Daily Archives: March 4, 2015

Heads Up!

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We hear a lot these days about the Internet of Things (referred to as “IoT”). IoT generally means everyday appliances connected to the Internet.

But there’s another side to the IoT — using smart devices in the business environment — and rarely do we get a solid look at how big a business it is and how fast it’s growing. That changed last week with the release from Verizon of a fairly comprehensive report that outlines the size of the business use of IoT and how fast it’s growing. For starters, Verizon (with help from ABI Research) estimates that as of 2014 there were 1.2 billion different devices connected to the Internet, and that the number will rise to 5.4 billion by 2020 for an annual growth rate of 28 percent.

On its most recent earnings conference call, Verizon said IoT business brought in $585 million in revenue in 2014 — a tiny drop in a very big wireless bucket worth almost $88 billion, though it grew at a respectable 45 percent year-on-year.

In an interview with Re/code, Mark Bartolomeo, a Verizon VP who runs its IoT business, said the carrier had about 15 million devices running wireless machine-to-machine connections last year. Compare that with the 108 million human subscribers using phones and tablets. “We’ve seen the early adoptions, but now we’re getting to a new phase where we’re seeing fast followers in this business,” he said. They run the gamut from automotive companies working on connected cars to electrical utilities deploying smart meters, or manufacturers.

In fact, it was the manufacturing sector that saw the fastest growth in adopting IoT products last year, up more than triple since 2013, according to the report. Companies started small, using connected cameras and sensors to monitor security in factories and keeping a close eye on the flow of production and shipments. Now companies that make and service large-scale factory equipment are adding IoT smarts to watch for signs of costly breakdowns and to help save on the cost of regular in-person inspections.

Other segments deploying IoT devices at a fast-growing rate included finance and insurance companies (up 128 percent year-on-year), media and entertainment firms (up 120 percent) and the home security and monitoring businesses (up 89 percent).

And the opportunity for growth is sizable, Bartolomeo says, in part because relatively few firms across all industries — only about 10 percent worldwide — have yet adopted any IoT technology. Many are deploying early-stage pilot programs or waiting to see results from other companies.

Source: Re/Code Daily.

The Economy

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Last week the positive economic reports exceeded the negative. Following are the positives:

  1. Durable goods orders increased 2.8% vs 1.6% expected
  2. Case-Shiller home prices rose 0.87% month over month and 4.46% year over year, both above estimates.
  3. Core consumer prices rose 0.2% month over month vs +0.1% expected.
  4. Pending home sales grew 1.7%, less than the 2% expected gain but still hit 18-month highs.
  5. Revised Q4 Gross Domestic Product came in at +2.2%, down from the 2.6% initially estimated but better than the 2% expected revision.
  6. University of Michigan consumer confidence came in at 95.4, higher than expected.

Negatives:

  1. Chicago Purchasing Mangers Index fell to 45.8 vs expectations of 59.4, lowest since July 2009.
  2. Existing home sales fell 4.9% month over month vs expectations of a 1.8% decline
  3. US initial jobless claims rose 31k to 313k last week vs 290k expected.
  4. Dallas fed manufacturing index fell to -11.2, down from -4.4 in January and below the expected reading of -4
  5. S. oil rigs decline for the 12th straight week.

The “Heat Map”

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Most of the time the U.S. stock market looks to 3 factors (call them the “pillars” that support the stock market) to support its upward trend – let’s grade each of the pillars.

CONSUMER SPENDING: This grade is an A (very favorable) due to the favorable effect of lower gasoline and heating oil prices.

THE FED AND ITS POLICIES: We continue to grade this factor an A+ (extremely favorable) because the FED cannot do much more than it is doing to support the stock market and asset prices.

BUSINESS PROFITABILITY: This factor’s grade is a B- (slightly above average).

OTHER CONCERNS: The “Heat Map” is indicating the U.S. stock market is in good shape ASSUMING no international crisis. The Greek government and the European officials have extended the loans with which Greece is saddled for 4 months which delays the hard choices which must be made. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these collectively as a 2, a decrease from 3 last week. These risks deserve our ongoing attention.

The Numbers

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Last week, Foreign Stocks and Bonds increased but U.S. Stocks declined. During the last 12 months, STOCKS outperformed BONDS.

Returns through 2-27-2015

1-week

Y-T-D

1-Year

3-Years

5-Years

10-Years

Bonds- BarCap Aggregate Index

.5

1.0

 5.0

 2.7

 4.3

4.7

US Stocks-Standard & Poor’s 500

-.3

2.6

16.2

18.3

16.2

8.0

Foreign Stocks- MS EAFE Developed Countries

1.0

6.5

.5

 9.4

7.4

4.9

Source: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized excluding dividends.

“Your Financial Choices”

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“Your Financial Choices” The show airs on WDIY Wednesday evenings, from 6-7 p.m. The show is hosted by Valley National’s Laurie Siebert CPA, CFP®, AEP®. This week Laurie and her guest Rodman Young CPA, CFP®, of Valley National Financial Advisors will discuss: “Tax Deductions and Tax Credits”

Laurie and Rod will take your calls on these topics and other inquiries this week. This show will be broadcast at the regular time. Questions may be submitted early through www.yourfinancialchoices.com by clicking Contact Laurie. WDIY is broadcast on FM 88.1 for reception in most of the Lehigh Valley; and, it is broadcast on FM 93.9 in the Easton and Phillipsburg area; and, it is broadcast on FM 93.7 in the Fogelsville and Macungie area – or listen to it online from anywhere on the internet.  For more information, including how to listen to the show online, check the show’s website www.yourfinancialchoices.com and visit www.wdiy.org.

The Markets This Week

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U.S. stocks treaded water last week in quiet trading, sans the volatility that has characterized 2015 so far. The rest of the world’s equities, however, rocked ahead.

Though U.S. major indexes finished little changed, there was enough action to make yet another new high in the Standard & Poor’s 500 index Tuesday. Prices eventually fell back and trading was light.

Friday saw a revision of the U.S. fourth quarter gross domestic product growth rate down to 2.2% from 2.6%. Other economic reports released during the week were similarly mixed, notes Chris Gaffney, president of EverBank World Markets. The data wasn’t enough to push the indexes out of their recent range, he adds.

Last week, the Dow Jones Industrial Average lost seven points to 18,132.70, while the S&P 500 index fell six to 2104.50, after hitting a high of 2115.48 Tuesday. Both rose over 5% last month. The Nasdaq Composite gained eight points, or 0.2%, to 4963.53, and was up 7% in February.

As March begins, investors will have lots of data to parse, especially the February unemployment report Friday, adds Gaffney. After Federal Reserve chair Janet Yellen spoke to Congress last week, the market appears to be moving its expectation of the first rate hike to later in the summer from the beginning.

Stock markets outside the U.S. were ebullient, and “pretty much every other market is beating the U.S.,” notes Michael Shaoul, chairman of Marketfield Asset Management. The MSCI World Index excluding the U.S. rose almost 1% last week. Year to date, that index has doubled the S&P 500’s 2.5% rise, even in dollar terms.

(Source: Barrons Online)