Contents:

• 2005 Stock results
• 2005 Success Stories
• 2006 Predictions
• 2006 Stocks
• 2006 Stock Portfolio
• Prognostications from you:
  - Dan Hankins
  - Brian Fitzgerald
  - David Lundell

2005 Stocks: Results

More losers than gainers, but the gainers were very impressive. 
The "05 Portfolio" had a 155% return, beating the flat returns of the market as a whole.

• Apple far exceeded as a result of it's game-changing iPod and it's variants.

• The one sure bet of '05. Google is the Internet hype of '05, but it's earnings are legit.

• Texas Instruments leveraged it's DLP technology and did great.

• Amazon is struggling to find growth but did regardless.

• ASKJ Bought by IACI 3/21, as predicted but stock didn't pop.

• YHOO struggled a bit though innovation looks good in this now big company.

• Palm-changed it's branding for the third time. Long-term, the Treo and it's offspring are their only hope. The "LifeDrive" is too expensive but a good concept.

• Starbux-maxed it's growth?

• Sprint-suffering from mediocre handsets and huge competition.Changed to Sprint-Nextel (S)

• Walmart-languishing; have to get rid of bad PR.

• Sears. Ticker changed to SHLD 

• Research in Motion-hobbled by a lawsuit from a now-deceased inventor.

• Ebay-let everyone know they don't know where growth is, have not successfully integrated Shopping.com. Company is in a panic; purchase of Skype for 4 billion reasons to many still doesn't make sense.

• Kodak-good lord-try listening to one of their quarterly announcement calls-it's painful. They honestly don't know what they want to be now that they are faced with growing up.

• Ford. Along with GM, paralyzed by outmoded policies for retirees and paralyzing health care costs. They have a few great products (GT, Mustang, Escape Hybrid) but their mainstream cars (500/Freestyle) are weak in comparison to what's offered by Honda and Toyota. Of course, their cash-cow SUV/trucks are being killed by gas prices increasing 50%.

If you bought equal shares in each of these stocks, you should be very happy.

For comparison

Notable Stocks not in the "portfolio"

- Was impressed with INFY after a visit to India in June.
- Adobe and Toyota, picks from 2004, have continued to impress.
- GM is just pathetic

2005 Success Stories:

• Clark got his company Motionbased bought by Garmin and Dirk has released his Progio, proving that passion and startups are still alive and kicking. Other cool companies are Zero Gravity and ibikesports.

• The red cross said they didn't want any more money for Tsunami relief.

• The Toyota Prius is a great car that is making hybrids finally viable

• iPod Video: This could be huge. While the programming you can get now is limited ("Lost" and "Desperate Housewives"), the potential is amazing. Paying for video content, on-demand. Imagine getting all of the Rockford Files or the Sopranos, quickly and easily? How about buying and downloading that DVD instead of renting it off netflix for close to the same price? Or just browsing through all of the Saturday Night Live skits and buying a select few?

• iMusic: The iPod is nothing without iMusic. iMusic makes it easy to buy, download, and copy music to your player. Though I think Yahoo Music is conceptually better, it requires you to buy/download then BURN TO CD before copying back to your mp3 player. It's faster to just copy your disc!

• Texas Instruments DLP processor. DLP tv's have set the HDTV marketplace on fire; they've made plasma and lcd's become more price-competitive, faster.

• HDMI standard. Pure genius. One cable that sends, digitally, 5:1 sound AND video over ONE cable. All future components will upgrade to this better standard. I have a SACD dvd/cd player. It's a joke; 5 cables for the SACD, 3 for the video, and 1 optical cable for the audio. A new unit requires only ONE. About time!

• Xbox 360. While I could care less about video games, I realize they are important to future generations (my child will probably get most of her education from some kind of video game). But what's impressive about the xbox 360 is that it's a technological quantum leap in processing. It has THREE cpus. This kind of horsepower will open new possibilities. They use Motorola PowerPC chips, which is a bad sign for Intel (and the wintel monopoly). Intel should have pitched their butts off to enter the gaming market with Microsoft. But they didn't. I think Intel could suffer the same consequences of Quantum/Maxtor/Seagate-hard drive manufacturers who were slow to adopt to change.

• HDTV. Yep, it's cool. Too bad there are only ~7 channels. But the picture quality is phenomenal; better than DVDs! This is a really ambitious change that will take a while to really infiltrate the mass market. But the consumer is benefiting with prices falling by 30% for plasmas and lcd tvs.

