2008 Contents:

• 2007 Stock results
• 2007 Recap
• 2008 Thoughts
• 2008 Stocks

2007 Stock Picks

The US market moved mostly sideways this year; it was difficult to pick. These picks bucked the trend. Notable stocks were:

• Nintendo. Amazing growth from the game-changing Wii console, despite production problems. Nintendo had a larger market cap than Sony at one point this year. Incredible, isn't it?
• Toyota is now the #2 automaker, surpassing Ford, however the stock had already been run up last year.
• Sadly, Yahoo and Dell both struggled this year. Yahoo! had a far too public soap opera and Dell seems to be loosing ground fast and finding it difficult to differentiate and diversify.
• Cummins had one of the largest YOY gains this year with growth in power generation equipment.
• The big story is International; this is where the real growth is. Of the BRICs, did not include Russia (RSX), though it was up 11% since inception in September. China, Korea, Brazil, and India did fantastic. India was a real surprise with a whopping 86% ROI.

Other notable stocks this year

Stock Pick Recap 2004-2006
Since inception, the Prognostication Picks have beat the market 3 of 4 years and have averaged a 29% return. Here is the recap of 2004-2006.

2007 Recap

Quote of the year,  9/11/07: When General Petraeus presented his update on the war in Iraq, Republican Sen. Chuck Hagel of Nebraska, asked:
"Are we going to continue to invest American blood and treasure at the same rate we're doing now?"

"Malaise of America. There seems to be a huge disconnect between US Citizens and the Agenda of the Government, especially “War in Iraq” and Global Warming. American citizens are focused on their own realities—paying the bills, getting lattes at Starbucks, and getting their perfectly packaged goods at Trader Joes, Whole Foods, Walmart and Costco. Iraq is detached and foreign sounding words like "shiite" and "sunni" help to marginalize the conflict as background noise. Global Warming is like a warning from the Surgeon’s General to “not drink while pregnant” or “cigarette smoking can cause cancer”. In other words, there is a vast disconnect between the agenda of the Nation and the pursuit of actualization by individuals. There is a dangerous inconsistency between American Policy and the people of the Nation; they are not in agreement. This is a new and overwhelming sentiment that rests in the subconscious of most Americans. They don't agree with the Nation's policies but feel powerless to make change. Further, they justify they are busy with their own pursuits so simply don't try to reconnect or make a difference. It is too overwhelming yet non-specific at the same time."
Yep.

"As a result, in 2007, there will be a growing sentiment for change, ripe for the '08 elections. Americans want to feel empowered and cohesive. This will lead to growing nationalism. Expect this to manifest in pop culture: Country/Country Rock music; there will be new hits from John Cougar, Brian Adams, Jewell, Melissa Etheridge, and/or Bruce Springsteen. There will be new TV shows dedicated to political debate that attempt to simplify issues for the masses and even allow interactive "voting" on issues."
I see this in the strong support for Obama and Hilary. But I don't really see the nationalism. More like a recognition that the US of A is no longer the #1 super power.

"Global Warming. If you haven't seen An Inconvenient Truth, you must. It is a riveting documentary by Al Gore, and the statistics seem irrefutable. Bottom line: the atmosphere of the Earth is getting polluted too rapidly; heat from the sun cannot reflect back because it is trapped by carbon dioxide in our atmosphere, sending heat back to earth which elevates temperatures. Back to the cancer analogy, it seems that the WORLD has been given a terrible and terminal diagnosis. And time is running out. Unfortunately, there isn't universal recognition of the problem -- we live in denial -- and there is no cohesive plan of action to combat the effects of pollution-caused global warming. It's chilling to think that the movie was produced ~a year ago--and predicted the extinction of Polar Bears due to the rapid melting of the North Pole. Just this week, news reports surfaced confirming the Polar Bear's plight. Ironic that the canary in the coal mine is now one thousand+ pounds, 10 feet long, and one of the world's apex predators.
Wow, Global Warming has really struck a chord. It's incredible how everyone is talking about it and "trying to be more green". What's more hopeful is the sudden growth and interest in the investment community. Green is the next Internet from a VC perspective. Absolutely brilliant that Al Gore was hired by Kleiner perkins.

Sports

• "Super Bowl. Eagles vs. San Diego Chargers."
  Dead wrong. Indy beat Chicago.
• 
  "Tour De France. Ivan Basso, unless Vinokourav's team makes it to the TDF, then he will win."
  Dead wrong. Ivan, Vino and a host of others were busted for doping. TDF one by Contador.
• 
  "Barry Bonds: will play next year but have tragic injury broadcast live."
  Broke all time home run streak. And broke open the end of the steroid era (hopefully).
• 
  "Michael Vick of the Atlanta Falcons, the highest paid player in history, will go the way of Kordell Stewart. Brett Favre will play one more year."
  Michael Vick goes to jail for dog fighting. Favre has one of the best years of his life. The thing to understand about betting/cheating and sports is it isn't about winning the game. It is about WINNING THE SPREAD. That is where the betting and corruption lives. That's why it's not that Michael Vick killed dogs--it's that he was BETTING. Which means he might have been in higher stakes trouble--and could have been controlled to win or loose the spread. The basketball ref that was found guilty of betting influence is a case in point.

