Bull and Bear – an optimistic and pessimistic view of investment news. Today’s stories include: Apple’s incremental change; it’s good, but no revolution today, thank you. Intel heralds next big thing. UK bond yields pass 3 per cent. IEA warns of new, rather flat normal. Unemployment falls again but wages fall too
Apple’s incremental change; it’s good, but no revolution today, thank you.
Finger prints, a faster process, a better camera; it’s all good stuff, but hardly the tell-tale signs of a revolution.
If you like iPhones, and yours truly does – and to let you into a secret the contract of his current phone is up in December, meaning one of the new Apple iphones may be a Christmas present to himself – then the new products are all very interesting. The new iPhone 5s will offer a new way of doing security. Instead of those annoying passwords, which you sometimes type in wrong, the phone will recognise your finger print.
Wouldn’t it be great if all passwords were replaced by controls from a smart phone that uses finger prints instead of passwords. What a headache that would cure! But Apple is not offering to solve the problem of how you remember all those passwords – not yet anyway, merely to reduce the total number by one.
The 5S will come with an A7 chip, while the cheaper 5C will be available in green, yellow, pink or – and get this – white.
And so it goes on. Whether or not the list of specs is impressive is not actually the point. What matters is whether the apps that make use of the features offer users something special.
What Apple has not done is entered the cheap and cheerful end of the market. There is no product here to grab the lion’s share of the Chinese market, for example.
What the new features and their launches lacked was excitement, any pizzazz. Many may say that as a result the company has lost its edge; in a world with no Steve Jobs it has just become another tech, another supplier of consumer electronics.
But, as has been said here many times before, that is not the point either. The smart phone market is at that stage. It is hard to see how anyone can come up with something truly innovative. Smart phones can already tell you what the weather is doing, tell you what your friends are up to, let you watch TV, give you access to a rather large library called the world wide web. Short of providing hyper drive, or the ability to beam yourself up to the Star Ship Enterprise, it is hard to think of what features can now revolutionise this particular market.
But that does not mean the Apple growth miracle is over. We are merely waiting for the next big thing – and whether that be smart watches, TVs, driverless cars, or a new high speed train link to the moon, (HS3) don’t write Apple off until it launches its first product designed to be the next big thing.
Intel heralds next big thing
One of the contenders for the legend, new disruptive technology is what they call wearable devices. But does ‘wearable’ mean in-your-face fashion, or something altogether more subtle?
Intel has come up with a product aimed at the altogether more subtle end of the fashion market; that is to say really, really small chips. It calls them Quark chips, which presumably means they’re named after that even smaller particle that sits inside the atom, and helps to form protons and neutrons.
So what will these quark chips do – eventually? Well one idea is for smart bandages, and a pill or disposable sensor that you can swallow. Images of that 1960s film ‘The Fantastic Voyage’ are conjured up – that’s the one with Raquel Welch. Intel inside may take on a whole new meaning.
Intel’s CEO Brian Krzanich said at the announcement of these whizzy bits of technology: “Smartphones and tablets are not the end-state…The next wave of computing is still being defined. Wearable computers and sophisticated sensors and robotics are only some of the initial applications.”
Intel also banged on about Moore’s Law being alive and well, and announced its new chips to sit inside PCs. “I’m here to introduce the first 14-nanometer PC,” said Krzanich, adding: “Fourteen nanometers is here, it’s working, and will be shipping by the end of this year.” For your information, one nanometre is one thousand-millionth of a metre. PCs with this chip inside will be a lot faster than the current crop.
The point of mentioning all this techy stuff is to illustrate that it’s not just Apple and Google and co, Intel is at it too. It is all very dramatic, and the prize, among other things, is to dominate what is being called the internet of things – a prize that may be worth trillions of dollars.
And by the way, don’t write ARM off yet (no pun intended); a new smart watch was released the other day; this one called the Qualcomm Toq. It has a display that you can see in direct sunlight – which is supposed to be a very impressive, not to mention unique feature. The chip inside comes courtesy of ARM.
Whether ARM can compete with the mighty Intel as the internet of things takes off and the potential riches increases by at least one zero may prove to be one of the more interesting questions over the next few years.
UK bond yields pass 3 per cent
The yield on UK ten year bonds is 3.0 per cent at the time of writing. This is more than double the yield seen in August – when it fell to 1.44 per cent at one point.
The yield on corporate bonds has risen too, although there was a fall in the total issuance of corporate bonds in July. Stop there. That may seem quite significant – July saw fewer corporate bonds being issued. The explanation is pretty intriguing actually. It turns out that large companies are finding bank finance so attractive that they have been switching from bonds to the good old fashioned bank.
The reason for the surge in bond yields is pretty obvious, but not good for Mark Carney’s credibility. The markets don’t agree with his pessimistic prognosis for the economy. They don’t believe rates won’t be rising until 2016; they reckon a hike next year is more likely. To persuade them that he means business, Carney may need to kick off some more QE – except that fellow MPC members may agree with the markets, and won’t let him. The markets, for their part, reckon the MPC will vote their way – it is a kind of conspiracy of hawks.
There are wider implications. Any companies wishing to engage in a bit of mergers and acquisitions funded by leverage need to get in quick and take a leaf out Verizon’s book. That is why the final quarter of 2013 may see a big – very big – pick-up in M&A activity, which could drive share prices higher.
IEA warns of new, rather flat normal
“Until 2008 the UK had got used to our economy doubling in size every 25 years: unless action is taken it will now only double in size every 70 years,” says the Institute of Economic Affairs (IEA).
Its editorial director Philip Booth said: “People shouldn’t get too excited about better growth figures and recent forecasts from groups such as the OECD. We still have a long way to go before we recover the loss of output from the 2008 crash. Furthermore, the medium-term prospects for growth do not look healthy unless the government determinedly reduces government spending and regulation.”
The IEA says the UK is being hit by too much regulation, too much government spending, and too little credit flowing to households and businesses. It wants to see “radical supply-side measures.”
It asks this one rather depressing question: “Will flat-lining become normal?”
Hello, is there anyone out there? Has the IEA heard of technology? It is not regulation and government spending that stands in the way of growth. It is not free market policies alone that are going to create the foundations for higher growth. The biggest threat and opportunity right now is with technology – it may suck jobs out of the system, it may create new levels of wealth for all. A way has to be found to ensure the fruits of innovation benefit all, and not just some, and for one thing that means better education. If you believe in the idea of the NHS, and a free health service for all regardless of wealth, then in an age when cures for blindness, Alzheimer’s and cancer, and indeed the means to help people with what were once thought to have been debilitating injuries to walk again are being developed, taxes will need to rise.
Unemployment falls again but wages fall too
Well the countdown is still on. Mark Carney says interest rates won’t rise until UK unemployment falls to 7 per cent – actually even then he says they may not rise. According to the latest jobs stats, out – literally out about one minute before this item was written – UK unemployment fell from 7.8 per cent in the three months to June to 7.7 per cent in the three months to July. So we move one step closer. On the other hand, the ONS has been experimenting with data showing unemployment for just one month, as opposed to three month periods. In June, unemployment fell to 7.4 per cent – a point which got bulls and hawks alike most animated. In July, it was 7.7 per cent, however.
Also, between May to July 2012 and May to July 2013 total pay rose by just 1.1 per cent, and regular pay rose by 1.0 per cent. That is a blow, but not a surprising one – or is an unsurprising blow an oxymoron? In the three months to June total pay rose by 2.2 per cent. Data during the previous three month period was distorted by high levels of bonuses in April, as employers delayed payments to this tax year when taxes rates were lower.
These views and comments are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees