How do you know it is the Tavor inside?

It is not Ethanol. It is speculation.

The bulk of the increase in commodities including oil itself is not because of imbalance in real supply and demand. It is due to a speculative bubble. The same bubble that went into stocks in 99 and early 2000, rolled over to housing in 2003-2006 and has now rolled over to commodities.

People who have no intention of using the oil or gold or you name it whatever the commodity may be, are buying contracts out a year out only in hopes of unloading it for a profit. In other words it is speculation.

As with all bubbles it is extremely difficult to know how long it will run and when it will pop. It is entirely possible that it may run for a while and we may see $4000 gold. Or it may pop much sooner than that.

Bubbles never unravel cleanly and the Fed cannot control it. It is usual an event or some other trigger that causes the domino to fall. For example, it could possibly be that China has a hiccup. If so, watch out for the bottom fall out. The same people who could not wait to bid up prices on corn will be fighting each other to sell.

I have no idea what will happen tomorrow. Probably the unemployment report has more to do with it than anything. However, in the longer term there is no doubt what so ever that the quarterly results and for the first time the conference call was very positive.

They generated 160 million in cash in the quarter.

Intel pre-announcement a positive.
I was expecting quite a bit worse. The fact that their core business remains on tract is a significant positive as far as I can see. I think that if Wednesday confirms this then we can in fact expect a rally as many others have been thinking like me.

Yes. This is the bottom I believe. As I pointed out last night in the message below on csco being a leading indicator and indicating that we are already in a recession, bar the central banks around the world acting stupidly, which is a distinct possibility, the US recession will be over quickly. And stock market will start moving up as the rest of the world will move into a slow down as they lag the US. It will be choppy but it is up from here.

CSCO precisely stated that if one were to listen carefully to Chambers. CSCO is truly the best leading indicator out there.

Recession is already here. And csco is reflecting that. CSCO is an astonishing leading indicator, better than any other single indicator.
If you listen carefully they said that they were already seeing improvement in the US trouble spots but that it was Europe that was weakening.

So I do believe the story of this being a short-lived problem. Bar the Fed acting stupidly, as it did again today, this will be short-lived and we are or will be seeing bottom in US equities shortly. The only thing that can extend the downturn are the Feds around the world. The European central bank is way behind the curve now.

Lastly, given Fed's thinking, it is also crucial that oil stops here in its Bush-induced upward trend. It is paramount that oil either flattens or starts going down.

Yes that would have been a better time but my risk tolerance appears to be lower than yours. My first aim is not to loose money. Yes, I agree it will be quite choppy. So patience and having cash reserves are important.

Time to buy.

Market will be choppy but the bias is up no matter what. Had the Fed, cut earlier they would not be in the position that they are now where they have had to cut so deeply in just one month.

Regardless, it is up from here despite choppy action.

Long-term competition to MRVL is this from TI

http://www.eetimes.com/news/latest/showArticle.jhtml;jsessionid=TYJBLY3PZBXFCQSNDLSCKHA?articleID=205920481

Others of course have similar products announced or on the way. Tha game is about integration. Marvell needs to get its act together and fast on XScale or it will be game set and match

Looks like you were right. I hope you benefited from it.

On what basis are you considering shorting yahoo? They are down quite a bit already.

1/4 point must be accompanied by strong language that the Fed will move as needed anytime to ensure liquidity to the markets. Anything less and there will be 10-15% drop in the markets.

As I have said for a while it is all about the Fed. Everything else is just a side show.

If he disappoints either in language or in cut, watch out below. If he delivers there will be a huge rally. This one is not going to be neutral reaction. It is a huge break one way or another.

He has proven to be an idiot. It is hard to imagine that he has the guts to undermine the markets again. Had he not done this in the past, there would have not been any need to cut interest rates this deep.

I do not think it is all their IR handling. Though just about anyone beats mrvl in IR, with a CEO that can hardly speak in any language let alone English, no IR, and no CFO.

Basically the street has immensely low expectation for semi's across the board. The best leading indicator for semi mood is Micron. Micron has started to act well after just getting beaten down to death. To me this indicates that wall street mood is turning positive on the semis after a brutal sell off. This will very likely have legs as mu rally off the lows has been sustained.

The dollar issue is much more a crisis of competence than an issue with liquidity. And Bernanke is directly responsible for it. He is a certified clown.

Thank you, in any case.

Bernanke is a certified idiot. Would'nt you agree?
He has made this problem several times worst than it needed to be.

In any case, the real question for you and me is how to take advantage of the current situation. What are your thoughts?

