Having just published a review of last year's predictions in our last issue(you don't see folks doing that voluntarily), I thought I'd go back and measurethe results. Summary: inside our TenPredictions we had a total of 20 real calls, each laid out separately. Of these, 16 (80%) were correct, 2 (10%) werewrong, and 2 (10%) were undecided as of this date (i.e., will the dollar havehit a low?).

If I had been writing instead of reviewing predictions thatissue, I might also have missed our website going down for a week as wetransitioned to a new physical site and server, new OS, and new tools, all atonce. On the other hand --

Let's see if we can do a bit better this year.

1. In a clearreversal, Content Drives Bandwidth, rather than the other way around. (For U.S.members, this prediction could also be called, "The Emperor Has NoClothes.") After years during whichthe type of content being distributed on the Net was dependent upon the amountof bandwidth being metered out to consumers (think AtomFilms and BMW ads), thisyear will see content in the driver's seat, as operators scramble to satisfyuser demand to see full-screen video and, to a lesser degree, HDTV, via theNet.

Corollaries:

For those U.S. phone providers (and Michael Powell at theFCC) who have been (unethically) telling their customers that they are getting"broadband," the Emperor's true state of dress will be evident, asthey cannot see the real videos that everyone else is seeing. Result, widespread customer dissatisfactionwith 256Kbps hookups, and high switching rates out of telephone ISPs.

Second result: Relatively strong performance by cable andsatellite providers, as every telco ISP except Verizon starts looking a bitnaked. 

Third result: Telcos will be under pressure to do whateverit takes to provide real broadband (1.5 Mbps and above), either moving up tobetter DSL technologies, creating alliances, merging, somehow getting into realbroadband. I expect almost all cablecompanies to offer Voice Over IP by year end.

2. People PubliclyFight Monopolies Over Broadband.Another U.S. phenomenon, this trend should provide plenty of legalexcitement for the technology sector, as cities struggle to install their ownbroadband wired and wireless networks, even as telecom monopolies work at thestate and federal levels to make these installations illegal.

This could be a truly bitter and ugly fight, and one inwhich no intelligent lawmaker gets on the wrong side of the vote.As broadband becomes accepted as the topurban economic development tool, helping a telco force your (or any) city intoeconomic stagnation will not be seen as a path to re-election.

Corollary: an increasing number of smaller cities, andgroups of cities, will take this matter into their own hands, bringing realbroadband to citizens ahead of current telco/cable schedules.

Second result: This defensive blocking behavior by telcosand cable will open the door to FiMax Nets, Clearwire, and other fixed wirelesscompetitors.

3. Vendors andothers wake up to the huge size of the Inkwell (one to one K-12) educationmarket. By the end of this year, theidea of whole states buying all seventh graders their own laptops will not seemunusual, it will seem inevitable, as state after state starts to put togetherplans for doing just this. Although, inthe U.S., thistimetable has been extended slightly by federal profligate spending, and costspushed down to the states, there is no going back. People will become used to pictures of cuteChinese, Taiwanese, Japanese, and even American kids sitting excitedly at theirown laptops in class. The idea of weekly"laboratories" as being sufficient computing resources for K12 willseem laughable.As we leave the year,the question will be how soon all this can be arranged.

Note: since SNS Project Inkwell is involved in thisprediction, it is totally self-serving.Doesn't mean, of course, that it won't be right ---

4. The world view ofChina will again change dramatically, as it asserts itself more powerfullyacross the globe.Currently thisview is quite benign, almost bemused, among many observers; this will change toone of greater respect as Chinabegins to throw real weight around in international circles. Among the changes that will bring this newperception: Chinasteel exports will reverse the course of global steel markets, crushinginternational competition and dropping prices.China will effectively compete for an increasing share of world oilsupplies, helping support a $40 oil price floor, and will strengthen its tiesto Russia for this and other purposes, forming a new power axis the very onefeared by cold warriors.

Chinawill begin exporting cars worldwide, and will quickly gain market share byselling high quality at low prices.Chinawill continue to grow its military at about 19% per year, and will become amajor arms customer for both Russiaand Europe.

Europe will break its arms embargothis year. Israelwill remain keen to help as well, by selling it top-secret weapons, to the increasingfrustration of the U.S.

