Profiting From Cellulite

The Daily Reckoning Presents: The Second Coming of Jim Davidson… in which the author – having made himself famous among DR readers for experiencing a New Era epiphany on the eve of the Nasdaq meltdown – takes a look at the profitable applications of technology in today’s economy.

PROFITING FROM CELLULITE

“Plagiarize, Plagiarize, why not use your eyes?”

– Tom Lehrer

If you’ve looked at Americans parading at the beach lately, you might be licking your chops at the prospect of any idea for capitalizing on cellulite. There has never been more of a bull market in cellulite in the history of the world.

I notice it all the time, mainly when limbering up in my local gym, where the floor mats are directly behind the Precor elliptical trainers, creating a perspective known as the “Cellulite Gallery.”

Some of the women gamely exercising have so much cellulite dangling from their hips and legs that you can see it jiggle through their tights. It is an unsightly reminder of a major opportunity ignored.

Let me explain. The identification of cellulite, along with the multi-billion market for remediating it, are epiphenomena of technology.

The first thing that should be understood about cellulite is that it is nothing new in evolution. Indeed, “cellulite” is not even a medical term. It is simply another word for “fat.” Americans may be the fattest people in history, but fat has been around almost as long as life itself.

That said, you would find it impossible to track a history of cellulite or cellulite remedies beyond a horizon that extends back for more than a quarter of century. The word “cellulite” was only invented by French dietitian, Nicole Ronsard, about 20 years ago. By contrast, there have been fat women through the ages. Rubens’ paintings; even those of Renoir, suggest that portly women were considered the epitome of beauty in times past.

Be that as it may, no one seems to have noticed the unsightly globs and wrinkles of fat tissue jiggling just beneath the surface of so many women’s hips and legs in Ruben’s time, nor that of Renoir. Little attention was paid to women’s legs because they were never seen in public. Even in private, the lighting was not very good, and few women paraded around exposing their bodies to scrutiny. Through most of history until recent generations, legs were covered. Sometimes even women’s arms and faces were veiled behind layers of clothing.

Technology has helped make heavy clothing to hide women’s bodies anachronistic. The Information Revolution in the last half of the 20th century made it much more acceptable for women to go around half naked. For one thing, technology has steadily diminished the importance of physical strength in combat and making a living. A woman can launch a guided missile as well as a man. And the muscularity required for most jobs has steadily decreased.

Of course, an argument can prove too much as well as too little.

In principle, a woman might as well have pulled the trigger on a machine gun, or ignited a blast from a cannon as a man for many years past. But this did not happen for good reason. So long as there were rising returns to violence in an economic sense – meaning that larger forces generally defeated smaller ones – it would have been destabilizing for women to have entered combat.

It was only during the last decades of the 20th century that the Information Revolution created diseconomies of scale in the deployment of violence, opening the door to organizational challenges to the nation-state system. This was a solvent that helped dissolve many traditional relationships.

Information Technology has raised the returns to the most intellectually talented individuals, many of whom are women. In the process, it has both reduced the incomes of uneducated males and increased those of educated females. This has made women more economically independent of men.

So-called “women’s liberation” was just the sociological soundtrack that arose to keep these technological developments company. Add to this already potent mix, the birth control pill, which made recreational sex more feasible in reproductive terms, and it is little wonder that cellulite went undiscovered until recent years.

In traditional societies that emerged when physical force was predominant in defense and muscularity was crucial for securing a livelihood, women were far more likely to remain in subservient positions. You can still see this for yourself in many parts of the globe.

Not long ago, I was in a remote village in central Turkey, reviewing the site of an amazing gold discovery by Anatolia Minerals Development Corp. All the women I saw wore baggy pants and long-sleeved blouses and sweaters, not to mention, veils and scarves over their faces. Without doubt, some of these women were hiding cellulite behind their ample costumes. But they were under no public pressure to trim and tone their bodies. Any man who chanced to see their cellulite would be taking his life in his hands.

Technological developments, now well established in Western economies, have allowed women to drop the veil – and more – to compete for the attention of men. A logical, indeed, an almost inevitable consequence of this competition under conditions of “full disclosure,” has been pressure on women to “shape up.”

