Hello out there.
I am not blogging because I am not moving my money, and that because when things depend on government actions, I am not particularly better informed than the rest of the market. It is the same reason why I chose to get out of AMD even though I was very bearish, AMD's fortunes depend on financiers, what do I know about their negotiations and interests?
So, I just got rid of long term puts, because they were depreciating, to keep only short and long positions, since the long positions outweighed a lot my long share positions, I have been hurt by this downturn, but only money that I can leave alone indefinitely.
Perhaps I will write non-trading blogs
Monday, December 15, 2008
Hello out there.
Posted by Eddie at 5:41 PM
Monday, September 15, 2008
Just to land a poor employee in hot water.
Read all the gory details of evil Intel Sk Ph.D Boy Genius' blog.
¿¡What do you mean he posted nothing on it!?
¡Intel is evil! ¡He must not waste this chance to post!
Posted by howling2929 at 9:12 PM
Saturday, June 21, 2008
Tomorrow, June 22, 2008, the Formula one will have its last Grand Prix at Magny Cours.
They have run there from 1991. The circuit gives very little traction, which forces the participants to lean towards soft-compound tires.
The only french pilot to win there was Alain Prost in 1993.
I hope AMD's Magny Cours chip fares better.
Posted by howling2929 at 11:40 AM
Wednesday, May 28, 2008
"I Worship in the Temple of Christensen!"
Back when I was doing my MBA, my International Marketing professor (HarlemBoy, the nickname he choose for himself) used to say as a catchphrase: «I Worship in the Temple of Walmart». In that same term I was taking General Management classes (you may call those Advanced Strategy),and I loved that phrase so much, that I adapted it for myself, and began saying there: “I Worship in the Temple of Christensen”.
You see, that refers to Mr. Clayton M. Christensen, DBA (Doctor in Business Administration, a REAL PhD) and best-selling author. I actually read one of his books “The Innovator’s Solution” before I entered the MBA. That advanced knowledge, and my firm belief in Christensen got me an A+ in General Management class (the Holding Fast Case, in case you are curious). I wholeheartedly recommend reading his books and articles, you can become a convert too.
Every time Christensen talks, I listen. So, I was very surprised when Christensen talked about the « The New Economics of Semiconductor Manufacturing ». I read the article, and something got me thinking:
« Competition is shifting toward a new playing field. Now what matters is making a large variety of products, each product in small volumes and each perhaps for only a short time. Examples of these growing markets include cellphones and MP3 players, which are subject to trends in fashion. Then there are the thousands of chips that are increasingly finding their way into our homes, offices, automobiles—and into every nook and cranny of our lives.
You often hear executives in the semiconductor industry sighing for the next great vehicle for industry growth, like the PC in the 1990s and the minicomputer before that. Well, perhaps the next killer application won't be one thing but rather scores or hundreds of things, none of which require the raw performance that only the biggest, most technically advanced fabs can provide. Perhaps what the next wave of killer apps requires is a new business model, made possible by such things as TPS.
Throughout history, business models that reduced the minimum effective size of factories have transformed entire industries. Steelmaking was transformed by the minimill's ability to efficiently produce small batches of steel, business computing by a succession of ever-smaller machines starting from mainframes for payrolls and ultimately leading to the personal computer, and photographic film processing by fully automated one-hour film-processing machines, which were then replaced by digital photography. Because these transformations offered customers entirely new ways of doing things—rather than simply making the existing model work a bit better—we call them disruptions. The agents of disruption are invariably business models (although these models often come with a new technology wrapped inside).»
That got me thinking. Then I read this blogpost from Mr. Rahul Sood « AMD Breakup ». Here Mr. Sood argues that AMD should split the Fab Business from the µProc+Chipset+Video business. At first I thought “This is Madness! Madness, I tell you!” But then, I heard Christensen’s voice… I mean, I really heard his voice in this podcast: «Spectrum Podcast: Q&A With Harvard Business School's Clayton Christensen »
And here, The Light was made. Basically, One of Christensen’s points is that the semiconductor industry is going through a commoditization/decomoditization phase, things that before were differentiators become commodities, and what was a commodity before, becomes a differentiator (too confusing, read his book, he is a DBA, I am just an MBA).
Of particular interest to us is that, for the bulk of the market (about two nodes behind the state of the art) the capacity to design chips is becoming a commodity, because libraries of modular components are readily available, but now the capacity to produce small batches of wafers with very fast turnaround times is the differentiating factor, because the process in very interlocked, one may say proprietary. His advice to investors:
«Go around and buy a bunch of these fabs […] then as you get the [TPS] system going you can price your products 15~20% over the market price, because you are fast».
Also, remember that at 32nm, with 450mm wafers, there is a huuuuuuuge number of chips that can be manufactured per wafer. Christensen admits that there is a segment of the market (like state of the art X-86 µProcessors) that will need to stay in the forefront of Moore’s law, but for the first time in history, for the bulk of the market, we can go back a couple of nodes and Just Do It Right.
Please bear in mind that I am not the only one listening to Christensen. Many people in the investment community do. So, ¿What would I do if I were Hector Ruiz? Not exactly what the rumor mill is telling you. Rather, here is my recipe:
1.) Make a partnership with some investor (Chartered? TSMC? Some European Player? Some Chinese bit player with no access to such advanced technology?). Give them 45% of the Dresden Fabs right now, for a much needed cash investment. Assure them steady business from AMD (let’s say, for 10 years or more), and full ownership at a later date. Retain operational control.
2.) Do step (1) in a way that is compatible with the covenants in your patent agreements with Intel.
3.) Use the proceeds to finance your Fab in the US. When that FAB is Up-And-Running, transfer the rest of the shares to your partners.
4.) The Fab in the US will be your main Fab, will be your Fab for advanced µProcessors and GPUs (or Fusion, whatever that means). 32nm with 450mm wafers means plenty of chips. Probably, will allow AMD to serve 40% of the Advanced X86 Market.
5.) Let your partner in Germany manufacture yesteryear CPUs, GPUs and Chipsets.
That way the boys and girls at AMD can survive. Will there be anyone interested in grabbing those Fabs? YOU BET!
Hey Hector, if you need more details, you can hire me. Or Christensen. Or both of us! (or just leave a coment)
Some Clarifying notes:
· If you already heard the podcast, you know one of the companies exploring this is Intel, in FAB 17. They have so many Fabs that for the 32nm nodes and beyond, they will have excess capacity. That is part of the allure of Classmate PC, or Atom, increase the demand of TRANSISTORS (not µProcessors). As usual, Jon Sokes has a great article about it « Beyond the BlackBerry crowd: life in a post-32nm world ».
· Is AMD exploring this? We do not know. Besides, the application of the TPS in the Fabs at Dresden is a problem of the one who buys the Fabs, not AMD’s.
· The investors from Dubai got their 6% in AMD as an investment, in the same sense that my MBA was an investment. They are learning first-hand the Ins and Outs of the semiconductor business from a global player. If the company itself turns a profit later on or not is secondary. Please remember that not every day there is an opportunity to enter such an important company in such a big way, so if the heavens give you lemons, you make lemonade! I guess it would have been impossible for them to buy such a big stake in Intel, Philips, IBM or Samsung at that particular point in time.
· Chinese companies are sitting on 130µm technology (more or less, depending on the foundy). And European regulations are more lax towards China than the US’s, I bet many Chinese foundries would LOVE to get their hands on Dresden, even at a premium.
· Samsung acquiring AMD was my scenario of choice, now is in the second place. I meant to write an article about that, but there is no point now.
· I was thinking on doing an article about Intel’s AMT. Is not Active Management Technology, if that is what you think, but searching for it in the Net is not easy). Does the respectable audience want it? Let me know.
Posted by howling2929 at 11:12 PM
Sunday, May 11, 2008
Spark left us the following comment upon which I want to elaborate:
I was tossing this around. I also posted it on Robo's blog. What do you think?
We know this, obviously. The performance speaks for itself. I use the word “we” loosely, you make the stuff and know it well (as others on this site).
I know it because I buy the stuff a clock the shit out of it, and I’m personally invested.
Perhaps others, shall we say, possible future AMD investors/owners don’t, or even care? They may see an opportunity into buying into a world class, albeit 2nd class, semiconductor manufacturer.
These cash rich, technology/manufacturing/business poor countries are buying assets, big time. I see it all the time. A good percentage of the hotels in NYC are owned by Middle Eastern concerns looking for a business future when the oil runs out. A couple of billion is nothing to big oil money to buy into a fully operational big name semiconductor firm.
I’ll stick my neck out here, at the risk of loosing my head. Wrectors strategic long term goal is to make the company as attractive as possible to such prospective buyers.