5. Under-funded U.S. pension programs will become the new blackhole in the U.S. economy. Although some ofthis has already surfaced, its extent will be discovered to be far beyondcurrent estimates. With U.S.healthcare costs completely out of control and often a key part of pensionprograms there will be no way to avoid a crisis. Responses will include cutting health andother benefits, bankrupting pension funds, bankrupting companies, andultimately requiring a massive bailout by the Pension Guaranty Fund (althoughthis bailout will probably happen a bit further in the future).

6. A Down ConsumerYear. Healthcare costs and collegetuition fees will continue to wrestle share from the rest of the familycheckbook, even as higher energy prices work their way throughout theeconomy. 

What is wrong with colleges?There is no one to say "no" when they raise the budgets everyyear parents trying to get their kids into good schools should be the first,but are really the last, to complain.Result: no feedback loop to the customer, and a business out ofcontrol. Why did the University of Washington just hire a newpresident for just shy of $1MM per year?Because they could. This process,together with the one below, is going to impoverish what remains of the middleclass, even as it defines it.

What is wrong with healthcare? Once again, there is no real feedback loopbetween costs and services: welcome to another business where, essentially,there is no customer. You get theservices, many more than you really need, so the docs get paid more and suedless, and the insurance companies and taxpayers pay. No wonder the system is so screwed up andso far behind the rest of the world (we're about 13^th in average healthcare quality in the U.S.,and pay double the next contender). Thisis a welfare system for docs and insurance companies, and ought to be re-brokenas soon as possible. It's eating up U.S.business competitiveness, and is probably the leading cause of LOSTproductivity in the economy. We arepaying way too much for way too much we don't need.

Result: less left for everything else, and a down consumeryear.

As SNSers already know, the Greenspan Refi Madness liquidityspree is now over, and the only question is who will pick up the slack indriving the U.S.economy. Increased Fed rates throughoutthe year will drive the nail into this coffin.

Result: less debt and equity money for consumers to plowinto cars, houses, and the other line items in their Quickbooks ledger a downconsumer year. 

7. As Wintel fadesinto oligopoly status, and new platforms emerge in many new markets, this maywell be Technology's Year of Opportunity perhaps the best in a decade. In other words, what better time to start anew company, invent a new product, find a new market, create a global startupsuccess? There are more niches to fillnow than there have ever been, from biomed and biotech to nano, software andcommon uses for supercomputing. There ismoney for funding, and there are plenty of practiced managers ready and willingto try something new.

And here is an irony: while enterprise computing should domoderately well in 2005, and although consumer spending will not be enough tosustain past U.S.growth rates, the consumer will be the backbone of most new technologyopportunities. 

8. The U.S. economy will slow, the Japanese economywill slow, the Chinese economy will slow, the European economy will slow, theglobal economy will slow. Thisgeneral slowdown will mask the handover of economic drivers from the West tothe East, a decades-long trend now firmly under way.

Given the current cost of oil, the invasion of Iraqhas to be viewed has having produced a negative ROI. Indeed, since the U.S.cannot tax those it conquers, there is good reason to doubt the economic returnof its world police function.Goingfurther, one might ask: unless the world is going to kick in and pay for theU.S. Department of Defense and its operations, is deficit-creation, andeventually bankruptcy, not inevitable for the Global Cop? What a thankless job and one with seriousnegative financial consequences at home. 

I expect U.S. GDP this year in the 3.5 4% range, with atleast .5% attributable to additional deficit / defense spending.China'sslowdown is intentional (about 7%), Europe's is not(about 2%), nor is Japan's(about 1%). 

9. Phones will be the center oftechnology innovation in 2005. Wewill see more features, more services, and more high-end sales. Currently, there are just over a billionhandsets in the installed base, with a few hundred million cameraphones; byyear end, there should be about double that number, or 600MM cameraphones. 

GPS phones will emerge, finally, and phones will start toacquire GPS or other-tech location and map functionalities until now reservedfor separate (Garmin, Thales) devices.Expect to have phones talking you to your next appointment, locatingyour kids, and people sending maps to each other explaining how to get fromhere to there.

10. 2005: the yearwhen SID becomes the byword for technology product creation. Thanks mostly to Steve Jobs, iPod team leaderTony Fadell and a few others, the bar for new product design has been raisedfar above where it was just a year or two ago.It is no longer sufficient to produce a cool black or silver case withendless mode and feature buttons: now teams have to do the hard work ofunderstanding what people really want, often before they themselves do. More important, the technology gets hidden,instead of emphasized. And finally, theobject must fit ergonomically, and bring users the physical and aestheticpleasure of its own design. 

In other words, new technology products going forward willrely upon Simplicity, Integration, and Design.This year is much less about inventing new technology, than aboutpackaging technology in new, useful and pleasing ways for normal people. 

Well, that's the list.We'll come back a year from now and see if we have matched or beaten our80-90% record from 2004. I hope thisyear brings great business and personal success to all our friends and members,and that SNS will directly support that success.

Your comments are always welcome. 

Sincerely,

Mark R. Anderson

Quotes of the Week:

"We are in the age of 'searchculture,'in which Google and other search engines are leading us into a future rich withan abundance of correct answers along with an accompanying naive sense ofcertainty. In the future, we will be able to answer the question, but will webe bright enough to ask it?"

-- John Brockman, from The Edge; thanks to Thomas Curran for the quote.

"The errors -which came during what's usually an ode to Microsoft's dominance of thesoftware industry and its increasing control of consumer electronics - prompted the celebrity host, NBC comedian Conan O'Brien, to quip, 'Who's in charge of Microsoft, anyway?' Gates, who was sitting next to O'Brien on a set staged to look like NBC's Late Night set, smiled dryly and continued with his discussion."

-- on the crashing of the MS remote TV demo during CES;
Canadian Press, last Thursday.

"Once you have silicon as an optical material, then you can takeadvantage of this enormous (silicon) infrastructure that exists around theworld. You can imagine starting tosiliconize photonic devices, and maybe integrate photonics and electronics.''

--Mario Paniccia, director of Intel's photonics lab; quoted in Siliconvalley.com.

"People don'treally need to be worried by nanotechnology as a whole. In fact, I think they shouldbe delighted as it really will provide the next wave of innovation. Having saidall this, I do think there are some aspects of the technology that need to betreated with care and appropriate caution."

-- Dr. Natasha Loder, The Economist; thanks to Steve Waite for the quote.

"The fraud ofthe year --- [government actions] has inflicted a colossal damage to thecountry."

-- Andrei Illarionov, Putin's top economic adviser, until he was stripped of his powers this week; describing his boss' illegal takeover of Yukos Oil.

"Since thethird quarter of 2001, oil revenue seems to have been channeled increasinglyinto euro and other currency deposits.This shift out of U.S. dollars probably reflected to some extent therelative change in interest rates in the United States and the euro area since 1998."

-- a spokesperson for the Bank of International Settlements,
Geneva, on December 6^th; Reuters.

Hot Saudi money into the euro. That helps explain things. Next I suppose you'll say that oil price isthe most inflationary object in the U.S.breadbasket. Then you'll remind me that oil prices worldwide are denominated in dollars. Is oil a currency?

[The GM Daewoo Matiz and the (Chinese) Chery] "shared remarkably identical bodystructures, exterior designs, interior designs and key components and that themajority of parts in the Matiz and Chery QQ were interchangeable."

-- from a lawsuit filed in China by GM, claiming its Matiz / Chevrolet Spark model had been ripped off by the Chery firm and is about to be exported; in the FT,December 17^th.

"There hasbeen a remarkable growth of pro-Taiwan sentiment in Japan. There is now no pro-China figure in theKoizumi cabinet."

-- Phil Deans, director of the Contemporary ChinaInstitute at the School of Oriental and African Studies, University of London; quoted in the same FT.

It's even more interesting that right-wing author and Tokyomayor Shintaro Ishihara went there in October and that Taiwanese ex-presidentLee will be visiting Japan soon.

"Is it conceivable that Al Qaeda, as defined by President Bush as the center of a vastand well-organized international terrorist conspiracy, does not exist?"

-- Robert Scheer, lead sentence in an article on a new BBC
three hour documentary claiming:

"There aredangerous and fanatical individuals and groups around the world who have beeninspired by extreme Islamist ideas and who will use the techniques of massterror the attacks on Americaand Madrid make this only too clear. But the nightmare vision of a uniquely powerful hidden organization waiting to strike our societies is an illusion. Wherever one looks for this Al Qaeda organization, from the mountains of Afghanistanto the 'sleeper cells' in America, the British and Americans are chasing a phantom enemy."

-- both quoted in the LA Times January 11^th.

