Bull and Bear – an optimistic and pessimistic view of investment news. Today’s stories include: Intel strikes a blow, while Apple gives ARM a leg up. If estate agents were turkeys could you say they just voted for Christmas? Carney rattled or just amused by MPs? Construction surges again
Intel strikes a blow, while Apple gives ARM a leg up
64 Bit may come to its aid, but Bay Trail may yet prove to be ARM’s undoing.
The markets were not impressed by the latest offerings from Apple revealed this week. But in writing off the new iPhone 5S with its A7 64 bit processor, they were being way too hasty. The point about 64 bit is that it is much more powerful than 32 bit, but until software is written making full use of that power, there isn’t much point. The software will follow, however. The criticism of the innovation comes from those who have problems seeing past the end of their nose.
And here is another point about the new 64 bit chip: it is another ARM product – or ARM design at least. ARM has not been sitting on its laurels, or indeed its hands. The new Apple product uses the ARMv8 architecture with its 64 bit operating capability. One of ARM’s weaknesses relative to, say, Intel has always been its profit margins – well, for this chip the margins are higher.
More significantly, the new A7 chip is not powerful enough to power a PC, but it is getting there. In other words, ARM technology is closing in on the PC business.
Here is one interesting contrast between ARM and Intel. ARM starts with efficient use of energy, and is gradually increasing the power of its technology. Intel starts with power, and is gradually improving the energy efficiency of its technology.
Intel has now announced its Bay Trail family of chips. This is the giant chip maker’s second attempt to grab a big slice of the tablet market; its first attempt – the Atom SoCs – did little more than scratch the surface of its intended market place.
Intel is making bold claims about the performance of its new chip versus ARM products. An ARM spokesman said in response: “Frankly we do not put any weight behind Intel’s benchmarking when they use compilers that are specially tuned to deliver better benchmark results on the x86 architecture. If you use standard production tools for building the common operating systems and applications, the story is different.” Err, in other words when Intel compares its chips to ARM’s it uses criteria that appears to be handpicked to emphasise Intel’s unique selling points – or that is what ARM is suggesting.
A key difference – perhaps it is THE key difference – between ARM and Intel, is that Intel makes its own chips, affording it higher profits and greater resources, but higher overheads. ARM designs are licensed out, giving customers more choice about whom they use as a supplier, and allowing ARM to focus on what it is good at – design. Presumably this approach makes ARM more nimble and more able to adjust to changing market requirements.
If the so-called the Internet of things and wearable technology prove to be as significant as many are predicting, then the potential rewards to both ARM and Intel are simply huge.
Who will win? Frankly the potential rewards on this one are so great, that it may be worth hedging your bets and going for both.
If estate agents were turkeys could you say they just voted for Christmas?
RICS stands for the Royal Institution of Chartered Surveyors, but it represents estate agents as well as surveyors. You would have thought that it was in the interests of its members that house prices go up and up and up.
“The Bank of England’s Financial Policy Committee should consider limiting annual house price inflation to five per cent in order to prevent another housing bubble, reckless bank lending and a dangerous build up in household debt,” said RICS in a statement published today.
RICS is recommending that the Bank of England implements new rules entailing caps on elements such as loan-to-value ratios, loan-to-income ratios, and mortgage durations, or imposing ceilings on the amount banks are permitted to lend, should prices exceed a given limit.
Apparently schemes just like these were introduced in Canada during Mark Carney’s tenure as head of the country’s central bank.
Joshua Miller, RICS senior economist, said: “The Bank of England now has the ability to take the froth out of future housing market booms, without having to resort to interest rate increases. Capping price growth at, say, five per cent is one way of doing this. This cap would send a clear and simple statement to the public and the banking sector, managing expectations as to how much future house prices are going to rise. We believe firmly anchored house price expectations would limit excessive risk taking and, as a result, limit an unsustainable rise in debt.”
RICS is a respected organisation, and is not inclined to hyperbole. The fact that it has made these recommendations even though arguably they do not serve the short term interest of all its members says much.
What the UK really needs of course is more houses. It need land prices to fall, so that even if house prices stay at current levels, the profits to builders can increase, encouraging more construction. The UK needs softer planning rules, and to be able to impose higher taxes on property/land lying idle.
Either way, the prognosis for house builders is pretty good. As for estate agents, trying to stop a housing bubble may feel as if it is akin to turkeys voting for Christmas, but in the long run a bubble is not in their interests either.
Just bear in mind, however, that whatever regulations have been imposed on Canada, many think its houses are overpriced and set to crash.
Carney rattled or just amused by MPs?
Yesterday Mark Carney had the pleasure of appearing before the UK Treasury Select Committee.
He was asked to defend forward guidance. “Overall, my view is that the announcements have reinforced recovery. It’s made policy more effective and more effective policy is stimulated at the margin,” he said.
But one thing did come from his grilling/chat. The committee’s chairman Andrew Tyrie tried to pin down Mark Carney on the difference between loosening and stimulated. For whatever reason, Mr Carney doesn’t like the word loosening. He prefers to talk about effectiveness. So what you might ask? Well for a two minute video showing Carney under the spotlight, and how he deals with Tyrie’s questioning (is he flustered or amused?), see this clip on YouTube.
Construction surges again
Actually, construction activity has surged by rather a lot. According to the ONS in Q2 of this year new orders in the construction industry were 19.8 per cent higher than in Q1 of this year. Okay, back in Q1 the weather was awful so that may have distorted the readings. But the volume of new orders is also estimated to have been 32.8 per cent higher than in Q2 2012.
In July the volume of monthly construction output increased by 2.2 per cent when compared with June 2013. “This increase,” says the ONS, “was predominantly due to a rise in new work (of 3.2 per cent) coupled with a small rise of 0.6 per cent in repair and maintenance.”
New housing saw its highest growth rate since Q3 2010 and its highest total volume since Q4 2007.
It’s good stuff, but new orders are especially encouraging. Don’t be surprised if the data continue to improve over the rest of this year.
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