They’ll keep our homes, track our finances and clean up after our pets. Best of all, they’ll be robotic. So you won’t have to feel guilty. You won’t even have to tip them! Within a few years, truly sophisticated consumer robots will be common in high-income households. Before you know it, incredibly capable general-purpose robots will be seen as essential appliances.

It’s funny how hard it is for people to accept big, obvious change. Even when the world is transforming in front of their eyes, lots of folks don’t see it. I remember when the prevailing opinion was that personal computers were a novelty. The real money, analysts said, would be in mainframes. Do you remember when the Internet itself was viewed as merely interesting, but with little financial potential?

If you go back further, you’ll see this same inability to recognize trends with cars. At first, the notion that people would want to own automobiles was too much for the mainstream. Sitting in traffic these days, it’s hard too imagine such shortsightedness was once conventional wisdom.

Those who understood that those changes were inevitable made fortunes. They didn’t worry about timing or recessions. They just invested in a portfolio of early carmakers. Despite the fact that some automakers crashed and burned, those who bought diversified portfolios of car stocks made vast fortunes. That’s what I’m urging investors to do with robotics now: build a diversified portfolio of the companies that hold key competitive positions in the industry.

Already, some low-end robots are exploding into new markets. Even as consumers cut back dramatically last quarter, sales at one of the robot companies I follow increased dramatically during the first quarter. This trend will continue. Selected robot companies are bucking dismal economic conditions. Moreover, military spending on robotics continues to expand and buoy many robot companies. Just days ago, the U.S. Army ordered 125 robots from a company I have been following.

The proposed Obama budget increases funding for the Department of Defense programs that move robotics forward. The trend toward unmanned robotic weaponry, like iRobot’s PackBot, is unstoppable. Military conflict will not go away, and robots offer many developed nations a way to reduce battlefield casualties.

As Moore’s Law continues to improve computer technologies, the decision to risk robots, rather than humans, will be easier and easier to make. Regardless of consumer spending trends, we will see far more advanced robots in the battlefield and on crime scenes. Those advances will, in turn, accelerate the domestic and industrial robotic industries.

Believe me. You want to own robots.

Part II: Memristors

Memristors are the “fourth circuit variable” hypothesized in 1971. Until now, though, three circuit variables have long been the basis for all electronic circuits. They are resistance, capacitance and inductance.

Last year, HP made news by demonstrating a practical application of memristance. At the time, I was astonished that the development had occurred so soon after HP’s announcement that it had discovered a way to build memristors.

HP may have been only the first group to recognize what it had on its hands. Researchers from such institutions like the University of Parma in Italy and UC San Diego have also built prototype memristors from polymers and metallic oxides. They too are exploring applications for this exciting new technology and could end up holding important memristor intellectual property.

Nearly all existing commercially available transistor-based technology is capable of assuming only two states per element, either 1 or 0. So by necessity, all calculation is done in binary.

Memristors, because they can assume different states corresponding to different levels of resistance, are multi-state elements. This quality facilitates a much higher data density. Memristor storage density will be at least 10 times that which is achievable using current transistor-based technology. Imagine the storage capacity of a large hard drive on the head of a pin.

Moreover, memristor memory is nonvolatile. It retains its state even when no power is applied to the circuit. This has tremendous advantages over current memory technologies that lose their data when the power is switched off. Furthermore, unlike current transistor technology, memristance becomes more pronounced and efficient the smaller the element is. In transistors, small size and high density lead to greater power loss and heat production. The opposite is true with memristors. Nanotech-level scaling actually amplifies the memristive properties of the individual elements.

It’s not only computer scientists who are excited by these developments. Biologists are beginning to realize the potential memristors have to mimic organic or biological computing.

Because many of the properties of memristors are so similar to brain cells they may be used to imitate brain functions. If, as scientists believe, they can be used to mimic synaptic function, they could bring true artificial intelligence much closer.

Recently, researchers have been able to model the learning ability of the amoeba with a simple memristive circuit. According to HP, these circuits can “remember and associate a series of events in a manner similar to the way a human brain recognizes patterns.” In other words, the circuits learn.

While HP has grabbed the headlines, such devices are currently being developed for use as nonvolatile resistive memory by various companies. Some, like HP, are probably too big to be breakthrough technology stocks. Samsung is one of the giants working on the technology. On the other hand, Micron Technology and Unity Semiconductor apparently have some patent rights, at least, to memristor technologies. If they’re significant, these companies could be small enough to experience transformational profits that rival Intel’s historic growth.

