A lot of words have been written about the bear market price of gold. Conspiracy theories aside, much of the talk is of a less fearful investor, moving back into a risk-on phase of an economic cycle. But gold is not a special commodity. It seems to follow the same laws that have beset the metals index as a whole. There has been a clear down trend in hard, and energy commodities since Feb this year.
The cliff like drop in the gold price is more or less mirrored for copper and silver two industrial metals that have real uses, therefore robust markets. China the biggest buyer of is in a slowdown phase. Silver's biggest consumer, PV panel sales have seen a market collapse. If growth in china continues to cool, commodities as a whole will cheapen.
This falling trend has been seen before, and then reversed by bouts fo quantitate easing, this continues at a faster pace, with Japan now targeting to inflate its own economy by increasing the Yen supply. Seems that these actions are losing their potency, new money is not leaving the reserve banks at any kind of velocity.
The good news is there is a floor in the gold price. At least one that makes it uneconomic for miners. Peak gold was estimated to have passed in 2000, but records in volumes of recovery continue to be broken. But the cost of extraction sits somewhere around $1,200 per ounce up from about $500/oz at the peak. Gold bugs are right to stay away from miners.
In my estimation gold will not diverge from its downward trend as long as metals prices follow the same trajectory. Its still risk off, in all markets, the velocity of money at least in speculative trades has ground to a halt.
Saturday, 20 April 2013
Thursday, 4 April 2013
Capital Idea to save on Labour
The industrial landscape balances between the supportive forces of capital or labour. Things are tipping toward capital. Last decade after the tech bubble popped, was called the jobless recovery. But hindsight says it was more a debt binge, on non-productive capital. Thats to say we imported domestic durables from Asian countries with low-cost labour, and little government regulation.
Labour is still king in certain industries like clothing and footwear. In fact China is losing to even lower labour cost sources like the Philippines and Thailand. Burma is going to see enormous growth in the coming years, with firms taking advantage of the dirt poor that are ready to work.
But this era is seeing the rise of the small-scale robot. Affordable Computer Numerical Control (CNC) machines, 3D Printers, robotics, give the industrialist command over a flexible production line, that can turn out prototype and duplicate product very quickly.
Many of the crowdsourced projects in the design and technology category on kicstarter.com are from entrepreneurs looking for the capital needed to buy tooling, to up production rates of their prototype gadget. And the price of entry is not that high for the kit that would enable production in the thousands.
The fall of USD has been a boom for local manufacturing. Its allowed many to bring their manufacturing home, in a low worker configuration. Machines with a low number of technicians managing them can produce components with high tolerances necessary for a new level of quality. Many manufacturers are having difficulty finding the skills necessary to fill these jobs. Worker incompetence can cost firms dearly, a new level of attention to detail is necessary.
Bringing R&D and production departments together allow the synergy necessary to shorten the cycle of production changes. Allowing a product to evolve faster. This is a slingshot to innovation. Traditionally the firm that imports, wears a large inventory, thus prolongs the iteration of a product. In some cases will need to discount the remaining stocks, when the next shipment is due to arrive. Small scale manufacturing gives the owner the freedom to innovate, and keep margins high on a just-in-time schedule.
Many have been burned by outsourcing, everything from whole production runs out of spec, to firms competing against illegal runs of their own stolen intellectual property. Larger firms are going to a hybrid model, having separate designed components outsourced across a number of different manufacturers. This provides some insurance against the many levels of theft.
Some suggest the 3D printer will change the face of manufacturing, but economies of scale, and efficient supply chains are still cheaper, for the moment. But the idea of digital delivery of products to your personal 3D printer are not outside the realm of possibilities. This era of manufacturing, may be the bridge to that future.
Labour is still king in certain industries like clothing and footwear. In fact China is losing to even lower labour cost sources like the Philippines and Thailand. Burma is going to see enormous growth in the coming years, with firms taking advantage of the dirt poor that are ready to work.
But this era is seeing the rise of the small-scale robot. Affordable Computer Numerical Control (CNC) machines, 3D Printers, robotics, give the industrialist command over a flexible production line, that can turn out prototype and duplicate product very quickly.
