Amazing Volatility: Gold, Bitcoins and JGBs Hammered

The volatility of today’s financial markets has simply been breathtaking. 

As US stocks reached new record territory, gold prices had been slammed hard yesterday. Such irony comes in the face of the broadening confiscation of people’s savings by governments

Reports say that proposed liquidations by Cyprus and other crisis stricken euro nations in an attempt to raise funds.

From Reuters:

Gold posted its biggest one-day drop in nearly 2 months on Wednesday after Cyprus was forced to sell most of its gold reserves, but analysts said strong bullion buying by other central banks should underpin the price of the metal.

Investor fears over more gold sales by other debt-stricken euro zone members such as Portugal and Greece sent spot bullion prices down 1.7 percent on Wednesday, within striking distance of a 10-month low…

Cyprus, one of euro zone's smallest economies, has to sell excess gold reserves to raise around 400 million euros (341.2 million pounds) to help finance its part of its bailout, an assessment of Cypriot financing needs prepared by the European Commission showed.

As I have been saying all these liquidations narrative are just really part of the gold suppression scheme.

Analyst Alasdair Macleod points to studies which show that “substantial amounts of gold have been supplied into the markets by Western governments and their central banks” and on the Bank of England’s real holdings of gold as “only 60% of the gold in the Bank’s custody is actually monetary gold”

The genuine intent has been to justify more inflationism, such as the recent advice by the IMF to central bankers, in order  to preserve the untenable political status quo.

The capital flight and yield chasing phenomenon has also battered bitcoins, which has recently gone parabolic

Such selloffs from the recent frothy upswing as shown in the above chart should account for as normal profit taking—consequence from extreme yield chasing activities.

But since bitcoin is a virtual or digital currency and has been a product of decentralized spontaneous market order via technological innovations, they are likely subject to volatility from technology diffusion cycle or the S-Curve.

Unless structural deficiencies of the system will be exposed or if government successfully hacks into the system to adulterate, sabotage or control it, then diffusion cycle means that the bitcoin’s adaption will take time. The chart above demonstrates of the technology diffusion process or cycle.

So current bitcoin's volatility could be a symptom of the resistance to change from the marketplace or even attacks from mainstream, aside from of course, the outcome from intensive yield chasing brought about by distortions from financial repression.

And I would further add that so-called boom from Kuroda’s doubling of monetary base by 2014 has not been smooth sailing as seen by apologists. 

Japanese Government Bonds or JGBs have also been plagued by sharp gyrations.

JGBs have seen a sharp spike in yields over the last few days following an earlier boom. (charts from Bloomberg)

While I expect the bond boom to continue over the interim, eventually the BoJ's massive inflationism will force up interest rates that will make Japan's unwieldy debt loads susceptible to a crisis.

 

Such steep fluctuations reveal how global financial markets have been operating in a very treacherous environment.

Here Comes 3D Printed Cars

As part of the deepening of the information age, the 3D Printing revolution will affect large parts of today’s economy.

From Wired.com

Picture an assembly line not that isn’t made up of robotic arms spewing sparks to weld heavy steel, but a warehouse of plastic-spraying printers producing light, cheap and highly efficient automobiles.

If Jim Kor’s dream is realized, that’s exactly how the next generation of urban runabouts will be produced. His creation is called the Urbee 2 and it could revolutionize parts manufacturing while creating a cottage industry of small-batch automakers intent on challenging the status quo.

Urbee’s approach to maximum miles per gallon starts with lightweight construction – something that 3-D printing is particularly well suited for. The designers were able to focus more on the optimal automobile physics, rather than working to install a hyper efficient motor in a heavy steel-body automobile. As the Urbee shows, making a car with this technology has a slew of beneficial side effects.

Jim Kor is the engineering brains behind the Urbee. He’s designed tractors, buses, even commercial swimming pools. Between teaching classes, he heads Kor Ecologic, the firm responsible for the 3-D printed creation.

“We thought long and hard about doing a second one,” he says of the Urbee. “It’s been the right move.”

Kor and his team built the three-wheel, two-passenger vehicle at RedEye, an on-demand 3-D printing facility. The printers he uses create ABS plastic via Fused Deposition Modeling (FDM). The printer sprays molten polymer to build the chassis layer by microscopic layer until it arrives at the complete object. The machines are so automated that the building process they perform is known as “lights out” construction, meaning Kor uploads the design for a bumper, walk away, shut off the lights and leaves. A few hundred hours later, he’s got a bumper. The whole car – which is about 10 feet long – takes about 2,500 hours.

Pls. read the rest here.

The problem I see with the competition poised by 3D Printing could be that incumbent companies may lobby to impose regulatory obstacles (e.g. safety and energy standards, etc…) on them.

Nevertheless, 3D Printing seems yet at the fringe of the technology adaption cycle. (chart from evocator.org)

Mary Meeker on Web 2.0: Bet On Mobile And Social Networking Trends

GIGAOM.com showcases the projections of “Queen of the Net” or Morgan Stanley's Internet guru Mary Meeker.