• Honorable mention: Slingbox. Slingbox is this device that connects to your tv and broadband connection. It lets you watch tv on any connected computer. So you can watch ESPN in your hotel room in Prague, on your laptop, if you so desire. Very clever idea, but I still won't buy it yet

2006 Prognostications

The Internet

Web 2.0
The good: The most remarkable thing to happen en masse this year was the widespread adoption of blogging, coupled with Google's ingenious Ad Sense. Blogs are really no more than the new version of a personal homepage, but the cool part is they are easy to set up, very easy to update, and very easy to syndicate via RSS feeds. The built-in feedback mechanism strokes the "publisher's" ego creating a perception that, yes, in fact, people really want to hear your rants. What's amazing is how much power some of these bloggers have; otherwise unremarkable people (usually engineers) have suddenly found a voice in geekdom-they are the early adopters that now seem to have as much PR value (if not more) than the standard media vehicles.

Personal experience. I set up my blog on blogger.com in less than an hour. I noticed an ad pitching google ad sense-yes those text ads at the top right of this page. I "applied" online and in a few hours received an approval with a url to go to. I walked through some terms of service pages and filled out a 1099 tax form--all online. That night, i copy and pasted the code to serve the ad words and went to sleep. The next morning, the ads were CONTEXTUAL to my site; biking and fitness-related. It was amazing because i never told Google what my site was about. I later posted a story about raccoons tearing up our lawn in search of these white grubs. Amazing-almost simultaneously, I had ads on my blog pitching white grub insecticide. That's awesome. While I won't be quitting my day job any time soon, Ad Sense has generated a whopping $9.31 in revenue for me :-). You don't actually get paid until you clear fifty bucks, though. While Google has hit a home run by buying blogger.com and by monetizing infinitely targeted content with ad sense, Yahoo deserves credit for making RSS feeds REALLY easy to aggregate via My! Yahoo and Y! 360. If you want to learn more about any of these buzzwords, check out wikipedia, a self-policed/any one can publish encyclopedia of the world as we know it. Another "good" from web 2.0.

The bad: Most overrated web development this year? TAGGING. Good lord; apparently our worlds are SO complex that we think it's helpful to SPEND TIME categorizing web sites, photos, "content" with words that make them easier to find later on. Being a bit cynical here, and if people standardize on what they call things, this could be useful. But I don't see this being realistic without some BODY of people really reinforcing where things should go and why. Yahoo attempted to categorize the web in the early days (the "directory"). Funny how what's old is new again, with del.icio.us being acquired by Yahoo. I think the application-tagging-is probably better realized with flickr, another yahoo acquisition. Flickr uses tags to categorize the reams of photos we all take--now that's useful. With photos, you go through a lot of effort to take the pics, organize by event, and upload them. Adding "tags" is really already part of the process.

Similarly overwhelmingly hyped is Pod casting. Pod casting is publishing content (usually indy artists or garage-based talk shows a la Wayne's World). I'm fine with making mainstream content available on-demand (such as programs on NPR), but the illusion that a huge marketplace for independent music will come of this is naive. There is a reason why big music labels ARE big and why they seem formulaic. It's because that's what the mass market WANTS. There is probably a business model out there in ranking Podcasted content to bubble up the wheat from the chaff. I guess that might be what myspace is.

The ugly: Dorky phrases for 2005.

• "Mashup"-meaning to use publicly available api's from different technologies/companies to create something synergistic. Yes it's cool, but the phrase is hopelessly romantic sounding and pretentious.

• "Folksonomy": essentially, what tagging is. Categorizing concepts to a structure defined by the FOLKS that build it. Tagging should have been called categorizing. And there is no need to call tagging Folksonomy. Again, hopelessly romantic and pretentious, if not just silly.

• "Moblogging"-publishing photos or comments to the web via cell phone or pda. In all honesty, until cell phones have higher camera resolution, who the hell cares? "This is me in my pimped out Acura in the parking lot of In N Out Burger".

Web 3.0
What is the next generation of web greatness? Devices and applications that do more or do it better. Yahoo! Mail's new beta is incredible; it looks and feels like Microsoft Outlook; it's amazing that it's web-based. Successes of the future will be devices and applications that link to the web for real-time updates and empowerment, and all of these devices/apps should have also have web-only interface that gives a substantial portion of the functionality no matter where you are. Examples: finance consolidator: something that synchs all of your credit cards, checking, savings, and brokerage accounts with bill payment. At an instant, you have a real time look of your bills outstanding and personal balance sheet. But the kicker is, from this one device/app, you will be empowered to trade, pay off bills, transfer funds, etc.

