Featuring Lutts’ Logic:
Why Conde Nast is Dying
Big Changes are Afoot
Modernizing our Power Grid
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This week Conde Nast announced it was killing Gourmet magazine, leaving my wife and thousands of other foodies feeling betrayed. Many blamed Editor in Chief Ruth Reichel for the failure, but to me the termination of Gourmet--along with Modern Bride, Elegant Bride and Cookie, and following the shuttering of the ultra-rich Portfolio--is one more symbol of the times, and the result of forces far stronger and more pervasive than Ms. Reichel.
Just consider these other victims of the times: Saturn, Delphi, Charter Communications, Fleetwood Enterprises, Ritz Camera, Star Tribune Companies, Sun-Times Media Group, Six Flags and above all, General Motors, long a symbol of American might and now a symbol of the past.
These companies failed not just because we had a recession, and not just because our nation’s credit bubble imploded, but also because we’re in the early phases of a major economic shift.
The two factors are these:
The shift of information from print media to electronic media, and the parallel shift of the advertising that supported so much of the former.
The shift toward a more energy-efficient economy that is less dependent on fossil fuels and more dependent on renewable energy sources.
The first shift is well under way. We’ve already witnessed the great successes of Yahoo!, Amazon.com, Google and many more Internet companies in the early days of the shift, and many more will come. In fact, just this week I read about a new health care portal (http://www.keas.com, still in Beta) that aims to provide personalized health care plans to people based on their specific health inputs; it looks like a great idea to me.
But the second shift is far younger, and thus offers far more profit opportunities.
Its effect on the automotive industry has already begun. Among the losers are Ford and General Motors, who were simply too hide-bound (and too laden with debt and other obligations) to change rapidly enough. Among the winners are Toyota and Honda, whose small cars were available when the buying public wanted them, and who’ve already made decent first steps on the road to hybrid and battery-powered automobiles.
There will be many more winners in the automotive space in the years to come, and I look forward to writing about them.
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Today, however, I want to focus on the possibilities for change in our enormous electric power grid, an animal that is so complex--and so rooted in ancient technologies--that it is rife with inefficiencies. Which to me spells opportunity.
We all know how it works in general. All across the country, power plants burn coal or oil or natural gas or combinations of the three. Others burn wood, or generate nuclear power, or use hydropower, or take in trickles of power from little wind power farms and solar panels. And all across the country, people like you and me go around flicking switches off and on whenever we want something ... light, heat, dinner, communications, clean clothes, entertainment, etc., pretty much without regard to the effect our actions will have on the grid as a whole. And because electricity can’t be easily stored, the power companies have to continually adjust their inputs to meet our demands.
That it works is pretty wonderful, almost a miracle. Yet it’s crying for modernization. Above all, it’s crying for transparency and intelligence about operating costs. In short, when power demand is high, we should know it, and we should have the choice of deferring using that power until it is cheaper.
Some of that behavior, in fact, is going on right now, thanks to a company named Echelon (ELON). It was recommended in Cabot Top Ten Report recently, and here’s what editor Michael Cintolo wrote.
“In the future as designed by Echelon, the electric grid (smart grid) has the intelligence to understand changing demands, and to vary electricity pricing to make it more expensive to the user when production costs are high and less expensive when production costs are low. At the same time, increasing numbers of electricity-consuming appliances and devices are endowed with intelligence and communications capabilities that enable them to operate at the intersection of when electricity is cheapest and operation is most convenient for the user. The company has two main product lines now: Networked Energy Services (NES) for advanced metering infrastructure and LonWorks (Local Operating Network) for infrastructure products for control networking. Today, Echelon’s largest customers are electric utilities; its products are used in commercial buildings, smart homes, industrial plants, mining operations, schools, streetlights, warehouses, electric vehicle chargers, solar farms and more. The company has not been profitable since the last quarter of 2007--the slump in the construction industry was painful--but the stock is telling us better times lie ahead.”
When that was written, on September 21, ELON was trading at 14. Since then it’s been up to 15, down to 13, and now it’s at 14 again, building a tidy base in preparation for its next advance. I wouldn’t buy it today, but if it dipped to 13 I’d nibble, and if it was still building this base a month from now, I’d snap it up.
Yours in pursuit of wisdom and wealth,
Timothy Lutts
Publisher
Cabot Wealth Advisory
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