All the following quotes from GIGAOM.com

Ms. Meeker first predicts the major dynamic:

"Two overwhelming trends that will affect consumers, the hardware/infrastructure industry and the commercial potential of the web: mobile and social networking."

Next is the evolution of the technology cycle from the Desktop to Mobile.


"The Morgan Stanley analyst says that the world is currently in the midst of the fifth major technology cycle of the past half a century. The previous four were the mainframe era of the 1950s and 60s, the mini-computer era of the 1970s and the desktop Internet era of the 80s. The current cycle is the era of the mobile Internet, she says — predicting that within the next five years “more users will connect to the Internet over mobile devices than desktop PCs.”

In addition, internet take up will increasingly migrate to the mobile spectrum.

"Meeker says that mobile Internet usage is ramping up substantially faster than desktop Internet usage did, a view she and her team arrived at by comparing the adoption rates of iPhone/iPod touch to that of AOL and Netscape in the early 1990s"

And in terms of application, connectivity is now largely driven real time via social networking platforms as email is gradually being dislodged as the main instrument of communication.

"On the social networking side, Meeker’s report notes that social network use is bigger than email in terms of both aggregate numbers of users and time spent, and is still growing rapidly. Social networking passed email in terms of time spent in 2007, hitting about 100 billion"

Another feature of the rapid adaption of technology would be the "creative destruction" as toll carriers lose ground on the increasing use of data.

"But that mobile boom will take its toll on carriers, Meeker says, because mobile Internet use is all about data."

As you can see the next set of "industrial" wreckage (and job losses) is already becoming palpable, as people (consumers) speedily migrate to new technologies to 'enhance' their web 2.0 based lifestyles.

This also means business models will likewise be changing, where those attuned to these changes are likely to benefit, while those who can't cope up with the swiftly altering consumer demand are likely to perish.

This only implies a deepening transition to web based businesses as new industries are likely to be created.

"One of the implications of mobile access is a growth in ecommerce, says Meeker, featuring things such as location-based services, time-based offers, mobile coupons, push notifications, etc. In China, the success of social network Tencent proves that virtual goods can be a big business, she says — virtual goods sales accounted for $2.2 billion worth of the company’s revenue in 2009 and $24 in annual revenue per user. Online commerce and paid services made up 32 percent of mobile revenue in Japan in 2008, up from just 14 percent in 2000. Meeker’s report suggests that the rest of the world — which is still below the 14 percent-mark — could see much the same trajectory over the next 10 years.

Finally Ms. Meeker gives us where the revenue side is likely to emanate;

"Meeker says that users are more willing to pay for content on mobile devices than they are on desktops for a number of reasons, including:

* Easy-to-Use/Secure Payment Systems — embedded systems like carrier billing and iTunes allow real-time payment

* Small Price Tags -– most content and subscriptions carry sub-$5 price tags

* Walled Gardens Reduce Piracy -– content exists in proprietary environments, difficult to get pirated content onto mobile devices

* Established Store Fronts -– carrier decks and iTunes store allow easy discovery and purchase

* Personalization -– more important on mobiles than desktops

Read Ms. Meeker's presentation via GIGAOM.com

Ms. Meeker appears to be validating what we think as a massive shift in the wealth creating process, which had been predicted by Alvin and Heidi Toffler in Revolutionary Wealth,

The Tofflers: "Several forces have been converging to drive the acceleration needle of the gauge. The 1980s and '90s saw a global shift towards liberal economies and hypercompetition. Combine that with the eighteen-month doubling rate of semi-conductor chip power and you get near-instantaneous financial transactions. (Currency traders can find out about a trade within two hundred milliseconds of its completion.) Put differently, behind all these pressures is the historic move to a wealth system whose chief raw material-knowledge-can now move at nearly real-time speed. We live at a pace so hyper that the old law that "time is money" needs revision. Every interval of time is now worth more money than the last one because in principle if not practice, more wealth can be created during it."

Wonders of Market Innovation: Text-to-Speech Technology Reaches an Inflection Point

This is just one of the numerous examples of the miracles borne out of the marketplace mainly through technological innovation.

This from Ashlee Vance of the New York Times, (bold emphasis mine)

``Moore’s Law is a funny thing. Computing gear ticks along, getting faster and often cheaper at a steady rate. But, every now and then, we hit an inflection point where things change in a drastic fashion. Such is the case with the iPhone from Apple and with netbooks -– products that nailed the right recipe of horsepower, size and cost at the right time.

``In an article published Tuesday, I took a look at how iPhones and netbooks have disrupted not only the consumer electronics market but also health care. People with speech-impairing conditions like A.L.S., autism, Down syndrome and strokes have started to discover that general-purpose devices, equipped with downloadable text-to-speech software, can in many cases help them communicate better and more cheaply than the proprietary speech devices covered by Medicare and private health insurance.

