Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
Stocks continued their slow, but steady, government-shutdown-driven declines this morning and, near noon EDT, the Dow Jones Industrial Average (^DJI -0.98%) was down 0.39%. But a quick comeback was fueled by minutes from the Federal Reserve's last meeting and glimmers of hope for an end to the gridlock on Capitol Hill.
Fed minutes give us a peek into what was discussed at Federal Open Market Committee meetings, and how much debate or agreement there is over any given topic. Last month, the policy of great interest was "tapering," or the slowing of an $85 billion-per-month bond-purchase program the Fed has in place. Minutes showed that while "tapering" didn't take place in September, there was general agreement that it would begin sometime this year. So long as that doesn't cause a recession or a sharp rise in interest, that's music to investors' ears.
There also appeared to be a small sliver of hope that House leaders would be able to work out differences, and both reopen the government, and avoid hitting the debt limit. House leaders met this afternoon, and the tone out of Washington, D.C., has softened slightly over just the last 24 hours. It's only eight days until we reach the debt limit, according to Treasury Secretary Jack Lew, and that's not a lot of time to come to an agreement, so any progress is being viewed as a positive right now.
The stock leading the Dow Jones Industrial Average higher today is AT&T (T -1.37%), which announced a partnership with General Electric (GE 1.30%) that will allow GE machines to connect to each other through AT&T's network and cloud. This is what GE is calling the "Industrial Internet," and it's a vision of building a network that will allow equipment owners to monitor -- and even repair -- GE equipment from anywhere in the world. Since GE makes jet engines, electric car chargers, power plants, lighting systems, and other industrial equipment, there are a world of possibilities that a partnership like this opens up. For AT&T, this may start as a small opportunity for GE, but new developments across the tech industry will need networks to run on, and AT&T has one of the largest to work with.
GE is also partnering with tech giants Intel (INTC 1.77%) and Cisco (CSCO -0.52%), which will make the chips and the Internet infrastructure, respectively, to enable communication between GE's devices. Both companies have called their device interconnection networks the "Internet of Things," which can be anything from a smartphone to a smart watch, or even simpler tags to track items. Intel said yesterday it is accelerating development for the "Internet of Things," and targeting the Bay Trail-I and Quark families of chips for these interconnected designs because they're more energy efficient than other chips. Getting a head start in this new area may put Intel ahead of the game in smart, interconnected devices instead of being late to the game like it was in smartphones.
Cisco is the really interesting player in the "Internet of Things," because it is the backbone that will make it all work. Everything from traffic lights, to manufacturing floors, to shopping malls, could be controlled by this network of devices, and it's Cisco who will take these capabilities to the masses. The opportunity is also huge for Cisco. The company's VP of segment marketing, Sherri Liebo, said last month that "between 2013 and 2022, $14.4 trillion of value will be 'up for grabs'" as companies compete to for a new connected market. As a leader in the space, Cisco won't grab $14.4 trillion in value, but it's share will be substantial, although putting a figure on new innovations is nearly impossible at this early stage.
AT&T is the winner on the market today, and it will be interesting to see how it leverages its network to gain share in this connected world. GE, Intel, and Cisco will all be building more connected devices, and this is like a playground for engineers right now. The opportunity is almost limitless, especially for the first movers with the scale to pull it off.
