Big Announcements from TFCP holdings, Otoy and ASOCS


It's been a big week for Taylor Frigon Capital Partners, LP as two of its holdings, ASOCS and Otoy Inc.,  have made major announcements recently. Just last week, Otoy's Jule Urbach announced his contribution to the new Render Economy, Rendertoken.com. To learn about this revolutionizing technology it's best to read his articles in Medium.com,  HERE and HERE.


And today, ASOCS announced its launch of Cyrus, an "on-premise mobile cloud for enterprises that addresses the mobile connectivity, capacity and security challenges associated with true digital transformation. By giving enterprises ownership and control of their mobile networks, Cyrus fundamentally changes how users wirelessly connect with and leverage the internet inside large buildings and venues such as corporate offices, sports arenas, mixed-use buildings, retail establishments, hotels, hospitals, and more." Read the announcement HERE.

Disclosures: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Taylor Frigon Capital Management LLC (“Taylor Frigon”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Taylor Frigon.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Taylor Frigon is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice.  A copy of the Taylor Frigon’s current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are a Taylor Frigon client, please remember to contact Taylor Frigon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.
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Chief Investment Officer, Gerry Frigon, yesterday posted a blog, "Don't Fear Investment in Israel," in the Times of Israel discussing the advantages of investing in Israeli companies.  As the blog explains, "We never set out to invest in Israel just for the sake of investing there.  Quite the contrary, we simply follow the most important investment ideas and themes we could find, which led us to the vibrant country of Israel." READ MORE

Disclosures: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Taylor Frigon Capital Management LLC (“Taylor Frigon”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Taylor Frigon.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Taylor Frigon is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice.  A copy of the Taylor Frigon’s current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are a Taylor Frigon client, please remember to contact Taylor Frigon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.
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The State of Technology


We have referenced Bret Swanson's work in the past in this blog.

In his latest article he reinforces the research he recently conducted with Michael Mandel and debunks two extreme, and opposing views on the state of technology offered by Economist Robert Gordon, and Tesla CEO Elon Musk.  Gordon argues that innovation is dead, and Musk argues we need to regulate the fast pace of technological growth, lest we kill all the jobs.

As Bret brilliantly argues, both are wrong!  And as we have stated so many times in our writings over the years, one solution to the "roadblock" that is hindering the economy is less burdensome taxation.  This would unleash capital spending by the part of the economy that has underspent on technology investment and has relegated the majority of industry to an inefficient existence.  We would also add that a reduction in the regulatory burden on these businesses would also help greatly.

Nonetheless, Bret hits hits the nail on the head, in our view, and we would urge all investors to read his pieces and understand these issues thoroughly.

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Taylor Frigon Capital Management LLC (“Taylor Frigon”), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Taylor Frigon.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Taylor Frigon is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice.  A copy of the Taylor Frigon’s current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are a Taylor Frigon client, please remember to contact Taylor Frigon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.
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A Correction Is Here

With all the news about escalating tensions regarding North Korea, which finally seemed to gain the attention of the market this week, much has been lost on what appears to be a correction going on in some of the highest growth-potential companies in the economy.

The second quarter earnings reports from many companies were stellar, in some cases, and good in others.  Rarely were they poor; at least in companies we follow or own in our portfolios.  The number of companies in our portfolios reporting favorably, as far as actual second quarter earnings, were plentiful.  However, when referring to guidance for the third quarter, expectations were running very high for many companies and any sign of "delays" or "transitions" in business activity caused violent reactions in a number of the best-performing businesses in the market.  Even in companies whose guidance was positive, the old "buy on rumor, sell on fact" phenomenon kicked in and many of those stock prices were met with healthy declines.  A sure sign, in our view, that we are in a correction.

In our recent Investment Climate we pondered the likelihood of a correction in the market and even suggested it would be healthy.  Given that we have seen some really significant moves up in prices, it does not surprise us that we are seeing this correction, even if it is somewhat "stealth" at this point.  It may well be that it is not fully complete since it has not been clearly evident in the major stock market indices.  It should be emphasized that these are normal and healthy actions, and while there are often "hiccups" in business activity over the course of any company's life span, we are quite encouraged by the underlying business trends we are seeing with respect to most companies in our portfolios.

We stand ready to take advantage and become more aggressive as prices "back and fill" and recommend that investors do the same over the coming weeks as we move through this correction, recognizing one rarely chooses bottoms.

