January 29, 2007 | posted by Michael Baxter in IABN | comments (0) |

There are many common themes in the Sunday papers: Big Brother for example. But this weekend we detected a theme not only prevalent in the Sunday papers, but also at the World Economic Forum at Davos. The world, it appears, is awash with money.

Writing in the Independent, Hamish McRae said there were huge “sums of money sloshing around.” He said: “money is hunting for homes” and that “surging liquidity encourages investors to accept higher risk”

Then there was the Sunday Telegraph; its economics editor Liam Halligan quoted Zhu Min from the Bank of China, who said: “There is money everywhere, you can get liquidity from the market every second from anything.”

It’s this massive flow of liquidity that is helping fund the US and UK trade deficit.The availability of money is caused in part by low interest rates, in part by high savings in the Far East (especially in China and Japan), and now, thanks to the high price of oil, through high savings from the Middle East.

Speaking at Davos, European Central Bank President Jean-Claude Trichet put it this way: “#91;it’s#93; not necessarily sustainable#133; Capital … is chasing all over the world. You have to be prepared for a possible global re-appreciation of risks.”

This influx of money, is actually very important.

While commentators and the UK’s central bankers fret about the rate of interest and January pay settlements, and whether inflation will fall back to 2 percent later this year, as one-off effects such as higher council tax, high oil and higher tuition fees drop out of the inflation figures, it does feel a little as if the deeper, underlying force at work here is being ignored.

This influx of money sloshing around the economy means one of two things. Either advances in technology, and globalisation means the money is affordable, and that we are in for a period of record breaking economic success in which the global economy just keeps on growing - or reality will eventually strike.

If it’s the latter, the inevitable consequence of all this money will set in, with a return to much higher inflation across the globe. Much higher interest rates will follow. If it’s the former, the world will have experienced nothing short of an economic miracle.

January 29, 2007 | posted by Michael Baxter in IABN | comments (0) |

The main difference between the underlying principle of Moore’s law, and Vicky Pollard, that character from Little Britain, is “but.”

Ms Pollard would say, “yes, but no, but”. Moore’s Law is just about yes and no, or on and off. Each transistor sitting on a chip is effectively saying yes or no, and the particular selection made determines whether you get a zero or a one. Such are the building blocks of digital technology. With digital, there are not buts.

The more transistors you fit onto a chip, the faster it can process information. Back in the 1960s, Gordon Moore predicted a doubling in the number of transistors on each chip every 18 months to two years. But, of late, many have feared we are approaching the end of this period of ever faster chips, that they were getting too small to work with.

The smaller the chip, the higher the level of energy loss, which translates into heat. Scientists have feared that if chips get much smaller they will simply be too hot for their technology too handle.

Now, both IBM and Intel have separately announced new technology for, partially at least, solving the problem. Some experts are calling it the most significant breakthrough in forty years.

The technology, which was developed by both companies independently of each other, uses something called high-k material. The result, according to Intel, is a transistor that will require 30 percent less power for it it to be switched on and off. Apparently, the new Intel chips - to be launched in 2008 - using the technology will be just 45 nanometers. To put that in context, a nanometer is just one billionth of a metre thick.

As scientists pour their energy into reducing the heat created as chips gets smaller, the battle between AMD and Intel also heats up. And despite the huge research bill Intel will have incurred in developing this latest breakthrough, the advantage has not necessarily been ceded to the larger chip company. Apparently, AMD has been working with IBM on its RD, so will also have access to similar technology.

Last summer, we revealed news from Intel on another technological breakthrough for helping maintain adherence to Moore’s Law.

The company announced a breakthrough with a substance called Indium phosphide. The theory works like this: Silicon chips need to get smaller so that the information between each transistor can be passed more quickly. But if a way could be found for sending this information at the speed of light, the chips would not need to be so small.

Silicon is fine when it comes to detecting, modulating and even amplifying light, but it can’t create it. Indium phosphide, however, can. And the Intel scientists reckon they have found a way of getting the two materials to work together.

So, it seems Scientists are having their cake and eating it; having the cake of being able to build smaller chips, while eating the cake of not needing to make the chips smaller anyway.

It’s a case of little and large: either way does it.

January 29, 2007 | posted by Michael Baxter in IABN | comments (0) |

The AIM market has been making the headlines this weekend.

Time was when the NASDAQ would have been the obvious home for a brave, newish technology company. But in these post Sarbanes Oxley times, it’s not just London’s main market that seems to be stealing the thunder from New York. AIM too is proving a hit.

This Sunday, the newspapers were keen to tell how potential Google rival Acoona is planning an AIM to flotation.

