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| http://www.gilder.com/ | Issue 246.0/May, 12 2006
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HEADLINES:
▪ The Week / Milkenomics
▪ Friday Feature / Catching the Bad Guys
▪ Friday Blogger Bonus / About That First Job
▪ Readings /
The Week / Milkenomics
‾‾‾‾‾‾‾‾‾‾‾‾‾
George Gilder (5/10/06): Perhaps people are all spooked by debt.
Inspired by Warren Buffet’s memorable dismissal of spendthrift America as
“Squanderville,” doomster pundits point portentously to the “twin towers” of
debt: record trade ($900B) and budget deficits (a projected $448B). The
Squanderville chorus prophesies the same debt doom disasters they and their
cohorts predicted last year and the year before that and so on back over the
centuries in the annals of finance. In a global economy, shifts in the balance
among goods, assets, and bonds are utterly predictable and innocuous. A trade
deficit between the U.S. and China should arouse no more alarm than a trade
deficit between California and Nevada.
Nonetheless,
perhaps I am missing something. Perhaps “it is different this time.” So to get
a perspective on debt I decided to consult the world’s leading expert on the
subject, Michael Milken. Amid the economic bubbly and guru goulash and mad
politics and media-borne flues and immigration snits and Time magazine Weather Channel panics, I headed west for the Milken
Institute’s annual bash at the Beverley Hilton Hotel in Los Angeles.
I had not visited the place since the glory years of the early 1980s when the
crested capital of Milken’s $200 billion junk bond empire was funding most of
the key companies that laid the foundations for a new era of networks. That
became the Telecosm and it was initially financed chiefly by debt. At the time,
such firms as MCI, TCI, Newscorp, McCaw Cellular, Cablevision Systems, Viacom,
Turner Broadcasting, Warner Communications, and even secondary beneficiaries Corning
and Disney were widely seen as Ponzi schemes poised and propped up for quick
deal-making profits by the Machiavellian vamp from Wilshire Boulevard and
Drexel Burnham. But among various
permutations of ownership, wafted by the relatively gentle but persistent
inflationary winds of the late 1980s and early 1990s, these heavily indebted
companies grew in market cap from less than $100 billion to around a trillion
and fueled the communications infrastructures for an information age.
After five years of federal harassment of the high yield security market that
he pioneered, Milken went to jail in 1991 on a tidal wave of journalistic and
judicial blindness to what he was doing, aggravated by the ulcerating grip of
envy at his success in doing it.
When he emerged from jail more than two years later, he found himself nearly
bankrupt from $1.2 billion of fines and from the federally enforced crash of
junk bond values. (Congress forbad any regulated companies from buying them,
forced Savings & Loans to give them up, and then congratulated itself for
foresight as the securities tanked.)
Contrary to the predictions of the politicians and their consultants,
though, junk bonds soon revived and became a staple of American finance.
Banned
from financial markets and other uses of his amazing talent, Milken found time
to address the 1997 Gilder/Forbes Telecosm conference, where he warned that
while the 1980s were the era of debt finance, the 1990s were an era of
equities. As Greenspan issued alarms of “irrational exuberance,” Milken
declared that an eightfold rise since 1985 in corporate price-to-book ratios
signified not a vast overvaluation of stocks but the increasing role of
intellectual and human capital in U.S. companies. (Business Week made a similar discovery in a cover story by Michael
Mandel a couple months ago.) Milken in 1997 saw the change as a sign that
equities were still undervalued, but that debt risks had risen.
Meanwhile,
Milken was reassembling the shards of his own career. Banished from the fields
of finance that he had earlier mastered, he would have to find new work.
Paraphrasing his lawyers, I sum up the conversation: “Well, what can I do?” he
inquired of his probation officers, “How about education? I’m interested in
education.” Sure. You can do education.
How about prostate cancer, can I do that? Sure.
In one of the greatest second acts in the history of enterprise, Milken within
seven years beat his own prostate cancer and accelerated research across the
field. Then he launched a venture called FastCures that is addressing the other
cancers as well, and created an education empire under the aegis of Knowledge
Universe nearly as lucrative as his junk bond empire of the 1980s. Including such companies as Leapfrog for
educational toys, CBT-Group for vocational training, Cardean University for business
education, and K-12—watch for it, soon to go public in online courseware—Milken
actually enhanced his reputation after leaving prison to a point beyond his
renown as a high yield financier. His one-time nemesis Rudy Giuliani contracted
prostate cancer and became a friend. No
one any longer speaks of Warner, Newscorp, digital cellular and long distance
fiber optics as Ponzi schemes, but few have apologized to Milken for their
earlier misjudgments.
Excerpted from the May 2006 issue of the Gilder Technology Report, by
George Gilder. Logon to www.Gildertech.com with
your GTR subscriber ID to read the complete May issue.
|
Gilder
Technology Report: Gains of 152%, 135%, 97%, and 74% |
Friday Feature / Catching the Bad Guys
‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾
Charlie Burger, (05/11/06): Following
the first-quarter call, we conclude that the December issue of the Gilder Technology Report remains a current and
relevant guide to Essex (KEYW) and its prospects. Inspired by optical
genius Terry Turpin, this ascendant military and intelligence contractor has
great potential in commercial markets, but success there will likely come later
than Wall Street expects. Meanwhile, Essex’s talent for catching bad guys such
as terrorists and drug lords will drive its nimble band of optical and
data-mining gurus yet deeper into the conclaves of covert operations.
