Our protectionism against Chinese

The best illustration of a ridiculous the US congress is the tariff complaint on Chinese tires. When Chinese tires are priced out of the U.S. market due to the tariff, they are replaced by tires from other countries like Indonesia, Thailand... at higher prices and less quality (relatively) to the U.S. consumers.  With this tariff, we have not gained a SINGLE job. Some say that we gained a thousand jobs without including those jobs we lost in this deal. The U.S. tire companies do not compete in this low-end tire market. It is a lose-lose situation that we've been accustomed to.

The solar panel issue is another example. Most likely I expect the Chinese companies will open manufacturing plants in the U.S. like Toyota assembling cars here.

Politicians please take note: China is the most efficient manufacturer so far, even though there are other low-wage countries can replace China if labor cost is the only consideration. Again, a $20 per hour wage will never compete with a $2 per hour wage which would never be considered in the U.S. We should abandon such tariff complaints over low-wage manufacturing.

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Afterthoughts

As in last article, free trade can work. It is not feasible to grow sugar cane in Alaska. The tariff threat is the first step to start a trade war, as we cannot afford to make our banker angry.

We can compete with China in manufacturing quality products. Is it ironic that the major buyers of these products are Chinese consumers? It is due to the trustable quality and the boost of their social standing in buying U.S. products. When the Chinese wear the underwear outside, stuffs from Victory’s Secrets could be a hit in China. J

Links

Chinese tires:   

http://online.wsj.com/article/SB10001424052970204301404577171130489514146.html

Solar Panels:     

http://rendezvous.blogs.nytimes.com/2012/12/17/amid-global-trade-fight-a-bright-year-for-solar-use-in-the-u-s/?_r=1

Is Volt an angel or a devil?

Financially Volt is a disaster but it serves as a compliance car. It drove GM to the brink of bankruptcy – thanks to Chinese for saving GM. Without Volt, the investors of the new GM could make more money. The current owners of Volt do not have good resale values.

Estimate how many miles you drive in a year to calculate how much money you save in gasoline. Most likely it will not pay back the extra investment / maintenance (two drive trains until we have a pure electric car) / reliability, the extra electricity bills, the inconvenience of charging (your time as a Volt owner must be more expensive than the time of a Corolla driver), finding a qualified mechanic (except from the dealer who will charge you a bundle), the tickets for driving too slowly, the increased chance of hitting something due to no warning sound...

Why folks buy it besides the rebates from the government (at least at one time)? It is the same folks camping in line to buy the new iPhone to replace the ones they bought several months ago except of the age difference of iPhone owners and Volt owners. Don't tell me the iPhone would improve the productivity after they have wasted one night camping in the cold.

They want to be the first one in their town to own a Volt and show the world they're green conscious (that is debatable). The obsolete battery is not bio degradable and will harm the environment. I also wonder how often you need to replace the battery. It boosts their social standing and 'prestige' for some. It is not for me even if I had the money. Well, it could save them money by visiting a psychiatrist to boost their ego and most likely a prostitute could do a better job for less. J

There are a very small number of folks buying the car for the good of the environment. It is debatable as I said before. There is no convincing figure that it will reduce carbon dioxide emission significantly even when 80% of all cars are electric. However, I have to thank the first wave of electric car owners and the government rebates. Without them, we will never have a truly usable and affordable electric car in the future.

The battery technology is evolving and M.I.T. has a very promising technology. It may take at least 10 years for M.I.T. folks to deliver the next breakthrough from a research project to a commercial product. Until they prove the battery is 100% safe, you’re advised to take the extra insurance among a list of options. J

I’m very absent minded. Many days I may have to call my boss that I cannot come to work as I forget to charge or I may drive the car with the charger on that could do some harm to the car, the charger or the house (hopefully it would not burn it down).

I also wonder how long it takes to drive an electric or a hybrid car from Boston to Washington, D.C. (including the time to recharge) for my family vacation. It could be a nightmare just planning where and when to find a charger.

ALU

ALU fell from $6.50 to $1.00 in Nov. 2012 and rises to over $3 in 2013. I read two similar articles on ALU and Cisco from Wall Street Journal. I predict it will lose more than half of its peak in 2013 by the end of 2014.

The bad

- The company is not recovering esp. with the global recession that I expect to continue with Obama's policy and the EU crisis.

- It could bankrupt if they cannot service their long-term debts (about 2 B) that are larger than their entire market cap.

- It should not be the management as the stupidest fools cannot make it that worst. However, they have to lay off more than the announced to save some cash.

- The problem is China, namely Huawei. Chinese engineers and researchers in Huawei have a fraction of this compensation.

China is a major market for Huawei. When it becomes a public company, it would add wings to its already strong body; a public corporation will attract professionals and leaders. China's huge market will be a good customer base for Huawei.

It reminded me of one apparel stock I owned. It could not compete with low-wage country even before lifting the embargo to China. When the management did not do anything positive, it will die even the chance for ALU is slim.

The good

- Cisco may buy it with a combination of stock and cash and it is better than giving dividends (that has raised the stock price and great for its investors).

Cisco does not have the state-of-the-art technologies that ALU, Huawei and Ericson have. It will be a strategic buy but 2B plus the hefty debt is not too easy to swallow. However, they can sell many of AUL’s other products / patents that do not have synergy with Cisco.