"Like many,many here in the United States, many around the world, the United Nationsthought he had weapons of mass destruction, and so , therefore, one, we need tofind out what went wrong in the intelligence gathering." George Bush,yesterday, as the UN formally abandoned all search for weapons of massdestruction in Iraq.

Gee, George, that would be another outright lie: you andColin used trumped-up (and "stove-piped") intelligence to try toconvince the UN, and you failed: they did not buy your story, and did not agreeto invade. Is there anyone in the worldwho doesn't know this?

UPGRADES

Intel Numbers

 Intel did what wehoped it would last quarter, turning in record sales and strong earnings. Here are the numbers:

 Q4 earnings were $2.12B, down 2% from $2.17B YTY; on salesof $9.6B, up 13% from $8.7B YTY. Thecompany beat EPS Streetestimates by two cents, at $.33.

 For the year, the company had earnings of $7.5B, up from$5.64B YTY; on sales of $34.21B, up from $30.14B YTY.

 During the quarter, the company lowered inventory (consideredan issue by some analysts) by $559 MM, even as it raised forecasts for thecoming quarter. Gross margins fellslightly YTY, to $5.4B from $5.6B.Operating expenses were also down, from $3B to $2.5B. But cost of sales skyrocketed, from $3.2B to$4.2B, blowing the earnings story all to bits.

 The Communications Group continued to provide a sea anchorfor Intel, losing $196MM (vs. a $143MM loss YTY) on $1.4B in sales.

 The company finished the quarter with $14B in cash andshort-term investments and another $3.1B in trading assets.

 Summary: The market is healthy, the Comm Group is not. The rest of the company is improvingperformance, with a 58% margin predicted for the future quarter, up a shade QTQ.

Intel's main problems are less about AMD's continued strongchallenge in flash as well as processors than about expansion into newmarkets, a territory still essentially unproven. The company is approaching another of AndyGrove's inflection points, but without the execution to date to make the jump.

 New CEO Paul Otellini, already involved in daily management,will have his hands full mastering this challenge. I think it's going to be a tough year.

CBS Bends Over: Covering Up the Coverup

It's kind ofamusing watching how the British and U.S. leaders have fumbled their waythrough goading their nations to war and then discovering, well, nothing. On both sides of the water, the main idea hasbeen to Garotte The Messenger, in hopes that the public won't notice that thereal issues were more than embarrassing.

The British had a first run at this technique over thequestion of whether Tony Blair had ordered the Iraqthreat "sexed up" for primetime, resulting, apparently, in the famous"45 minutes from nuclear destruction" quote that soon came from hisoffice. When the media, in the form ofthe BBC, reported on this fabrication, the penalty was swift: hire a willingstooge who looks august to the public (in this case, Lord Hutton), then makesure his report has nothing to do with the charges, and everything to do withscrewing the BBC. Hutton announced hispurview did not include matters of Cabinet, and then dismantled top BBCmanagement. There, take that. (Then- managing director Greg Dyke haswritten a book, Inside Story, about management's view of this sham, availableon Amazon; check here for that and another about him: Citizen Greg: The Extraordinary Story of Greg Dyke and How He Capturedthe BBC. See both here: <http://www.amazon.com/exec/obidos/search-handle-form/102-2151695-8774566>

Of course, the matter of lying to the British public to getthem to war remained completely unaddressed.

The same kind of thing happened with the uranium yellowcakecharges in the U.S. much of which is in grand jury hearings this week, thanksto Joseph Wilson of the state department, who has pursued the"outing" of his wife, Valerie Plame, as a CIA agent in what he claimsto be "retaliation" for his insisting on pointing out some of thegovernment's fabrications for getting us into war. In this case, Kill the Messenger became,first, Destroy Wilson and Plame's livelihoods.When CIA chief George Tenet went voluntarily before a Senatesubcommittee to testify that "Iraqposes no direct threat to the United States,"the mission became one of destroying Tenet for lying to the president, ofcourse --- about how really severe the Iraqthreat was. Is anyone paying attentionhere? Along the way, prosecutors alsowent after a NYTimes reporter who was not even involved in the story: shoot thefuture messengers, just in case.

And so we come to this week's news about the CBS 60 Minutesshow, which claimed that George Bush was essentially AWOL during a decent partof a year from his Air National Guard unit.Response: hire another team to Garotte the Messenger. With a 255 page report on whetherjournalistic rules were followed now complete, four of the six all-starreporters and producers involved in breaking this story are fired or haveresigned from their posts, because not all documents were fully vetted. Keep in mind: as of this writing, not asingle of those documents has been shown to be false, despite blogger commentson likely typefonts.