Lastly, returning to geopolitical circumstances, North Korea has been a disaster for over 25 years and four different U.S. presidential administrations, from both political parties, have failed to adequately handle the situation.  While we have no way to accurately predict how this will play out, we are extremely confident that the U.S. will prevail should it be necessary to take military action in order to neutralize the North Korean regime.  We believe that military action remains remote at this point and serious diplomatic efforts are underway to address the situation, involving South Korea, Japan and most notably, China.  We would consider any further weakness that develops in stock prices as a result of this situation another buying opportunity.

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Taylor Frigon Capital Management LLC (“Taylor Frigon”), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Taylor Frigon.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Taylor Frigon is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice.  A copy of the Taylor Frigon’s current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are a Taylor Frigon client, please remember to contact Taylor Frigon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.


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More Fed Fear


A client of TFCM recently brought to our attention this article by Anthony Mirhaydari, published in The Fiscal Times,  which queries if the U.S. Federal Reserve (the Fed) is about to begin a "war on the rich".  In it, Mr. Mirhaydari enlists the commentary of Merrill Lynch Chief Investment Strategist, Michael Hartnett, who appears to suggest that such is the case in his call for a "big top" in stocks sometime this autumn.  The article further suggests Hartnett advises investors to "...Get back into big cap tech stocks for one final push higher, but prepare for the looming downside in stocks and upside in long term yields by reducing exposure to credit, buying volatility, and avoid emerging market debt and high yield."

At TFCM, ​we couldn't disagree with this line of thinking more vehemently!

Not that a correction in stocks may happen, it surely may.  And suggesting it may happen in the autumn is no surprise given that autumn tends to be the weak part of the year, historically.  But it is with the "trading" mentality, and most significantly, the view regarding the Fed's influence that we take issue.

This view of the world, that the Fed is thoroughly responsible for what happens in the economy is nonsense, in our opinion! These ideas are what contribute to volatility and poor economic performance, quite the contrary to what the author suggests.

The Fed was not responsible for the move in stocks.  It was not TARP, QE, or anything government related.  These policies have only served to act as a weight on growth.  Instead, it is corporate earnings, driven by the business community's relentless ability to "get by in spite." that has driven markets higher and kept the economy growing, albeit very slowly.  

Our view is that the Fed is behind the curve on tightening!  They should have been tightening much sooner and that includes shrinking their balance sheet.  The expansion of the balance sheet at the Fed (QE) has done nothing to help the market/economy in that those money's have sat idle on reserve at the Fed, paying banks interest instead of incentivizing them to lend.  

QE was put into action in October 2008, in the midst of the "financial crisis".  After the November 2008 election, the market proceeded to drop another 30%.  It was not until March 9, 2009 that the market bottomed, consistent with the timing of Congress putting a stop to the insane mark-to-market accounting rule that relegated banks illiquid (and perceived insolvent).  QE has been a drag and will continue to be so until it is extinguished completely.

That said, looked at in the context of the 21st Century (17 years now), the market is not at all extended. It took years for the S&P 500 to cross back over the top it made in 2000.  And even more years for the NASDAQ to do the same.  People with the view of the world described in this article seem to have this uncanny ability to think the world began March 9, 2009, the very bottom of the bear market.  This is also nonsense.  The series of "crises" that began with the dot.com blow up (and tech/telecom meltdown that followed), the 9/11/2001 attack, and the mortgage and credit crisis (a self-inflicted wound due to mark-to-market), confounded by horrific policies from two presidential administrations from both political parties, has served to stultify the economy, create a "perma-crisis" mentality, and generally keep a lid on growth.

If the current government is successful in reforming the tax code (simpler, with lower/flatter rates), and continues to ease the excessive burden of government regulations on businesses large and small (most notably small), then the pace of growth will pick up and the Fed's move to "lessen" their impact by eliminating QE and keeping rates at a level commensurate with the new, higher rate of economic growth, will be further stimulative.  

The main worry, in our view, is the Fed underwhelming with its attempt to get out of crisis mode.  We shall see how this plays out, but should they even remotely be successful with this move, then many of the themes in our portfolio, which we believe have been held back by the policies of the last 15-20 years, will be unleashed in a much bigger way and be reflected in considerably higher prices.  If not, and the old ways continue to dominate, then we will "get by in spite".

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