The buyer(s) may see:
That AMD is quite capable of giving its competition a serious challenge, if not outright producing a better product. After all, they’ve done it before.
AMD not only comes with manufacturing capabilities with 2 FABs , but with also a world class graphics component, technically a one stop shop of an established world market in computing.
AMD also comes with a total platform solution, chipsets, laptops, and other marketable Intellectual Property, inclusive.
They have an established supply chain, market exposure, a broad customer base, and a competitive solution for the world’s top 500 HPC solutions. Additionally they have good, if not excellent performance, presently, in the 4P market.
They are slated to start construction on a new state of the art FAB with 1.2 billion dollars of government incentives in July of 2009.
They have open complaints against their main and only competitor, conceivably worth billions.
AMD has strategic allies abroad, the EU inclusive, and a relatively untapped market in the Middle East, where top performance would not be a factor, nor would unvarnished favoritism towards an Arab held company.
IBM is a major technology partner.
Wrector’s long term strategic goal of holding on to market share at all cost, an in house graphic component, competitive laptop solutions, major world market inroads, may indeed have a silver lining, after all. They could do it again, with a little help.
All they need to do is sell this to a buyer with deep pockets, who already owns an 8 percent stake, the entire middle east backing (read: trillions), and a dream of obtaining a world class facility for a miserable couple of billion.
At 6 to 7 bucks a share and under 4 billion in market cap, this might look like a goddamned bargain. Hey, Blackstone bought the Hilton chain for 26B, a nice buy, for private equity, choke change at 4 billion, for big Middle Eastern oil.
FTC, SEC, and other choke points you may ask? So, ultimately this rests in the hands of American political interest to force AMD to die? Nope, this time, unlike the Arab held World Port that failed, this one just may fly.
INTC licensing issues 49% is close to 51%, but not that close.
The slightest pissing hint of this would send AMD stock through the roof, double overnight in fact. We will know soon enough.
Just some food for thought.
AMD acquired by the Arabs, interesting topic:
We had a conversation in Investor Village about why China can not acquire AMD,due to the political influence of Intel, I think that this also applies to the Arabs, albeit not as much.
Regarding AMD's strategies, AMD's only problem of significance is the economies of scale disadvantage. Perhaps I should explain in broad strokes: The market for processors is global in nature, then the marketing investment to have a presence in the global market is relatively fixed, thus, greater number of products means smaller individual marketing cost. Most importantly, the research and development costs of working at nano-scales make sense only if the number of products will be huge, and the factory network becomes more capital intensive as a result of the increased difficulties of working at ever smaller nano-scales. This little company has demonstrated that with 1/5 of R&D budged can out-compete Intel in performance, that means that the problem is not how to do good enough global marketing, R&D, or top class Factories, the problem is that it doesn't have the scale to sustain a competitive parity.
Having clear what the real problem is, you see that AMD does something right: To hold on to market share at all costs. The ATI acquisition happened, in part, as a way to increase the scale of operations. Why is this a disaster? Because, according to me, it was the wrong way to increase scale, so wrong, that the net effect has been to reduce the scale:
- The role that ATI fullfills inside AMD was being fulfilled MORE effectively by nVidia and ATI competition
- At this point it is somewhat proved that there are no manufacturing synergies between ATI and AMD that could have emerged faster than in Joint Ventures.
- Regarding "Fusion", the concept was totally devalued when it was announced that it won't lead to higher performance but higher power efficiency: absolute graphics performance leads to higher premiums, better power efficiency is difficult to demonstrate and hard to monetize.
- AMD had the chance to launch the enthusiast and prosumer "coprocessor revolution" of graphic accelerators and physics/AI accelerators, a market where Intel couldn't have gotten to in at least three years, but it didn't, probably because nVidia was already a competitor.
- The acquisition distracted a financial position that could have been used to improve the core business
Probably, AMD is done for, because it went this absurd route of reducing scale (acquiring ATI) and devoting all resources to a good for nothing architecture (you can't have single-die quadcore semprons, you can't have fast enough high-end quadcores if they are single die, so, AMD is only able to participate in the low-performance quadcore segment, a very limited segment); thus, in its current predicament, it doesn't even have a project that could save it provided it gets the money. More Dubai, or any other country, funding could still happen, but not on sound investing reasons, but because government officials may be getting "a cut".
Posted by Eddie at 11:15 AM
Tuesday, May 06, 2008
AMD needs to more than double its market share to survive as a processor maker. This isn't the opinion of rival Intel, but AMD's own admission, in a court filing which forms part of an antitrust suit AMD is bringing against Intel.
At the end of 2007, AMD had 13 percent of the processor market, "less than half of what it requires to operate long-term as a sustainable business", the brief said, explaining that Intel's alleged efforts to shut the company out of the processor business had largely succeeded.
AMD seems to argue that Intel, understanding that AMD needs 25% of the market to be viable, made sure it never got there by whatever means, including illegal monopolistic practices. What is significant here, and it is mentioned in the article, is that processor customers care a great deal about long term viability of processor producers, thus, AMD is alienating further its customers by explaining that it is not viable, but perhaps it needs to do it because at this point, the normal business of the company are going nowhere and the last hope is the lawsuit.
I have repeatedly explained that AMD is not viable due to the economies of scale disadvantage to Intel. In that regard, I have criticized the ATI acquisition on the grounds that it turned nVidia from a great partner and supplier of complementary products, chipsets and motherboards which was pretty much forced by market realities to promote AMD-based computers rather than Intel-based ones into a powerful direct competitor while weakening the possibilities of the primary business by taking on the great financial burden of the acquisition, that is, the acquisition destroyed any possibility to solve the economies of scale gap, and this happened at times when the Virtual Gorilla was very healthy; on the other hand, it was clear that the ATI part of the company, that at most can pull its own weight, will not be capable of carrying the whole company forward. "Fusion"? if acquiring ATI doesn't lead to vastly superior performing General Purpose Processor/Graphics Processor combinations, it will clearly be game over for AMD. Since all the details of Fusion we know about today, nearly two years after the announcement of the acquisition, is that in its first incarnation it won't be vastly superior performing units, but at most better at power efficiency, we are to conclude that it is not nearly enough.
Regarding the recent spike from about $6.30 to over $7.15, I don't think it is due to information known by the public, that is, something may be going on that we, pedestrians, don't know anything about. I hear fools on the message boards saying that perhaps Wrector Ruinz will finally give some details about Asset Ligth (Smart?), or other speculation. I think those are fools because they miss the real point: There is no clarity whatsoever about what's going on at AMD and we are the last to get the information about it. Great that recently I have only taken $200 in positions on AMD, the little gamble (that now is worthless).
Posted by Eddie at 2:25 PM
Thursday, April 17, 2008
I am not invested in AMD anymore. Thank god!
I wrote a while ago that AMD is a reactive position and since its future is determined not by its own actions, but the actions of other entities, I think those entities have too greater advantages to get information about the real state of the company as compared to "pedestrian investors" such as myself. Not only I still think the company is not viable, but I see plenty of confirmation in the latest events that this crisis may be of bankruptcy.
However, I think that I could indulge in a little gamble, since AMD appreciated over $6 due to Intel's results that dispel the economic crisis in the processor market (which I still doubt as explained in "Intel good investment?"), made me think that at least a portion of Intel's good results involve market share gains on AMD. That, together with the rather soft reaction to the news of 10% workforce reduction and worse than anticipated quarter, indicate that what it is to be announced today is ugly, so, I went ahead and acquired 5 may @6 puts at $0.40, just a little gamble. I do not recommend to do this play for anything but amusement, 'cos the implied vol. of those puts is astronomical.
Speaking of which, the reason I am not blogging much is because I am losing interest on the market, I am downsizing all positions: This business of the impending recession/depression is uncharted territory, so, it is difficult to anticipate what is Wall Street going to do to protect its money. I don't think I can perceive emerging trends and make money because just like it happened with Bearn Stearns, deux et machina a big player shows up and intervenes making irrelevant the market trends work; since I am not a Wall St. insider, I fear it will not be possible for me to guess exactly how Wall Street is going to protect itself.
Posted by Eddie at 1:48 PM
Thursday, March 20, 2008
My investments are quietly tracking to prediction, I keep being busy, and still no inspiration to write about financial markets. My dear audience will have to bear with another off-topic article, also written in long flights while cris-crossing the U.S. I hope that since I will be talking about Silicon Valley and its companies, it would still catch a little of the attention of the people interested in investing in those companies.
I recently had a business trip to California. About the southern leg, I was so busy that I was barely able to squeeze a few hours to go to any touristic destination, and by chance it happened to be "Inspiration Point" in Corona Del Mar. That's quite an awesome place to watch a sunset. There I swam for the first time in the waters of the Pacific ocean, despite my friends' words of caution against swimming there without protection for the supposedly too cold water, but several months of adaptation to the really cold Chicago winter made it merely refreshing and relaxing after a busy day.