All the billions spent on running shoes, health clubs, spas, diets and other remedies for “cellulite” are but the logical consequence of dynamic of human relationships tilted in a new direction by technological change.

As I view the future, the probability is high that entrepreneurs marketing remedies for cellulite will find themselves selling into even more avid markets in the future. Advances in biotechnology that extend life and mitigate the deleterious effects of aging will prove ever more profitable.

That technology is a major part of this trend should inform your investments without making you into a geek. The hidden logic of technological change permeates almost every feature of society.

If you wish to succeed, in your business, your investment and your livelihood, it would be a rash mistake to dismiss the importance of technology.

James Davidson,
August 10, 2001

for The Daily Reckoning

p.s. I have a prejudice to reveal, in that I am a director of Anatolia. I would not have been in Turkey otherwise. But that aside, Anatolia has something extraordinary to report.

One of its drill holes at Cukurdere, Turkey, has brought evidence to the surface of the richest gold find from any drill hole in approximately 30 years.

The drill intersected a gold zone to a depth of 93 meters, with 26 meters at 27 grams per tonne, including 17 meters averaging 1.2 ounces of gold per tonne. To put this in perspective, these results alone establish a deposit worth approximately $2 billion. Yet the stock rose on the announcement, to give Anatolia Minerals a market cap of just $14,040,000 – a massive discount to the value of the deposit, which is still being extended by additional drilling.

If your interested, keep an eye out for my new newsletter, Vantage Point.

James Dale Davidson is the author of several best- selling investment books, including The Sovereign Individual. In September of this year, Jim will launch “Vantage Point”: a new exploration of profitable opportunities in the application of technology to existing Old Economy businesses.

*** Let’s think of it as an “involuntary vacation”… yeah, that’s better.

*** Initial jobless claims rose to an unexpected 385,000 last week, says the BLS. “Layoffs are still taking place at a fairly brisk pace,” reports Bloomberg. The week of July 7th saw the highest number of jobless claims since October, 1992.

*** But why use such downer language? “Jobless” and “Layoff” – they sound so much like ‘negative drivel’, don’t they?

*** “With The Economy Down, Many Still Live It Up!” reads a headline in the San Jose Mercury News. A firm called Trade Winds Aviation is reportedly doing brisk business teaching tech workers taking “involuntary vacations” how to fly airplanes.

*** “Most of the local 1,500 workers Cisco laid off in April, for instance,” says the article, “came away with six months’ worth of compensation, including biweekly paychecks that kept coming for months…” What do you suppose happens when the sun sets, summer fades and it’s time to go ‘au boulot’ (French term meaning roughly ‘get your butt back to work’)?

*** Well, I guess there’s always credit. “The once- Puritan work ethic that emphasized saving over consumption has given way to widespread credit use,” says economic sociologist Richard Manning. US consumer debt is now pegged at $6.5 trillion…leaving each household in America, on average, $12,000 in debt. Au boulot, folks, au boulot.

Eric, what’s happening on Wall Street?

*****

Eric Fry reporting from New York:

– My advice to Mr. Market: seek therapy. He’s becoming just a little bit too manic-depressive these days. He’s happy. He’s sad. He’s happy. He’s sad. Yesterday, he spent all morning singing the blues. But by the end ofthe day, life didn’t seem so bad after all.

– The Dow Jones Industrial Average managed a 5-point gain to 10,298, while the Nasdaq Composite shed a mere 3 points to 1,963.

– Even though the stock market finished the day boringly close to break-even, there was plenty of action elsewhere. The foreign exchange market slapped the dollar around and gold surged higher. The greenback dropped 1.6% yesterday, its biggest loss since July 18.

– Gold, which always seems to delight in a struggling dollar, soared $5.50 per ounce to $276.20. Why the sudden dollar weakness and gold strength? Why not? The weakening U.S. economy provides no shortage of reasons to sell the dollar and to buy alternative stores of value.

– Alas, yesterday when retail stores reported their mostly dismal same-store sales, it came to light that one of the last-enduring the pillars of our economy may be crumbling – the consumer just isn’t spending as freely as he was before. Although consumer spending is not drying up completely, it is certainly not gushing as freely as it did last year.