During the quarter, Turpin’s team revved up its newest government contract, Cougar, and continued expanding facilities to meet escalating demands of its military clients. CEO Len Moodispaw expects to invest further in workforce and infrastructure during the rest of the year to support Thunder, Cougar, Woodstock, and future contracts. Essex field tested its advanced optical processor for radar, collected initial flight data using its software configurable radar, and received orders of over $4m for the Windermere subsidiary’s signals intelligence products.
On
the commercial front, Essex and its stealth partner on the optical encryptor
began meeting jointly with potential customers. Moodispaw expects to extend the
partnership and sign on new partners during the coming months. He also began
sampling new optical products and stepped-up the development of such products …
Find out why “the good folks at Internal Revenue are the biggest threat to
Essex investors this year and leading allies of Bin Laden and Company as they
reduce the capital available to Turpin and his cohorts.” Logon to www.Gildertech.com
with your GTR subscriber ID to read the complete Essex update.
|
Gilder/Forbes TELECOSM 2006 |
Friday Blogger
Bonus / About
That First Job
‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾‾
Rich Karlgaard (5/22/06): This question always comes up at the end of a
speech: "Given the dizzying pace of change in the economy, what careers
should my kids pursue?"
I
always chuckle. The question is legitimate, of course, but the fact that I am
being asked it is a bit funny, if you know me. In college, let alone high
school, I had no clue as to what I wanted to do once I graduated. All I cared
about was sports, track-and-field especially. That I wound up working for a
magazine might have been predictable--might have been--from my twin passions at
the time, Sports Illustrated and Track & Field News. I would
read and reread each new issue to the point of memorization. At the library I
shirked my homework and pored over old bound volumes of these magazines. Forget
Mark Twain and Ernest Hemingway. The best American writer was sportswriter Dan
Jenkins.
As a result of this goofballing, I graduated with low Bs and was clueless about careers. College friends headed off to law school, med school, divinity school … and I headed off to a security guard agency. My first job was to show up at 5:00 p.m., relieve the receptionist and sit in the lobby until midnight. It was there that I discovered the prose of H.L. Mencken and George Orwell. And lively contemporary writers, too, such as Tom Wolfe, George Gilder and P.J. O'Rourke. They were nothing like the sour postmodernists I had been force-fed in college.
The
written word, I had come to appreciate (on my own and rather late), was
everything. So here is my first piece of advice to parents: Get your kids to
fall in love with reading. It doesn't matter what the writing is. What's key is
that the kids claim it as their own. I know scholars who were intellectually
awakened as teenagers by Playboy magazine interviews. Those are great
interviews. A few years ago a neighbor's kid was struggling in high school,
despite an IQ score in the nosebleed zone. His passions were golf and
basketball. "Fire the tutors," I told his mother. "Buy him
subscriptions to Sports Illustrated and Golf magazines." She
did. The boy was awakened. Now he works for
Read more from Rich on the importance of finding the right
mentors and thinking like an owner: http://www.forbes.com/forbes/2006/0522/037_print.html.
Check out Rich’s blog: http://blogs.forbes.com/digitalrules/
|
The Royal
Society Names George Gilder’s The Silicon Eye Finalist
|
Readings /
‾‾‾‾‾‾‾‾‾‾‾‾
Tech Allies
Split On 'Net Neutrality'
http://www.njtelecomupdate.com/lenya/telco/live/tb-KFJT1147205296597.html
China: Rich Country, Poor Country
http://www.forbes.com/business/forbes/2006/0522/035.html
Uncle
Sam Knows Best?
http://www.cato.org/pub_display.php?pub_id=6363
Seybold: O’Brien Almost Got It Right
http://www.outlook4mobility.com/commentary2006/may0206.htm
Smaller,
Cheaper Flash Memory
http://www.technologyreview.com/read_article.aspx?id=16842&ch=nanotech
Your
World On A Flash Drive
http://www.technologyreview.com/read_article.aspx?id=16734&ch=infotech
Q&A:
Sun Microsystems’ Jonathan Schwartz
http://www.forbes.com/management/2006/05/04/sun-microsystems-schwartz-cz_ec_0504schwartz.html
Chasing
Google In Online Ads
http://www.siliconvalley.com/mld/siliconvalley/business/technology/14563970.htm
Why
Google Hasn’t Split Stock
http://www.siliconvalley.com/mld/siliconvalley/business/technology/14563983.htm
Google
Watchers On Alert
http://www.redherring.com/Article.aspx?a=16804&hed=Google%20Watchers%20on%20Alert
Karlgaard:
The Stock Market Is Underperforming
http://blogs.forbes.com/digitalrules/
Darda:
Growth-flation
http://author.nationalreview.com/latest/?q=MjE4Nw==
Lowry:
How The Boom Began: Tax Cuts!
http://article.nationalreview.com/?q=MzQxNzI5YTM2NzZhMzcxNzU5N2Q0ZTMzZWVjMjllZDY=
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