Anyway, I also had to go to the "Bay Area", and had the whole Sunday to go around. The first thing that really impressed me is how nice and cool the weather is all along the South Bay, and my friends who live up to Mountain View tell me that it is nice and cool year round, that only in San José and Silicon Valley itself it may get hot a few days in the summer, but that the South Bay area is cool all the time.
My businesses were substantially closer to the San José International Airport than to the San Francisco International, but since I am attracted to places with History and personality, I chose to go to the SFO instead. There is a very nice Creative Commons picture of the SFO passenger terminals by "druchoy" at flickr that I had seen a while ago,
that then I had the chance to see in real life from the plane when I arrived, at night, and with the benefit of more context. Anyway, my arrival to San Francisco couldn't be more auspicious, not only could I see the airport at night in full splendor, I was already sick of the warm/hot southern California weather and the lack of rain, but just arriving, there was a drizzle, so, I got welcomed by the city with everything I was yearning for: an uplifting aerial view of the city and Bay, cool/cold and humid weather.
In my initial plan, I wasn't going to rent a car, so, I took public transportation, but discovered that it is a rather tedious sequence of transfers to get to where I was going: You must take the train in the terminal that will take you to the Bart train, then you must take the Bart train in the direction of the city, once you are in San Bruno then transfer to a train in the opposite direction towards Millbrae... to then finally wait for the Caltrain and still spend about an hour without internet until you finally arrive to Mountain View; so, if you ever go through the SFO to Silicon Valley, rent a car!.
To me, the whole area between Tiburón and San José (Tiburón, Sausalito, Golden Gate Bridge, San Francisco, ..., Palo Alto (where the Stanford University is), Mountain View, Sunnyvale, Cupertino, Santa Clara and San José), feels like a very large University: The people is young, cultured, informal, nice to talk to, the radio plays eclectic music, shops are hip, and things are expensive, in all, an absolutely lovely place, although how expensive life is in the region really put me off. Another thing is that almost everybody uses Apple for computers and players, and it is nice that, at least in "Castro Street" in Mountain View, you have good free wi-fi courtesy of Google.
In case you are wondering, yes, I went to the Googleplex, it was within walking distance to where I was staying, and yes, I went walking there. The problem is that I didn't get past the receptionist, because when I arrived —on time!— to meet my partners, our business with Google was already done, so, I didn't get to know much about the place. When all of us were walking to the car in the visitors parking lot, I couldn't help but to notice how full it was, that there was a valet parking, an African American who sits below a round white tent with the Google colors. Ah!, and there were interesting license plate decorations, like a frame that said "Proud member of Pixar Animation Studios". On my insistence, we took a quick detour and went to AMD. The difference of atmosphere was more than noticeable, among other things the visitor lot was practically empty. Anyway, perhaps we arrived just at lunch time: I really wanted to see if I could get inside, so, I concocted a very goofy excuse: I presented myself to the receptionist as an investor who wanted to talk with someone in Investor Relations, naturally, the woman didn't do anything but tell me that it was lunch time and most people was out; so, I used and even more laughable "plan B": I told her that I was also an Engineer interested in working for the company, if someone from Human Resources could talk to me; then she said "Oh!, give me a minute and I will give you the telephone number of Human Resources so that you can set up an appointment". While she was doing that, I stared at the Ferrari formula 1 that they have at the entrance; the red really makes contrast with all the AMD Green in the building. By the way, I have always loved F1, but I have never seen up close a F1 car, it surprised me how small they are; I am not even 6 feet tall and still it seems it would be difficult for me to get into such small cockpit. On our way to San José, we went by the 101 to a place that has large buildings of Yahoo, WebEx, Intel, and Sun Microsystems. This large and beautiful Webex building set me off to think about what other products Webex makes, because it is unfathomable for me that a mediocre piece of junk used for remote collaboration has made so much money, leading me to think that or their customers are stupid, or the company somehow exploits the system; about the whole game of selling "puffware", about how startups ceased to be incubators of game-changing technologies to become hustlers that want to become as sexy a target for acquisition as possible; about the rat race of people living beyond their means in the opulence I was seeing... I will finish the thought in a minute.
By this time, I had already gone to the SFO to rent a car and driven back to Mountain View. You don't even need a GPS to go around the place, there is a freeway, the 101, that goes all along the South Bay, and if you don't want to drive freeways to get to know the place, you can drive along "El Camino Real", it is about 50% and 100% slower, with traffic lights, but I think the drive along "El Camino" is so scenic and nice to see the trees and shops, that it may even be worth it. You can open your window and breathe the air of the place, the freeway would be too noisy.
My friends wanted to go places like Larry Ellison's mansion, but I didn't feel inclined to do that, so, we split and I left with an old friend of mine who studies at Stanford to get to know San Francisco. It was Sunday in the late afternoon. I drove in "El Camino" for as long as she let me, but since we wanted to cross the Golden Gate before sunset, I took the 101. It is beautiful just before the bridge, there is a nice park, and after the bridge, the Golden Gate Vista Point. I went there not looking for photographs, but I must say that one hour before sunset, the view from there is spectacular: At the right, the Golden Gate bridge, below, the deep blue of the Bay waters, at the top, the light blue of the sky, and in the middle, a bright Yellow strip, the outline of San Francisco with its world-renowned skyscrapers. To improve upon perfection, we had dinner right on the shores of the bay in a restaurant in Sausalito, from where we could see the lights of the houses in Berkeley and Oakland already lit for the evening.
Now, I advise to arrive to San Francisco on Sunday at noon or so. Since typically the day you arrive to a city you don't do much in the way of businesses, you may go through the i80 to the island of Yerba Buena, and go around Treasure Island before continuing to Berkeley, to see the University, to then take the Richmond-San Rafael bridge (i580), and drive through the "Paradise Drive" (very winding road and not so well maintained, but still scenic) until you get to Tiburón or Sausalito, and from there, Vista Point, cross the Golden Gate, and enjoy nightlife in San Francisco, that is, the opposite direction of what I did. Doing this, you will have the rest of the week to hang around in Silicon Valley, go to Stanford, and do whatever your business may be.
After I left, while in the plane, I went on to meditate about all the people I met in my trip, the significance of technology for the economy of the region, and the whole region itself. It occurred to me that the people and companies based in there better be extraordinarily productive, because in almost any other place it would be way cheaper to do whatever it is they do, I was thinking of my friend who just bought a minuscule apartment for half a million and needs to keep paying her mortgage, but she is working on one of these startups that has just been acquired and the new owners set basically unrealistic revenue and profit schedules which mean that all the original employees are working mad hours; if they succeed, they just survive, if they don't, though luck, some more roadkills of the frenetic spin of mergers and acquisitions; unfortunately, it is a rat's race in which nothing of substance matters but the impression you cause on prospective buyers. I fear that very soon places in China and other countries that produce legions of excellent engineers are going to be overtaking Silicon Valley in innovation, it just doesn't make sense to develop an innovation there if it costs 20 times or more what it would cost to do it somewhere else, it makes me think whether I went there at the beginning of the decline.
Posted by Eddie at 11:40 PM
Sunday, March 16, 2008
The last post about Obama generated an intense interchange about public policies. This is a subject I don't want to write about , but I fear that I must, to provide adequate support to opinions that I hold that are not conventional.
I am a firm believer that power corrupts, and absolute power corrupts absolutely, therefore my approach to politics is to support minimization of government and maximization of the power of individuals and thus can claim to be Libertarian. But, just like Democracy is not a pack of wolves and a sheep deciding what to eat for dinner in an election by simple majority, the complete absence of coordination is not Liberty but the law of the jungle. Why am I so skeptical of Government?: Because Truth is elusive and relative, it is morally objectionable to impose one's Truth to others that don't share the same beliefs. There is some people that think that the solution, then, is to homogenize societies: All that share the same beliefs should segregate themselves from the rest; but then I have a strong objection against that principle: If every human life is valuable, then it should be that every one has something unique, and the celebration of that uniqueness must be among the most "humane" of pursuits. Furthermore, being a scientific/engineer myself, I clearly see how the creativity to crack mathematical incognitas or pose models of the Universe, and the creativity for invention are very directly correlated to independent thinking, that is, respect and promotion of doing the same thing differently until an objectively better way is found. Even more amazing, Nature has produced the most exquisitely diverse biological mechanisms by randomly mixing and matching genes (sexual recombination) and managing to actually benefit from predominantly (when seen individually) destructive errors in gene copying (mutations); that is, the uniqueness of combinations of genes is enough for Nature to do wonders, and errors are not only tolerated, but serve the positive function of "supercharging" the engine of diversity. On a final note about this subject, Evolution through Natural Selection does not have the slightest characters of hypothetical or unproven for me; I have done research on Artificial Intelligence (that is, how to help computers "learn") using so called "genetic algorithms", which are systems that begin by proposing multitudes of stupid hyphotesis, generated randomly, and have them compete for a chance to "reproduce" by combining their qualities with the qualities of other hypothesis in successive generations, that is, imitating Nature's Evolution through Natural Selection; not just "learning" actually happen, but Genetic Alogrithms as those used by John Koza has gotten to the point to generate inventions that have been patented. So, evolution through natural selection is actually a proven, quantifiable engineering technique based on the promotion of diversity; it turns out that Diversity is good not just in the Moral arena, but also in some practical matters.