Another example is a truly integrated and easy to use media center. One console to program your remotes, transfer songs/podcasts from your ipod to your home and car stereo, program and record your Tivo, and send any and all content to your work pc, home pc, home tv, and car stereo. The device that stores and controls all of this content will likely be the next generation iPod. It will have to have plenty of storage and very secure data-protection.

Web search should also have a big change this year (if it doesn't, it needs it). There is something horribly primitive about merely "text based matching". There has to be a better way to gauge CONTEXT and bubble that up.

Cell Phones. I hate the preoccupation with cell phones. I honestly think that people aren't really that much busier than say 10 years ago. They like to THINK they are. It boggles the mind to see people instantly on their cell phone as soon as they break away from a meeting. Recently saw a young couple eating at a restaurant. HE was on his silly cell so SHE decided to get on as well. Neither was talking, I guess each was "checking messages". From who? Yes, cell phones are a great convenience and can help fill idle time, but the addiction is just so unnecessary.
What's even worse is the advent of "pee mail" as coined by coworker David Beach. Meaning, using your treo or blackberry to check email while taking a leak (or on the throne). Good lord, what have we come to?

DUBS aka huge wheels and low profile tires.
"Dubs" means a wheel that is over 20'' in diameter. I honestly don't know how this craze got carried away. Big wheels mean flat-spotted and scratched rims, stiffer ride, longer braking distance, and a dubious improvement to handling. In the early '90's, low profile was 50 series. Now it's 30 or even 20 series. Ridiculous. And those Spinner wheels. Talk about the disco embarrassment of the millennium. Lower profile tires ARE good, but the new extremes are just silly.

Music. Maybe it's just old age, but in my opinion, modern music is just crap. 50 cent? Kanye West? Jessica Simpson? Gross. Coldplay and Green Day are ok, and Sheryl Crow is this generation's version of the Eagles, but talk about mediocre overall.

The in competency of the president-and that no one is doing anything about it.  I don't think there has been a president that has been more ridiculed in US history for being an idiot. It's so ironic-he has the state of the art staff and he governs on an agenda of world leadership that has been the US mainstay for centuries. But the administration seems to get caught up with releasing too much information at the wrong times. I believe most Americans secretly  (or openly) acknowledge that US policies are not inherently fair, and are driven by our needs to continue to grow and support our standard of living. But the "freedom of information act" or whatever you call it, and the unquenchable thirst for sensationalism of the media has brought more scrutiny to this president's regime. And they are failing under the scrutiny.
The White House has admitted that we invaded Iraq under false information--yet we are still there. It wasn't false information, it was a weak story. And then further gaffs, such as the prisoner abuse, His flat denial that global warming doesn't exist, and the revelation that the government will wire tap pretty much any conversation really doesn't help our cause. What's more ridiculous is the ignorant party lines; democrats and republicans purposefully take the opposite side of the argument but don't seek compromise. It's a recipe for disaster. The next president will need to bridge both sides (I think McCain has a good shot). Meanwhile, Bush better be careful. It's not unrealistic to think he'd be impeached for in competency. The deeper issue, though, is the general public's disassociation with government. I think only about 50% of the public votes. And most of us don't feel that we can really affect change-so we don't try. America has become lazy and complacent. We will get our asses kicked, and soon. It's already happening in the automotive sector and tech is being chipped away by outsourcing. I don't think outsourcing is inherently bad, but the decline in the car industry is shameful.

Recycling and Global Warming. Have you ever put a small amount of dirt in a pool of water--ever kicked out the mud in your boots in a puddle? It's amazing how cloudy and murky the water turns, isn't it? Yet we release countless amounts of pollution every second of every day. Littering should be a felony. Global Warming is, unfortunately, now an extremist term that is too large to comprehend. But it's more glamorous than simply saying we need to clean up our waste. Waste and pollution are a crisis that need to be dealt with as our most important priority.

Higher standard of living. In the US, it's amazing how there is a continuously higher standard of living, though I don't know how it's being financed (must be on debt). It is admirable that stores such as Wal-Mart, Target, Starbucks and Whole Foods, as well as devices such as the iPod and cars like the Prius, and services like cellular coverage, DSL and Cable, are making lives for ordinary Americans better. Though "better" is now defined as materialism versus personal satisfaction through hard work and a higher meaning.