Accona’s big thing is artificial intelligence working within its search engine. The company says that if you type a sentence into Google, the search engine will then search for web sites containing those words. But, or so says the company, with Accoona, web sites will be searched with information that reflects the meaning of the sentence.

Of course, Google came from nowhere to occupy its lofty position, and maybe a listing on AIM, which will value the company at around $700 million, and be used as the vehicle for raising between $50 and $70 million, will catapult Acoona into the dot-com premier league.

On the other hand, the Independent reported that the plan is to eventually sell out to either Google or Yahoo.

Meanwhile, Private Media Group, a pornography provider, is ditching its listing on NASDAQ and listing on AIM instead.

It’s no wonder, London and AIM owner, the LSE is proving so popular with NASDAQ as an acquisition target.

The latest news, however, over the battle between LSE management and NASDAQ for control of the London’s stock exchange company seems to suggest the bid is treading water. NASDAQ still refuses to up its price, even though, recently, shareholders have acquired stock at a higher level than that being offered by the US company.

But what about the other potential US player on the scene?

For the time being, the New York Stock Exchange seems content with its merger with Euronet, and - while at DAVOS - its chief executive, John Thain couldn’t resist the opportunity to fire a shot at London and, in particular, little old AIM.

He said: “anyone could list” on Aim, and warned that London “had to be careful not to damage its reputation by allowing in companies that are not well run.”

No doubt, LSE’s management will be grateful to Mr Thain for the advice, although AIM’s boss, Martin Graham, didn’t seem that grateful, when he told the Telegraph that Mr Thain’s comments were “complete garbage”. Presumably, his gratitude will be tempered by the desire to count the money they are making as tech firms rush towards London.

But there used to be a computer term in common use: “Garbage in, garbage out”. Let’s hope Mr Graham is right, and the only rubbish is Mr Thain’s comments, and that his talk is just motivated by jealousy.

January 29, 2007 | posted by Michael Baxter in IABN | comments (0) |

The property bulls are moving up our garden paths, and grazing from the grass before our living room windows.

Today has seen the release of two pieces of information on the property market that could be enough to have the property bears going the same way of polar bears.

First there is the Centre of Business and Economics Research.

According to CEBR, your average house price will rise by £1,000 per month this year.

For homeowners, it will be possible to rake in the bucks, even if they stay in bed all day, with CEBR predicting a 7.6 percent rise in house prices this year, at least that’s what it told the Observer.

John Ward, one of the report’s authors, said: “The underlying fundamentals of the housing market continue to support prices.

“Even though interest rates may act as a dampener on the market people are spending considerable less of their incomes on mortgages than in the early 1990s.

“Furthermore, in many parts of the country, shortages remain acute.”

Meanwhile, according to Hometrack, January saw the highest level of house price inflation for three years.

London seems to be the focus of the latest explosion in prices, or so says Hometrack. The surging market in the UK’s capital combined with a shortage in supply is creating the latest boom.

January 26, 2007 | posted by Michael Baxter in IABN | comments (0) |

Yesterday seemed to be the day for video games consoles to hit the headlines.

The Xbox was the star of the show when Microsoft announced its latest results yesterday.

The software giant revealed a drop in quarterly profits, with net profits for the quarter ending 31 December falling to $2.63bn - from $3.65bn a year earlier.

Delays in Vista, with the company being forced to provide vouchers to recent purchasers of XP for free Vista upgrades, hit the bottom line.

But the Xbox sold in droves. According to NPD, in the US, 1.1 million Xbox 360s were bought in December, and the company hopes to shift 12 million units by 30 June, the end of the company’s fiscal year.

Meanwhile, the Nintendo Wii, which really seems to have taken both the public and the media’s imagination, is proving a big hit already.

The product with the innovative game controller was launched at the end of November, and already 4 million units have been sold worldwide.
In part thanks to the Wii, but with the handheld DS console also doing its bit, profits at Nintendo for the last nine months soared to 131.9bn yen ($1.09bn; £556m), that’s up 43% from the same period a year ago.
But meanwhile Sony still struggles.
The latest news on the Sony PlayStation 3 was also revealed yesterday. The machine will be winging its way into UK and other European stores on March 23. But the top of the range 60 gigabyte version only will be available. And that will retail for £425.

January 26, 2007 | posted by Michael Baxter in IABN | comments (0) |

According to Strategy Analytics, total mobile phone sales reached 1 billion units last year, with the final quarter seeing 300 million units sold, that’s up 22 percent from a year earlier.

