WEB TRAFFIC UP, AUTO TRAFFIC DOWN, OIL DOWN, CREDIT IRAQ?

The market see-saw is moving. The demand for web traffic is growing and share prices in effected companies are moving. Corning Glass and Level 3, which are both influenced by web traffic are in the early rounds of significant moves. LVLT, which is the "pure play" was down below $2 per share about 3 months ago and is selling for $3.43 today. How big will this growth ultimately be?

An article on the Gigaom site suggest that Google should build its own nuclear power plant. The company currently owns as many as 1 million servers (my guesstimate is higher). These servers use about 500 watts of electricity per hour. Google has often successfully negotiated unusually low electricity but 500 times a million per hour adds up. At the current rate of exponential growth in functions performed and in data stored, Google will use the output of a nuclear power plant in a year or two. Oh! how wasteful?


An announcer at a liberal media outlet repeated one of my pet peeves yesterday. She said energy use is soaring because even the poorest of people are now buying appliances. I wonder if this announcer has the energy to wash and dry a load of clothes with a washboard, tub and clothes line. I wonder, given a full day, if she could chop the wood to build a fire in a wood stove to cook a meal. I wonder what relative percentage of energy is consumed when she heats the same meal in a microwave oven? Sure, the purchase of a microwave or washing machine may (or maybe not) result in a small increase in the amount of electricity used but not in the amount of energy used. Indeed, including the heating of the water, the energy consumed when washing a load of clothes by hand would be several times the energy consumed by a modern machine.

Google is the washing machine of the world wide web. People push a few buttons and wash a load of clothes with minimum energy usage. Google and other web based companies allow people to "visit" around the world with minimum energy usage. The use of huge quantities of electricity used by Google represents even larger quantities of energy saved.

Google is adding features that consume huge amounts of computing and storage space, as is Apple, Amazon, Bee-Hive, Comcast ... A recent development is that social networking sites such as MySpace are reducing the amount of servers they need by making social networking email features searchable by Google. In other words, Google is becoming the big cloud computer for businesses as well as for consumers. The Bee-Hive, an Israeli start-up recently purchased by VMWare, is all about making cloud computers all the more efficient. Apple has an installed base of 5.4 million iPhones but it is adding service to country after country quickly. Apple has been proven to be correct about video pricing. Consumers are buying the under $2 shows. The delivery costs of these shows is minor. The profit margins are great. No more driving to rent a DVD. Google Android is set to launch soon.

The value of all "data" will be enhanced when it can be accessed rapidly. Cisco and others are helping crank up broadband speeds. Another report at Gigaom is about broadband speeds. Around the globe, only 16% of Internet users access the web at speeds greater than 75 mbps. In the USA, 20% of users enjoy these speeds. The numbers respectively from South Korea, Japan and Hong-Kong are 64%, 48% and 35%. The correlation to lower energy use per dollar of GDP is interesting. These economies have all increased their GDP per barrel of oil consumed for 15 years or more. Japan has recently become a petroleum products exporter! Japan has not built refineries beyond their needs, instead, they have reduced their needs below the capacity of their refineries. The USA is certainly not the only country to see a decline in auto traffic. The USA is late to the party. Our congress is too busy winning pork to do the businesses of the country.

The world wide scramble to build nuclear power plants is a result of the developing Internet economy. The delay in the 123 nuclear power agreement between the USA and India keeps making the news but the scores of other agreements hardly get a mention. Agreements between China and Russia and the USA and Russia are important but Pakistan has contracted to build 6 nuclear power plants, Turkey 3, Egypt 3 .... No less than 49 developing nations, including oil rich nations such as Saudi Arabia and UAE have signed agreements. Developed countries such as France (a country opposed to the invasion of Iraq and a country that produces 80% of its electricity by nuclear power) are jumping on the chance to do business in the Middle East. Jordan has contracted with AREVA for nuclear plants. Why the Middle East? The Willie Sutton rule applies. The oil rich Middle East has the money to buy the nuclear plants. China, which gets its money by exporting goods, is importing oil and nuclear power. China will build more plants over then next 12 years than any other nation.

LONG RUN -- SHORT RUN

Nuclear plants will be a major portion of the intermediate solution to the worlds energy supply. The 123 agreement between Russia and the USA is an historic agreement, still, we must have a short run solution. While the congress leaves about 85% of US oil reserves off limits to drilling, the rest of the world is cranking up exploration. Brazil is on its way to potentially becoming the Saudi Arabia of Latin America. Even here, most of these discoveries are intermediate term solutions. In the mean time, many countries are contributing to an immediate increase in production. Iraq is the one most notable. Iraq is currently producing at the rate of 2.5 million barrels per day. It is projected to be pumping at the rate of 2.9 million barrels per day by year end and by 6 million barrels per day in 3 to 5 years.