Where did you hear that?

Stock markets plunge worldwide

Still doubt the idiocy of the twin towers of stupidity, Benanke and Bush? How about that stimulus plan? Could Bernanke be any more stupid? The United states managed to move itself and the world away from Keynesian Economics after 60 years then this idiot wants to take us back.

As I stated before, without immediate and strong interest rate cuts and much more to follow up, the US is not heading to a recession but a depression. This is 1930s revisited. Money supply has shrunk by close to 10% in just 9 months and this idiot is talking about a government stimulus plan.

Of course they can. As I pointed out in the previous posts the entire point of occupying Iraq was not to steal their oil but to keep them off of the oil market to allow the enormous run up in oil that we saw. Saudis can produce an additional 3 million barrel per day. Oil would be around 40s.

Except for Bush and Bernanke will continue to make the matter worse. Didn't you see what just happened when that "stimulus package" the great idea of Bernanke was presented by Bush?

Stimulus package? Are you out of your mind? Do we have a central banker that is that idiot. Every country around the world is doing away with Keynesian economy this idiot is taking US backwards. It is simple. The problem is in the banking sector. Lower interest rates you idiot.

Instead everything this idiot has done has made things worst. The twin towers of stupidity, Bush and Bernanke are now occupying the most important economic positions of this country.

No I do not think this is over unless the Fed changes its actions. It will get worst. Just watch.

Bernanke is a certifiable idiot. I finally had the chance to go over his testimony. What an idiot! He truly is clueless. At least half of the stock market drop and turmoil in US economy is directly attributable to his incompetency. He neither has a clue on what is going on nor chooses his words carefully enough on the little he knows. A bad central bank is just about the worst thing that can happen to the US economy, even worst than Bush itself (that is right itself not himself) if you could imagine that. Ask those who went through the 1930s depression.

Not to worry: market will fall

You said: "The market was falling before Bernanke testified. "

Do not worry, there will be a sell off due to Bernanke; it is a guarantee. He has been horrible for the markets and has done so amazingly poorly in his communication that if he opens his mouth it is a guarantee for a market sell off.

Just watch and see the markets go down.

Watch Bernanke open his mouth and watch the stocks tank.

There is no way the market will turn around without the Fed cutting interest rates hugely. They are behind the curve badly. Their matrix is way off. On the current course we will slowly but surely go down another 20-30% and we will get a severe recession guaranteed.

It may not look like we are in an all time low environment but we are directly heading that way and even worst than an all time low environment, that is, we are heading for depression like environment. And the Fed is responsible for it.

The only reason I have not bet the house on double shorting everything is that this is a reversible situation by the Fed. And I just do not know what these guys are thinking. Of course the more they wait the more likely it is that they will become helpless in reversing a serious recession if not a depression.

The stocks are already telling us that we are heading to an all time worst environment. How is that? It is because money is being destroyed and this gets reflected first in the stocks before it starts showing up in the general economy.

It works in this way, many institutions, such as big brokers and many others as well as hedge funds are holding mortgage securities that they cannot unload to anyone and now have to comprehend in their books as debt. As a result they have no choice but to sell other assets such as stocks to balance their exposure. Money that they previously thought available for buying stocks and other activity has suddenly disappeared. This gets first reflected in stocks. But it will without a doubt spread to the rest of the economy and also world wide. It just takes a little time.

When the reverse of this situation was happening from 2003 onwards, when true money supply was expanding at 15%+ every year, it took a while for the inflationary results to show in gold. This will similarly take some time to show up. But the stocks are already telegraphing the end point. Usually downside happens quicker than upside. As a result, I think that 1 year from August, we should expect to be in a significant recession. And it will be much worse than that if the Fed does not reverse course.

In all honesty, I expected a surprise rate cut this week. It is shocking to me that they have not moved yet. And that is the problem. I have no idea what the hell this Fed is going to do. In August they kept insisting that they will not cut anything. But boom they came in with rate cuts.

Of course, the ultimate culprit of course is the banking reform. Some parts of it were good but some have led to disaster. But there is no leadership in Washington to correct anything. That idiot in chief is playing golf in Dubai and lecturing the world.

It is all about the Fed. It hardly has anything to do with intel. If intel would not sell off after the results it would sell off later. In fact intel's results were quite good. The company is now valued like when it was making half as much money and the future looked quite uncertain when it looked like AMD is going to eat intel's lunch.

You think 19.5 is too low? It will be 11-14 unless the Fed changes course. And mrvl? It does not matter if they have or have not a turn around plan. The stock will be in the 5-7s, similarly, unless and until the Fed reverses course.

