Monday, May 09, 2005

What's up...Doc!

Done some reading this weekend.

A lot happening in our wide world of tech. Problem is since I am growing old I don't remember everything I read.
Also a lot of banter on about the icon and housing market below.

Anyway things of interest in tech:

1) Machine enabled surgery demoed on TV this morning. A robot used for surgery. The surgeon uses remote control joysticks and looks into a 3D environment. The joysticks are finger precision and control arms that are very small. This means when operating the surgeon does not have to make incisions that are large enough to fit his hands. Also means since you make smaller incisions, you reduce chances of error and also complications.
Tech used: 3D projection, magnification, real time controllers, force feedback, and a lot of other stuff that I can't think of and don't know!

2) Lots of new phones and pda's being launched with mini drives in them. 4G is the norm at the moment. iPod dominance is at the verge of collapse.
Tip: Short aapl

3) First there was Huwaei from china. Now watch out for networking gear from the subcontinent. India's startup's are now moving out of India to sell there wears to the international market. Another blow to the networking market as some of the current networking mulitnationals struggle to maintain any traction.

For more gadget news check out this site and for a complete list of gadget sites check out the following link.

Ok other general news:
Blair makes it back into his seat with a reduced representation. The coalition of the willing continue to will!

A lot of chit chat about global markets. The US market continues to suffer from rising debt levels, trade deficits and account deficit's. Pressure on China to float their currency. Mixed feelings on how this will impact trade. They say the Chinese currency is 40% undervalued.

What could this mean for Australia? Firstly all imports from china go up 40%. Our exports become cheaper. Exports from Australia are metals and primary produce. Not sure how much primary china buys from us.
Ok so imports become more expensive, puts pressure on inflation. Question is by how much? I am not an economist so can't tell you. Just to remember that it adds to the pressure to rise interest rates.
More exports sold means more money coming into our economy, more jobs. Since most of our companies are internationally owned most of those earnings leave Australia anyway.
Ok so next question, where does the balance lie? If imports go up 40%, will the additional earnings from exports neutralize the effect by additional earnings and jobs?

My guess is, it won't in the long term. The number of jobs that need to be added to create more of a product is hardly ever a one to one ratio, i.e to increase output by 30% may mean an additional 10% in labor required.
The other issue, to increase production you need to buy more equipment, most of which is imported and thus eats into the additional earnings due to the weaker exchange rate.
The other issue is sustained demand. China has gone through some years of close to double digit growth. This is going to slow down and thus if their appetite for our exports reduces and they are not earning as much from exports, it could mean even further loss of revenue.
Hopefully cause our exports become cheaper they can continue buying the same amount in dollar value even if not in quantity. Our earnings remain the same but we slow down consumption of imported goods. Ok, now if quantity remains the same, no job increases and thus no additional money into the economy. Consumer spending will decrease and thus pressure on retailers and thus job reduction in that industry causes some more job loss which has a domino effect.
Increased prices means increased interest rates which means more pressure on families with large debt which means decreased spending which again impacts the economy.
Business spending will not be going up since there will be no autumnal demand for services or products. This will bring upon a cycle of cost reduction which means additional job cuts but investment into some new technology. Thus the reason to buy tech stocks.

Ok next question, if currency rate does not change? Impact will be felt by America and us since we will continue buying their cheap goods but they will not be buying ours since demand will come off. But from the above I said demand will come off anyway, so whets the dif? The dif is that the cheaper price will keep a level of demand which will allow for our biggest exporters to continue to earn relatively the same amount.
This is why there is so much pressure on them to float.

Ok, so why would they float when they know they don't need as much as our stuff and they can continue selling their stuff at prices we will keep buying at.
Yes good question my friend. Ok the reason is because this is when politics comes in. What the so called western world excel at.
America and Australia will protect local industry and rising debt levels by imposing trade embargos on Chinese products. The US have already started on this path to a small extent.
This will hurt them if those embargos will create less demand then the currency exchange rate might.
So they will have to find a compromise and ofcourse this is what the economists of the countries have to figure out. The Americans will want them to float as this is the best case for them.
The Chinese will not want a 40% price hike in their products since it will make them less competitive in the world arena since their inflation rates will be rising as well.
I think the Chinese will try to set a new peg rate to reach a compromise.

Lets see...should be interesting. Anyway end goal, look for a slowdown in Australian growth which has already been mentioned by the treasurer around budget time this year.

Ok impact to housing market. Should continue to cool off since job growth and wage growth come of the boil and interest rates may creep up slowly. What about the immigrant factor.
When the economy slows down and job growth slows down the number of immigrants allowed to enter also slows down since we restrict entry. But Australia requires more people to invest in Australia and open businesses so there may be a continued flow of immigrants who are previous business owners and want to establish in Australia. This is a small number which will not impact the majority of the housing market.
Ok so we know from last set of statistics that the biggest immigrant population is from England. They do have money to buy into our market since their market is so highly priced. What do they mean to the market? These are the people that will make sure the market has a soft landing in the areas of aus that are highly valued like Sydney. They will come out to get bargins not drive price higher since supply is now greater than demand since internal demand has died.
For the cheaper areas of Australia prices will remain the same or continue to grow i.e parts of QLD.

ok enough banter...on to next post.

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