Futures, Intel, and Silicon Valley

I am staying up late preparing for a trial next week. Out of habit, I checked the futures:

http://www.bloomberg.com/markets/stocks/futures.html

DJIA INDEX	7,893.00	-199.00	8,051.00	8,093.00	7,889.00	05:02
S&P 500	802.60	-22.90	824.50	826.40	801.50	05:02
NASDAQ 100	1,143.50	-28.75	1,171.00	1,171.75	1,142.25	05:02
S&P/TSE 60	508.90	-16.30	515.50	519.00	504.40	01/22
MEX BOLSA	19,469.00	-154.00	19,400.00	19,850.00	19,100.00	01/22
BOVESPA	38,371.00	-428.00	39,400.00	39,400.00	37,500.00	01/22

As of around 2:19AM PST, futures are down 199 points. If General Electric (GE), which is reporting in a few hours, tells the Street it will cut its dividend or do nothing to sustain its credit rating, we are going to be in for a really bad day. I wouldn't rule out Dow 7500 if GE reports particularly poor results.

In other news, it appears my prediction that Intel stock will reach 14 dollars this week will be proven incorrect. My average buy price is around $13.50/share, so I am not concerned (Update on January 28, 2009: Intel stock today increased above $14/share). With the upcoming dividend payout, I will have an opportunity to buy more shares while I wait for Intel to return to more reasonable levels.

For now, Intel appears to be in full-blown cost-cutting mode. Bloomberg recently reported that Intel is shutting down its Santa Clara, CA chip factory:

There are no incentives to have sizable manufacturing operations in Silicon Valley. The Valley is hugely focused on intellectual property and innovation, rather than on manufacturing.

"Silicon Valley, CA" may now be a misnomer. As Cypress Semiconductor's CEO T.J. Rodgers warned earlier, employers are leaving the Bay Area in droves, taking manufacturing operations with them:

Few people know it, but so-called Silicon Valley is not really Silicon Valley anymore--almost all of the wafer fabrication plants have been shut down due to the hostile business climate.

As a Santa Clara County resident, this is troubling, but I understand why Intel made its decision. California has strict environmental regulations and very expensive land. As a result, it's almost always cheaper for companies to build fabs or other manufacturing operations outside of California. Although it's tough seeing a large, well-known employer offshore any work, I've heard over and over that the top brains and talent are still in the Bay Area.

It's surprising, however, that Intel seems to be offshoring such an IP-laden part of its business. The Bloomberg article doesn't specify whether a chip fab or a research fab is shutting down. In either case, if an overseas employee takes Intel's chip-level (not motherboard level) source code, or the manufacturing specs for Intel chips, it can sell them for millions of dollars to many interested buyers. That's one problem technology companies have when moving overseas to save costs--they may not be as familiar with local employees, cultural norms, or local court systems. America, despite its problems, still has a healthy respect for the rule of law--something that isn't universally shared.

Disclosure: I own Intel shares.

Interview with a Blue Dog

Here is an interview with "Blue Dog" Democrat Jim Cooper. What's a Blue Dog Dem? It's the perfect politician--fiscally conservative, socially liberal. Dems like Cooper are why I am still a registered Democrat.

Obama Delivers

I had a mental orgasm when I read this article on Obama, who just froze the salaries of high-paid aides, instituted a new ethics code, and changed FOIA policy:

http://news.yahoo.com/s/ap/20090121/ap_on_go_pr_wh/obama_executive_pay

"For a long time now, there's been too much secrecy in this city," Obama said.

Obama gets it. He really gets it. God bless him, and God bless America.

Microfinance: Oikocredit et al

If you have at least $1,000 to invest and a desire to make a difference, where should you invest? If dislike stocks, you might be interested in Oikocredit:

http://www2.oikocredit.org/sa/us/doc.phtml?p=Investing1

http://www2.oikocredit.org/sa/us/doc.phtml?p=investing-in-oiko-usa

From what I gather, it's like Kiva, except micro-finance investors receive 2% interest on their loans (instead of Kiva's 0% rate). I am not an Oikocredit investor, so I don't have any personal experience with the organization. I find Oikocredit's website hard to navigate and their procedures convoluted. In addition, they appear to favor donations/investments from organizations (like churches) rather than individuals.