Many of the crowdsourced projects in the design and technology category on kicstarter.com are from entrepreneurs looking for the capital needed to buy tooling, to up production rates of their prototype gadget. And the price of entry is not that high for the kit that would enable production in the thousands.
The fall of USD has been a boom for local manufacturing. Its allowed many to bring their manufacturing home, in a low worker configuration. Machines with a low number of technicians managing them can produce components with high tolerances necessary for a new level of quality. Many manufacturers are having difficulty finding the skills necessary to fill these jobs. Worker incompetence can cost firms dearly, a new level of attention to detail is necessary.
Bringing R&D and production departments together allow the synergy necessary to shorten the cycle of production changes. Allowing a product to evolve faster. This is a slingshot to innovation. Traditionally the firm that imports, wears a large inventory, thus prolongs the iteration of a product. In some cases will need to discount the remaining stocks, when the next shipment is due to arrive. Small scale manufacturing gives the owner the freedom to innovate, and keep margins high on a just-in-time schedule.
Many have been burned by outsourcing, everything from whole production runs out of spec, to firms competing against illegal runs of their own stolen intellectual property. Larger firms are going to a hybrid model, having separate designed components outsourced across a number of different manufacturers. This provides some insurance against the many levels of theft.
Some suggest the 3D printer will change the face of manufacturing, but economies of scale, and efficient supply chains are still cheaper, for the moment. But the idea of digital delivery of products to your personal 3D printer are not outside the realm of possibilities. This era of manufacturing, may be the bridge to that future.
Tuesday, 2 April 2013
EBay are Trashing their Monopoly
As from the first of May, Ebay ups their commission from 7.9% of the final sale value to 9.9%. The last change 12 months ago, that made them a flat 7.9% changing from a multi-tier system, which was arguably cheaper for lower priced items.
The move is slowly changing EBay from an Auction site into a browsing to the instant purchase. Insertion fees are all but gone for the casual lister, even for the Buy it Now option. Sellers must consider the GST level of tax when selling items. And thats before you pay quarterly GST if you are a business. There will be a lot more Buy it Now buttons on items come June, just to ensure the margin necessary to cover all these fees.
EBay's profits are down on last year, but their PayPal system brought in a larger portion of the firm's profit. So if you sell on EBay and receive monies via PayPal, you'll be slugged another 2.4% on your sale. Gone are the days when you spent a half a dozen dollars to get an entry put into the old Trading Post.
Don't begrudge a monopoly player acting like one, but there are a set of free listing me too sites in Australia to choose from, that are becomming quite popular:
gumtree.com.au - Free to list, free to sell, but feature advertising spots are a dollar or two for a range of, front page, front of search list options.
tradingpost.com.au - An old timer which recently stopped its fortnightly issue dead tree edition. Free to List, free to sell. Mainly listings for cars, boats and caravans.
craigslist.com.au - Underused in Australia, but not dead. Each major Australian city is prefixed before craigslist in the URL. Free to list, free to sell, no fees at all.
There are dozens of others that don't get any exposure, because frankly they aren't used. One can list their item for sale in twelve different places. If its rare, or unique you might have people stumble upon your hidden gem. Alternatively list on EBay at a price that won't sell, with the realistic price inserted for the same item elsewhere.
The move is slowly changing EBay from an Auction site into a browsing to the instant purchase. Insertion fees are all but gone for the casual lister, even for the Buy it Now option. Sellers must consider the GST level of tax when selling items. And thats before you pay quarterly GST if you are a business. There will be a lot more Buy it Now buttons on items come June, just to ensure the margin necessary to cover all these fees.
EBay's profits are down on last year, but their PayPal system brought in a larger portion of the firm's profit. So if you sell on EBay and receive monies via PayPal, you'll be slugged another 2.4% on your sale. Gone are the days when you spent a half a dozen dollars to get an entry put into the old Trading Post.
Don't begrudge a monopoly player acting like one, but there are a set of free listing me too sites in Australia to choose from, that are becomming quite popular:
gumtree.com.au - Free to list, free to sell, but feature advertising spots are a dollar or two for a range of, front page, front of search list options.
tradingpost.com.au - An old timer which recently stopped its fortnightly issue dead tree edition. Free to List, free to sell. Mainly listings for cars, boats and caravans.
craigslist.com.au - Underused in Australia, but not dead. Each major Australian city is prefixed before craigslist in the URL. Free to list, free to sell, no fees at all.