What I mean by "classic" libertarianism, as codified in the U.S. Constitution + Bill of Rights, has always been for me the the Paradigm, but one must question whether the world has become qualitatively different in the last 50 years, 200+ after the framework was designed, so as to grant some updates to the classical framework. Must of "classic" Libertarianism assumes that individuals may face the consequences of their actions without disturbing other individuals. Today, the individuals are so interconnected, that it is virtually impossible to leave everyone on their own. In the last post, there was criticism of my stance that the only sensible approach towards health is universal, free of charge (meaning paid by the whole of society), care. Some have told me: "What about the drug abusers?, Why am I going to pay for their lack of responsibility towards themselves?" this is a good example: In principle, we should let the people who didn't have the restraint to not become addicts on their own, it is not our fault their problems, so, at first approximation, there is no justification to force responsible people to pay the expenses created by irresponsible people. The problem is that whether the responsible people wants it or not, indirectly or directly they end up "paying the bill", the reason, again, is that the world is too much interconnected. An opportunity to paraphrase JFK's words: A society that is not able to help the many who are poor [ stupid, irresponsible, crippled ] can not the save the few who are rich [ smart, resonsible, healthy ]. I come from a country where rich, competent people thought that they could segregate themselves from the poverty and misery around. For a while that's possible, but it becomes increasingly difficult, until such a system collapses under its own weight. Larger countries may think that they can protect their wealth from the misery that prevails in the rest of the world, but that is just not possible, it just takes longer for the collapse to happen, and when it happens, it usually ends up worse than what it would be had the adaptation began earlier. A system of health care primarily supplied through private institutions funded by private insurance naturally decays into a system for the management of disease, I mean: A system where disease is the primary generator of treatment business; universal, free care leads to see disease as a problem to be rooted out, hence a much more effective focus on prevention than treatment. I wonder what's the matter that people who would readily admit that just like it doesn't make much sense to have private courthouses and private judges (although market forces may help in Law Interpretation, the primary system for Law Interpretation must be the universal, free provided by the State ), can't understand so readily that the market forces generate distortions on public health, thus the primary means should be State-supplied. While I am at it, ditto for Education. In general, these three primary services, together with Defense, work best while their primary supplier is the State, given the interconnectedness of societies, private offerings in these areas can't be infinitely superior to the public, free offerings, therefore, very quickly the best of private offerings reach a quality limit that can only be improved by the improvement of the public offerings.
Regarding NAFTA, it seems nobody understood the subtlety that while I am all for it, at the same time have objections. Regarding free trade with Mexico, I have the objection that the impairment between the incomplete freedoms that Mexican workers enjoy and much better freedoms the U.S. workers enjoy mean that it is easier for companies to go exploit Mexican workers, thus, the exercise of freedoms to trade erodes the freedoms of workers in the U.S. while strengthening the exploitative system in Mexico. As a libertarian concerned with maximizing overall freedoms, the tradeoff is anything but evidently positive. The solution here is to improve the freedoms of Mexican workers. Do you see? Liberty's price is eternal vigilance, the smart libertarian defends liberty when the attacks are incipient, it is easier and cheaper to defend one's liberties by fighting the attacks on other people's liberties: Other people's liberties are the firewall that would protect our own. Words attributed to Martin Niemöller very succinctly describe the collapse of freedoms:
First they came for the communists, and I did not speak out—
because I was not a communist;
Then they came for the socialists, and I did not speak out—
because I was not a socialist;
Then they came for the trade unionists, and I did not speak out—
because I was not a trade unionist;
Then they came for the Jews, and I did not speak out—
because I was not a Jew;
Then they came for me—
and there was no one left to speak out for me.
Going back to my departure with classical libertarianism, the world is so densely interconnected that the only sensible approach is to provide assistance to those that either by irresponsibility, stupidity or sheer incapacity can't help themselves. Should that "help" be imposed?: No.
Unsurprisingly, it turns out that my principled approach actually works more efficiently in the real world. Take for instance drug addiction: The "classical" libertarianism prescribes an approach of "leave alone the abuser", because the drug abuse does not directly infringe on any of the liberties of non-abusers. Nevertheless leaving the drug addicts on their own lead to nasty problems, so, almost all countries fight addiction, and since one of the sources of addictions is the availability of drugs, enormous amounts of efforts are spent in fighting their availability (a mild form of imposing "help"). Furthermore, some countries actually criminalize drug addiction (meaning that some countries impose criminal penalties to activities inherent of addiction), another form of imposed help. But these impositions are as expensive as ineffective. On the other hand, it is proven that spending efforts into helping addicts to voluntarily get out of the vicious cycle of addiction is both effective and efficient. I prefer the apparent contradiction of calling myself libertarian and still support programs that help people deal with the consequences of their own irresponsibility than the hypocrisy of calling myself "libertarian" and support the criminalization of fundamentally private activities.
Classical libertarianism suggest that the first step towards helping with the problem is to strengthen individual responsibility. How is it possible to improve responsibility if the punishment for irresponsibility is diluted? that's a valid objection, just that drug addicts become a problem for themselves at the same time they become a problem for everyone else. I have somewhat concrete ideas about how to strengthen the instincts of responsibility, they had to do with breaking legal systems that "baby" people, excessive and abusive intromission of government into people's lives, this, in turn, goes to the heart of why this country turned into a litigious society, a problem that was mischaracterized as something to solve within the realm of Health Care Reform; but I won't succumb as usual to the temptation to write an article about something like infantilizing laws, irresponsible citizenry, and societal litigiousness inside an article about something like Liberties.
The war of ideologies already finished, Liberty won, hands down. There is universal evidence that the support and promotion of the value of uniqueness is the engine of progress. Since all other ideologies were defeated, the task of this generation is to perfect the classical model of liberties, and I suggest to begin with adaptations to the qualitative differences derived by the vastly superior degree of interconnectedness of contemporary world. It pleases me that the friendly politician I met several years ago, Barack Obama, who for some people appears to be friendly to even more government intromission, in reality strikes me as both a libertarian and a pragmatist, is making merits to become the most representative figure in this generation to resume the greatest tradition of this country: To have served at times as the beacon of Liberty for the rest of the world.
[ 1 ] The reason why I don't want to talk about this subject is because it is not suitable for the rushes of blog reading even if I were to do the work to document the thesis adequately. Not only that, I have the great disadvantage of it being improper of me to praise or criticize any concrete example of public policy of my host country
[ 2 ] About my usage of the word "State" for U.S. readers: In the U.S., "State" almost always refer to the non-federal, state-level; and "Government" is used in place for the concept of State, but the correct meaning of government is almost synonymous with the executive branch of what here is called "Governement". I know that it is impractical to use the proper meanings when talking about politics of the U.S. because then it becomes tedious to qualify issues as State-level or Federal level, but since I am not talking about U.S. policies, I use the proper meanings.
Posted by Eddie at 3:49 PM
Tuesday, March 04, 2008
I was reading yesterday the fellow blogger Marc Andreessen's [ tongue in cheek gesture :-) he is the co-founder of Netscape ] article "An hour and a half with Barack Obama", and I thought that I could do a better job [ really ]. It happens that I haven't donated him $10,000 nor even a single dollar, I even declined his request to help him hand out a few flyers, and probably we spoke less than a minute and a half total, but boy, I have great things to say about those ~90 seconds and the successive years.
It should have been the Fall of 2003 the day I met Barack Obama, but just like Andreessen begins his article with disclaimers, before relating to you this story, I need to say a few disclaimers of my own: I have been as opinionated in Politics as I am in technical matters, the problem is that my effectiveness as a political organizer led to my blacklisting by the incipient communist regime in my home country and my eventual departure, thus, being just a guest in the USA, I try not to discuss its policies nor its politics. After a long thought about it, I concluded that I can still relate my encounter with Mr. Obama without it being a distasteful intromision into U.S. politics, and there are some ideas that I think are novel, worthy of communicating.