The reason? Simple, money is being destroyed, that is money supply is shrinking at the rate comparable to what led to the great depression. In both cases, it was the Fed that was responsible for creating the crisis.

It is all about the Fed.

Like I have been saying for a while. It simply does not matter what the earnings are. The Fed will dominate. Until and unless the Fed reverses course and starts very aggressively to cut interest rates then we are looking at, at least a 30% downside to stocks and probably quite a bit more. The problem is that I have no idea what this Fed is going to do and they do not know either.

The real money supply in the US has shrunk by probably close to 8% in just 9 months. This is 1930s Depression type numbers. The Fed has actually accelerated the shrinking of the money supply.

Without the Fed cutting interest rates hugely there is no way in the world that the market will stabilize. Bernanke has handled the situation very poorly.

Money supply is contracting at an astounding rate. This is deflationary. The problem is that there is a 1.5-2 years time from money supply changes to prices reflecting the change.

What happened is that from 2001-2004 money supply increase quite a bit as a result of the Fed reaction to tech bubble as well as 9/11. They should have and could have tightened money supply by 2003. They did not. As a result, off the books money supply increased hugely from 2004-2006. This is now reflected in commodity prices. However since August money supply has contracted by at least 10% if not more. This is deflationary and has the potential to push the US to a downward spiral and depression not just a recession.

The fact is the past is the past. When inflation happens as it now has, there is no way to bring the prices back down. Doing so will result in a depression. What is done is done. The only thing that can be done is to ensure price stability by halting the growth in money supply and thus future inflation.

Money supply growth not only has stopped it has reversed to the tune of a 10% contraction. This is not ideal. Money supply should not be contracting by that much. The Fed must have eased much more much earlier and should have not kept their current language. They have royally screwed up.

If they do not reverse course, the US will spiral into a depression not just a recession.



However, it really was from 2004-2006 that there was a tremendous problem

It was RFMD news that moved the related stocks such as MRVL down so much (more than the market sell off merited). Basically their short-fall was substantial. And more importantly they blamed weakness in Asia for it. This would be horrible news if it were true. But it is not. This is mostly RFMD specific problem.

While there is surely a slight slow down but most of the issue here is RFMD's. They are badly loosing market share to SWKS and also others. RFMD management has made horrible strategic decisions and have managed the company poorly. They are now paying for it.

The day before RFMD, SWKS pre-announced positive. Duh! Of course the picture is clear. RFMD is loosing market share badly and few want their outdated transceiver products that were the bulk of their sales.

That simple question is a very good one.

If I knew exactly then I would be a billionaire. I am not, yet :), someday I hope God willing.

To me it appears that at least some of it is being permanently destroyed. That is we have shrinking money supply and is hitting stocks the hardest. It is being destroyed by hedge funds, and all sorts of other institutional instruments who must sell their stocks to raise money to cover their debt products that they now must own and cannot unload.

And thus far, the Fed has been unwilling and much too slow to step in to prevent contraction of money supply.

Some of it is making its way to Gold. Some of it to cash, in particular Euro the currency.

If the Fed remains with its current course then I have no doubt that all those flying commodities will drop hugely.

However, as I have recently pointed out and no one has really had any opinion on, I am concerned that there may be some surprise attack planned against Iran that we may be unaware of and this is really what the price action is telegraphing.

Any other input would be appreciated.

Thank you very much for that reference. It was a great read. I think that the market is so volatile that you may get your chance to bail out. However, I personally believe that unless the Fed steps up aggressively and starts cutting interest rates hugely then we will be seeing the price of oil and all other commodities retrieve significantly throughout the year. I believe that the market is already telegraphing this through price drops in the stock market as a whole. Since the commodities have been so hot no one believes that this will happen but we are on course for it. On oil of course this is bar any new wars of course.

would you have a link to the interview? I would much appreciate it. I am quite interested to hear it.

If China is derailed. Watch out. Of course then oil will also come down hugely.

A serious concern that I have is that there is a possibility that a surprise strike plan is in the works against Iran.

Ever since I saw the price action of the market before 9/11 I have become sensitive to strong market drops like we have recently observed.

Of course this is a remote possibility, but the recent Bush visit to the Arab states and today's Persian Gulf incident made me more concerned.

Otherwise, I do think that the gloom and doom surrounding technology stocks is way overdone. We are simply in a new era where US sales are just not as important. People are way underestimating how much of the drive in demand is due to internal, not export driven, but internal growth within BRIC and other emerging nations. Further, people are way underestimating the fact that the US high tech companies have become much better than the past in exporting.

