Speculation in the speculative gold price

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.

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.

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.

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.

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.

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 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. 

The Three Ps of Infrastructure

Public Private Partnerships have proved themselves a model for getting road infrastructure projects completed with a minimum of fuss and with a smaller burden on the public purse. The cost of which is transferred directly to the road user, every time they use it.

Infrastructure responsibilities are enormous. Road maintenance account for up to half of local council outflows. Yet bridges, tunnels and freeways have usually been majority funded from larger state and federal coffers.

Almost all bypass roads built in Australian capital cities in the last decade have followed a BOT model. Private capital is given rights to the toll revenue for the costs of construction. With the road then falling into public hands well into asset's twilight years.

This has proved a disaster for any investor who ventured into this asset class. Core to any project viability, is estimated ridership. Both of the two multi-billion dollar PPP tunnel operators in Brisbane Australia have fallen into receivership by wildly over estimating the number of cars passing through. A third toll tunnel now under construction is wholly funded by the Brisbane City Council.

Australia has a long history of deferring costs for big ticket infrastructure on to others. The New South Wales government defaulted on the Crown during the Great Depression in the years after the Sydney Harbour Bridge was opened.

Singapore and London have chosen a much more cost-effective albeit a politically risky route in taxing overall congestion. This has proved wildly successful in keeping the downtown streets flowing freely. In London's case, the roads in the city are far more congested over the weekend, when the tax is not levied.

Which highlights the Achilles heel of individual toll roads across the big cities. Ridership is skewed toward those who are simply time poor. Leaving roads meandering through the city streets marginally less congested. Clearly an integrated strategy for tolling those who are needlessly contributing to downtown congestion, incentivising them into using the superior, tolled bypass.

A post GFC landscape has seen PPPs, fall dramatically. Contracts with more conservative arrangements are effectively shifting risk back to government ledgers. Which still presents a risk to the people if the tolled infrastructure can't lure passengers. That's not to say toll routes are worthless. The Ontario Teachers Pension Fund snapped up a lucrative toll operator Transurban that runs a tunnel through Western Sydney.

Clearly private ownership of important public infrastructure is here to stay. But governments need to step up to reducing capital risk, not simply by taking it on. But by having an integrated approach to ensuring that the assets operate at their designed capacity. This way they can effectively fulfil their public good.

Who has the copper to roll out fiber broadband

The screech and white noise of the telephone modem are a distant memory for those digital natives who adopted the Internent early. But the humble phone line is still the dominent medium for which the world's broadband is delivered into customer's homes.

That's about to change with many government and private initiatives rolling out optical fiber as copper's successor. Opportunities for a diverse set of provider each with a unique, competing set of services can all share the capacity on offer. Fiber is pretty much the best future-proof high-capacity data conduit science can provide.

Fiber optics is a mature technology. Firms that operate Internet backbones are laying strands of fiber, so much so, there has been a glut of switching capacity in the wholesale market. Which not only has taken a profit centre out of monopoly telcos. Its allowed may smaller ISPs to get a niche subscriber base, in under-serviced regions.

The dominant telcos continue eke out higher data throughput rates of existing backhaul fiber installations by upgrading the electronics at each end of the conduit. Pundits gush over the enormous capacity that can theoretically pushed through one of these little strands of glass, if only our computing power were enormous enough to accomodate it.

Much of ageing copper at the customer end has been the yolk around the neck of the telcos that own them. The capital costs, managing the network eat into profits. Whereas the mobile telecoms businesses are far more profitable and relatively cheaper to operate. So the copper network is left on life support.

And things are getting worse for the humble domestic telephone, the subscriber base is choosing to drop the landline in favor of cellular. Those that keep broadband have little choice in what type of cable that enters their homes. Thus a limited choice of broadband provider. For example, Verizon seems to have much of New York market for itself.