But, hey -- what about the REAL question: was Bush reallyAWOL? I've read every major paper Icould find this week on this story, and not a SINGLE paper even mentioned thequestion. Too bad, eh? Because, first, there is every indicationthat Bush was, indeed, Away Without Leave, a very serious charge. But, more important, because the media arenow afraid of what will happen to them no matter how well-respected they maybe if they report something negative about our leaders. As well they should be.

Free speech, anyone?Sayonara, Mr. Rather having resigned your post as national anchor, nowyou can spend even more time, ironically, doing 60 Minutes. Eat your heart out, Mr. Putin: we're gettingmore like your dream of Russiadaily.CBS should properly becongratulated for taking a hard look at its own journalistic tactics, and thenbe buggy-whipped for dropping the most important story of the 2004election.

Commander in Chief AWOL or a Deserter? Someone has to print it. And then wait for the sound of jackboots inthe alleyway. If you want a morecomplete and detailed description of this boondoggle, go to

<http://www.salon.com/news/feature/2004/09/20/bush_guard_records/index.html>

Apple Numbers

We had to cover Apple: what a story! (And what a stockresponse). Premium members know thatwe've had a long term recommend on Apple (which I also own myself); the resultsyesterday were outstanding.

Here are the numbers:

For Q1, net income was $295MM, up over 4x from $63MM YTY; onnet sales of $3.5B, up 74% from $2B.Fully diluted EPS jumped from $.17 to $.70 YTY.

The company finished the quarter with $2.5B in cash andequivalents, and $3.9B in short-term investments. The operating margin of 11.5% was far ahead ofmost expectations.

The numbers came out on the heels of the annual SF Macworldconference, where Stevej did his usual stage magician number, introducing a newversion of iLife software, two new iPod iShuffle products (at $99 and $149),and a new MiniMac cpu that's 6.5 inches square by 2 inches, at $499 w/okeyboard or monitor (this should have been called the PC Conversion Kit).

Here is what matters:

The company shipped 4.6MM iPod units in the quarter, shy ofthe 5MM "whisper number" on the street, but an amazing number noless, up 525% YTY. The iPod was the Giftof the Year in my book, the most sought after item under the tree.But the real question was about Macs, whichshipped 1MM units in the quarter, up 26% YTY.

One question the Street wants answered: do iPod salesincrease Mac sales? Apple is now down toabout a 1% share of the PC market, according to CNBC this week; the lowestnumber I have heard to date. A 26% unitjump, when considering price erosion, new model intros, cost of goods,component pricing on new units, etc., breaks down to a considerably smallerdollar jump which is why Steve is bragging about units. Still, Apple appears to be growing at about2x the market rate for the quarter, according to SNSer Steve Milunovich ofMerrill Lynch. 

What matters more: for the first time in his career, Steveis going after the low end of the market, in both product lines.If he succeeds, Apple will be transformedfrom a company that made a niche machine For The Rest Of Us (who are wealthy),to machines For All Of Us. This alonecould transform the company.

Steve's biggest problem now: resolving the tension betweensmall screens and video.

Also interesting: CFO Peter Oppenheimer notes that Appleessentially breaks even on its iTunes sales, but it's worth noting that theyhave reached $177MM in the quarter. At99cents, that's how many songs were sold as well. Steve is not looking toiTunes for earnings right now, and has no immediate plans to raise prices. It's the engine that drives everything else.

The other thing that matters: Apple is no longer a computercompany. It should discard the oldrubric, as noted above, and replace it with Apple: Insanely Great Products.

Great quarter, Steve, and what a brilliant job transitioningthis company.

ETHERMAIL

Re: ***SNS***: 2004 In Review

Mark,

I went to my local FT (Orange) shop in Paris today to pick up new cell phonesfor wife and son and enquired about latest adsl rates.  If I sign upbefore Dec 31st. 2004 I can get 18mbps adsl for 34.90 euros for first sixmonths and 44.90 euros thereafter.  I think I'll stick with my unknownfriendly wireless neighbour (aka Thomson or 192.168.0.1) who is providing meplenty of bandwidth for 0 euros per month.