Anyway, what happened was that I was walking around the corner of Madison and Western, a predominantly African American neighborhood, and there was someone handing out flyers, for what seemed like a political campaign. When I walked by this person, who turned out to be Barack Obama, he offered me a flyer, but I had to tell him that I couldn't accept it because I didn't vote. Immediately, Obama said something along the lines that that was deplorable, that without voting no improvements may happen, to which I replied that I agreed with him, but that I still couldn't vote 'cos I was just a "visa-student".
At this point, Mr. Obama was already intriguing to me, it was his demeanor that denoted great culture, it helped he didn't speak with the thick African American slang typical of Chicago. Then, Obama said something I couldn't possibly expect, like "Really?, my father met my mother when he was a visa student!". Although we were interrupting each other's business (I couldn't vote for him so there was no practical objective for him to speak with me, and I was fairly in a hurry), we still wanted to chat; perhaps just like for me it was interesting to out of the blue make an acquaintance with a very cultured gentleman in a notoriously rough neighborhood, for him it may have been refreshing to speak with a cultured Hispanic without accent; so I asked him where his father was from, "Kenya", he said, and I replied that I guessed it was very different from the monotony of most of the U.S., to which he asked whether I still liked this city, and I said that sure, Chicago was special, that it had a distinctive personality in so many ways; that I had discovered skills at Photography trying to capture the visuals of the city so that my friends back home could enjoy. By this time, I was totally misled into thinking that this guy I was talking to was running for some City Council or some ward as Alderman... to this day I still don't know what was he was running for. Anyway, he talked a little about the personality of the city, from the point of view of the communities of Chicago. By that time at least a minute and a half had passed and we had to go on our businesses. So, we shook hands and told our names.
I quickly forgot his exact name, I could only recall the strangeness of it. Although I forgot some details, this was memorable to me because this encounter made me feel proud to live in a place whose city politicians were very likable, modest, "down to earth" cultured people like the one I just met. I told a few friends about this encounter, but no one cared much about it nor knew him.
About a year later, I had a conversation with a friend of mine from New York, and he asked me if I had ever heard of a Democratic politician from Chicago, some "Barack Obama". This was after his insertion into superstardom orbit with his speech at the Democratic National Convention of 2004, of which I didn't know a thing at the time, so, ignoring why my friend was asking, I told him that I thought I did, that I met a black politician with a funny name running for Alderman or something, that they had to be the same person because there weren't so many names like that, and that yes, the guy had caused a really good impression, the whole thing. My friend then tells me that I must be wrong, 'cos that politician was already a State senator, that the reason why he was asking was his recent speech. I immediately went to watch the video on the Internet and had one of the most intense "OH MY GOD!" moments of awe in my life (Google for it, it is worth!).
One of the things it still surprises me about Obama is his authenticity. I mean, it isn't an efficient form of campaign to individually hand out fliers on a Chicago corner, a successful politician doesn't normally do that, unless s/he has a genuine desire to speak with people; our encounter illustrates this point.
Anyway, then it came his bid for the U.S. Senate, and then the publishing of "The Audacity of Hope". By that time, I still wasn't paying too much attention to Obama, until Newsweek publishes a long excerpt of "Audacity", one that dealt with his religious tribulations until he settled for his current Church. I was very pleasantly surprised a third time by Obama, being an agnostic myself, I tend to see Religion not much more than as a problem that engenders intolerance and a handicap for intelligence and progress, but reading Obama's accounts on the subject, about the significance and value of spiritualness, about how Churches could help positive social change, I appreciated that here there was someone with the intellectual depth to be able to not just elegantly walk on the very sharp edges of the subject of religion, but to also be actually persuasive about propositions that I have been opposed to most of my adult life; then I had to read the whole book.
Reading "Audacity", it emerges a more complete idea of who Obama is. I had the advantage to have actually spoken with him before his superstardom, so, when he speaks in "Audacity" about the ordeal of commuting to Washington through the O'Hare Airport rather than using his privileges as a Senator to use private jets so that he can talk to normal people, I have evidence to think that what he is saying is sincere, no bullshit. Another thing is that although he is fond of being in touch with actual people, he is not at all the kind of demagogue/populist that appeals to voter ignorance; on the contrary, he is in his own right an academic of highest caliber and best selling author who is not afraid of disagreeing with his political constituency on issues like abortion or foreign trade when the reasons are compelling; his political success stems from his ability to appeal to reason to bridge differences. Being successful at getting support from diverse constituencies that do not agree 100% with him, it is no surprise his evident success at garnering "bipartisan" support for his legislative initiatives.
The guy actually gave me a fourth "punch". I am not an U.S. citizen, so, it is a given that I can look at the U.S. from the outside; but I have been invited to look at it from the inside and have been always open and exposed to its culture and its essence , so, I think I have both perspectives, that's why I venture say that Obama's speech in Des Moines on Dec. 18 had a flash of greatness that really touched me:
[My opponent] will not be able to say that I wavered on something as fundamental as whether or not it is ok for America to torture — because it is never ok… I will close Guantanamo. I will restore habeas corpus… And I will lead the world to combat the common threats of the 21st century: nuclear weapons and terrorism; climate change and poverty; genocide and disease. And I will send once more a message to those yearning faces beyond our shores that says, "You matter to us. Your future is our future. And our moment is now.”We must remember the context in which this words were said. At the moment, Mr. Obama was nothing but the very long shot for the candidacy who had just become a not so very long shot. So, what is the point of demonstrating that you care for the "yearning faces beyond our shores", or that he cares for the "towelheads" accused of implications to the massacre of 9/11?. I think it is fair to say that the relationship between what happens to the accused in Guantanamo and what happens to the common citizen is perceived at best as abstract and remote by the vast majority of the citizens of this country, that the people probably supported the actions of the current administration in that regard, so, why antagonize something that is apparently popular for principles that are perhaps too nuanced for the common people to appreciate?; why did Obama said that at times he already was being criticized for not being a "true American"? Was it a blunder?
This is another example of apparent electoral inefficiency that reveals what Obama is about, and here I begin to speculate: The logical extension of the body of thesis of what Obama stands for is what the excerpt says, thus, I guess he thinks he would rather elevate the plane of discussion from the day to day bickering to the ultimate ideals he stands for, than trying to please everybody by being devoid of any meaningful stance that could be attacked. That is, he is going to be attacked sooner than later for everything, so its better to show the daring to express what he really stands for to come across as a principled candidate and force the opponents to risk coming across as unprincipled, cynic, mean spirited, to force them to accuse him of being a "hope monger".
I can't say that this is the "correct" electoral strategy because all over the world politicians are elected by spewing the bullshit their constituencies want to hear, I mean, for me, public policy issues have become hopelessly complex for ignorant citizenries that can't do anything but be manipulated; the greatness comes from not appealing to the low instincts of fear, envy, egotism, that have been proved efficient to win elections, but, at times the electorate seems to feel overwhelmed with primary concerns, to dare higher messages that are essentially generous and by actually making them prevail.
These words are not very original, in fact, compare unfavorably to others like those of John Kennedy's inaugural:
To those peoples in the huts and villages across the globe struggling to break the bonds of mass misery, we pledge our best efforts to help them help themselves, for whatever period is required—not because the Communists may be doing it, not because we seek their votes, but because it is right. If a free society cannot help the many who are poor, it cannot save the few who are rich.Again, what makes them special is the context in which they were said: Kennedy wasn't risking anything by saying what he said, he already had won the whole thing and just needed to convey the idea of a grand beginning, Obama gives munition to the petty politicians in a very tight contest by aiming to objectives that may not be so popular, but are "right".
Another compelling thing about Obama is his intelligence. Take "Audacity", for instance: Is it a text of great literary value? I don't think so: It is not full of immortal "one-liners" nor anything of the sort, rather mundane things, at times it is even boring; but one must not fail to appreciate how fascinating it is his account of his most improbable role among the most powerful political entity the world has ever seen (the U.S.A.). Being a scientist/engineer myself, I took notice of the reiteration of this quality of being the "odd ball" that Obama has experienced his whole life: The improbable relation between his mother and father, his early life in Hawaii and Indonesia, growing up in mainstream U.S. not being white nor black, his religious doubts, his descent to organize communities in the the Chicago rings of poverty from the academic heights of the presidency of Harvard Law Review to his posterior ascent to the world wide prime stage is almost mythical, an invitation to think about Karmic fate, but more concretely his perennial oddity tells me volumes about the intellectual tools this person possesses: The good skeptic gets to deeper truths than the dogmatic, not being able to take things for granted, the misfit is forced to synthesize the elements of his success. Obama has walked the sharp edges of the great matters of life his whole life, well, "Audacity" demonstrates how good he became at it. Needless to say it, those are greatly desirable qualities for people in positions of great power.