– “With only slight poetic license,” writes Christopher Byron, “it apparently comes down to this: after six interest rate cuts and more sell-side cheerleading from Wall Street than anyone has seen in a generation, the best hope for growth in the economy now looks to rest with America’s 40 million mall rats between 10 and 19 years of age…

– “$42 billion worth of federal income tax rebate checks will be going into the mail, and so far as I can make out, the Bush administration’s entire economic program now boils down to whether America’s teen-agers can get their hands on the money and blow it at the mall before their parents put it in the bank.”

– Will it work? Byron continues: “Will an economic pump- priming to the tune of a mere 0.4 percent of the nation’s GDP over the next two and a half months somehow offset the impact of a loss of more than $6 trillion in stock market value since the tech bubble popped in March of 2000?”

– On the other hand, hedge fund manager Michael Lewitt: “If Americans started saving 1.6% of their monthly income, it would lead to a 1.1% decline in real GDP growth…In other words, if consumers stop spending, this economy will fall off a cliff.”

– Maybe what this economy needs is more Pentagon-issued credit cards. AP reports, “Here’s what a Pentagon infamous for buying overpriced toilets and hammers produced when it handed out credit cards to its employees: 10 million purchases, $9 billion in debt and plenty of examples of fraud. The fraud ranged from a soldier who spent $3,100 at a nightclub to an Army reservist’s wife who went on a $13,000 shopping spree in Puerto Rico…So far, 1.8 million cards have been issued to defense workers, according to the GAO.”

– The good news is that not each and every one of the 1.8 million cardholders has committed fraud. But think how our GDP would grow if they did!

– “The Federal Reserve chairman [was] no impartial observer of the boom,” James Grant observes. “He seeded it, accommodated it, celebrated it and defended it from those who believed they saw it turn into a bubble. He was as uncritically and besottedly bullish as the luckless brokerage-house analysts who have fallen under the gaze of the Washington inquisitor, Rep. Richard H. Baker.

– Grant continues: “Fearful of a Y2K calamity, the Fed stuffed tens of billions of dollars of credit into the banking system late in 1999. Not for the first time in monetary history, excess credit raised speculative spirits, inducing a sense of optimism bordering on invincibility.”

– Intriguingly, ever since Prudential Securities divested most of its investment banking operation earlier this year, a growing number of the firm’s analysts have learned to write: S-E-L-L. “The firm’s analysts rate 28 of the nearly 450 companies they cover, or 6%, a ‘sell,'” Crain’s reports. “That is up from just one – not even 1% – a year ago, according to First Call Corp.

– “That makes Prudential analysts four times more likely to say “sell” than their peers at other firms, where on average, only 1.5% of companies get slapped with ‘sell’ ratings.”

– When Prudential analysts rate all but 6% of all stocks they cover a “sell,” we will know that the bottom is in.

*****

To Addison, in Paris…

*** Hmmmn…here’s some more “negative drivel” to spruce up your Friday afternoon. “Historically, all busted bubbles result in regression to mean value of the busted bubble assets,” writes Bill King. According to Barron’s, of 28 bubbles in various assets, all resulted in return to, or below, mean valuations. That’s a 14.5 P/E for stocks.

*** As we reported yesterday, P/Es on the S$P are currently sitting at 26. A drop to 14.5 would mean S$P – 636…a stunning 547 point drop from today’s opening.

*** What if the market doesn’t revert? Well, when P/E ratios are about 21 or so, reports the Leuthold Group, the average return on stocks in the subsequent ten years is only about 4.9%.

*** Still, it’s summertime and the livin’ is easy. And as Money.com’s Bethany Mclean reports “…as the summer season segues into August, a good deal of the developed world’s equity players are headed for the beach.” You might as well enjoy what are likely to be lower volumesand less volatility in the markets until the earningsseason heats up again in September.

*** Lastly, I’d like to bid adieu to our exceptional intern, Jennifer Westerfield, today. She spent the summer with us here in Paris… alas, duty calls and she must return to Texas, where she’ll resume classes for her final year in college. We see bright days ahead for Jennifer; she will be missed. Bon voyage!