- When ALU is broken down into pieces, it is worth at least four times its market cap (two times when you include the debts). It has more patents than most companies in the world.

- EU intervention with US's help.
EU is a mess now and I do not think they can bail ALU out. EU and the USA will encourage local companies and government to buy ALU's products and stop Huawei.

Cisco is successful in doing so arguing with security reason. It is not a valid reason as some of the internet traffic has been routed to Huawei's products already and they will expect China to strike back for the same reason.

- Need a partner and an investor.

As of 11/2013, I do not want to invest in French companies for the following reasons:

·         EU is still a mess. They depend on selling goods between the EU countries.

·         You will incur some fees: A one-time fee of about $27 plus a 0,20% transaction tax. My estimate.

·         They have 12 weeks of vacation. Can they compete in the global market without selling to EU?

·         Their unions are too strong.

Nokia, iPad, Microsoft...

Nokia runs on Windows now. The risk is high to deal with new software and new hardware. Nokia could be just a big bargain or a bouncing dead cat. It is very risky but it could be very rewarding. Do not bet your farm on it. As of 12/2012, they had a phone with picture quality better than most point-and-shoot cameras.

The tablet for Windows is in a similar situation. When you're late for dinner, the food at least the better ones have been eaten. Apple has the advantage of being a better mouse trap. They are supported by the huge number of quality apps. Samsung is Apple’s sole competitor now. The lower end market is dominated by Chinese and Taiwanese companies. 

I predict the tablets running on Window will be popular for business users and investors like me which could be a huge but ignored market.

The vision of Steve Jobs changed our industry and Apple became the most valuable company as of 2012 when its stock was 700 (a little high for me to buy). He was not the real pioneer in my definition, but his passion made great products and drove his engineers to the limit. Steve Jobs separated Apple from the rest. He was smart to outsource his manufacturing to China with low wages, better educated work force, easier access to the rare earth elements, etc. In the U.S., the unions and regulations would not allow Apple to produce quality products in amazing speed. Moving assembling PCs back to the U.S. will improve the image, but this will hurt the bottom line.

Nokia already had iPhone and iPad in the drawing board seven years ago. Microsoft had one too a long while ago and it failed miserably. Windows and Apple’s screen interface were copied from Xerox’s PARC. When you do not convert your research to practical products, others will use and enhance your ideas and build products based on your original ideas.

I wonder what happened to all those managers at Xerox. Did they receive generous bonuses for not bringing their ideas to market? The engineers and scientists who invented all these ideas must be frustrated. May be high tech companies should be run by programmers, engineers and scientists such as Jobs and Gates, not by some MBAs who know nothing about high tech except counting numbers.  

Windows 8

I like the new Windows especially in the reduced time to bring up the system. 

However, there are bugs/problems that should be fixed before its initial release. The companies including Microsoft and Google rush their products too early to market to make an extra buck. It will hurt their customers and the company itself in the long run. The days we had focus group, Alpha testers and Beta testers have gone.

I wrote a paper on the importance of paper testing to aim at achieving zero bugs: Try to list out all the possibilities of the program flow (or user interactions) and test the flow (or user interaction) one by one by using a pen – I called it paper testing or simulation using a wind tunnel. If you find 10 bugs, it means you have not tested the program thoroughly.  Repeat the testing until there is no bug.

The current version of Windows has more holes than Swiss cheese.

However, Windows is heading to a new world and I believe it will be successful or most of us have no better choice than cry. My HP 17" laptop is only $400 after all the rebate and discount.

Microsoft's tablet

The Good

Microsoft should capture a sizable market for business users if they market the product Surface right. They provide Word Office, a browser compatible with Internet Explorer (IE) and storage via Cloud.  Built-in disk storage may not require Cloud for storage, but it would drain the battery and take long time to boot if it is from disk (the new version of Windows greatly reduces the boot time).

Most of my investment software requires IE and all of my investment spreadsheets use Office’s Excel. It will be a good tablet for business folks especially for travelling.

I do not believe I'll use it during my vacation but it will be a handy tool to many. We will see how Office is implemented in the tablet, the energy consumption using the Intel chips and the prices. It will be appealing if you can run the business software in your tablet and your office PC.

Migrating current business applications to the tablet is a good such as the laptop applications my doctors are using.

As long as it is not losing money, it would be a win especially for the lazy Microsoft’s management with no innovation for a long while. You cannot sit on the cash influx from Windows and Office forever. Wake up from your afternoon sleep and dream on how to spend your bonuses in your fancy offices and do something even it will not always be safe.

The Bad

Surface will not be replaced as a consumer product as iPads are years away with growing apps. The new version of Windows has a lot of nice features. It is very buggy as of 3-2013. I hope they have a specific version for tablet.

My thoughts

When Surface was announced, it was a non-event. The first article on Surface at Seeking Alpha, a website for investors, appeared very late. There was not much publicity as opposed to folks lining up for Apple's products. As a stock owner, I hope it will change. 

Microsoft should not compete with iPad directly with the RT. The Pro is ideal for business folks with Office and Internet Explorer installed with full functions. I predict the Surface Pro will be the winner and RT will fade. Personally I plug in my electric outlet automatically on my laptop so I will not be disturbed while working. The battery life will not be a concern to me and I expect the newer chips from Intel will resolve this problem.

Afterthoughts

More on Microsoft.

http://ebmyth.blogspot.com/2013/11/more-on-microsot.html