Obama's increasing chances made me think about change, reforms and revolutions. Of the great processes of change in History, it seems that the most perdurable and profound are those initiated by insiders/outsiders: If complete outsiders begin a process of change, the momentum gets consumed in the replacement of the incumbent oligarchy, the ideals dilute due to the practicalities of consolidating power; if complete insiders initiate a reform, it tends to be "Gattopardian", things change so that everything remains the same. There is one notable partial counterexample, though, which is the History of the "American Revolution", that consolidated itself by radicalizing its principles, but anyway, when a reform gets initiated by the inside it gets better chances. Also, profound reforms initiated by the inside may lead to the collapse of the whole system, as it happened with the Soviet Union, here it is critical how good the leadership is to assess how far the system can move without breaking.
Paradoxically, South America is suffering a contagious infection of neo communism, so everything that smells to "progressiveness" (what is commonly understood as "liberal" in the U.S. is referred to as "progressive" elsewhere), that is, Obama, is seen as an ally of the neo communism while in fact it may be its deadliest enemy: His election would demonstrate that the U.S. is not an exploitative empire, communists would not be able to chalk everything bad that happens in the world to the "evil" U.S., they would have to accept more responsibility in their failures, demagogy becomes harder; this is what I try to explain to my friends there. I don't know much about the Islamic world, but the same principle I see clearly where I come from may apply to the Islamic world...
It gives me great delight that Mr. Obama and I are almost neighbors, we live less than half a mile apart, and frequently there is no detour to go by his place when I go home, which gives me plenty of opportunities to entertain my friends with this anecdote. Also, my wife is a Ph.D. candidate at the UoC where he used to teach; so there are several links that have me come closer to his figure; please excuse my lack of objectiveness, but before dismissing my
enthusiasm as just rooting for the local team, I encourage you to get to know him better. It happened to me that the more I learned about him, the more amazed I became.
Posted by Eddie at 5:50 PM
Monday, March 03, 2008
This blog began in January of 2006.
When I got some money to invest in the stock market in November of 2005, I discovered the very active community around the Yahoo message board for AMD, and began to participate there with intensity. The usefulness of the board indicated what was lacking: There were some propositions that I was thinking about that I didn't know how to summarize into items suitable for fora; and fora illustrates the need for reference material. On the other hand, and I don't feel any guilt or embarrassment to say it, Sharikou's blog demonstrated how far a blog could go. So, I decided to experiment with the concepts of blogs, and began to publish articles here.
At the beginning, I got to be popular really fast, hundreds of repeating visitors per day. The reason is clear: This blog was part of the system that made AMD's euphoria to resonate in technophile circles. Once AMD crashed, the credibility for my opinions and this blog crashed along with it. Fortunately, a core of readers kept coming back, perhaps because a minimum of readers realized that while I was very opinionated and arrogant, at least I never compromised in intellectual honesty.
Since a core audience never abandoned this project, I eventually came to appreciate that I should just continue with it, to continue to improve the quality of what I write; the part that gets me enthusiastic about you, the audience, is that you are neither mindless AMD cheerleaders (you would have left long ago), nor mindless AMD bashers, 'cos mindless bashers wouldn't ever respect the opinions of someone who used to be as optimistic on AMD as I was. Furthermore, the audience of this blogs tolerates the change of opinion form one extreme to the other. That is remarkable, to have filtered an audience from the cacophony of the internet to people who respects opinions.
I wanted to explain why I am so proud.
Anyway, lately I have been particularly busy with professional engagements, and as I said I would do, I reduced my positions on AMD to a minimum (due to the lack of clarity and ample opportunities the big players will have to manipulate this price), to construct a not so speculative and not so big bullish-Intel/bearish-Market combo, so, I have been sort of taking a vacation on the market lately. There are a large number of things to talk about, though. Perhaps I will squeeze the chances to actually write them, just that it has been over a month since my last post and I don't want to create uncertainty about the future of this project. It has been over two years, and I can see how much the constant effort of writing has improved my skills to get information and present that information, like I said, I very much appreciate the audience, so, this project has increased its importance for me; just that I can't keep the usual rythm in times my business are doing so well.
Posted by Eddie at 5:03 PM
Monday, January 28, 2008
Long time no write!
I have been quite absorbed with work, and have no energy left... but, I think I would be nice to let you know that I am alive and well, and, well, post a little something.
This links comes from a more reputable sources than those we see in some blogs:
Here, an antitrust lawyer (a real lawyer) discuses the implications of the antitrust lawsuits against Intel. Pretty much self explanatory, just to dispel the confusion brouth to you by "some other blogs".
(Proud member of the IEEE for 14 years!)
Posted by howling2929 at 8:21 PM
Thursday, January 24, 2008
The Acquisition of MySQL by Sun finally gives me something positive to blog about, I will try to explain in good detail why I think this is an excellent move by Sun.
Sun doesn't want to make most of its money from Hardware. They don't want to sell software either. What they want is to use their Hardware and Software products as marketing drivers for their services. The expenses in both categories pale in comparison with the amount of work and expenses needed to have hardware and software running smoothly in large configurations. To be able to effectively help companies to have smooth systems is something Sun is increasingly good at, therefore, their prospects look promising there and it is natural to be on the look for acquisitions to strengthen the company position.
People who has done Systems Administration probably would agree with me that Free/Open Source software gives you the feeling of being little bit "raw", or intimidating to people who is not master of a given package. This is where experience is valuable and companies such as Sun may provide assistance. On the other hand, once you are past what I call the "infantile mortality region" of the learning curve (when you do not have enough understanding of the software to make it useful for your purposes), Free/Open Source is much better than proprietary software: it does not imposes its policies on you. Proprietary software forces you to accept its policies, beginning with the "shrinkwrap" license on. For large organizations, that have non-mainstream requirements, frequently proprietary becomes increasingly frustrating, the "zealotry" of protecting licenses and stuff makes it much more complex to use third-party tools to assure corporate-wide compliance to policies, that is, proprietary software may become an obstacle for selling products and services that a compay such as Sun provide.
I think Java provides a good example to explain the principles that justify the MySQL acquisition. This wasn't obvious to me, it took me several years to understand how or why Sun may make money off things like Java, that are Free with capital F: In continuation with what I described above, Free software helps a vendor to create a free marketplace where products and services move fast [ free marketplace => market liquidity => efficiency ] where the best positioned vendor enjoys several advantages, and the best positioned vendor tends strongly to be the originator of the free software. I would say that while Sun invented Java, it didn't realize its full potential until recently, because, as I explain in "multiple personality complex" [ old enough to be the sixth article in this blog ], the original strategical role that Java was supposed to fulfill was ill-conceived: My interpretatin of "Code once, run anywhere" was old Sun's master plan to bite into the mindshare of software developers who only developed for x86 and where slighting Sun's hardware, but what really happened was that the few developers for Sun's boutique platforms used Java to free themselves of Sun's platforms [ I would say that Sun felt secure of its platforms 'cos Java would mean a significant increase in computing capabilities demand for the same software, therefore their reasoning could have been that software migrations to Java would be accompanied by hardware upgrades, since Sun commanded the high-ground, Java would highlight Sun's competitive strengths ]. I got to understand all the potential (for Sun) of Java not by looking at Sun, but becoming aware of how IBM had outcompeted Sun in the Java arena. From late 2001 up until late 2003 I worked heavily with Java, and I think this was a period of particular significance because it marked the sunset of IBM's Visual Age and the sunrise of Eclipse/Websphere while Sun was merely repackaging Forte as Netbeans. First, it came the observation that IBM had outcompeted Sun at Java, since the fact was very weird to me, it made me meditate long about how come IBM embraced so wholeheartedly a direct competitor's key product and turned it to its advantage. I had the advantage of a fairly good understanding of what IBM was looking for by embracing Linux, so, I was able to come to a conclusion by early 2006, soon after I wrote "multiple personality complex" [ like I said, it literally took me years! ]
It is nearly indisputable that IBM's transformation from a Hardware company into a Software services one was the success story of the 90's. Sun is also going that route, so, it is important to continue to discuss what IBM did. One of the key elements of that transformation was the development of a free marketplace where offering the services IBM could offer made sense, that's why IBM leveraged its participation in thus far compartmentalized markets such as PCs, Client/Server workstations and mainframes into a continuum of offerings. To accomplish this, IBM needed "glue" to hold things together when the customer wanted to shift gears up (or down) in scale, techniques focused on scalability. From old times, Virtualization, so that applications could be moved upward or downward without trauma. Settling on Linux for the Operating System wherever possible, because Linux runs well enough from embedded devices to mainframes, so that the Operating System won't become a problem, and Java for the applications themselves: "Code once, run anywhere". Since the PC market is a free enough marketplace already, it makes total sense for IBM to get rid of it if the corporate energines are better spent elsewhere, thus the selling of that business to Lenovo.