Internet
2007 was the year of Web 2.0 and Social Networking. Lame-O. It is amazing to me that people strive for anonymity and privacy yet they are willing to "become friends" with complete frigging strangers any where in the world (myspace, facebook, etc). What's worse is the gall that people have to think that others really give a damn about where they are every minute (twitter.com). I do think FaceBook is useful, though, and is a way to stay connected but not obligated. MySpace is a fad and will die in the next two years. LinkedIn is useful and, hopefully, will survive. Nothing really great came out of the Internet this year except the ones that chronicled them: TechCrunch (useful), PaidContent (useful), and Valleywag (ambulance chasers).

2008 Thoughts

The Next President.
I hope I am wrong, but, America will never elect a Woman (Hilary), a Black (Obama), or a Mormon (Romney). Probably not a Latino (Richardson) or a Libertarian either (Paul). The democrats will end up trying to regroup behind John Edwards. He will loose to Rudy Giuliani, our next president.
How's that for a prediction!

Technologies

• Lithium-Ion batteries. Though explosive, this is an incredible advancement. Batteries have no "memory" and are able to deliver relatively more power, even featured in the Tesla motor car. Look for hand held appliances/power tool companies to have increased sales due to folks replacing their ni-cad powered devices with new Li-Ion ones.
• Autogas. This is using Propane as an alternative fuel for autos. Has less emissions and more octane. Will become prevalent in emerging countries. Already popular in Japan. Look for cars to be able to use either traditional gas or autogas (commonly available in India already).
• BlueTooth. As of July 1, 2008, it will be illegal to drive a car and use a cell phone without a hands free device. Translation: surge in demand of blue tooth cell phones and headsets. This is amazing technology; it's good it is being mainstreamed.
• Wii Video games. The Wii will re-revolutionize video games, making them more interactive and family friendly than ever. This New Year's, our friends brought over a Wii with their kids and we had a blast playing it. Every other person I talked to PLAYED VIDEO GAMES ON THE WII this New Year's. Amazing. Expect interactive workout via the Wii in the upcoming months; this will dual purpose the console as something for both kids and parents.
• In-car Telematics/Controls. Holy gadget, Batman! Cars are becoming (unnecessarily) complicated. I recently drove an Acura MDX. The owner's manual devoted TWENTY-EIGHT pages to synching a blue tooth cell phone to the hands-free system. Another 12 pages were dedicated to figuring out the rest of the electronic wizardry. Ugh. Interaction needs to be improved with hands-free, dvd players, and GPS. This is a growth area for Microsoft (now working with Ford) and Apple (working with Toyota).
• Food, water and shelter. The world's population is growing and we need more fundamentals. In California, there will be a drought which will drive up prices for produce. World-wide, there is growing demand for food, water, and shelter.
• Waste. There will be new technologies for high-tech waste management. Particularly-disposing of computer parts and batteries.

Recession
Yes, there is going to be a recession in 2008. Basic costs are rising for food and gas, and the bottom has fallen out with construction, banking, and technology. It will take a while for the economy to recalibrate; "green" ideas won't employ the masses for years to come. Plus, International markets are continuing to erode the US. Of course, our International standing (ie, Iraq war) doesn't help.
Folks will spend less this year and will treat themselves to low cost, replayable entertainment (cable tv and video games) as well as low priced luxuries, aka the Tootsie Roll theory.

America
There will be a resurgence in American patriotism. "Made in USA" will become popular.

Sports
Football: Somehow, Green Bay wins the NFC and gets their ass kicked by the Patriots.
Tour de France: Has lowest TV rating ever but features Andreas Kloden winning it with Fabian Cancellara coming in second.
Baseball. A bunch of players will get some kind of plea bargain and all confess at once. Whatever.

2008 Stock Picks

BRICs. Be careful with these countries this year, especially China. China might be oversubscribed, just like the dot com bust and sub-prime bust. China may clamp down on growth in ways that we haven't seen before. India seems like a more solid bet, though it might be better to pick individual stocks versus the ETF. I don't know enough about Brazil or Russia. Korea still has a lot of headroom in my opinion.

Companies to look out fo

• T - AT&T. The monopoly will continue to grow.
• CMCSA - Comcast. The monopoly will continue to grow...Very cheap right now.
• TR - Tootsie Roll. Company is due for a shake up. Plus...the Tootsie Roll theory.
• PLT - Plantronics (blue tooth headsets)
• TTM - Tata Motors (TTM). India's #1 auto supplier. And just picked up Jaguar and Land Rover from Ford.
• ERTS - Electronic Arts. Of the Video Games (ATVI, ERTS, TTWO, NTDOY.PK), pick ERTS because of growth forecast and stock headroom.
• RMKR - Rainmaker. Cheap stock with lots of upside.
• PHG - Philips - largest maker of CFL bulbs
• JCI - Johnson Controls - automotive, batteries
• ETFC - Etrade. Very risky, but they will get bought out.
• FNI - Chinindia ETF.
• MKTAY - Makita. Cordless power tools.
• Bombadier International. Sadly, this company is PRIVATE. They own a bunch of amazing technologies and products, including Evinrude.