This is a curly problem for government. Infrastructure in wired telecommunications, is seen as a fundamental right. But the copper and coax strewn around the urban landscape suited a bygone era of phone and cable. Monopoly owners are reticent to the enormous capital risks in a refresh, and have little incentives to change.

The South Korean and Australian governments have set aside billions for fibre to the home projects. Australia has a four billion dollar contract with Telstra, Australia's biggest telco, for access to their suburban pits and poles. Rollout is a slow process, with very little payback for stakeholders, during construction. A possible change of government in Australia this year, may see an untimely demise of the ideal elements of the project.

But the payoff may be enormous at least for partners with big visions for the spare capacity fibre has on offer. Multi channeling of services along the single strand of fibre is an important feature of the architecture, which ensures a faster return on investment. But for some applications like 4k, the ultra-HD TV, optical fibre becomes the only realistic delivery mechanism.

Copper has a relatively short operational life and it's signal can be degraded with electromagnetic  interference or shorted out by water. Contrast it with fibre, which is little affected by harsh environments, and has a much longer service distance and operational life. Any refit of telecommunications infrastructure needs to dig deep for this technology, because the future payoffs make for a compelling argument.

A counter argument to flows of fibre over the land, has been uptake in handheld computing. Portable devices are accounting for a larger slice of eyeball time. Its their portability and ubiquitous access across both celular and WI-Fi networks makes them so compelling. Mobile connections to Facebook are now more common than the desktop browser.

Whatever the future holds for the humble telephone, it's government money and legislation that will be needed in order for the next generation of boxes with blinking lights to enter our homes.

Working hard at working hard

For all the technological advances we've amassed, more of us are working. Labor force participation is at historical highs. Despite some recent trends downward, this rate may imply the diversity of activities for the workforce has broadened.

Unemployment is the headline rate that is often quoted, which divides job seekers with the total population. But this number that some would argue is artificially deflated. Unemployment rates do not account for those who are not actively seeking work. Nor does it count those under-employed looking for more work. Sometimes those in part-time study and looking for work, also miss out in unemployment figures.

When you dig into the numbers the jump in the participation rate is wholly due to women entering the workforce. On a gender split, men have lost jobs to their female counterparts. When you consider that some countries, like the US include the unemployed as labor force participants, this trend is worrying at least for men.

The consequence of higher participation rate has been to inflate assets the workforce needs. Property price as a function of years worked is still high in those countries who avoided the GFC and continue with low unemployment. Both Australia and Canada have price multiples of 7 to 8 years of wages to buy a house. Contrast that with the US, being 3 or 4 years.

At this point political conservatives would finger a bloated government sector. But the share of government to private sector worker moves within a tight band. Granted, in the Thatcher/Regan era, the government workforce downtrend began. But rates remain much as they were then, in a now austere era.

Maybe with more of us working, we're working less. But a trend can't be found here either. Again recent events are anomalous, but the forty hour working week has not bounced out of trend. At least in working memory.

High workforce participation says more about what we are gainfully being employed to do. Technological advances have made our work lives more complex. Ironically computers have freed us from simple tasks, but we've found ways to do other more granular activities. Some would argue that its our inventions in efficiency that is the reason that more of us are working.

A Rainbow of Possibilities

The future of the electric lightbulb

Imagine how the electric light bulb profoundly lifted the early twentieth century society out of poverty. Light without smoke must of confounded all who witnessed it for the first time. Today, the humble light bulb is ripe for reinvention.

Uptake of Compact Florescent light bulbs in the last decade has markedly changed the urban landscape. Their relative efficiency is one fifth the incandescent equivalent. Governments and utilities alike are giving them away, likely in order to put off expensive infrastructure investment in power production. Domestic lighting accounts for 12% of electricity production in the US.

But the CF is becoming a bridge technology. Their manufacture requires trace amounts of mercury, which is a hazardous element to be adding to landfill. In some markets, like the US, CF bulbs are not universally accepted. Likely due to their cold unnatural hues. Early examples exhibited a high frequency flicker, much like the florescent tubes they emulate.

