleets are parked in the Nevada deserts because they cannot operate at a profit. The available planes have been cut in half. A mere 40% loss of air travel demand creates a supply surplus and higher prices. The net performance/loss of air travel demand is in fact 30% to the red side. Assets are being taken out of service, not the other way around.


We can’t believe a lot of the news we might hear. We are in a deflationary mode in the US. We need to adjust our plans accordingly. Don’t get left out.