There are dozens of others that don't get any exposure, because frankly they aren't used. One can list their item for sale in twelve different places. If its rare, or unique you might have people stumble upon your hidden gem. Alternatively list on EBay at a price that won't sell, with the realistic price inserted for the same item elsewhere.
Sunday, 31 March 2013
Bitcoin Wanted Dead and Alive
The total value of circulating Bitcoins touched a billion worth of USD recently. Volatility in this exchange is high, but up will be the long-term trend. Its the architecture of the system that will see a Bitcoin worth more and more over time.
Of course value is a comparative term, Bitcoin has garnered favour in a number of markets because its an anonymous currency without a central authority. Its a Peer to Peer protocol between users of digital wallets. If a wallet of Bitcoins becomes corrupted or deleted, thats it, those Bitcoins can never be recovered.
Bitcoins are scarce. Currently about 10 million coins are in circulation, there is inflation to a maximum number of 21 million, estimated to occur in the year 2140. Each new Bitcoin that is created is mined through a time-consuming computer algorithm. A new Bitcoin birth is confirmed into existence by consensus with others over the Internet.
The intrinsic value of any system is for those that use it. Like gold, one can't eat a Bitcoin. So its value is only a modicum of exchange. The parallels of gold are eerily similar. Both are rare commodities, with limits on production and an estimated maximum quantity. Thus the Bitcoin market is steady state, unlike fiat currency that has central banks conspiring to inflate.
The markets in which Bitcoins are used are limited. Much of this has been seen on anonymous ebay like web sites that seem to trade in illicit substances. But there are spectacular instances, like a Canadian man happy to exchange Bitcoin for the sale of his home.
Fiat currency is where the government forces inflation via usury, and ensures a system that is constantly inflating. However Bitcoin is inherently deflationary, by being as scarce resource with an inflating user base. Proposals are in place to move Bitcoin splitting from eight to sixteen decimal places of division. Plenty of scope for a Bitcoin to become a valuable, but still tradable commodity.
US treasury classes Bitcoin as a Virtual Currency, and wants to regulate the exchange of it in and out of USD. Broadly, authorities want to class Bitcoin under a pre-paid ideal, like tokens at a casino or transportation smart cards. The community is somewhat miffed, as Bitcoin can be considered a fully-fledged currency that can operate independently of other currencies.
A currency that is international, immune to government intervention, and completely anonymous is as much an ideal as it is a practical means of exchange. And that by itself will likely see Bitcoin endure.
Of course value is a comparative term, Bitcoin has garnered favour in a number of markets because its an anonymous currency without a central authority. Its a Peer to Peer protocol between users of digital wallets. If a wallet of Bitcoins becomes corrupted or deleted, thats it, those Bitcoins can never be recovered.
Bitcoins are scarce. Currently about 10 million coins are in circulation, there is inflation to a maximum number of 21 million, estimated to occur in the year 2140. Each new Bitcoin that is created is mined through a time-consuming computer algorithm. A new Bitcoin birth is confirmed into existence by consensus with others over the Internet.
The intrinsic value of any system is for those that use it. Like gold, one can't eat a Bitcoin. So its value is only a modicum of exchange. The parallels of gold are eerily similar. Both are rare commodities, with limits on production and an estimated maximum quantity. Thus the Bitcoin market is steady state, unlike fiat currency that has central banks conspiring to inflate.
The markets in which Bitcoins are used are limited. Much of this has been seen on anonymous ebay like web sites that seem to trade in illicit substances. But there are spectacular instances, like a Canadian man happy to exchange Bitcoin for the sale of his home.
Fiat currency is where the government forces inflation via usury, and ensures a system that is constantly inflating. However Bitcoin is inherently deflationary, by being as scarce resource with an inflating user base. Proposals are in place to move Bitcoin splitting from eight to sixteen decimal places of division. Plenty of scope for a Bitcoin to become a valuable, but still tradable commodity.