In fact the entire Iraq plan was not to steal Iraq's oil but to ensure that they stay off of the market for oil to run up the price.

There are only five countries in the world that can increase oil production hugely. These are Saudi Arabia, Iran, Iraq, Venezuela, and Russia, in order of potential to increase outputs by many millions of barrels. Iran and Venezuela have basically been kept out because of political tension. Both have falling output. Iraq has been kept out due to the invasion. Russia has increased its output to its maximum, and that is why their GDP has recovered.

Saudi's, the US oil companies, and Bush et al are basically one. Saudis could if they wished increase output by several billion. They have not.

The idea has been to have these higher oil prices.

The point is, and this is the core of the issue with Marvell and precisely, exactly, the one and only cause that resulted in the stock drop after both quarterly conference calls, that numbers must add up. Neither the analysts nor I can figure out how they are doing their accounting. As a result, no one trusts their numbers. This is the exact, the main, the precise reason why the stock is down.

The question is simple, show me exactly how they are accounting for the Xscale costs. This is a key, key question.

The question on accounting of Xscale still stands.

Lakers, your explanation misses the point. Yes, I know that they use the fair market value in the cost of goods sold. However neither Marvell nor you are addressing were the benefit is being accounted for.

This is how it works:

They actually paid lets say $100M for parts that were shipped in Q3. However, when they shipped this product they only report in their cost of goods that they spent $100M-$26M = $74M for the parts because that is the fair market value of such inventory. $74M and not $100M is what they report as their cost of goods. This artificially inflates their margins. They in fact paid $100M for these products but under cost of good they are reporting $74M. OK, fine. Now where on their accounting sheet do they account for the $26M that they have actually spent but have not reported in their cost of goods? Where is it? This $26M is money they have spent. They must account for it somewhere in their accounting. Where is it?

Thank you Lakers for your reply. However these do not answer the question.

It is simple, you are also agreeing that what they mean is that they are reflecting the actually cost paid in their inventory. However when they sell that inventory they mark it down to fair market value in their cost of goods sold portion of their reported results. As a result their margins improve beyond what they would be had they actually reflected the true cost of the goods they paid.

All right. So where are they reporting the difference. If they reduced their cost of good sold by $26.3M for accounting purposes in their cost of goods, while in fact they have actually paid that $26.3M show me where are they reporting this in their quarterly results. What section is this buried in?

Second, this means that their margins have been much worse than they reported due to Xscale. Why should I believe and how will they improve their margins by that much, not just .4% but in reality by .4% + $17M?

Third, if they are continuing to source from intel why is it that the fair market adjustment is going to go away?

Do you follow?

This is simple accounting for which there is no answer anywhere to be found yet?

More on 10Q and understanding Xscale accounting

Please those who know join in and comment. This is the most important tangible issue regarding Marvell and at the heart of their drop in the conference call for both of their last quarters.

Thank you for your response and also yours Syndicate two,

I still do not think that Mavell's accounting of Xscale is clear to me and in fact, I am quite sure that most analysts and others on this board do not understand it either. IT is

Lets look at the conference all exchanges below:

++++++++++++++++++++++++++++++++++++++++++++++
Michael Rashkin

Well, at this point we’d prefer not really to discuss that any further. We could discuss that maybe at a future date.

With regard to the fair market value adjustment, what that relates to is -- and this gets a little complicated, but when we acquired the Intel division, there was a supply agreement that’s part of that and that -- the amounts that we had to pay for the wafers under the supply agreement, they are valued for accounting purposes at fair market value. And when we process these wafers through sales or they go into inventory, there’s an adjustment from the actual price down to fair market value and only the fair market value goes into the cost of goods sold or into inventory. So this is done by a unit calculation and it’s a very structured calculation. There’s no real discretion on our part as to how this works, and it’s audited very carefully by our accounting firm.

David Wu - Global Crown Capital

So the unit, the price you pay to Intel is not -- isn’t that based on “fair market” price?

Michael Rashkin

No, the price we pay to Intel that is the price that was negotiated under the supply agreement.

David Wu - Global Crown Capital

I see.

Michael Rashkin

Yeah, the fair market value is the price that was determined by an appraisal firm as to what the actual fair market value was.

David Wu - Global Crown Capital

I see. So those adjustments will continue until you stop -- well, until you finish all your Intel inventory.

Michael Rashkin

Actually, we -- after Q3, we have a very small amount of adjustment left, so there will be a very small adjustment in Q4, maybe about $8 million worth.

