Big Data is a Big Deal. Growth in “smart” devices = growth in internet connectivity and data generation and hence fueling demand for a new generation of IT services to accommodate data storage and business analytics.

While the market is understandably fixated on the smartphone / tablet adoption there is a correlated boom in businesses that are needed to help deliver, store and add value to the mountains of data being generated by the tsunami of internet connected smart devices.  We refer to this overarching phenomenon as the “datasphere” and we have populated our portfolio to be highly geared to its growth and proliferation.  The following charts have been selected from recent research published by Morgan StanleyMonetizing Any Data”  Jeb Terry, Sr. October 23, 2012

Growth in total enterprise data expected to continue for 3 years in excess of 50% p.a.

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Spending on Mobile Ads is set to BOOM. 80% growth this year. Over 50% annual compound growth to 2016. Spending to rise from $1.45 billion in 2011 to $11.9 billion in 2016.

Spending on mobile ads and marketing is booming.  As prior posts have pointed out, the massive adoption of smartphones and tablets has generated a sharp increase in spending for mobile/wireless advertising.  A recent webinar by eMarketer included the data in the following chart.  Total mobile ad spending is expected to increase 80% this year and 69% next year.  Our direct experience in the space confirms that rate of growth.  We have an investment in a company that is growing at over 4X the 2012 projected growth.  This growth will be sustained regardless of who is President or the outcome of the “fiscal cliff”.  The aggressive roll out of new tablet computers by Apple, Amazon, Google and Microsoft in coming days (see prior post here) underscores the rising tide in mobile ads and marketing.  Jeb Terry, Sr. October 23, 2012

Courtesy of eMarketer

 Aberdeen Investment Management – a guide service for micro-cap technology investment

Cash still pouring into M1. The increase in idle cash is challenging the spikes we saw at the time of peak panic in 2008 and the debt ceiling debate induced panic in September 2011. People are apparently sitting on sidelines awaiting the election outcome and resolution of the “fiscal cliff”.

No wonder corporations are guiding toward weaker earnings . . . people are withdrawing cash from the real economy and capital markets and stuffing it into insured bank accounts.  We saw this happen in 2008 and last year.  It is an indicator of a high level of fear and uncertainty in the economy.  Cash in M1 is now 15% of GDP, the highest since 1995 when there was another debt ceiling debate and gridlock in Congress and a battle between a Republicans House and a Democratic President.  An economy in recovery should have M1 in the order of 10% or less of GDP – that implies that there is ~$800 billion in idle cash that could be used to grow the economy.  Resolving the public’s fear on the direction of the economy and the “fiscal cliff” could trigger a improved recovery in the economy and a strong gain equity markets.  Spikes in M1 in the past have proven to be opportune times to invest in equitiesJeb Terry, Sr. October 23, 2012

Aberdeen Investment Management – a guide service for micro-cap technology investment

An Avalanche of tablet computers is on the way. Apple, Microsoft and Google will all be launching new tablets over next two weeks just in time for the holiday season. Think more wireless video, More mobile ads, More m-commerce.

The boom in mobile is about to get even “boomier”.  The tablet computer market is entering the phase when tablets are “sold” instead of “bought”.  This happens at the base of the “S” curve for technology adoption.  Large, sophisticated and wealthy marketers – i.e. Apple, Microsoft, Google and Amazon – are unleashing prime time marketing campaigns designed to sell a range of products addressing multiple user segments and price points – there will be an affordable tablet for every household.  In the process, all manner of content will become digitized to be consumed on the new always near portable screens.  The following chart from Pew Research displays the already rapid cannibalization of radio and print news channels by online news . . . this cannibalization is about to go into hyper drive.  We all know that ad money follows eyeballs.  It is rational to expect a similar chart scenario will begin to play out for ad spending . . . and yes – we are very much exposed to the growth in online –and particularly mobile/wireless – ad spending.  Jeb Terry, Sr. October 22, 2012

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Swap spreads – a very sensitive barometer of economic cycle risk – are saying systemic risk is low and outlook for 2013 is for an improving economy.

Swap spreads are the expression of the direction in interest rates.  They are derived from a massively liquid market for treasury and money market securities.  Scott Grannis of Califia Beach Pundit (here) provided the following chart and commentary.  Jeb Terry, Sr. October 16, 2012

Swap spreads are excellent leading indicators of economic health, as the above chart demonstrates. (Here is a primer on swap spreads.) Swap spreads can be thought of as the price that market participants must pay to reduce their exposure to risk. When swap spreads rise, it’s because investors are becoming more worried about the future, the market is becoming more risk averse, liquidity is drying up, and/or the economic fundamentals are deteriorating. As a result, it becomes more expensive to get rid of unwanted risk. Swap spreads have risen in advance of the last three recessions, and they have declined in advance of the last two recoveries. The decline in swap spreads in late 2008 led me to predict improving conditions in 2009. Today, swap spreads are about as low as they get, and that suggests that systemic risk in general is very low, and therefore the health of the economy is likely to improve over the next six months

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Equity market on the rise – Equity mutual funds and ETFs still draining assets. This is unprecedented. When and if the mutual fund outflows turn into inflows the market will likely accelerate.

The strength in the equity markets this year has been driven by institutional allocation of assets even though hedge funds are still in a highly short posture.  The persistent drain of assets from equity mutual funds and ETFs displayed in the following chart from Bianco Research will come to an end.  We can observe that there were net inflows in 2005 and 2009 following recent Presidential elections.  Inflows will drive stock appreciation.  Anecdotally, Fidelity has reported they have more funds in bond funds than in equity funds – this has never happened before.  This too may be a strong contrarian sign that investors are too bearish.  Jeb Terry, Sr. October 16, 2012

Aberdeen Investment Management – a guide service for micro-cap technology investment