US treasury classes Bitcoin as a Virtual Currency, and wants to regulate the exchange of it in and out of USD. Broadly, authorities want to class Bitcoin under a pre-paid ideal, like tokens at a casino or transportation smart cards. The community is somewhat miffed, as Bitcoin can be considered a fully-fledged currency that can operate independently of other currencies.
A currency that is international, immune to government intervention, and completely anonymous is as much an ideal as it is a practical means of exchange. And that by itself will likely see Bitcoin endure.
Saturday, 30 March 2013
NBN may be rolls royce, but its worth it
Australia supposedly learned during the 90s that stringing coax and copper over the same telegraph poles was a bad idea, when essentially they accomplished the same thing. So now the Federal Government hived off an infrastructure company to provide one physical link into peoples' homes. This ment that there is a two tier system one that provides the infrastructure, the other that provides the service.
The US however is hamstrung by a patchwork of telco/cable providers each with their own exclusive geographical patch of wires and services. The video below is tech's community's complaint. One that says customers don't have choice.
Why does South Korea get it better than the US? Partly geography, and partly the drive of federalism that ensures everyone has necessary infrastructure. We have left the government to manage roads, water, sewage. These are monopolies in the public good. So too the telecommunication cables running into our homes. Let an authority manage the infrastructure, and a business provide services through it. A model adopted here in Australia for Electricity and Gas, seems to work, keep the NBN alive.
Tuesday, 26 March 2013
The riot in the cypriot deal
Its a masterstroke on behalf of the ECB and the IMF. Perhaps they learned from the Iceland experiment where a debt that can't be paid, won't. Cyprus has a finance sector many times its GDP, with foreigners having invested heavily in cypriot banks, and in turn the banks shoveling into Greek bonds.
The ECB defends sub 100,000 euro depositors, which keeps individuals and business out of hock. But the Russian Oligarchs are left out in the cold. The capital that can take flight out of Cyprus will, leaving it with the same prospects as Greece.
Balance sheets are now looking more precarious for the European banks. They have been the core reason sovereign bond rates are so low. The precedent is there are a set of banks worth saving, and others who will be firewalled from the market, then closed.
When banks start looking less viable as safe investment propositions, its other markets that will float. The Australian experience has been just that. While these banks are in no risk of failing, falling bank interest rates have arguably been the reason for a 20% lift in equities over the last year.
Easing by central banks have done a lot in keeping inflation ticking along. But capital is borderless, it sloshes about the globe inflating perceived growth prospects. This makes it very difficult for the value investor in finding long-term prospects. The investment world is certainly more speculative that it ever has been.
The ECB defends sub 100,000 euro depositors, which keeps individuals and business out of hock. But the Russian Oligarchs are left out in the cold. The capital that can take flight out of Cyprus will, leaving it with the same prospects as Greece.
Balance sheets are now looking more precarious for the European banks. They have been the core reason sovereign bond rates are so low. The precedent is there are a set of banks worth saving, and others who will be firewalled from the market, then closed.
When banks start looking less viable as safe investment propositions, its other markets that will float. The Australian experience has been just that. While these banks are in no risk of failing, falling bank interest rates have arguably been the reason for a 20% lift in equities over the last year.
Easing by central banks have done a lot in keeping inflation ticking along. But capital is borderless, it sloshes about the globe inflating perceived growth prospects. This makes it very difficult for the value investor in finding long-term prospects. The investment world is certainly more speculative that it ever has been.
Saturday, 23 March 2013
The coming storm in the cloud
Two years ago Google engineer Glen Murphy starred in a YouTube video, demonstrating some of the features of the upcoming Chromebook. But none were about the laptop, or laptops. He showcased browser-based apps that kept his fictitious lost cat flyer project humming along, despite the destructive 'accidents' that beset a slew of his laptops.
Google's latest flagship Chromebook, the Pixel which retails for a thousand pounds should not be subjected to such evil. This is a lust worthy piece of kit, may just arrest sales away from the Apple Macbooks the tech elite seem to prefer. But likely the first thing the'll do is wipe the hard drive and install another operating system.
