Links of the day

Low Subsidies, Aging Plague Rural Japan...an AP story from Yahoo that gives a good illustration of problems Japan is facing...

Japan's Consumer Prices Flat in January...the BoJ doesn't seem to have room to raise rates again in the near future...

The Fourth Great Assault on the Anglosphere..."essential values - belief in democracy, the rule of law, tolerance, equal treatment for all, respect for this country and its shared heritage"...good...

Georgia to increase its military contingent in Iraq - president...that's the country of Georgia, not the home of the Atlanta Braves:)...courtesy of GlobalSecurity.org...

About Recent Financial Turbulence...re sources of inflation outside the US is this quote:

"China and India are expected to continue tightening in response to inflationary pressures. Indeed, the China Economic Review says analysts expect reserve ratios in China to go as high as 11.5% in 2007. And analysts expect more hikes in India given domestic inflation of 6.5% and forecasted GDP growth of 9.2% (highest rate in 18 years)."

The author further states: "one trigger for the recent turbulence in stock markets was a stepping up of efforts to withdraw liquidity from the world economy", referring to the previous quote. Although the primary goal of the Chinese and Indian authorities is naturally to reign in their domestic inflation, it is likely that this withdrawal of liquidity will have meaningful effects in the US capital markets. For example, funds for purchase of mortgage-backed securities may shrink as a result of these actions. A document produced by Brad Setser has several interesting statements:

"Chinese deposits in international banking system are relatively small; most Chinese reserves seem to be invested in securities.
It is not just Treasuries
China holds a relatively diverse portfolio
Lots of agency bonds
Other mortgage backed securities as well
The trend has been for more purchases of agencies, corporate debt, and the dollar-denominated debt of emerging economies
China will likely set up a “government investment corporation” at some point to make more aggressive investments; PBoC manages a very significant share of China’s national wealth."

It seems to me that the PBoC is possibly going to take it in the shorts not only on its dollar reserves that it has accumulated while suppressing the value of the RMB, but on its investments made with those dollar reserves.

Peter Drucker on Demography

is the title of a post at Demography Matters: in my view countries(such as Italy) where nationality is based on ethnicity rather than a concept of citizenship such as the US are going to go through a serious crisis when the imported non-native workers demand political representation commensurate with their demographic profile in those countries. Some level of violence is likely, and we've seen a preview of that with the riots in France in previous years.

Links of the day

Concerns With Investing In Intel...the key point is the statement:

"PCs, the bread and butter of Intel, have become increasingly commoditized, especially the desktop version. New buyers of PCs would only likely come from the emerging economies, and those would be sub-$400 PCs, not the usual $1000+ PCs that we were used to back in the early 2000s. Performance improvements on the desktop would only affect niche segments such as gaming positively. This would lead to erosion of gross margins in the long run as lesser number of high margin PCs would get sold with time."

I agree with this analysis 100%; one further possible negative for Intel is the move to server virtualization. As enterprises can cost-justify purchasing high end mainframes or servers and run a large number of virtual servers on those large machines; the demand for commodity x86 boxes should shrink.


Population Reference Bureau...their 2006 World Population Data Sheet is a very handy summary of a wealth of demographic data for every country in the world...highly recommended!

Intel versus AMD: recent events

A few factoids:

From a Seeking Alpha post of February 1, "AMD gained control of over 25% of the microprocessor market for the first time ever in Q4, according to preliminary data from Mercury Research. Its 25.3% share is a 2% quarter-over-quarter increase. Intel's share slipped to 74.4% from 76% -- its lowest share in over a decade."

Next, William Trent has a good chart showing Intel and AMD's inventory trends recently:

It looks to me like Intel has a pile of pre-Core 2 Duo chips sitting in warehouses somewhere; while AMD has been selling its chips as fast as they can produce them until Intel released its newest chips.

Some commentators are indicating that AMD is looking at a cash flow problem due to its ATI acquisition and its need for investment in new plants.

A few quotes from an article at techtarget.com:

"If AMD is bothered by Intel's lead in getting quad core on the market, it never let on. The company appears to be pacing itself with a slow and steady tactic, biding its time as software catches up to the technology.

"The adoption of quad-core technology will lag until the software catches up, so we aren't too concerned about Intel's lead, or rather, their perceived lead," said Steve Demski, AMD's Opteron product manager. "It isn't as big as it's made out to be."

Intel claims the up-take on its quad-core technology has been good so far though, pointing to Sun Microsystems Inc.'s decision to offer Intel-based servers as a sign of success, Fields said.

Sun used to offer exclusively AMD chips for its x86 Galaxy line, but gave in to customer demands and announced it plans to offer Intel in January.

"(Sun) chose Intel because of the performance and energy efficiency of Intel's quad-core products that are available today, and our future products," Fields said.

Months prior to Sun's headline-grabbing decision to partner with Intel, Dell Inc. added AMD chips to some of its servers, ending the exclusive relationship it had with Intel in the server space.

"Intel did beat AMD out of the gate with quad core, (but) the expectation is that AMD's quad-core processors will be faster when they arrive," Haff said. "This is a game of technical leapfrog. Especially in the server space, quad core does deliver increased application level performance for most workloads, and that's what users care about."

When AMD releases its quad-core processors, it will feature significant core enhancements, and the company estimates a whopping 40% performance advantage over Intel's current quad-core offerings.

Intel is, predictably, skeptical of the projections.

"As for their 40% claims on their future product, Intel is walking the walk and we will let the competition talk the talk," Fields said. "We are ramping quad-core technology today that delivers leading performance across industry standard benchmarks."

AMD does have reason for its steadfast optimism, with a history of benchmarks placing its processors ahead of Intel's.

For instance, a recent review of AMD Socket-F Opteron processors against Intel's Woodcrest chips by AnandTech Inc., an IT hardware analysis and news company, showed that AMD's Socket-F Opteron excelled in the areas of power consumption and performance per watt by as much as 29%."

My take: there are two major issues for both manufacturers. Server virtualization is going to decrease demand for physical servers, and there is little incentive for consumer purchasers to upgrade their machines given the powerful nature of the chips that have been sold in the last couple of years.

Links of the day

Infoworld's Notes From the Field..."DOT’s all, folks: Cringely confidant Ross G. has unearthed an interesting memo from the U.S. Department of Transportation. It seems that the DOT has put the kibosh on all upgrades to Vista, Office 2007, or IE7 for at least another six months. The document’s money sentence: “There appears to be no compelling technical or business case for upgrading to these new Microsoft software products.” No problems with Washingtonian double-speak there."...har har....

The New Economist discusses an academic paper analyzing the economics of the private equity sector(which is divided into two segments: venture capital and leveraged buyouts)...my interpretation of the paper's results is that the mechanics of buyouts can be fine-tuned so that a buyout firm generates increasing profits as it gains experience, while the same is not true of VC's. This makes sense to me as VC's generally are investing in technological advancements where forecasting which companies will become blockbusters isn't possible.

Questions Budget Chairman John Spratt should be asking....includes this thought-provoking chart: