Monday Sep 07, 2009

Gamma Ray Burst (GRB) = a bad day somewhere...

The worldwide economic downturn that accelerated in the year 2008 and 2009 certainly has caused problems for everyone.  The situation was caused by people and the remedy lies with people .  While the majority of people on Earth focus on the numerous everyday issues of our only known habitable planet, there are other people who think about problems beyond Earth.  Think beyond social, personal, government, economic, humanitarian, business and climate issues and try to solve the unknowns of the universe.

Astrophysicists think about problems that extend into the known universe.  I specifically say known universe because we do not fully know or understand what we don't know. Some questions may seem like nonsense, especially as applied to Earth. 

Imagine harnessing the energy of 1 single star over its lifetime.  How many stars are in the known universe? It's billions upon billions.  How many stars are within a single galaxy?  It's billions.  How many galaxys are in the known universe.  It's billions.  That's a huge amount of energy!  In fact the energy of 1 star is huge.  To comprehend what we know today about the universe can make the common persons head hurt.  To try to understand what we do not know or understand about the known universe makes all astrophysicists heads hurt every day.

Speaking of energy there is a distant binary star (WR104 - see video clip above) 8000 light years away that will eventually go supernova when the star cores collapse.  If events align right a gamma ray burst can result which is the known mother of all luminous electromagnetic events in the universe.  In addition it appears that one end of the gamma ray burst beam, which will exit from the polar ends of the rotating star could be pointing directly at Earth. 

Perfect alignment of two large objects 8000 light years away with a narrow beam of 12 degrees in an expanding universe is possible, but I feel that issues such as global warming are better near term problems to address.

Blog is available also at: http://bobporras.wordpress.com/

Monday Apr 27, 2009

Have you been watching the TED spread?

A picture is worth a 1000 words and it certainly resonates with the economic global meltdown this past year.  A red flag indicator on the economy is the TED spread.  This metric is an indicator of perrceived credit risk in the economy.  The TED spread tracks the difference between interest rates of interbank loans and short term T-Bills (government debt).  The difference is measured in basis points (bps). Unlike the economic recessions of the past, this spread skyrocketed universally across the globe rather than in specific countries.  Historical averages are usually below 50 bps so when the TED spread went over 450 bps in the Fall of 2008 there was no surprise what was happening in the world stock markets.  Click here to see a TED spread quote from Bloomberg.

While the TED spread has dropped in the first part of 2009, there certainly needs to be additional closure of the spread in order to get back to historical averages. This will only happen, in my opinion, when credit flows normally once again.  There has been too many mixed messages on banks lending again (but to whom???) and being able to assign value on toxic assets that the banks are holding.  Until these two items can be cleared out, the one common solution for both is attracting private investors.

Consumer and private investor confidence is at an all time lowGovernment loans and stimulus packages globally all factor into where and what to invest.  Where have all the risk takers gone?  I certainly don't have the stomach to hedge in the current securites environment.  Even governments have retreated to purchasing safe, secure debt for investments so who can blame the private investors to be in a you lead and then I'll follow strategy.

Events got pretty scary last October when the TED spread peaked.  A money market fund defaulted, consumers were running on banks and many financial institution capitalizations were evaporating.  You could literally hear value being sucked out of the market and retreating to liquid assets.  Where did it all go?  It's like we had full balloons in a closed room and suddenly the balloons are all empty... but there is still the same amount of air in the room.  We just cannot find the air to blow the balloons back up again.  Reports have indicated that world banks have written off ~$900B (U.S. dollars) in toxic assets but there remains ~$3.1B still working its way through the system.  The TED spread will be watching...

This is where consumer confidence plays a huge factor. 


Blog is available also at: http://bobporras.wordpress.com/

Tuesday Feb 03, 2009

Follow the Ships in Singapore...

Flying into Singapore, one of the worlds largest ports, I noticed something odd.  There seemed to be too many ships anchored in the waters.  From the SwissHotel in Singapore you have a beautiful view of the port.  From this view you can also see the Singapore Flyer.  One rotation on this structure takes 30 minutes.  It is B-I-G.  Unfortunately it was closed as mechanical problems caused some people to get stuck at the top for several hours.  Not a pleasant thought if you don't like heights...  This Ferris wheel measures 571 feet (165m) in height!  During my attendance of Sun's TechDays 2009 in Singapore I spoke with a lot of developers and customers among the ~1300 that attended (see below).  During the event reception, on the 70th floor of the hotel, we had the backdrop of the port amongst several conversations (see below). 

I was speaking with folks about Singapore's Port Terminal and why so many ships at port.  I was not surprised to find out that many of the ships are short term moored, since imports and exports have slowed.  One individual told me that ship movements started to slow in October, then some more in November and plummeted in December.  The decrease in port activity is in direct correlation with the economic slow down worldwide.  Another person described the port activity as "crawling."  While activity may be off in Singapore's port, it still processes 1/5 of the worlds export/import containers and serves as an economic barometer in my view.  I noticed a large number of oil tankers in the port as well...  Short term mooring of vessels at Singapore is measured in days and it makes sense to stage vessels there-- especially if you consider the amount of throughput at this port.  One only needs to watch the ship activity at Singapore's port terminal to gauge if the world economy is getting better or worse.  No need to listen to all the analysts, experts, press, news feeds, ect.  Simply watch the ships in Singapore.