Linus Torvolds quipped as much about his new Pixel on social media last week. Linus is the inventor of Linux, the core that powers such operating systems distributed by RedHat, Ubuntu, Android and even ChromeOS itself. His review of ChromeOS? Not horrible.
Despite the amazing penetration of Phone and Tablet devices, working in the cloud still seems a bit far fetched to some. The web applications on offer are polished, intuitive and most importantly, open an amazing world of collaboration. Somehow we prefer the full-featured application software installed on a desktop environment. Like a clean new notebook, having the power of Photoshop or Word just seems better.
It's not. Tools like photoshop have had decades to pile on features into gestures and clicks that most of us will never uncover. The time and dedication in learning complex tools is a perverse reward, when all we do is tweak some filters and crop! But it does seem likely that given time, those specialist tools that professionals do rely on will make it to the cloud, eventually.
ChromeOS represents an ecosystem similar to those your smartphone sports. When you buy a Chromebook you're buying into an environment of web-centric applications that you install into what is essentially a Google account in the cloud. Google aren't the only ones. Mozilla foundation, the makers of FireFox browser are offering something eerily similar.
With the W3C considering extensions to HTML 5 that enforce a type of Digital Rights Management (DRM), the browser becomes a walled garden, much like Apple has pioneered in their handheld software, iOS. Our reticence of the cloud has been one of privacy in a increasingly public world, but a much more likely risk to individuals is in shutting down free and open markets to individual and incompatible software media storehouses.
Anyone who has had to the misfortune to switch from say an Apple iDevice to the Android environment will know that all of their app and media investments are all but abandoned. Some go the path of converting music, audiobooks to more open formats, but it's often left to technical experts with the time and patience it requires.
Vertical integration can be a net negative for a skittish customer. It can be argued that proprietary hardware, system software and e-commerce tie ins are bad for innovation generally. It is however our best method in capturing value from the software artefacts programmers ceaselessly toil to perfect.
The move of these types of markets to the web make a compelling set of incentives for traditional software developers. No longer is there the problem of ports to different computing platforms, distributing software upgrades or even directly negotiating a plethora of resellers in foreign countries. But they too have to consider a single partner who can change the playing field or snuff out your market in a single keystroke.
Big brother may be the first fear people have in leading their lives in the cloud, but its more likely going to be the realisation of lock-in when it comes time to consider the cost of adopting something better in the future.
It's not. Tools like photoshop have had decades to pile on features into gestures and clicks that most of us will never uncover. The time and dedication in learning complex tools is a perverse reward, when all we do is tweak some filters and crop! But it does seem likely that given time, those specialist tools that professionals do rely on will make it to the cloud, eventually.
ChromeOS represents an ecosystem similar to those your smartphone sports. When you buy a Chromebook you're buying into an environment of web-centric applications that you install into what is essentially a Google account in the cloud. Google aren't the only ones. Mozilla foundation, the makers of FireFox browser are offering something eerily similar.
With the W3C considering extensions to HTML 5 that enforce a type of Digital Rights Management (DRM), the browser becomes a walled garden, much like Apple has pioneered in their handheld software, iOS. Our reticence of the cloud has been one of privacy in a increasingly public world, but a much more likely risk to individuals is in shutting down free and open markets to individual and incompatible software media storehouses.
Anyone who has had to the misfortune to switch from say an Apple iDevice to the Android environment will know that all of their app and media investments are all but abandoned. Some go the path of converting music, audiobooks to more open formats, but it's often left to technical experts with the time and patience it requires.
Vertical integration can be a net negative for a skittish customer. It can be argued that proprietary hardware, system software and e-commerce tie ins are bad for innovation generally. It is however our best method in capturing value from the software artefacts programmers ceaselessly toil to perfect.
The move of these types of markets to the web make a compelling set of incentives for traditional software developers. No longer is there the problem of ports to different computing platforms, distributing software upgrades or even directly negotiating a plethora of resellers in foreign countries. But they too have to consider a single partner who can change the playing field or snuff out your market in a single keystroke.
Big brother may be the first fear people have in leading their lives in the cloud, but its more likely going to be the realisation of lock-in when it comes time to consider the cost of adopting something better in the future.
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