Nokia must have been celebrating, for the first time it saw sales pass 100 million units, but the star performer overall was Sony Ericsson. A Strategy Analytics statement said: “A combination of attractive models and cool sub-brands drove shipments to an all-time high. In terms of revenues, Sony Ericsson has become the world’s third largest vendor, overtaking Samsung for the first time.”

At times like this, maybe, we should reverently turn our attention to Apple.

In the final quarter of 2007, the company sold 21 million iPods.

No wonder it was so keen to launch an iPhone.

January 26, 2007 | posted by Michael Baxter in IABN | comments (0) |

It’s not just cold in Blighty at the moment, the balls are falling off the brass monkey stateside too.

Oil has picked up in price, and then yesterday came bad news on the US housing market. But on this occasion, the housing market cocktail was mixed with a twist of good news too.

Yesterday, the National Association of Realtors (NAR) reported on an 8.4 percent drop in the existing home sales in 2006. Total sales fell to 6.48 million from the 7.08 million in 2005. You would need to rewind the clock back to 1989 to see such a big drop.

But then again, since 2005 was the best year ever for housing sales, maybe the drop was not quite so disturbing.

The silver lining, however, came in the form of December’s figures. For while the last month of the year saw a continuation in the fall in sales, the median price was unchanged on a year ago at $222,000.

The year on year median price had fallen in the four previous months.

This has led many economists to speculate that the worst is over, and that strength is returning to the housing market.

But, on this occasion, markets, which for so long now have been optimistic to the extreme, ignored the good news, and the Dow Jones Industrial 500 fell 119 points. It was a big fall, but not enough to cancel out all the gains of the year. The index is now 39 points up on the start of year position.

Finally, a point about the median.

We rather like the US idea of measuring US house prices in median terms. The median average is the middle point. In the case of house prices, it’s when there are exactly the same number of houses with a higher price as there are with a lower price.

The mean average can be distorted by extremes. The fashion in London for million pound plus houses is having a disproportionate effect on the average reading, for example.

The same principle incidentally applies to GDP per capita. There has been much in the press lately about executive pay, and how much of the new wealth has been centred on less people.

Maybe, if GDP was measured in per median capita we would get a truer picture of how much richer we are getting.

January 26, 2007 | posted by Michael Baxter in IABN | comments (0) |

Meanwhile talking of China, the economy behind the Great Wall saw GDP grow by 10.7 percent in 2006. That’s the highest growth rate in 11 years.
So that’s four years in a row with growth in double figures. The country has overtaken the UK already, and is now on course for overtaking Germany during 2008, to become the World’s third largest economy.
Up to now, it’s been investment that has been driving the economy forward. Ironically, China is partially funding the consumer spending sprees of the West. This is driving up commodity prices, hence the high price of oil, and booming steel industries.
Maybe, however, the real impact upon us will occur when consumption starts to take over from investment as the spur to growth.
When that finally happens, maybe the world will see new inflationary pressures emerge, as Chinese consumers join Western shoppers in forking out for those luxury items.
And here’s a little known fact that may fascinate you. Did you know that before the industrial revolution India and China had been the two richest countries in the world for over a millennium.
So all we are seeing at the moment, is the return to that status quo.

January 26, 2007 | posted by Michael Baxter in IABN | comments (0) |

What’s the point, say the cynics. The UK’s chancellor can tax petrol all he wants, it won’t make a shred of a difference to global warming. The fight against global warming is out of our hands; it lies with the powers that be in the US, and even more so, with India and China.

For their part, India and China reckon it’s not fair. The rich countries of the world got to their lofty position at the top of the economic league by burning carbon fuels, and now India and China have their chance, they are being told to worry about the environment. There is no flaw in this argument; it is unfair.

And yet a glimmer of hope, or perhaps even a good deal more than that, is shining out from the snow at the World Economic Forum in Davos Switzerland.

In fact the latest round of hope started in Washington. In his state of the Union address George W said: “Let us build on the work we have done and reduce gasoline usage in the United States by 20 percent in the next 10 years — thereby cutting our total imports by the equivalent of 3/4 of all the oil we now import from the Middle East.”

And in Davos, eco warriors and Angela Merkel praised him. The German chancellor said: “Mr Bush’s comments inspired hope.”

Meanwhile, Sir Nicholas Stern, of the Stern report fame, (that’s the report published last year that warned of the economic threat posed by global warming) has been talking at Davos, urging governments to up taxes.

But the truth is that the answer to global warming lies in cost benefit analysis. Reports such as the Stern review have attempted to show that the cost to the world of global warming is higher than the cost of preventing it. That may be true on a global basis, but is that true in certain defined regions? For example China and India, which brings us back to the cynical view.