Moving up North to Tokyo I met with some customers in the mobile provider business.  I've been able to visibly see evidence that businesses world wide are interested in cost savings.  That does not necessarily mean stop spending, but rather spending to improve efficiencies via consolidation (cloud computing) and commoditized components (storage). 

It's rather scary to see more public companies report disappointing earnings and forecasts.  Benchmark companies such as Microsoft, Nokia, Toyota, LG, Lockhead, Sony, Hyundai, TSMC, GM, BofA, Barclays and HSBC have all slashed their outlook as well as stating reduction of operating costs.  One analyst quoted in the Financial Times has predicted trouble for some British banks who refused help from their government and may be over exposed to emerging market borrowers.  Some are speculating that these worldwide economic problems are accelerating computing away from the PC.  That means margin pressure for the businesses who center around this particular computing platform.  As PC computing moves more toward laptop to netbook to handhelds and thin clients, this will only accelerate the opportunity for those who can differentiate in the computing infrastructure environment.  This in my opinion is why the storage market and now the cloud market (virtulization 2.0) has become so visible.
Open sourced efforts will only gain momentum with a bad economy. The computing industry will become a low barrier to enter and exit among suppliers.  Look at the auto industry.  If you can drive a car your loyalty can move between any supplier.  The only way an auto manufacturer can “lock you in” is via your experience.  That is not so true in the IT industry today.  Apple does a great job today of keeping you as a customer because of the excellent experience with their products.  However look at Sony.  They had that edge previously, but commodity economics has caused Sony to retreat and regroup.  Customers are interested in solving new problems in different ways, especially if there is a savings in cost.  For example SATA disks and Solid State Disks (SSDs) combined can give you better performance than buying more expensive Fibre Channel 15K Disk Drives. If I give some quick thought as to what the IT commoditization order looks like I would list it as:

  1. memory
  2. processor
  3. networking
  4. operating system
  5. storage
  6. database

Items 1,2 and 3 are in advanced stages of being a commodity.  Items 4, 5, and 6 are early or accelerating stages of being commoditized.  In an accelerating economy leaders of new innovation who commoditize technology are usually venture backed private firms.  In a deteriorating economy the leaders of new innovation tend to be publicly traded entities who have the expertise to combine technology into new solutions.  Also it's important to not be squeamish on changing the business model for these new solutions.

In Tokyo a fellow colleague asked me how the economy was in the U.S.  I asked him has he been reading the papers or watching the news to which he said "yes."  He then told me he wanted to hear it first hand from someone in the U.S.  I asked him why and he stated that he still finds it unbelievable that the downturn is world wide.  It's obvious to him in Japan and he's living it, but the other economy woes worldwide are only news to him and difficult to fathom.   Having seen the downturn firsthand around the globe I don't need to ask anyone.

Keep innovating, keep commoditizing... the time is ripe for opportunity.


Tuesday Nov 25, 2008

The World Economy is a Turtle...

One would have to be pretty insulated to be oblivious to all the economic troubles throughout the world.   In the last 2 months I have visited Brazil, China and India and the economic impact in each country is amazing.  A year ago in India I was amazed at the Bombay stock index surge and the feverish pace in Beijing preparing for the Olympics.  Who would have thought back then that in one year things would be completely the opposite.  The credit crunch has hit consumer confidence throughout the world.  Banks are not lending.  Even private equity is hard to come by and the terms are not very attractive.  Consumer spending has decreased significantly.  Have you noticed the price of oil as of late?  Some countries that were surging on oil profits are now unable to sustain their economy which was built up over the past few years.  Selling out oil futures for the next 12-18 months is not something that is usually done.  There is plenty of energy data out there.  In India and China you can read about government actions to start infrastructure projects in hopes of jump starting their economy once again.  Stock market reaction seems to be driven less on fundamentals and more on the factor of fear.  Fear that nobody knows where is the bottom of the decline.  What is going to cause a turnaround of the confidence of people to start spending once again?  I read that approximately 70% of most economies are driven by consumers.  Another major factor is the credit market for access to cash for businesses.  It's also true that consumers in some countries are addicted to being highly leveraged so they need access to credit to spend again.  The formula for fixing this appears to be pretty simple:

Mend = Lend + Spend

However getting the lend and spend to occur has been one of the hardest problems throughout the world.  Confidence is easy when things are going well, but confidence in difficult times really is something that doesn't come easy.  Private equity and the venture capitalists naturally will get more inflexible during economic contractions.  New funding rounds for startups are probably going to require new lead investors.  Banks throughout the world are not willing to release capital just yet.  Businesses and consumers all feel the contraction.

The world needs to extend it's arms, legs, tail and neck and start slowly walking forward again.  Staying in its shell means no progress regardless of where you may reside.  It really is a world issue to be solved. 


About

The blog of Bob Porras - Vice President, Data, Availability, Scalability & HPC for Sun Microsystems, Inc.

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