Rates and Moore's Law
Rates Rates Rates!
Markets seem to be tussling over whether the next move for rates is up or down. I think it is important to note that a change in rates in either direction in Aus is going to be nothing like the 0 to 435 change over a short period of time that we've had recently.
I am more interested in the story 1-2 years out which seems to be, yes absolutely rates will fall.
Australia has had the least aggressive monetary policy in the world and the RBA were among the only ones who didn't raise interest rates above the inflation rate. And the chickens have come home to roost since, we don't seem to be able to get a lid over the inflation issue. 12 months ago, the killer scenario during the hard/soft/no landing days was that inflation is sticky and you'd expect rates need to go up to address persistent inflation.
12 months later, we seem to have crossed this threshold and are in the middle of simply hoping that inflation falls from here.
Hope isn't a strategy I thought? And I'm really hoping inflation does tail off, but tax cuts and other stimulus doesn't seem to be helping.
Either way, I welcome market volatility due to RBA activity (either higher or lower) – we need the volatility as it creates opportunity for investors to rebalance their portfolio. And it's about time we got some volatility.
Moore's Law, Ohm's Law and energy build
There seems to be an ever growing group of investors who believe the AI build will lead to much greater energy use and we need a huge build up to service this demand.
I have some serious issues with this line of thinking, spitballing here:
- Moore's law states "the number of transistors in an integrated circuit (IC) doubles about every two years"
- If Moore's law sticks (and I think it does) then the amount of energy needed to train LLMs should remain constant as new semis are released
Anticipated demand for copper is driven by a scaleout to meet the energy transition requirements. I'm very happy to be corrected here, but a lot of this depends on existing technologies.
- Ohm's Law (V = IR) is a thing, let's not forget it
- One way of saving raw materials is to use higher voltages - proliferation of SiC Semiconductors means that we can finally use higher voltages
- Voltage goes up and current comes down - cable cross section increases quadratically with flowing current, flip it over and you need much less copper…
I might be completely wrong with this stuff but the basis for a lot of our energy decisions are based on a few assumptions I don't think I agree with very much.