Coming back to Sun, now it is clear why Sun helps to develop its own market of services through not just Java, but Free/Open Source databases such as PostgresSQL and continued participation on proprietary databases alliances like IBM's DB2, Oracle and MS SQL Server, the whole point is that the database choice shouldn't be an obstacle. Just like the Operating System shouldn't: to continue to offer Solaris, the continued participation in directly competing Linux, and even Windows!. More recently, new offerings in Virtualization and now the acquisition of MySQL.
I would say that Sun's realization of these ideas was incremental, things like open sourcing Solaris could have happened much sooner, but I think they played a role in selecting Jonathan Schwartz as CEO, and by the time Schwartz was appointed the plan was very clear.
I read Dvorak's severely critical "The Sun-MySQL deal stinks" blog on the subject, and while I think he missed the whole point (I think beloved Dvorak wouldn't understand why Sun insists on Java either), he has provided me with the most convincing argument that Sun had a coup with the acquisition. I have to paraphrase and summarize his blog: The acquisition stinks because MySQL is far outside of the core competencies of Sun, so, the billion dollars will "simply vanish over time" together with the strength of MySQL. Dvorak suggests that since the great beneficiary of a dead MySQL is Oracle, Oracle would be using Sun through their long lasting partnership as its "stooge to do the job" of killing MySQL. One of the points that Dvorak wants to highlight is that Oracle is killing MySQL on the cheap by preventing a bidding war between interested parties: those interested in killing MySQL such as Oracle and Microsoft, and interested parties in its continued existence such as Google and Yahoo. I think that a monumental biding war for MySQL could indeed have happened, so, Dvorak's argument assures me that Sun did a great deal.
As to why the MySQL people sold themselves on the cheap, I am not sure, but it must has to do with two things: 1) Just like Microsoft is famous for acquiring companies just to kill their incipient competing products, MySQL's value for Microsoft and Oracle is "how much does it cost to kill it?", and "if we kill it, how much more could we exploit markets before an alternative fills the void MySQL would leave?", so, I guess companies with "ill intentions" to acquire MySQL have a tougher negotiation ahead for not so great benefits; and 2) Net customers such as Yahoo or Google may not have the willingness to develop the product or its market, so, the value to them is not so high. But Sun is particularly well positioned to make the most of MySQL on both senses: On behalf of its customers who want good and cheap databases, and on behalf of MySQL in terms of product development and corporate backing; this happened with IBM/Linux to the great benefit of the Industry and all the parties concerned, this acquisition will go the same route.
Posted by Eddie at 12:34 PM
Tuesday, January 15, 2008
I have been downsizing my AMD positions because, as I explained before, when a technology company is in dire straits, it is in a reactive position that makes it so much easier to manipulate the stock price. I don't like to be at the end of the line of important information.
Anyway, what I did with the money was to put it in other companies such as Intel. A mistake. I had a nice moderate bearish bias in my portfolio 'cos I was bearish on AMD, my main investment. I lost that bearish bias 'cos I haven't found good candidates to take bearish positions on, so, I turned bullish the market just before the market crashed, and Intel has done horribly wrong lately, so, I am really "hurt".
"Year to date", AMD is down 20%, Intc 15%, the Nasdaq 10% and the Dow Jones 5%, approximately. So, the talk of recession has really hurt Intel, but is Intel really vulnerable?
Intel has just gotten rid of a major competitor that put a clamp on profits, the worst (for Intel) of having Chimpzilla doing great products like the Athlon 64 X2 that force you to compete with gigantic cache memories in your Netburst lineup, is not that you lose market share itself, there isn't much difference between 85% or 70%, the real difference is that you lose monopoly status, and to prevent or recover lost market share you must lower prices. Since the attack was all across the board, the profit cuts where universal.
I wrote an article that now sounds very silly, but that illustrates this point. In March of 2006 I thought Intel wasn't going to succeed with the price war, and I wrote why. The prediction turned out the opposite because Intel managed to come back in great fashion and in great strides with the Core micro architecture line up, that is, outright superior products. The key are the superior products. Since Intel is at the brink of not having to concern itself with what AMD may do, it is close to once again be free to exploit the market at will, that translates to monopolistic profits.
In another area, Intel has been executing superbly. It succeeded at the challenge of bringing massive amounts of Core products and getting rid of the "Himalayan Mountain" of Netburst inventories, and the new families of products, with the advancements of transistors with metal gates and high dielectric constant field effect insulators so, from the execution point of view, shinning days lay ahead.
Having literally marginalized the competition to the scraps it leaves and being particularly strong in future prospects, product wise, the current Intel stock price is even lower in absolute terms to the price it had in early 2006, before the market fully realized that the K8 micro architecture was vastly superior to anything Intel was offering, thus, to understand the current valuation of Intel one must suppose that The Market thinks the business prospects for Intel are much worse today.
But are they? A significant component of Intel products are not consumers but business, the processors are a practical need that is not elective like, let's say, iPods. Its market is global. Part of its production is in the U.S. and part is outside. While Intel would surely be affected by an U.S. recession, or even a global recession induced by an U.S. recession, all of my analysis indicates that it should track way above the market, because it has more than average advantages and strengths to undergo a recessive period. Since Intel is much below the market in the beginning of this year, in my opinion a contradiction has showed up that I intend to exploit: Intel must not just catch up to the Nasdaq and Dow Jones, it must give better returns (or not as bad). Since there is already a 7%+ difference between Intel and the indexes, the closing of that gap represents more than 3.5% gain potential doing sort of an arbitrage "bearish the market and bullish Intel" in equal amounts.
I also think it is bullshit that the market for semiconductors will track worse than the broad market, yesterday's IBM results are sort of a confirmation. Unfortunately, the market keeps disagreeing with me...
Posted by Eddie at 1:49 PM
Wednesday, January 09, 2008
George Soros, Morton Topfer, Mubadala and Chicagrafo: Who are they?
George Soros is a self-made billionaire that now runs an important Hedge Fund. A very successful investor, who developed a theory about how the Market exaggerates trends, how Market Value and market participants' perception feed each other until Valuation and reality diverge to a breaking point. Mr. Soros used this model for his most famous exploit, when he "bankrupted the Bank of England" short selling the Sterling Pound in September 1992: The facts were that the Pound was coupled to the other European currencies because of its participation in the European Exchange Rate Mechanism, but wouldn't have comparable rates of interest. The perception was that the Pound was strong enough to sort of live an independent life of its own. Soros had the conviction to short sell 10 G$ worth of pounds on the reasoning that something had to give, and when the pound was taken out of the European Exchange Rate Mechanism the devaluation gave Mr. Soros more than 1 G$ in profits.
Soro's model deals with emerging trends and exhausted trends. Most investors try to detect emerging trends that The Market will embrace, but what I found valuable about Soro's model is the other part, that when a trend is fully embraced by The Market, this "reflexivity" of market participants becoming aware of the trend become a positive feedback loop that makes market valuations to lose the sense of proportion. I venture to say that AMD's recent crash lost its sense of proportion, but I won't delve deeper about this subject in this article.
Morton Topfer sits at the AMD Board of Directors. He was vice Chairman of Dell and was an important executive at Motorola before that, presumably he got to know Dr. Ruiz while at Motorola.
Mubadala Development Company
Mubadala Development Company is a State Owned investment company.
And I am a commentator of the technology equity markets.
So, in this group there is representation for Hedge Funds and their managers, large investment companies, directors of publicly traded companies, and "pedestrian" investors.
What do we have in common?
We all have lost substantial amounts investing bull-side on AMD.
According to this site, George Soro's Hedge Fund bought AMD around $23 by the end of 9/2006 and sold around $21.6 by 12/2006. He insisted buying @ ~$15.5 by 3/2007 and sold by 9/2007 @ ~$13.4. This page documents the approximate value of $20 millions that Mr. Soros owned of AMD by 9/2006 in 782,600 shares, or over $24.85 per share. We know that he lost money because the stock price never went back to those levels after 9/2006. What was he looking for when he took bullish positions on AMD? perhaps the materialization of the Dell deal that finally broke Intel's exclusivity?
It is important to remember how highly coveted a customer Dell was for AMD before the deal, the ties to Dell of Mr. Topfer are not to be underestimated. In any case, Mr. Topfer purchased, out of his own pocket, 1.8 M$ in 28 Jul '06 (100,000 shares @ $18+ per share) and another $2 M$ in Nov. 06 (100,000 shares @ $20.85 per share) of which he gave up 100,000 shares in 24 Jul 2007 at a price of $15.07 and still has more than 100K shares...