Mere mortals can get 8mbps for 29.90 euros for six months and 39.90thereafter.  In either the immediate or the thereafter zone methinks only5 euros per month to get an whopping extra 10mbps must be a new record!

Incidentally I'm told by both Orange and Vodafone to wait for a couple of months beforeupgrading my cell phone to 3G as a bunch of better phones are coming in.  Battery life is terrible on some of the current units.  ---

Perhaps Sol [Trujillo, former Orange CEO and SNSer] could arrange someespecially sweet 3G phone deals for the London dinner attendees?  Having suffered the SymbianOS on my P900 for about a year now I'm about ready for an upgrade.  IsPalm OS any better?  If so it must be a huge opportunity for them, bearingin mind the lackluster MS OS penetration in the cell phone sector.

--- The latest offer from Cegetel (aka SFR = Vodafone) is 8mbps for 14.90 eurosper month.  Also, like Free.fr and unlike FT (Wanadoo), no commitment to along subscription period is required!  My "THOMSON" access seemsto be getting weaker so I might try Cegetel soon!  See link: http://www.cegetel.fr/res/adsl/index.php

The 18mbps offer from FT I referred to in previous email is limited to3,000 lucky internauts within Paris only.  I can't find any reference to it ontheir website but there is a printed leaflet in their Paris shops. 

France now seems to be well ahead of UK in greater than 1mbps offers and pricing.

Tim Coldwell

CEO
TECSA
Paris

P.s. "Podcasts bring DIY radio to the web

By Clark Boyd

Technology correspondent

<http://news.bbc.co.uk/1/hi/technology/4120773.stm>

 Mark, Maybe we could wake upto hear your dulcet voice reading the SNS Newsletter one morning?

 Tim

Tim,

Whether those premium services are yet widespread in Paris,I have to agree with you regarding the French move to broadband, at least inthe city. I'm still not sure that thisis reaching out into the hinterlands of France,but clearly Les Parisiens will have HDTV over their Net channels long beforeFleet Street.

 This idea of audio and video logging was probably the mostinteresting trend to come out of the CES (consumer electronics show) in Las Vegas last week, and it is something we've beenwaiting for here at the Beach Palace Hotel for years. I don't see why we shouldn't set up somethingin the relatively near future that will be along the lines you're mentioninghere, perhaps also including interviews and chats with others.

 I think it would be a great addition to the website, now newall over again and a bit more geared up for the latest of tools.

 Thanks for the information, and keep it coming. This euro battle for bandwidth is not onlyinteresting, I think it is economically important as, obviously, do they.

 Mark Anderson

Mark,

 Re: the benign decline ofthe dollar

If you're able to watch The McLaughlin Group on your PBS station this week, thefirst item DOLLARS AND SENSE is very apropos to my previous emails earlier thisweek.  I hope you can watch it and provide SNSers with the sage wisdom inyour noggin on this important issue:

Since 2/02 the dollar's value vs. the YEN has dropped 22%. the EUR 55%. Ourgov't has to borrow USD 2 Billion a day to pay for the trade imbalance between U.S. and the ROW.  This trade imbalance is at anall-time high of 6.5% of GDP.  The November figures for the trade deficitcame in at an annualized rate of USD 666 Billion with the merchandise tradedeficit of well over USD 700 Billion -- around 7% of GDP.  given theinsatiable appetite of Chinaand India, oil may rise again with a possible price of $70 in2005.

In response to This Issue, last week, Our President, stated: "there's atrade deficit. That's easy to resolve: people can buy more U.S. products if they are worried about the tradedeficit." (!!)

Questions:

Can/will/what are the chances that the bloating U.S. trade deficit will create an international economiccrisis that could derail the US economy and world economies? (and take ThePresident's agenda With It?).  Are we on the verge of a possible run onthe dollar?

How does This Situation get turned around (esp. when our factories, technologyand jobs are going to china where they make USD 2k/year in manufacturing andour guys make 53k/year)?

It seems we --- are relying on The Good Will of foreign countries to underwriteour debt -- could they decide at some point, in light of the declining value oftheir principal and interest to bail and go to The Other Strong currency, say,the EURO?

C. Fred Bergsten, the director of the Institute for International Economics<http://www.iie.com/publications/author_bio.cfm?author_id=33>,who wrote the article "Bush plays high-stakes game with the fallingdollar" in The Mighty FT (which you can find at <http://search.ft.com/search/article.html?id=041205000457>)appears on this week's program.

