The cost of computing and data storage has collapsed facilitating the surge in the “internet of things” and a virtual “Cambrian Explosion” of new software and services to be delivered wirelessly.

The visions articulated years ago by geniuses like Ray Kurzweil and George Gilder are becoming reality. The absolute collapse in computing costs and data storage as depicted in the following charts by Mary Meeker at Kleiner Perkins will enable a surge in productivity that is unforeseen and incalculable by conventional econometric models. That’s my story and I am sticking with it –eh? The implication is you should be invested in businesses that compute and store and not in companies that make computing and storage stuff. Software is a king. Hardware is a serf. Aberdeen tries to find companies that are kings. Jeb B Terry, Sr. June 15, 2014

Decling cost to compute MM KPCB 6-13-14

Decling cost of data storage 6-13-14

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


Fun facts about Millennials . . . There are more of them, they are spending more and they are the best educated cohort ever to walk upright on the planet.

I have collected three charts from a recent report published by Business Insider from data originally presented by Goldman Sachs regarding demographic facts about the Millennial generation – that is people born between roughly 1980 and 2000. The oldest is mid 30’s. The youngest are teenagers. The coming of age of the Millennials is the most important demographic fact that will influence the extent and rate of adoption of technology in the U.S. It will hence represent a rising tidal force for the businesses that comprise the Aberdeen portfolio. Jeb B Terry, Sr. June 15, 2014

Millennials are the children of the baby boomers, and there are about 95 million of them, comprising 30% of the population – more than the Baby Boomers.

People have lost sight that the Millennials are the largest generation to reach adulthood in the U.S. They will represent a dominant share of consumer spending in coming years. They are the most tech savvy folks in the population and will cause an acceleration in tech adoption.

opulation distr by age - Millennials 6-13-14

Millennials are starting to age into their prime spending years.

Millennials are coming into their 30s, which means they will be an increasingly important consumer group, as seen in this Goldman Sachs chart. Millennials have been later in forming households, having babies and buying houses and the stuff that goes in them than the Boomers. This portends rising demand by them for household spending over the next 15 years.

Millennials approaching prime spending yrs GS data 6-13-14

Millennials are better educated than prior generations. They are the best educated generation – EVER.

A higher proportion of 18- to 24-year-olds are going to college now than at any time in the past. Despite a certain percentage of college education wasted on low value degrees, the fact remains that more people have been matriculated through higher education than ever before. This means they at least were exposed to diverse student populations and forced to realize there are different realities than the comforts of home. This suggests to me that they are at least more inclined to change, are more mobile and are more capable of learning new skills than any other generations.

Pct of 18-24 yr olds in College 6-13-14

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


Don’t look now but there is serious wealth growth going on as residential real estate improves and stock prices rise.

The prices for homes all across America are on the rise. They are still below their peaks but being up 24% from the housing bust lows feels good. Houses are still very affordable. There remains ample upside. In addition, the bull market in stocks has helped drive household net worth back to the record high level seen in 2007 when debt inflated home prices were creating illusory net worth. Today’s net worth has been accomplished with a reduction in household debt. The appreciation in real estate in a rational fashion and the appreciation in stocks can contribute to a sustained “wealth effect” for the economy. Jeb B Terry, Sr. June 15, 2014

Housing price gains from low 6-13-14

Housing price charts selected cities 6-13-14

Housing affordability chart 6-13-14

Household NW as pct of GDP 6-13-14

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

Should you be worried about an overheated IPO calendar or tech company valuations? . . . Nah!

The number of tech IPOs is a fraction of the number of IPOs brought to market in the 90’s. The market for IPOs should be viewed as recovering but certainly not frothy. As can be seen in the second chart, the number of public companies in the U.S. has declined 59% since 1997. The economy needs new company formation. Aberdeen focuses on young companies typically only a few years past their IPO. We are active investors in technology IPOs. Jeb B Terry, Sr. June 15, 2014

Hist Tech IPOs MM KPCB 6-13-14

Declining number of US public companies 6-13-14

Tech companies provide growth to the economy. The tech sector as a percentage of the total market value is a fraction of what it was in 2000

tech share of market value MM KPCB 6-13-14

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

Smartphones and tablets are growing fast – have much more room to grow. More bandwidth consuming devices means more video, games and m-commerce.

Charts included in Mary Meeker’s recent presentation on the state of the internet leave no doubt about the continuing surge in smartphones and tablet adoption. The rest of the world is catching up to the US and Europe. The proliferation of these devices (and replacement of older models) means more video consumptions, more games, more m-commerce – all of which bodes well for Aberdeen portfolio companies. And of course they need lots of touch screens and wireless bandwidth –eh? Jeb B Terry, Sr. June 15, 2014

Smartphones and Tablet growth - MM KPCB 6-13-14

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


The explosion in smartphones and tablets drives an explosion in TV Everywhere – video consumption on mobile devices is reaching scale with disruptive consequences for traditional TV.

Smartphones and tablets are screens connected to the internet with access to increasingly rapid bandwidth thanks to the proliferation of WiFi. The notion of TV Everywhere that I have mentioned often in the past is fast becoming a reality. Time spent watching video on mobile doubled in 2013. There are profound consequences for the TV advertising complex that spends ~$80 billion on TV ads per year. Jeb B Terry, Sr. June 15, 2014

More mobile - more video consumed 6-13-14

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

US Consumers Increase Spending at Strongest Rate Since 2011

Strengthening wealth effect and household net worth and rising employment are leading to a recovery in spending and consequently a willingness/ability to use credit cards. As Prime Executions has stated “Stronger usage of revolving credit could be an important driver of further economic growth, as consumers have mostly shunned revolving credit for the last several years”. There is no mistaking the trend in consumer revolving credit aka credit card usage in the following chart. Don’t get confused by the talking heads – the US economy is picking up steam . . . and that is a good thing for high beta stocks like the ones Aberdeen owns.  Jeb B Terry, Sr. June 15, 2014

US Consumer revolving credit 6-13-14

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


More evidence of improving economic conditions – mostly below peak levels – Small business optimism rising, sales outlook rising and employment intentions rising.

The small business optimism is the best since 2007 but still far below the peak levels. As optimism rises so does sales expectations. This is somewhat self fulfilling – the more optimistic businessmen are the more they spend on marketing which helps drive more sales. In addition, as is clear in the 3rd chart below, small businesses are expecting to hire more. This is all good. The economy should finish 2014 stronger than expected. Bring it on! Hopefully people will want to buy more high beta stocks – like those held by Aberdeen. Jeb B Terry, Sr. June 15, 2014

NFIB smal bix optimism 6-13-14

NFIB small biz sales expectations 6-13-14

NFIB small biz employment measures 6-13-14

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

Borrowing by consumers and businesses is picking up sharply. The amount of loans remains far below where it should be relative to the liquidity in the banking system. This means there is more growth to come.

The chart from the FED is unequivocal – bank lending is recovering which means capital is getting redeployed into the economy. That said – the amount of loans remain far below where they could be if cash was being utilized by the banks for lending as is has been in the past. Total loans could grow by nearly $1 trillion if monetary velocity returned to prior levels. There remains a lot of “dry powder” to fuel more economic growth. Jeb B Terry, Sr. June 15, 2014

St Louis Fed bank credit chart 6-13-14

C-I Loans vs M1 6-13-14

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