Lenin stares at me while I sleep. I know it’s not something you’d expect from an editor of Wealth Daily, but let me explain my motivation. The red satin banner on the wall next to my bed bears the face of that famous Bolshevik, and the following words in Russian:
"’We are moving towards the victory of communist labor!’ -V.I. Lenin" and then, "Be victorious in socialist competition!"
You may notice that the first part of this "pinko" pep is a quote directly from the strong-boned champion of Russian communism, while the second was a later addition.
Having been produced later in the Soviet era, this piece of cloth is, literally, a sign of the times.
You see, people need a nudge to compete. Whether it be higher salary, advancement, or a silver star on your notebook at the end of the day, even the most motivated individual will find a little more oomph if they can envision their own success.
In the communist framework of the Soviet Union, the cooperative, class-driven spirit of Marxism took a backseat to the reality of implementing Marxism in a non-industrial state. Russia was a feudal, largely backward state – not one of the Western European industrial powers Marx wished his "specter of communism" would haunt.
We don’t need your stinking competition…or do we?
Formerly agrarian workers, transformed by the forced collectivization of the Stalinist regime, did not make the best auto parts imaginable. But with incentives in place, and messages like the above, they could sure slap together crappy cranks and gears at high speed!
So the contradiction of utopian living in the mechanized world created images like the one that hangs next to my queen-size, and shows us just how flimsy ideologies can be in the face of the world economy.
As the Soviet Union self-destructed through glasnost and perestroika, her satellite states spun off into capitalist outer space. This left all the countries that dominate Olympic gymnastics to grapple, maneuver and grab a hold of whatever they could in order to let their people survive.
I will soon be embarking on an investment tour of the Baltic States (Estonia, Lithuania, and Latvia), as well as other former Eastern Bloc lands, to discover what spelled success or depression for those economies in the post-Soviet era, and what you can do to profit from the transition between stagnant socialist planning and free market economies.
But first, let’s time travel to an alternate universe in which the market economy and communism ostensibly coexist, even in 2006 – China.
Another Major Development
Months ago, I told you about chipmaker Advanced Micro Devices (AMD: NYSE) and its positioning to pounce on Intel, the haughty giant of its industry. My crystal ball was several savvy steps AMD made, including a research contract with Beijing University.
After nearly doubling your money on my recommendation, I went ahead and issued a new price target since the first conservative goal was shattered less than two months from my first words on the company.
Now, even Intel is admitting that the ding AMD has made in its market share is more like a crumple. The collision is ongoing, and the worldwide microprocessor race is about to turn into an all-out demolition derby.
That’s right, Intel cut its sales forecast by nearly a billion dollars for the first quarter of this year. Guess why Intel is so apprehensive? Could it be they see someone in the rearview mirror gradually eating away at their industry lead?
That’s exactly it. Microchip industry analysts predict that AMD will up its market share from 21% to 25% this year. And since AMD and Intel are the only two major players in the game, what helps AMD hurts Intel directly.
With each company building new production facilities that will come on-line soon, some insiders predict a price war based less on technological advances and more on bargain basement prices. But I don’t think AMD will let that happen.
If you browse the message boards – forget published websites, the real insiders are the geeks who swap insults in chat rooms – you’ll notice the passion most of them hold for AMD chips. That is because rather than rushing its new items to market, like Intel has done, AMD plays it conservative and goes for quality.
In the end, that waiting game pays off, leading AMD to faster maturity yields and high growth in markets where reliability is a must.
The most red-hot endorsement coming for Intel is the steady buzz that Google will turn to AMD’s Opteron server chip series to power its more than 200,000 servers as Google continues its rise and spreads into just about every conceivable corner of computing and daily life.
Combine that with mammoth PC maker Dell’s announcement to offer AMD chips, and AMD has the fuel to keep chipping away at Intel’s lead, establishing themselves with a firmer foothold as time goes on.
But far and away my favorite recent development is the reason I told you to buy AMD in the first place: China.
Back to Beijing
Lenovo, the Chinese company that owns what used to be IBM’s PC division, announced in February that they will employ AMD chips in a new business desktop line. I don’t need to tell you how fast the Chinese business world is booming (if you need a reminder, check out the Waking Dragon archive).
On top of the bustling beeswax, consider the tons of internet cafes throughout China where teenagers spend all hours of the night playing online video games like World of Warcraft. I’ve seen them crashed out on the keyboard after a long night of gaming, and it isn’t pretty, but I predict that AMD will penetrate the market of these internet cafes as higher power and greater chip efficiency – AMD’s specialty – are needed to keep the CPUs buzzing for profits and entertainment throughout the Middle Kingdom.
AMD is down a little today, but still sitting above 38. If you hold any stock, chances are great that you’re staring at a sea of red, so don’t think it’s just AMD that’s anemic. Bond yields and upcoming interest rate hikes are wreaking general havoc. But for AMD, the long term strategy is there, and we will continue to see great performance from this Sunnyvale, CA contender.
– Sam Hopkins
Red Nightmares