It is only a matter of time before this new technology begins to break through. We will be monitoring this area for developments and will keep you informed.

P.S.: The question now, of course, is will there be a memristor pure play. One of my colleagues (an IT engineer) is currently talking to researchers about that very question… Get on my list and become one of the first to learn about these transformational companies as they develop. Here’s a link.

Source: Robots and Memristors

This from The Sovereign Society:

Records were broken in 2008 – money-losing records from an investor’s perspective.

U.S. stocks will record their worst calendar year since 1931. As measured by the S&P 500 Index, the broader market tanked 40% this year while the Dow Jones Industrials fell 36%.

U.S. stocks are already “dead money” since 1996. They’ve shown no net gain at all – including dividends. The ongoing market environment is eerily similar to another period of dismal returns – from 1966 to 1982. During those 16 years, the Dow and S&P 500 Index posted zero profits. Adjusted for soaring inflation, the markets actually recorded a loss.

Global equities as measured by the MSCI World Index posted its worst year since inception in 1969. International equities fared even worse with European and Japanese stocks down more than 45% and the MSCI Emerging Markets Index clobbered – down 53% in 2008.

World Markets Got Trashed in 2008

For stocks, the ongoing bear market has resulted in record mutual fund outflows as investors continue to dump their holdings and run for cover into money market funds.

Unfortunately, money market funds are now paying barely any yield at all since the Fed slashed interest rates to effectively 0% on December 16.

Only Treasury bonds, European and Japanese government bonds yielded a profit for investors in a wickedly harsh year for investors. As a currency investor, naturally you already know that the Japanese yen was also a winner against the dollar and euro as the “carry-trade” came to a crushing halt.

So Much for “Diversification”

With the exception of super-safe and low yielding U.S. Treasury bonds, yen and gold, the entire gamut of assets from stocks to non-Treasury bonds all plummeted in 2008.

Commodities, certain currencies, fine art and hedge funds all succumbed to brutal price declines. Overall, 2008 was the first losing year for U.S. and global stocks since 2002 and the worst period to be invested in financial and hard assets in more than 75 years.

Stop-losses rang out like pinball machines in 2008. Diversification across sectors, industries, countries and currencies proved futile. Almost everything was pummeled. By October 10, a panic gripped world markets as the threat of systemic collapse threatened the viability of the banking system.

Chaos to the Rescue

In late 2007, I introduced the TSI Chaos Portfolio, to my Sovereign Society readers. It’s a U.S.-based portfolio of six equally-weighted investments, including short-term Treasury bonds, gold, Japanese yen and reverse-index funds that bet against the S&P 500 Index. Recently I added a seventh safe-haven – short-term German government bonds.

This cost-effective strategy dominated my recommendations in 2008 rising more than 17%, including dividends.

For growth investors, hedging your market exposure is vital in a secular bear market. I continue to like the TSI Chaos Portfolio in 2009 even though the stock market has probably suffered the bulk of its declines at this point.

Volatility will remain rampant in an uncertain economic environment marked by growing consumer credit woes, massive government bond issuance to support gargantuan fiscal spending plans and weak corporate earnings. Investors must hold downside market protection.

Short Most Commodities, But Stock Up on Gold & Silver

Starting in October 2007, I recommended my Commodity Trend Alert (CTA) subscribers begin to bet against oil and gas stocks as a way to hedge against the energy sector. At the time, oil prices were racing to US$100 a barrel and the oil stocks were in the midst of a multi-year bull market. We all know how that story fared in 2008.

Since peaking in July, the benchmark CRB Index has crashed more than 50% as the entire commodities complex continues to aggressively deflate in a rapidly slowing global economy.

To protect our natural resource exposure in CTA, I immediately issued a series of reverse-index purchases betting against commodities. We were most successful betting against industrial metals or base metals, as copper and other metals collapsed. That position, still open, has gained a cumulative 80% since August 2008.

And since September, CTA has been riding a broad commodity index to the basement as part of our reverse index strategy – up more than 60%. We also maintain hedges against gold, oil, gas and long-term Treasury bonds.

Gold has also been a strong performer compared to most other assets in 2008.
Significantly, gold is the only asset that is completely outside the credit system and the only asset that has no liability.

In 2008, spot gold prices gained a modest 1% – not much in absolute terms but certainly impressive compared to other plunging assets. Silver, more of an industrial metal and therefore more vulnerable to broad economic trends, declined 18%.