Read the rest here
The S-Curve as shown above depicts of the technology breakthrough cycle or where "an inflection point where things change in a drastic fashion" as applied to the text-to-speech technology.

As explained by AVG Aerospace, ``The S-Curve figure illustrates both the evolution of a given technology, and the breakthrough event when a new, superior technology becomes viable. For a given technology, the evolution is as follows: Initial efforts result in little advancement and then the technology becomes successful. This success point, at the lower knee of the curve, is where the technology has finally demonstrated its utility. After this point significant progress and improvements are made as several embodiments are produced and the technology becomes widely established. Eventually, however, the physical limits of the technology are reached, and continued effort results in little additional advancement. This evolution (effort expended versus performance gains) takes the form of an S-Curve. To go beyond the limits of the top of a predecessor's S-Curve, a new alternative must be created. This new alternative will have its own S-curve and will eventually require yet another new approach to surpass its performance limits. The breakthrough event, is when the new method demonstrates its viability to exceed past the limits of its predecessor." (emphasis added)

A Future Race Between Energy and Technology For Market Leadership?

Bespoke Invest has another set of great charts shown below. They reveal of the fluid dynamics of the composite weightings of the S & P 500.

Since the latest rally, the mangled financial sector has made a significant move to regain some of its lost grounds.

Although what really caught our eyes is the seeming emergence of a new leadership seen in the technology sector.

From Bespoke, ``After representing nearly a quarter of the S&P 500 at its peak, the Financial sector's weighting in the index fell all the way to 8.88% on March 9th. Since then, however, the sector has regained some market share and now represents 11.78% of the index. This share gain of 32.66% is by far the biggest jump for any sector off the 3/9 lows. Consumer Discretionary increased its weighting by 11.34%, followed by Industrials (6.52%), Technology (3.24%), and Materials (0.32%) on the upside. The Energy sector has seen its representation in the S&P 500 fall the most during the rally with a decline of 12.27%. Telecom, Utilities, Consumer Staples, and Health Care are the other sectors with declines in market share. Technology still holds the title for the biggest sector at 18.15%, with Health Care in 2nd place and Consumer Staples and Energy in a race for 3rd." (bold highlight mine)

As presented in a table...

Bespoke also illustrates the historical trending of each sector of the S&P 500.

Adds Bespoke, ``Below is a historical look at S&P 500 weightings for each sector. The red line represents the average weighting for the sector since 1990. As shown, Financials moved sharply below average at the end of 2008, but have bounced slightly recently. Technology is just above its historical average, while Health Care and Energy are well above average but headed lower. Consumer Discretionary, Industrials, and Materials are below average but appear to be headed higher." (bold emphasis mine)


We have been looking at the energy and material sector as possible market leaders over the longer term since they've been depressed for quite sometime. (yes decades)

Nonetheless, technology has also been a downtrodden sector since the dot.com bust during the advent of the millienium. But given the rapid explosion of technological advances, it wouldn't be a surprise for this sector to have a shorter cycle relative to the others.

So a question popped into my mind, could the next bubble be a race between the energy and technology industry?

Stay tuned.

Technology: From Imagination to Reality (and Business Opportunities too!)

New Scientist suggests of “Ten sci-fi devices that could soon be in your hands ”(pictures from New Scientist)

1 Super-vision…

The Super-vision technology will be introduced by ``the Prism 200 which can detect people through a brick wall by firing off pulses of ultrawide-band radar and listening for returning echoes.”

2 Disappearing act…

Harry Potter’s ‘invisible cloak’ turns real based on the technology of steering electromagnetic waves by virtue of metamaterials!

3 Hands-free healing…

A band aid kit in the future will possibly include high-frequency sound waves based portable scanner that would not only spot internal injuries (e.g. torn arteries), “but also heal them in a flash.”

4 Spider vs gecko…

Spiderman technology or hair based nanotubes that may allow vertical “stick to the wall” movements!

5 You power…

Gadgets like pacemakers that can be implanted and powered by electricity generators from our heart!

6 Jet packs…

James Bond move over, personal rocket belt jets are coming!

7 My other car is a spaceship…

Space travel coming to reality?!

8. Breathe underwater

Swimming with artificial gills ala Man from Atlantis…

9 You speak, it translates

Forget language barriers. The evolving revolutionary technology in speech recognition and translation software is coming to close that gap!

10 Smell-o-vision

To make watching TV attain a vicarious experience, smell-o-vision will give off scents/smells that fit the scenes.

Our observations:

Technology, like any businesses undergo transformational cycles as they get accepted into our lifestyles (see above chart).

Such advances may dramatically progress if they are allowed to develop by means of competition and less regulation.

And dramatic improvements of technology should improve our lifestyles or business process flows the way the cellphones and the web has done (lower communication and transaction costs, ease of flow of communications or data, and etc.)

Moreover, technological progression also translates to huge potential investment opportunities, as the transformational cycle allows for greater diffusion of its application. In Austrian economics lingo: lengthening of the production structure.

Read the entire article and its gallery from New Scientist