Why Chrome + ARM could dethrone Microsoft + Intel

Just the main points
- Cost: No need to pay for windows if you use linux. ARM licensing costs per chip are really small!
- Power consumption: ARM's focus till now has been low power. Intel will fight with Atom, but it's still such a small business for them
- Software over the web: This means there is no real need to get an x86 processor for all that legacy s/w. New companies will work on a cloud only model. Older ones will retrofit for this.
- Tablets looking more like smartphones with bigger screens: So how about deeply integrating the two? The iPad looks like a big iphone. So what about your phone being the on-go version of your tablet such that you can seamlessly move between the two?
And finally
Big backers: Apple, Google - the bread and butter for these companies is based on ARM and the browser. So even if the oldies don't want to change, their hand will be forced.

Truly exciting times in the mobile device market.

Market direction

It's really difficult to predict, and anyone who thinks they can time the market...watch out! So with that, here's what I see. Today. the S&P500 is just above the 20DMA of 1087. If and when it breaks past the 200DMA at 1107, there's going to be a mad rush in. My thinking is that the market goes down a little to maybe test 1070, then goes up like a rocket past 1107 up to 1130 (maybe even 1150!) and then begins a terrible downhill acceleration that takes it below 1040. As far as timeframes, given that we are seeing such crazy volatility, I wouldn't be surprised to see 1130 by month end (June) and then a waterfall decline for the next 2 months or so. I am currently not investing for the long term, trying to just get into some swing trades.

Google to start making processors?

Google's recent purchase of Agnilux, a company started by former PaSemi (and then Apple) folks, seems at first to be to improve the power/performance for the data centers. This would be the natural direction, since Agnilux was purported to be working with Cisco on more efficient chips. However, I think it's more likely that Google wants to seriously think about making chips that go into end consumer products such as mobiles, tablets and TV set-top and/or the TV's themselves.

Google has been a big proponent of improving the power efficiency of data centers. However, designing a chip that delivers the kind of performace for such heavy compute tasks is not easy. ARM architecture also doesn't seem to lend itself directly to use in server chips. On  that other hand, ARM is an ideal candidate for low-power consumer product chips as established by Apple designing its own processors based on such technology. Why would Google want to develop its own chips instead of buying them off-shelf from vendors. I think it's primarily motivated by the desire to own the entire ecosystem from design of the hardware and the software and eventually, design (or atleast create reference designs) for products they wish to see in the market. If Google controls the product, they control the display where they can show the advertising that will make them good money. This ties in well with their desire to encourage consumer access to high-speed broadband at home and wireless on the go.

I will post more info on this as and when I learn more. I'll leave you with a recent news I hear about Google reportedly preparing to intro TV software next month

Deflation

Considering we are still in the throes of a recessionary environment, it isn't surprising that consumer prices are falling, or atleast, hardly rising. Outright deflation as seen in Japan is a scary phenomenon as it can exacerbate a recessionary downward spiral in prices. As an aside, you would think that given the steep drop in house prices, this is a no brainer. However, the calculation of CPI (consumer price index) uses owner's equivalent rent (essentially rent) which has fallen much slower than housing.

Ben Bernanke (the Fed chief, aka Helicopter Ben as you will figure out in a little bit) had make a comment many years earlier saying that the Fed always had a ready tool to fight deflation - dropping dollars out of a helicopter! While that is a picture worth remembering, the fed doesn't really own choppers. What they have done so far is to drop the overnight lending rate precipitously (some may say this is exactly what got us into this mess) and gone into the market and bought shitloads of RMBS (residential mortgage backed securities) and treasuries. The prior move (rates) is part of monetary policy but the latter (buying risky securities) is getting into the realm of fiscal policy, and is almost the equivalent of pumping $$'s into the system (for every dollar worth that the fed buys, there is an extra dollar in the capital markets that can be used elsewhere). This is in addition to all the stimulus provided by the government. All of this would make us believe that the total amount of dollars in the system would increase leading to inflation!

Undermining the effect of all of these moves is the massive deleveraging by the consumer and the tremendous decrease in the rate of bank lending. Although the fed can decrease effective interest rates, there needs to be end demand from consumers and businesses to increase their indebtedness as opposed to paying off or walking away from their present commitments. Additionally, there is massive overcapacity of production making it difficult for companies to raise prices. So all in all, there's a big tug-of-war going on with respect to prices.

I'll leave you with a graph showing the month-to-month change in the CPI. After plunging in '08, prices seem to have stabilized but there is still the fear that they will drop into negative territory in the coming months. Interestingly, the prior month (Jan '10) was the first in a quarter century when core CPI (excluding food and energy prices) dropped!!

The Baltic Dry Index

From Wikipedia,

The Baltic Dry Index (BDI) is a number issued daily by the London-based Baltic Exchange. Not restricted to Baltic Sea countries, the Index tracks worldwide international shipping prices of various dry bulk cargoes.

The reason I like this index is that it represents the true price of hiring a shipping vessel. While it is true that it is skewed towards commodity prices (and as such highly influenced by Chinese demand), I think it foretells things to come. China is the leading manufacturer in the world today and its imports should show the upcoming demand from the rest of the world! China has been stockpiling crude oil, copper, and many other materials. Once that demand slumps, shipping costs will plummet. Here is a graph for the latest value of this index. I'm already concerned since this value has fallen below the trendline, but I'd get even more concerned if it broke down below ~2240.

Here's a chart of a longer timeframe view of this index. Notice the massive volatility during the financial crisis and a bottoming prior to the bottoming of the market. Today's prices are still a fraction of what it cost then!

KO = Knock-out!

From Coke's quarterly results

In emerging markets, Coke’s unit volume growth was even sharper, led by China, where the metric was up 29 per cent, and India, which saw a 20 per cent increase in unit volume.

Emerging markets => emerging waistlines?

Chemical Exposure Linked to Attention Deficit Disorder in Children: Scientific American

An important article. Key points...

"The connection was only detected for the types of phthalates used in perfumes, shampoos, nail polishes, lotions, deodorants, hair sprays and other personal care products."

"But there are no U.S. restrictions on phthalates in cosmetics and other personal care items."

"Engel said people should “press legislators” to restrict phthalates in adult, as well as children's, personal care products"

Here's the link to the article