Real Estate. It's sick and wrong that an acceptable 3br/2ba house in the Bay Area now fetches ONE MILLION DOLLARS. This is no exaggeration. The median price soared 20% in 2005. This is on top of already inflated years since 1999. Ironically, there are two kinds of loans that are gaining popularity; short term-interest only, and FORTY year fixed. The scary thing is, even if there is a huge correction, home prices will still be overpriced and, in reality, not affordable.

Cars and oil. The state of the US auto industry is deplorable. For 35 years, we've known about dependence on foreign oil, it's scarcity, and it's harm to the environment. But in realistic terms, we've moved at a snail's pace. Compare this to World War 2; aircraft in 1938 were pressed to exceed 300 mph. By 1945, jet engines were invented and 500 mph was possible. Let's say average miles per gallon in 1970 was 13 and in 2005, 20. This is a 54% improvement in 35 years versus 67% in 7. Like WWII, we are in a WAR, a war against reliance on scarce fossil fuels. Hybrid vehicles are a good step, but the dangers of disposing of batteries are not known.
Hydrogen releases water as emissions; imagine Los Angeles with millions of cars pouring out vapor; it could look like Seattle with acid rain if we aren't careful.
Best bet for now: renewable energy in the form of methanol made from corn. The government already subsidizes farmers to stockpile their corn in silos. Why not grow this cash crop as a renewable energy source? Methanol is already a fuel choice in Brazil. Longer term, solar is pretty much the ultimate solution, assuming adequate on-demand storage methods are developed.

Ford made a small effort with the Escape, but they need to launch more high-efficiency models. GM was premature and needs to catch up quick. Meanwhile, Toyota and Honda are kicking American car company ass.

Media. Wow, Howard Stern and Sirius; the end of Monday Night football available to everyone, TV available on Apple or Yahoo!.
Sirius/XM radio: I still don't think people want to pay for radio--but folks spend a lot more time commuting, and Sirius/XM is part of being technologically "hip". Again, I am probably too old for this audience, but I just don't see the value in paying for radio content. YES-cable TV is a success, but I don't see mass adoption of pay-per-hear radio. Meanwhile, Howard Stern has been over-hyped as some sort of content king. I see him as nothing more than someone who delights in degenerating our culture even more. He sucks; there is nothing substantively redemptive about him or his programming. Monday Night Football-wow, an American tradition; across the country, until midnight on the East Coast, the nation would watch the modern gladiators play to the orchestra of polished commentary. Now it's been revoked--and made available only to those who pay for cable. Amazing to me--it's the end of an era. Next up: Baseball is pay-per-view? Yet we are convinced that paying more and more for content and gadgets is the way to go.
Apple/Yahoo and TV content. Now this is cool though weak in it's current incarnation. It would be fantastic if tv content was made available, on demand, whenever you want it. That's cool and useful.

Gambling. The recent glorification of Las Vegas, the popularity of Poker as seen on ESPN, and the proliferation of Online Gaming sites embodies the revelation of another sin made available to the masses. There is NOTHING GOOD that can come of this, except to shareholders/owners of these companies. This is an unfortunate new emergence that capitalizes on the day-trading craze of the dot-com bust, with "everyman" able to bet.

Sports.

• Who will win the Super Bowl? Really sad that Indy's coach, Tony Dungy, suffered the unthinkable tragedy. His son apparently committed suicide at age 18. What the hell went on there? Regardless, I think Indy will rally and beat the Seattle Seahawks.

• Also, as stated last year, Michael Vick will go down as just another also-ran. His team's weak ending in '05 is a case in point. However, it is hilarious that he used a pseudonym while dating; "Ron Mexico" has to be the funniest ever.

• Lance Armstrong. Got to say, he retired in style. Unlike Brett Favre, who is strikingly similar in heroics, southern drawl and pure excitement, Lance quit at the top of his game. Favre is rapidly disintegrating right in front of his loyal fans. Shame. But what will he do when he retires?

• Tour de France. Ivan Basso is the heir apparent to Lance's throne. He will win the Tour of Italy (Giro de Italia) but not the Tour de France. Instead, freed from his nemisis, Jan Ulrich will finally win again with Alexander Vinokourav winning multiple stages.