Looking forward to your lucid insights,

Geoff Goodfellow

[Inventor, RadioMail;
Silicon Valley - just returned from Prague]

Geoff,

Great to have you back, and looking forward to see what theFather of Wireless Email comes up with next.Now, for your questions:

"Can/will/what are the chances that the bloating .ustrade deficit will create an international economic crisis that could derailthe US economyand world economies? (and take The President's agenda With It?).  Are weon the verge of a possible run on the dollar?"

 The trade deficit actually declines with the dollar,theoretically, so there is some good news here.However, there are other issues.If the dollar really falls out of favor (see Quotes) with large globalinvestors, as it seems to have done, they may stop buying our debt (this has just begun in the last two quarters).Then the Treasury has to drastically jack up yields at the debt auctionto attract buyers (in fact, in the last auction there was a mass exodus even ofU.S. purchasersinto overseas instruments, mostly the euro).

As the dollar falls, inflation becomes greater (it takesmore dollars to buy things), and the Fed is also forced to ratchet up rates, soyou have the key two agencies pushing against the dollar. Some people worry that this can create afree-fall kind of environment.

 Neither the Japanese nor the Chinese should be interested indestroying the U.S.economy, since our markets buy their goods.Then why the recent slowdown in U.S.debt purchases? We certainly look lessattractive, our interest rates are comparatively lower than that of the euro,and perhaps they are a bit re-focused on each other now, as Chinatakes our place as Japan'slargest market.

 Summary: the President has just chosen, as his top economicadvisor, a college buddy who owns a chemical holding company. I'm sure he is up to this task. If you don't think so, then I'd worry aboutunintended consequences.

 "How does This Situation get turned around (esp. whenour factories, technology and jobs are going to china where they make USD2k/year in manufacturing and our guys make 53k/year)?"

It gets turned around when Chinadominates most manufacturing sectors. Sofar, it is doing quite well, I'd say.Wait until it starts dumping steel this year on the global markets, andselling cars worldwide.

"It seems we --- are relying on The Good Will offoreign countries to underwrite our debt -- could they decide at some point, inlight of the declining value of their principal and interest to bail and go toThe Other Strong currency, say, the EURO?"

 I've already answered this one.

So, sorry not to be more reassuring, Geoff. I don't think anyone has a plan or a clue onthis side of the Pacific, but I continue to be impressed with the political andeconomic moves being made by the Chinese.

 Mark Anderson

Mark,

 I was wondering if you haveany thoughts on the Cingular/AT&T and the Sprint/Nextel mergers in thecellular world?  I can understand Cingular and AT&T as they havesimilar technology and for the most part, operated in different areas of thecountry.  So on paper I see a lot of synergies; there is the [question]can they pull off a smooth merger.  So far we have had a few bumps butoverall they seem to be making progress.

 I was more surprised atSprint/Nextel as they have very different technologies.  I am worried thatthe time and cost to properly integrate these two dissimilar technologies willgive Cingular and Verizon a window of opportunity that Sprint will be hard tokeep closed.  With Sprint's declining LD business and local phone servicein a slow decline I am not sure Sprint has the time or the pockets to make thismerger a success.

As I manage 1300 cell phonesfor our company I am eager to hear your thoughts.

 David James Hrivnak

EastmanCo.
[Rochester]

David,

The Cingular deal was done for territories and technologymatch, while the Nextel deal was done for customers (Sprint wantedNextel's). There will be a rudeawakening at some point for Nextel's wonderful, low-churn, sticky businesscustomers, when they get moved back onto the Sprint network and dump theirPushToTalk technology. Now, having saidthis, I have no doubt that the fake PTT cell guys are selling this week will bemuch closer to real PTT when this happens but not, I think, close enough tomake happy Nextel customers.

 I happen to think that Verizon looks like a real winnerright now, with strong plans in fiber and in wireless.

 Mark Anderson

Mark,

 Subject: Ferrari Raffle for Tsunami Relief
Date: Thu, 6 Jan 2005 13:34:49 -0800
From: "Z Elahian"

Ferrari for Tsunami  

Dear Friends andColleagues, 

The tragedy caused by the tsunami has touched all of us deeply. Many of us have helpedalready. And to get my husband, Kamran, to help even more I got him togive up his prized possession, the convertible 355 Spider (1997). To get him toagree I committed to use the Ferrari to leverage more support for the tsunamivictims.