The "poor" Mubadala company saw its 622 million dollars in AMD reduced to $271 millions (49 million shares at the current price of $5.53 per share), or less than 44% of what they began with...
As a matter of fact, AMD has attracted all kinds of investors (bull side) and almost all of them have lost money.
This company remains an anomaly among publicly traded companies being one that has net losses on its 30+ years of history.
There is something that has kept attracting investors to this siren call.
The point I am trying to make is very simple: While I made a terrible mistake, I realized I had screwed it up much sooner than Soros, Topfer, or Mubadala, despite my great disadvantages of only having access to freely available web sites and fora for investors to get the information to guide my investments. Why did I got ahead of them?: Because of my superior knowledge of the technology:
In July '2006 I advised to sell AMD while Soros was buying because I realized that the Core micro architecture was as good as Intel was advertising it, that AMD was in denial of the threat, and it won't have competitive products, this before knowing about the ATI acquisition.
The ATI acquisition was a very confusing factor for me, until by January 2007 I had assembled the whole puzzle (*) and got to the easy to understand conclusion that this acquisition is a blunder of suicide magnitude.
About the same time (*), I correctly interpreted the extended L2 cache latencies of 65nm K8 and their slow speeds as evidence of serious problems in the schedule of the 65nm process; furthermore, I acted with extreme conviction regarding the implications a bad 65nm process had for single-die quadcores, because I then understood that to commit the company to pursue a challenge as hard as the "triple challenge" [ single die quadcore/immature process/substantially different architecture simultaneously ] was another suicide-magnitude blunder.
Despite not having even a thread of information from inside AMD, much before Mr. Topfer sold half of his position, I was already sure that ATI acquisition won't ever pay off, and that Barcelona and Phenom were very mediocre products. Just like Mr. Richard, Mr. Topfer sold AMD before the shit hit the fan, before the launching of Barcelona, the first K10.
By the time Mubadala took a position on AMD, it was already very clear to me that this company is not viable.
Unfortunately, this chronology does not mention all the hesitation, tribulation and doubts I have experienced in the over two years I have been on AMD: At the beginning I had the extreme opinion that AMD was supposed to topple Intel not just in the technical leadership, but in the market too, took market positions as extreme as my opinions and lost equally extreme because the market and I disagreed from Feb '06 on regarding AMD. Ever since I had the "pessimistic" extreme opinion, AMD has declined fast, all right, but didn't crash as I expected, until recently, at a time that I wasn't prepared for. It is ironic that I turned out over-cautious when the crash really happened (from $12+ to $6-) because I still can't understand how is it that the market prices-in today information we knew as far back as August!
I really don't know what is the lesson to learn from this experience, but I am mulling over it.
(*) The blog articles linked were written much after the periods mentioned in the text. For me, it is easier to refer to articles that explain the ideas in their polished form, and for the reader perhaps it is also easier to read the polished version, but if I get requests to come out with incipient expressions of these ideas, I can dig my old posts in Investor Village about this subject. Some of them proved prescient, it is not that I am making wild claims of predictions, the record is there that among all the cacophony of opinions and my own flip-flopping I had the trends clear. I was always skeptical of the ATI acquisition but flip-flopped because I didn't really understand it and the Market and everybody else praised the gamble until I got to definitive conclusions; regarding the triple challenge, I still have problems to believe how irresponsible AMD's management had to be to go this path...
Posted by Eddie at 6:59 PM
Wednesday, January 02, 2008
Happy New Year.
Last time, when I spoke of the AMD Analysts Day, I tried to construct an interpretative framework to make the most of it. I said that the opinions of Management should be studied within the background of inviability, and I detailed how is it that AMD's management has over a year speaking of "perfect storms" rather than addressing the real problems. I am sorry to say that Management is still in denial of those problems, they just promised a better future for the company, but not at all how is it that it will improve, so, I begin to fear the worst. Normally, this would call for renewed conviction about bearish positions on AMD, but it is not so simple, as I try to explain:
Since recently it became evident for the Market that AMD is not viable, the stock price has collapsed very quickly. But there is an issue nagging me that I have not been able to explain: This AMD crash began right after Mubadala invested 622 M$ to acquire 8.1% of the company, that was announced in November 16. The price, rather than taking off from $12.64 per share, began the crash to today's low of $7.02. This does not make sense to me, because by November 16 we already knew in what disastrous shape the company was:
- We knew that Barcelona is not even in the same league as other Intel processors,
- that meant that the K10 design sucks,
- thus Phenom, its twin, was going to suck too.
- We knew that there were serious problems with the 65nm process, otherwise the speeds of introduction for the already very late Barcelona wouldn't be as abysmally low.
- Thus, we were perfectly aware that the single die quadcores were expensive to manufacture and would have to be sold very cheap
- We knew that the company was trying to hide all these problems behind outrageously optimistic promises
- We knew that Fusion continues to be very far in the horizon, and, despite being hyped as the second coming of Christ, Fusion is just a power efficient General Processing Processor/Graphics Processor package; hardly anything that would take the market by storm.
- We always knew that "Asset Light", or how it is now called, "Asset Smart" was 100% bullshit
- We always knew that AMD's Goodwill was inflated, it did not reflect the reality of the lost value of ATI
- We had reasons to expect some nasty "show stopper" bug in K10
- And we knew that the "Fat Lady" had already sung: The best shot AMD had, K10, had been fired and fizzled.
So, my concern is that the stock price collapse should have happened gradually, every time these items became more clear from April to October; the Mubadala acquisition of 8.1% of AMD turned out to be the most unlikely wake up call to the reality that AMD is not viable, I can't explain how is it that right after the Mubadala deal suddenly all the analysts began to seriously talk about the subject of AMD's inviability and to "connect the dots" mentioned above.
These coincidences make me think that the price was manipulated for most of 2007, otherwise it would not have remained above the absurd level of $12 per share in the face of extraordinary losses and uncompetitiveness. While the crash was happening, the company actually had a bit of positive news, the Mubadala injection of $622 was important, then there was the launch of the not so bad "Spider" platform, and the small vindication of the launching of the new series of graphics cards that closed the gap to nVidia a little bit. And the latest news are that the TLB bug is not as important as I initially thought, it has proven to be very difficult to replicate, so, people may as well forget about it, especially the Windows users that expect the system to crash every once in a while, so what does it matter that a processor bug makes it crash a couple of times per month?, and the Linux users for whom the Operating-System level patch does not hurt performance. Amd's Management didn't say anything new in the Analysts Day, they just repeated the same bullshit of a fictitious recovery they have been saying, so, that shouldn't be reason to continue to crash.
Although I am nearly sure that AMD will experience a very close encounter with Bankruptcy, I have reasons to think that the next round of manipulation will be bullish, thus my certainty does not translate into conviction to take bearish positons. The reason is very simple: AMD is in a reactive position, so, it must sort of "obey orders" from important market players. Those players have a great advantage over me about when the things are going to happen, so, by putting my money on AMD, either bull or bear side, I would just be exposing myself to be caught in the manipulation maelstrom.
I see that the manipulators have two important cards that they have not used yet:
- AMD has, apparently, succeeded at staving off questions about the inviability of its schedule of capital expenditures by saying that thanks to "Asset Light" or "Asset Smart" the company won't need as much money;
- And the manipulators may succeed at circulating rumours of an AMD acquisition now that the market cap is less than 4 G$.
The problem is that while most analysts and commentators insist on considering the possibility that AMD could sell factories to outsource most of its production, or the possibility of an acquisition, the dutiful investors of "Investor Village", "Yahoo Finance" and "Silicon Investor" knows better: AMD has important limitations on how much it can outsource production due to the x86 license, and the said license impedes a change of ownership too.
The conspicuous ignorance in the official press about the above subject is very suspicious to me, the ignorance, as it is today, helps the Bull case, to emphasize the licensing restrictions will emphasize the bear case.
So, the bottom line for me is that I should not have my money on AMD despite of being sure that my analysis of the fundamentals is correct: The closer the company is to bankruptcy, the more desperate the actions of the company, the better the information the manipulators have, and the easier the manipulation. The great crash that had to happen from above $12 to less than $10 already happened. Now that the price swung so much, the manipulators have an easier time to make it rebound on phony reasons, or to let it go further below, depending on their desires. Also, the less relevant AMD becomes, then Intel has better reasons to squeeze more profits. The way that I am going to ride this out this year is to unwind all my AMD positions with great patience, and trying to preserve the moderately bearish bias I've had after the price went below $9
Posted by Eddie at 3:44 PM