Dr. Sehat Sutardja

I think there’s a confusion between the fair -- with the continued adjustment. Actually, what we are saying we have less adjustments in Q3 compared to Q2.

David Wu - Global Crown Capital

I see. It’s coming down.

Michael Rashkin

Yeah, that’s right. That’s correct. In -- the amount of adjustment was $17 million less in Q3, so that -- and in Q4, there will only be $8 million of adjustment.

David Wu - Global Crown Capital

In total?

Michael Rashkin

Yes, so in spite of the adjustment basically going down, going away, that our margins for Q4 will be going up 40 basis points.

David Wu - Global Crown Capital

Well, I assume that lower adjustment has something to do with that.

Michael Rashkin

Well, it’s the other way around, actually, because if we were able to get more adjustment, we would have a higher margin. I think what it shows really is the strength of our margins that basically without any of this adjustment, which the adjustment positively affects our margin. Without any of this adjustment, or a very small amount of this adjustment, we are basically increasing our margin by 40 basis points and after that, it virtually goes away. And what we are saying is that on an ongoing basis as we look forward, despite having none of this adjustment and still having the Intel inventory at full value going for our cost of goods sold, we never the less expect to hit a 50% gross margin in the second half of the year.
++++++++++++++++++++++++++++++++++++++++++++++++

What the hell does this even mean? One possible explanation is this:

The inventory they report reflects the fully paid price of parts from Intel, lets say $20 per part. When they actually sell that inventory they do not use the price they actually paid for it as the basis for the cost of good reported rather they use the fair market value, let say $15. The fair market value is lower than the price they actually paid. As a result their cost of good is reduced to a lower number and their margin is improved. However they still need to include the difference between the amount actually paid and the amount they are including in cost of goods sold somewhere in their accounting, and that would $5 per part sold using the above example. Where is that? Where are they reporting that cost to the company? This is question number 1.

If this understanding is correct what it means is that their margins are in fact much worse than reported. They have managed to reflect better margins only because they use fair market value rather than cost of goods actually paid.

Question number 2 is that why do they think that they have only $8 million dollar worth of this adjustment left for the current quarter? Question number 3 is that if so, why do they think their margins will actually improve?

Note that in that same conference call this is what they said:
++++++++++++++++++++++++
Romit Shah - Lehman Brothers

Okay, thanks. And then you guys talked about reaching 50% gross margins in the second half of fiscal ’09. I guess baked into that forecast, what percentage of [X scale] products are you assuming will be shipped from TSMC?

Michael Rashkin

By Q3 -- let’s say by Q3 we should be -- and I’m just going to give you a rough estimate -- we should be shipping somewhere over 30% from TSMC.

Romit Shah - Lehman Brothers

Okay.

Dr. Sehat Sutardja

It will be a while before it reaches 100% because of the inventory of the Intel products, so it will reach 100% once the inventory gets depleted.
++++++++++++++++++++++++++++++++++++++++++++++

Question number 4, this does not jive with the idea that the reason they do not need to make fair market value adjustment is that they will not be using intel inventory. They evidently have a huge intel inventory. So how could it be that there no longer is going to be an adjustment made based on fair market value.

Lastly I have to say Sehat positively shows every sign of a petty cruel dictator to use a recent phrase used for the Islamic Republic President.

Anyone understands MRVL's 10Q?

Or for that matter their explanation in their conference call as to how they are recording Xscale parts from intel and how this is impacting their gross margins?

This is from their recent 10Q:

The cellular and handset inventory that we are contractually obligated to purchase under a supply agreement with Intel are recorded at estimated fair value as required under purchase accounting.

Then two sentence later,

We will record such inventory at cost, which will adversely impact our gross margins relative to periods where we only purchased inventory at the minimum committed level.

These two are in direct contradiction to each other.

Then they have this sentence in between:

The amount credited against cost of goods sold under the supply agreement was $26.3 million and $103.9 million for the three and nine months ended October 27, 2007, respectively.

Which they tried to ineptly explain in their conference call that resulted in the horrible drop in stock price after hours, confusion of analysts, and of course my own self.

Yes absolutely.
Anyone know why Marvell website is down?

Hell I was also expecting that they would do poorly. There is no question that they are loosing market share in their core wireless business. However, it appears that sales are so strong overall that they are still doing ok. The disconnect between technology sales and the noise about financial blow up is remarkable.

This news is hugely significant in my opinion. A whole host of companies must be doing better than wall street expectation.

I personally truly do not understand the disconnect. If it continues the way it has been going, it is only a matter of time before there is an explosive leg up on technology stocks overall.