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One of the Biggest Tech Shifts of Our Lifetimes

By Rob Fannon, editor Phase 1 Investor
Friday, January 8, 2010

Does your company employ a vice president of electricity?
 
I doubt it. In fact, you probably have never heard of a vice president of electricity.
 
But imagine more than a century ago, anyone who wanted power had to generate his own. Businesses that needed to power their facilities hired vice presidents of electricity to run in-house electric dynamos, operate coal-burning plants, or tap into some hydroelectric source for their power needs.
 
This, of course, seems crazy by today's standards... investing all that capital upfront to build equipment, committing to long-term maintenance, and recruiting manpower. It's inefficient for companies with zero expertise in power generation to operate such a business within a business. But they did...
 
Until Thomas Edison showed them a better way.
 
The legendary inventor knew his new light bulb would prove meaningless without a system to distribute energy efficiently. So in 1879, he opened the world's first centralized electricity-generating plant on Pearl Street, in the heart of New York City's financial district.
 
As the transfer of electricity became more efficient, central power stations served larger and larger geographic areas. This kicked off one of the fastest industrial consolidation periods in U.S. history. By the end of the 1920s, 10 utility companies controlled three-fourths of the electric power in the U.S.
 
The benefit of widely distributed electricity grids was immediately obvious. It's much cheaper and more efficient to simply plug into the grid and buy power from a central utility company. Companies were free to innovate and expand without worrying about how to power those efforts. And as we know, the model quickly spread to things like heat and water. Today, we take power utilities for granted, a fact of modern life. Vice presidents of electricity are extinct.
 
Now ask yourself another question: Does your company employ a vice president of information technology? Or a chief information officer?
 
Doubtless your company has hired someone to maintain all the computing infrastructure your company requires to function... In 10 years, that position will be as obsolete as vice president of electricity.
 
Today, the corporate equivalents of the in-house power stations are IT departments full of computer servers. Most major corporations run businesses within their business dedicated to storing and sharing mountains of data.
 
But most corporations are no better at computer networking than power generation... They spend truckloads of money on an operation outside their area of expertise.
 
That's why the global economy is creating a new kind of utility, one that will transform the most important modern business commodity – computing.
 
I'm talking about the expansion and consolidation of networks, computer servers, and data storage... You're going to be hearing more and more about new "data utilities," which are leading a kind of technology revolution called "cloud computing."
 
These data utilities will allow companies (and eventually private individuals) to mothball their data storage infrastructure and shove all those mountains of files out to a third-party that can more efficiently and reliably manage it.
 
Once people become comfortable with the idea of entrusting their data to a third-party, the efficiencies of data utilities will become obvious. Just plug into the cloud for any IT need – hardware, software, web hosting, networking, etc. Payment is based on usage not actual hardware.
 
The potential is limitless, but the trend is only in its infancy... Next week, I'll go into more details about what cloud computing is, how it's already part of your life, and the best places to get started profiting on this nearly brand-new industry.
 
Good investing,
 
Rob




In The Daily Crux
Market Notes
Big day for agriculture... fertilizer producers Potash and Mosaic reach new 52-week highs.
 
Health insurance surge continues... WellPoint, Humana climb to fresh highs.
 
New highs for aerospace firms Boeing, Northrop Grumman, and Rockwell Collins.
 
Giant timber REIT Plum Creek Timber reaches a new 52-week high.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1221.53 +1.3% +10.1%
Oil 37.77 +1.5% -2.8%
Gold 135.20 -0.1% +13.4%
Silver 27.93 +0.4% +47.9%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 19.39 -9.2% -8.2%
Gold Stocks 564.53 +1.3% +10.6%
10-Year Yield 3.00 +1.4% -9.6%

World ETFs
Symbol Price
Change
52-Wk
USA 122.56 +1.3% +10.2%
Canada 30.44 +1.3% +13.8%
Russia 21.63 +2.3% +16.7%
India 37.73 +1.9% +20.0%
Israel 16.47 +0.9% +9.7%
Japan 10.58 +1.0% +7.4%
Singapore 13.88 +1.0% +19.2%
Taiwan 14.72 +1.6% +17.8%
S. Korea 56.56 +1.7% +22.8%
S. Africa 70.85 +3.9% +22.9%
China 45.06 +1.4% +0.1%
Lat.America 52.82 +1.4% +6.7%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 136.18 +1.5% +14.8%
Big Pharma 64.13 +0.6% -3.3%
Internet 72.13 +0.7% +22.3%
Semis 16.03 +2.1% +28.9%
Utilities 31.21 +0.3% +1.6%
Defense 18.51 +1.3% +10.1%
Nanotech 9.99 +1.3% +0.0%
Alt. Energy 9.95 +1.4% -4.4%
Water 18.31 +1.1% +12.2%
Insurance 16.07 +1.2% +18.3%
Biotech 20.58 +1.1% +27.1%
Retail 19.65 +0.1% +28.4%
Software 24.59 +0.9% +24.1%
Big Tech 53.73 +1.0% +21.9%
Construction 12.99 +2.1% +13.3%
Media 13.57 +1.1% +25.0%
Consumer Svcs 67.26 +0.8% +23.3%
Financials 54.87 +2.4% +5.2%
Health Care 64.22 +0.7% +1.3%
Industrials 63.25 +1.6% +19.7%
Basic Mat 73.57 +1.6% +21.6%
Real Estate 55.24 +1.4% +23.8%
Transportation 91.17 +1.4% +25.6%
Telecom 22.48 +1.1% +17.1%

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