THE UPSIDE DOWN AP

The AP news syndicate continues to report a lot of stuff upside down and backwards. May was the month of the fewest US casualties during the war in Iraq; the AP put its ink on the number of suicides committed. Iran is being isolated in a number of powerful ways while the AP reports that Iran's influence is growing in Gaza. Gaza is the tiny little piece of land between Egypt and Israel that the Israelis gave to the Palestinians. It is a historically significant location but a nat on Iran's behind.

The Iran story is intriguing. There have been a very long list of under-reported or misreported significant developments in the isolation of Iran. Google BTC Pipeline and you will find the story of the longest pipeline in the world. It took a year for oil pumped into one end to come out the other. Every day, it carries a million barrels of oil out of the Caspian Sea oil fields to a port on the Mediterranean Sea, bypassing Iran. The port of Ceyhan, on the coast of Turkey, is the same terminus as a pipeline from Iraq. When the Basra to Persian Gulf pipeline is competed, it will be the same port that is connected to the majority of all exported oil.

The BTC pipeline was not even started until after the invasion of Iraq; construction on the TAPI pipeline on the other side of Iran will start soon. The strategic importance of the Straight of Hormuz is dropping like a stone. The pipeline network being built all around Iran makes Iran a nat on the rear of the world. The new oil coming out of Iraq is money coming out of Iran's pocket. Iran, a country sitting on massive reserves of oil, a country with the expressed intent to use military force to take over neighboring countries, a country that has supplied numerous terrorist organization with funds and weapons, a country where in the second year of requiring its citizens to stand in line to buy rationed fuel, a country where inflation is upwards or 30 or 40% is a country that needs to sign a peace treaty.

HANGING TOUGH

Amadenijhad and Hillary are to be admired for hanging tough when holding a losing hand. Hillary is trying to gain an office and Amadenijhad is trying to hold an office. The EU foreign policy chief, Javier Solana plans to deliver a package of incentives to Iran as soon as Iran agrees to suspend the production of nuclear fuel. Amadenijhad says he will not suspend.

As a result, the odds of a military attack on Iran has increased, not as much as indicated by the press but enough to cause saber rattling. The AP is correct in one aspect of Iran's growing influence; the political left in America is beating the drum for talks between the USA and Iran. On June 10th the left will hold a "congressional call-in". Their advertisements encourage US citizens to lobby congress in support of talks with Amadenijhad. For the purpose of winning an election, the left ignores the diplomacy conducted between the USA and Iran over the past 30 years, including the talks and actions of the Clinton administration. The winning of an election seems to be more important than the security of the country. The left is exploiting the kind of US citizen who pays the full retail sticker price and buys the extended warranty on the purchase of an SUV. If you buy a car without eventually negotiating with the sales manager, you have paid too much, but you should not insist that your first offer be discussed directly with the sales manager. If Amadenijhad or his successor cannot be influenced to suspend nuclear bomb making by any other means, then as a last resort, the nuclear facilities must be bombed. The cooperation of Russia, China, Europe and the USA is the reason the bombing will not be needed.

THE ROAD TO SERFDOM

"The Road to Serfdom" was written by Friedrich Hayek in 1944. Friedrich's premise, that socialism tends toward totalitarianism, has been proven time and time again. Today, we wonder what happened to the inalienable rights of Thomas Jefferson. Today, the word liberal is the word used to describe supporters of big government programs. Programs that take away individual freedom and civil rights.

At a conference in Rome, food shortages have been reported in scores of countries. The USA has been accused of contributing to these shortages by consuming corn in car engines. The response of the US participants is a "cherry picked study" that argues that only 2-3% of the global increase in food prices are the result of ethanol programs. Even if these estimates were accurate, the two billion people who spend all or almost all of their income on food have reason to be upset with the callus actions of the USA.

The environmentalist have become social engineering totalitarians. The results of trying to dictate what others should do is hunger, starvation and the loss of individual freedom. Mandatory consumption of food in car engines is the height of arrogance.

FREE THE WHITE SPACE

It is my hope that the FCC will "free-up" the white space between TV channels for Internet traffic. The Internet represents individual freedom. We are living in an age of increasing web traffic, decreasing auto traffic and the disbursement of knowledge. A time when more people live well than ever before. A time when living well does not depend on capturing wealth from others. A time when the public is pessimistic. A time when opportunity is great. I hope you make the most of these wonderful days!