Looking ahead to 2009, growth investors will only reluctantly return to stocks. Losses have been massive for investors since late 2007 as mutual fund redemptions hit records.

Stocks might indeed offer better values compared to mid-2007 after plummeting more than 40% from their highs. But domestic consumption in the United States, Japan and Europe is depressed and likely to remain under threat as unemployment rises and savings rates begin to rise again.

The correlation between a higher savings rate and corporate earnings is negative. It’s difficult to be bullish on earnings when the world’s largest economy will remain mired in a period of sluggish growth, debt retrenchment and rising job losses. The same is true for Japan and Germany – the second and third largest economies, respectively.

This is not the time to be aggressively buying stocks. Odds are prices will get cheaper again following any bear market rally. That’s certainly been the case every time stocks have rallied off their lows since October 2007.

Instead, make sure your portfolio includes gold, portfolio hedging strategies and income from high quality investment-grade corporate bonds in 2009.

Source: Rising from the Ashes: The Three  Investments You Need to Own for 2009

This from Investor’s Daily Edge:

“Fear frustration; Some Call it Quits,” a recent Wall Street Journal article, unknowingly summarizes what I have been saying for a long, long time.

The article is a short list of people who have thrown in the towel on the stock market. In every instance, the people described themselves as having everything or most of their money in the stock market.

A formula for disaster.

All of the people were professionals, all were successful, or sounded so from the description of them, and all must try, very hard, to ignore all the good advice that’s out there about how to invest your money.

After many years of trying to get investors to listen to good advice, I know it’s a waste of time to say this again, but you cannot have all your money in stocks. In fact, I left the brokerage business because I was sick of my clients ignoring what I told them to do and then blaming me because they were losing money. Here we go again.

It is financial suicide to invest only in stock.

Here’s one of the saddest stories I know about learning this lesson the hard way.

Paul, a former client of mine, just retired from a Fortune 500 company with a huge stock, stock option and 401K-rollover portfolio. This guy was the poster child for how to do your retirement planning right, around $4 million.

He took his entire 401K and rolled it over into some great mutual funds. Good move, he didn’t want to be bothered with the day-to-day stuff and knew this particular group very well. He also understood the fee structure and was ok with it. This portion was about 25 percent of his entire net worth.

The rest of his money was in stock options and stock in his former company, one that he rightfully held close to heart. He credited this company with everything he had.

Two problems that are common to many retirees: one, he had too much in this wonderful company. Investments are not collectables or mementos. Paul refused to accept this.

Two, he had everything in stock. Despite my best efforts, he refused to budge from his positions. When I first met with him, his company stock was at 94. Within three years, it was at 12. That’s an 87 percent drop in value. Three fourths of his total worth dropped 87 percent.

Leaving yourself open to the full brunt of the stock market will always have the same outcome.

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INTERNAL ENDORSEMENT Stop Playing the Stock Market Lottery! In the ongoing destruction of the capital markets, no haven is safe. Gold… down. Blue chips… down. Utilities… down. Consumer staples… down. Cash? Well, maybe for a little while, but we all know the dollar is doomed. Why risk your precious funds in the stock market lottery? Did you know you can make stock market returns… without stock market risk? You can! And there has never been a better time than RIGHT NOW for this investment…

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The past six months should be enough to prove to you that the stock market, while it has great long-term returns, is a risky proposition. There are techniques that if used properly will reduce that risk, but can’t ever eliminate it. Not diversifying properly in stocks, bonds and cash, as everyone now knows, is as close to a guaranteed loss as you get in this business.

Investors have severe tunnel vision and an unwillingness to allow for failure in their investment planning, or lack of planning. If you do not plan for the type of market we are in now, you will not survive.

There have been six different “end of the world markets” since I have been investing and working in the investment industry. Every one came after a period of crazy increases in real estate and/or stocks. It is the nature of the beast.

In case you haven’t figured it out yet, there will be another market just like this one; maybe worse, it is how the market works. Call it financial selection, market cycles or just craziness, but you must plan for the next inevitable crash or be a victim again.

How do you survive these killer markets? Diversify with stocks, bonds and cash investments, use reliable research, avoid listening to conversations about investing at parties, and stick with the tried and true. This advice may seem boring and nonproductive at times, but it is the only way I have found to be there to fight another day.

Source: A Survivor of the “End Of The World Market”