Hidden Trends and the Sectors They Drive - Barron's Interviews Charles Hess

by: SA Eli Hoffmann

Annotated article summary from this weekend's Barron's. Receive all our Barron's summaries by signing up here:

INTERVIEW: Making Sense of the World's Symptoms by Sandra Ward

Summary: Barron's interviews Charles Hess of Inferential Focus, who looks to detect subtle shifts in trend across investment themes:

  • He says the housing market has yet to see forced sales, which could happen if cost-cutting leads to increased corporate layoffs. Were this to occur, forcing the Fed to lower rates, the economy would then have to deal with foreigners pulling funds out of the U.S.
  • Saudi Arabia's King Abdullah, through recent ties with Russia (upon whom Iran depends for its nuclear program), is using oil price to pressure Iran to ease Middle East tensions: If Iran cooperates, Abdullah will let oil prices rise; otherwise, he will bring them down. Hess says current 'optimal pricing' is in the $50-60 range.
  • Online collaboration is a 'new necessity' due to significant increases in telecommuting. Online video and collaboration companies that stand to benefit: Cisco (NASDAQ:CSCO) who just bought WebEx, Citrix (CRXS), Polycom (NASDAQ:PLCM), Optelecom (OPTC) and iLinc (ILC).
  • The Department of Defense is beginning to build a global satellite network called the Global Information Grid [GIG] similar to the internet. Companies that will benefit from its $34 billion commitment: Globecomm Systems (NASDAQ:GCOM), SAIC (SAI) and Radvision (NASDAQ:RVSN).

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