LED technology is starting to appear in retail, at a niche price point equal to CF when it first appeared in the late 90s. Their electrical efficiency is only marginally better than CF. But it's the expected lifespan that has appeal, having a service life as long or longer than the fitting it goes into.

The first mass produced LED technology were red diodes used in low power electronic applications. Followed by orange and icy green. Different chemical crystals, produced a unique but dim color. Today, brightness and temperature stability challenges are mostly resolved, but approximating that warm incandescent glow is still elusive.

Enter the programmable RGB LED. A smart piece of circuitry that can use varying intensities of the three elements of white light. Red, green and Blue. With a power source, and a control application, a Smart Bulb owner can dial in the exact color they desire.

A recent Kickstarter campaign for just such a bulb, and custom designed smartphone app was over-subscribed by a factor of ten. The WI-FI connected light proposed a wild variance of possible applications. Such a holiday program of on/off light cycles, which makes it appear you are at home when you are not.

Phillips is the first of the big manufacturers to market with a kit of three screw-in bulbs, and a net-connected base station. They too have produced both an Android and Apple app to control color, intensity and timing for any or all of the bulbs in a mesh of lights about the room or house.

Efficiency gains in the use of these new bulbs may be offset by the standby power they draw during 'off' time. A trickle of current will always be needed for the bulbs to be able to react to the domestic radio frequency commands that are sent to it.

But the advantages in the use of color and intensity together may help promote better sleep patterns. The lights could wake you up with a slow crescendo of cool blue light. Or help you sleep by bathing you in a slowly dimming warm orange glow. These techniques have proven to promote better regulation of hormones in the human body. Seasonal Defective Disorder sufferers could benefit from a similar but slightly tweaked program of color and light.

The push should be on to allow third-party integration with the next generation of light bulb systems. With a vibrant ecosystem of interconnected sensors, and control systems any number of yet to be dreamed applications for the humble light bulb could eventuate.

While modern light generates no smoke, the new generation of lightbulbs on offer could just approximate the glow of a flickering fire.

Media ownership laws in Australia

The Australian Federal Government is desperately asserting itself in the legislative arena in an effort to subvert the narcissistic self-destruction that has plagued it. Changes in media ownership laws is a sure-fire way of putting a fire under the majority of media outlets in the country.

Australian newspapers are unashamedly conservative in their bias. Likening Senator Stephen Conroy, the minister for communications, to despots and mass murders. The colourful imagery ties to an editorial mulling the deterioration in the functions of the Australian democracy.

Most informed analist commentary consider the proposed changes in media ownership law as; tweaking. Every successive government feels the need to make changes to laws affecting the mass media. The oligopoly of Australian media this time are painting a picture of a loss of editorial diversity especially in rural and regional areas.

The Minority government who rely on supply from a few country independents, have made it clear that there will be no modifications to the bill which will be presented to parliament as this article goes to print. But negative noises are being made by those who hold the balance of power. This means some back room negotiations will be required if the government is to get it's way.


A core element of the new laws in an independent ombudsman to replace an industry managed press council. Which is regarded by anyone who is unfairly treated in the press, as nothing more than a toothless puppet of the media itself.

This matter cuts at the core of the different values one hold's depending on political affiliations. Self-regulation and market forces deciding the success or failure of businesses in a marketplace. Or an independent unbiased authority refereeing the players to follow due process.

If this is the current government's attempt to stage-manage a week's worth of newspaper front pages, it's been a resounding success. However if the activity was to polarize the difference between a government and an opposition, it has been less so.


The conservative opposition has a comfortable lead in the polls with six months from an election. It's showing a softer more conciliatory side, with the opposition communications minister Malcom Turnbull suggesting that there is some good in the proposed laws.

This is a new turn in Australian politics which may result in a reduction in bickering and name calling  being replaced with the fires of passion over policy. Which might make a weary electorate actually sit up an listen.