You know how it is. Something happens. It seems small and insignificant at the time. And yet you cannot forget it. Every now and then you are reminded of it. It gnaws away at you.
Well something is gnawing away at me just now, and I’ll tell you how it started. Just before Christmas, a nice friendly gentleman from BT rang me up and asked me whether I wanted to increase my broadband capacity. Not being much of a techie, I did not really understand what he was talking about.
I have signed up for some peculiar package called something like ‘BT Options Plus Family and Friends Together All You Can Eat For A Fiver’ and as far as I was concerned that was that. I’d pay for my phone calls but when it came to the use of the two computers in my home I could sit in front of both of them all day long if I wanted to without paying a penny extra...
It seems I was wrong. It seems that my family is now using so much of BT’s precious broadband capacity that they are threatening to charge me extra. How has this happened?
The cost of bandwidth
I blame my children. I have two teenage sons and when they get home from school they sit in front of the PC watching repeats of ‘The Apprentice’ or a video of the latest pop idol. This all uses bandwidth and one thing I do know is that videos use a lot more bandwidth than simple text.
Having got that far, I began to notice a few other things. I began to notice how I was not just reading text off the screen but watching corporate videos and webcasts. I have even sampled the joys of YouTube. I have read how the social life of teenagers – and not just teenagers to be honest – seems to revolve around Facebook. I noticed that the train operators were in trouble for offering discounts on tickets bought on line. But why single them out? Lots of organisations charge less for their products if ordered on-line. The fact is that it costs less to transact business this way.
Here is another thing about the internet. Its use does not just grow. It multiplies. Take one of those social network sites. Suppose it had five members and each of them were so sociable or so lonely that they wanted to speak to each other every day. That would require ten conversations. But if another five people join the club then for each person to speak to each other requires forty-five conversations.
Then think of the Grandmother whose grandchildren are in Australia...
She buys a PC, goes on-line, starts to receive all those photos of her nearest and dearest. And before she knows it she is buying airline tickets on-line, she is checking the weather forecast on-line. If she goes just a little mad she might start placing bets on-line. She might even end up as a ‘net hog’, one of those 5% of users who use 95% of the available bandwidth.
A new investment theme in internet capacity
This type of thing is happening all the time. The use of the internet is multiplying. And it is not just because of the behaviour of individuals. Organisations of all sizes are basing their business strategies on the internet. It allows staff to work from home. It allows companies to communicate with their suppliers and customers all over the world. Digital data is piling up relentlessly and must be stored somewhere. Internet usage is growing very fast indeed.
Which brings me back to my friend from BT, and reminds me of what was said in the City in those heady days of the dot-com boom in the late 1990s and early 2000s. So much internet capacity, the analysts told us, was installed a decade ago that it will last for ever. But it seems they were wrong. Capacity constraints are starting to appear in the fibre optic network and this has two inevitable consequences. It means that those who own the network have pricing power. And it means that there must be new investment in the infrastructure of the internet.
This has all the makings of a powerful new theme for tech-savvy investors and I am looking for ways to play it. I note that the share price of managed hosting and data services group, Telecity (ticker: TCY) is rising strongly. That could be one way. Sandvine (ticker: SAND) is another small company that has been mentioned in this context.
These shares have already risen considerably, so I am looking for new opportunities. I described one excellent company in the latest issue of my newsletter Red Hot Penny Shares. This share could benefit directly from growing investment in internet capacity. I am sure there are plenty more. The hunt is on...
Best regards,
Tom Bulford
For The Right Side
P.S. You can access my latest Red Hot Penny Shares issue and the details of this exciting play on the internet capacity theme, by clicking here. Your capital is at risk when you invest in shares, never risk more than you can afford to lose. Seek independent financial advice if necessary.
MARKET NOTES
Oil surges to a six-month high – with more room to grow
BY SHIVVY ARORA
Oil prices recently surged over $65 a barrel… and there’s no sign of it stopping. Mostly, it’s bullish comments from OPEC and a fall in US crude inventories that are giving it this boost. The ‘recovery fever’ that seems to have gripped markets isn’t hurting either.
At a special meeting in Vienna last Thursday, OPEC opted to hold output steady, citing higher demand expectations as the main reason for an unchanged quota.
The chart below shows crude oil prices for the past year to date. You can see that they’ve just broken through the 200-day moving average (blue line), which is a strong technical sign. Crude has doubled from a low of $33 in February (circled).
Oil prices on a roll as they break through the 200-DMA
Source: Stockcharts.com
With a near-30% rise, oil prices look to be on course for their largest monthly gain since March 1999 when they rallied by almost 37%. All this could attract even more investor interest.
Higher prices could be reached before the year is out. OPEC’s Secretary General Abdalla el-Badri certainly thinks so. “If this current trend continues, this recovery as we see it coming now, I think, by year-end, we’ll see prices in the range of $70 to $75 a barrel,” he told reporters.
Production cuts (including the non-OPEC nations) coupled with strains on global oil production mean tighter supply and higher demand. This could push oil prices to $80 by the end of this year. That is the price that the International Energy Agency (IEA) said oil prices need to rise to, in order to ensure future oil supplies.
It’s not too late to invest in oil.
Editor’s note: As Profit Hunter’s Chief Investment Strategist, Manraaj Singh has been busy scoping out the best ways to profit from the oil price surge. He’s looked at dozens of companies from around the world and has found the shares that he believes are best placed to profit from this opportunity. Click here to sign up to this unique service.
Your capital is at risk when you invest in shares, never risk more than you can afford to lose. Seek independent financial advice if necessary.
The Daily Reckoning
BY BILL BONNER
London, England
Monday, 1 June 2009
Bonds down. Gold up $17.
Someone seems to think there is a whiff of inflation in the air.
Sniff... sniff...
We’re not so sure. It seems too early to us.
But we’re not even going to think about it. Today, we’ve got to make tracks. We’re travelling.
Our regular commentary, such as it is... tomorrow.
P.S. If you enjoyed this article you can find out more about our free email, The Right Side by clicking here.