But, before you just throw your hands in the air, and say what’s the point this is a cause without hope, India and China were both very keen to talk about the environment at Davos.

China’s Zhang Xiaoqiang, Vice-Chairman of the National Development and Reform Commission, stressed that his country intends to follow the Kyoto Protocol, and urged speeding up negotiations and establishing concrete emission targets. But, and here is the catch, while China intends to try to keep its emissions low, Zhang said, cement and steel production in China is highly energy intensive, and only around half as efficient as technologies used in the West. To meet its targets, Zhang said, China would need help from the industrialised world.

Montek S. Ahluwalia, Deputy Chairman of the Planning Commission of India, reported that his country is increasingly turning to nuclear power to cut its emissions, and that India’s strategy is similar to that of China. But that it also expects to suffer from the effects of global warming. He said: “It’s clear that business as usual is not going to work.”

Jacques Aigrain, Chief Executive Officer of Swiss Re, also spoke out at Davos. He said that investments to control climate change are considerably less than the cost of risk-adjusted consequences. “Waiting and seeing because one element or another is not certain is not a valid answer,” said Aigrain. “No shareholders would tolerate this in business. Why should the people tolerate it from us?”
And that brings us back to the US. George W’s big idea is bio fuels, and yet many scientists don’t think bio fuels are good for the environment at all. The cost of producing fuel in this way throws carbon into the atmosphere, in massive quantities.
It seems, that Mr Bush is more worried about security, the war on terror and US farmers. By growing its fuel in the from the land and harvesting corn, US farmers do well, and there is reduced reliance on the import of oil from the Middle East.
So actually, it would seem that China and India are more concerned about the environment than Uncle Sam. They just need a hand, they need countries that already made themselves rich by pumping carbon gases into the air, to give them a bit of a bunk up.
The exception to the US apathy, is of course California. The state, led by its recent convert to the cause, Arnold Schwarzenegger, wants to reduce its emissions to 1990 levels by 2020, representing roughly 174 million tonnes of carbon reduction. And yet, while the state does its bit, pollution from other parts of the world is hitting the Californian way.
Steve Chu, Director of the Lawrence Berkeley National Laboratory, reported that the snow pack in California’s Sierra mountains has decreased 30% to 90%. “That is our water supply,” Chu pointed out. “Even a decrease of 20% leads to severe water shortages in California. A decrease of 50% means that our agriculture will be gone, and beyond that we cut into our drinking water.” Chu added that rising sea levels are now at the upper range of what was predicted five or ten years ago. Science has to come forward with new solutions to climate change, ranging from renewable fuels to carbon sequestration, he declared.
Maybe, the answer lies with IT. At least that’s what Gartner says.
“IT,” says Gartner, “provides ways to address many environmental issues from the role of virtual collaboration in reducing corporate travel to the use of control systems in reducing energy consumption in buildings. Furthermore, emerging or improved technologies will have a positive impact on the environment, such as low-power display technologies, improved battery technologies and low-cost sensor networks.”
Actually IT is a part of the solution, but other forms of technology are even more important; hydrogen fuel, bio diesel, solar and wind power, and what is required is money.
The world is not shy of ploughing in billions to fights its wars, and yet, for the most important war of the 21st Century, the war against climate change, the coffers are too low, self interest impeding progress. US has a paranoia with China. This week the Economist magazine reported on how Stephen Roach, the chief economist at Morgan Stanley, has counted 27 pieces of anti-China legislation in Congress since 2005. This is perhaps the biggest threat.
China is set to become rich. It is set to become the world’s richest country during the course of this century, and India will follow in her wake. Both countries are well aware of the dangers of global warming. But as long as their progress is seen as a threat, and as long as legislators in the US try to impede their growth rather than embrace it, then global warming can have no fix.

January 25, 2007 | posted by Michael Baxter in IABN | comments (0) |

Yesterday we thought we were being clever, but alas it turns out we were a good deal less smart than we thought. Unless that is, you decide to believe the next statement: #147;It was a deliberate mistake to see if you are on the ball.#148;

Yesterday we said: #147;The UK joined the ERM at 2.95 deutsche marks to the pound. When the euro was formed, the German currency was converted at the rate of 1.95583 deutsche marks to the euro. Today there are 1.5214 euros to the pound, and that works out as the equivalent of 2.9756 pounds to the old deutsche mark. 15 years on, from when George Soros made his fortune from dumping sterling, and we are back to where we started.#148;

Did you spot this error this time? The penultimate sentence should have said 2.9756 old deutsche marks to the pound.

In future we will regularly report on any errors of this nature, and if you spot a mistake, don’t be shy in coming forward. Let us know by emailing: the editor