Do your own due diligence. I am not endorsing Oikocredit. However, if you do invest in Oikocredit or are already an investor, please post a comment and let us know your opinion. It would be nice if Kiva had some competition to keep them on their toes.

Update on March 28, 2009: this eBay-affiliated site looks very promising:

https://www.microplace.com/

Update: found another site worth checking out:

http://lendforpeace.org

The information on this site is provided for discussion purposes only and does not constitute investing recommendations. Under no circumstances does this information represent a recommendation to buy or sell securities or make any kind of an investment. You are responsible for your own due diligence.

Tom Brokaw Interviews Warren Buffett

In case you missed it, here is the transcript of NBC's January 18, 2009 interview with Warren Buffett.

Every time I read what Warren says, I relax. America is lucky to have such an articulate, honorable spokesman. Excerpts from the interview are below.

Warren on public pensions:

[T]he pension plans of states and cities...have been decimated in the last year. And the costs from that, the lack of revenue they're going to face as the economy slows, means that you are going to see a parade of mayors and governors to Washington like you've never seen it. And they're gonna say, "If you can help out General Motors, and you can help out Citicorp, you can certainly help out, you know, this state or that state." So I think it's gonna make inauguration day look like nothing in terms of the public officials that come in here and say, "We need help." Their revenues are gonna be down. Their expenses, particularly including pension expenses, are going to be up. And you're going to have unbalanced budgets just all over the country with states and cities.

Warren on economic stimulus:

[E]very time you read about 523,000, or whatever, those people losing their jobs in December, those are 523,000 human tragedies. I mean, I can think of nothing worse than going home and saying, you know, to a family that, "I've lost my job and we've got mortgage payments and food to buy." And so we need to solve that one. And we will have consequences to the kind of deficits we're running up. And some of them will be unpleasant. But I would rather face those consequences than to face the consequences of doing nothing.

Warren on investing:

[Investors] have to look to the business, the asset itself. If you own an apartment house you wouldn't get a [price] quote on it every day. You'd just look at the rent, and what your taxes were and expenses were. And if they all came in line with what you expected when you bought it, you'd feel you'd made a satisfactory investment, and you'd never get a quote on it. So I don't look at quotes. Mostly-- I can't tell you what Berkshire Hathaway [BRK.A, BRK.B] is selling for today.

Warren on bailouts:

Well, that's [bank, auto bailouts] exactly what we did in 1933. I mean, in 1933, when Roosevelt came in, there was something called the Reconstruction Finance Corp, RFC. Actually, It got enacted under Hoover in '32. But Roosevelt appointed Jesse Jones in 1933. And they put preferred stocks into the banks. They concentrated on banks, but they went into other things. Incidentally, when [Jesse Jones] put that money in, he told 'em what the compensation rate was gonna be too. I mean, he was a tough tsar. And it helped take the United States out of a depression. I mean, the RFC was an important component. And I'm sure they got criticized at the start. And they said, "People, you're throwing money into the wrong things and all that." ...But you can't separate Wall Street, Main Street, side streets. We are connected. This is one big community. And you better have credit flowing.

I knew that Congress authorized loans in 1979 to prevent a Chrysler bankruptcy, and J.P. Morgan once bailed out the Treasury, but this is the first time I've heard about the RFC and Jesse Jones. I shouldn't be so surprised--as I wrote here, the more things change, the more they stay the same.

Obama's Inauguration Address Transcript

For those of you who missed it, here is the transcript of President Obama's inauguration address:

http://www.welt.de/english-news/article3062276/President-Obamas-inauguration-address.html

I didn't hear the address, but reading the transcript, this is my favorite part:

[I]t has been the risk-takers, the doers, the makers of things – some celebrated but more often men and women obscure in their labor, who have carried us up the long, rugged path towards prosperity and freedom.

In other news, stocks markets are down. The Dow is down 2.6%, and Nasdaq is down 4.2% in mid-day trading. It's got nothing to do with Obama's address--corporate earnings are still coming out, and people are scared.

Madoff Punishment