ReliefInternational has agreed to put up the Ferrari for a raffle on February 1^st.While I get my wish to get rid of the Ferrari both Kamran and I are happy thatthis will help thousands of families. All donations of $1,000 or more throughthe end of January will be eligible (except for volunteers, employees and boardof Relief International).

In line withRelief Internationals mission to assist not just in the immediate first daysto save lives but also to rebuild livelihoods and help families get back ontheir feet, we thought it appropriate that the funds generated from the Ferrariraffle create a Microcredit Fund for Livelihoods. It seems fitting that givingup a car here can help hundreds perhaps thousands of affected families in South Asia. The majority of these families on thecoastal areas make their livelihoods through fishing. With emergency loans theycan repair their damaged boats, buy new fishing nets, etc. and begin to feedtheir families again. Isnt that how you put a Ferrari to good use?! J

Please helpput this Ferrari to good use and raise funds for families hit hardest bythe Southeast Asian Tsunami.  Please forward this emailto your friends and colleagues.

To participatein the raffle and for more information,   please check  http://www.ri.org.  

Warm regards, 

Zohre Elahian 

Zohre (and fellow SNSers),

 I just loved every part of this offer. Kamran is a friend of mine, and for those ofyou who can see his picture next to his prize Ferrari, this is somethingstraight from the heart. There issomething so Silicon Valley about this wonderfulidea.No, this is not a scam, at leastnot unless someone is impersonating my friend.

 But it does seem like a great way to raise money for a goodcause something Kamran and Zohre have been doing with schools and kidsworldwide for decades. I wrote back toZohre, and she encouraged me to put this into this week's letter.

 Mark Anderson

Mark,

You absolutely must checkthis out.  Start with Phillip Anderson and just keep clicking on one nameafter another. 

 <http://www.edge.org/q2005/q05_10.html#andersonp>

 I am thinking of printingthese all out and putting them in my guest bathroom!  I particularly like:

<http://www.edge.org/q2005/q05_10.html#gardner>

<http://www.edge.org/q2005/q05_10.html#ledoux>

 And for those who want tounderstand big mergers that make no sense:

 <http://www.edge.org/q2005/q05_8.html#schank>

 Enjoy,

Scott M Johnson

Draper Fisher Jurvetson New England

[Boston]

Scott,

 Yes, I've noticed pieces from The Edge wandering about theNet this week, more so than usual. Whenasked what you believe that you cannot prove, it turns out that even physicistshave good responses.

 In the case of Phillip Anderson, who complains that StringTheory math is too broad (others would say powerful) and not predictive enough:there is a good reason for this: unlike Resonance Theory, which posits stringsas a natural result of physical experimentation, today's S- and M- theory mathscame straight out of Euler's formula, for no reason that anyone understands (ithappened to fit a CERN experiment 200 years later, and the rest ishistory).

Basing the Theory of Everything on Found Math is an exciting,and frustrating, business. If you wantthe fundamentals, you have to go back to Resonance, and what makes light, mass,energy and space itself resonate.

 Mark Anderson

Mark,

 A while back youwrote about the need for ISP's to take a role in securing the netfrom the viruses, hackers, malware, and the like. SonicWALL, themarket leader in Firewalls for the SMB market, has come out with a program todo just that and have signed Verizon, SBC, Time Warner, and Expedia to name afew.

My firm is oneof the partners representing them here on the West coast and I'm spending afair amount of my time working on this initiative. More info is here -- <http://dyrandsystems.com/partners.htm>

If you have any connectionsto any ISPs that you think would be interested in this, and you feelcomfortable enough to refer me to them, I would greatly appreciate any helpthat you could provide.

 Thank you and keep up the great work on SNS!

Trent Dyrsmid
CEO & Founder
Dyrand Systems Inc.
[Vancouver, BC]
www.dyrandsystems.com

Trent,

This is such a worthwhile project that I thought I would putit out to our members.

I will also add that Microsoft seems to understand the SNSCleanNet Initiative to a "T," with an announcement this weekproviding free virus examinations for all PCs running their OS, a tool fordumping spamware/spyware, and the promise of entering the anti-virus marketplace soon.

AOL is marketing their free virus and spyware software, asis Comcast, and it doesn't take binoculars to see that this is now going to bethe future. And yes, you heard it here first. 

Mark Anderson