Reasons Unbeknownst

Solid state drives (SSDs) are notoriously expensive beasts. Considering the recent price drops and growing realization that hard drives are now the last remaining bottleneck in everyday (non gaming) PC performance I set out to see if I could put together a Vista ready PC for under $1000 that will blow the doors off higher cost (non-gaming) systems. I’m looking for something that I can give to a parent who isn’t interested in Crysis timedemos, a parent who is more likely to complain about computer slowness during virus scans and web browsing than Adobe Premiere inadequacy. In short: 95% of the PC owning public.

Complaints about Solid State Drives mainly focus on the price. That’s still true but if you assume that the everyday user only needs 32GB things start to get interesting. Ignoring the disk subsystem, you can build a hugely capable system, even Vista ready, for a surprisingly low price.
The parts: The prices below link to NewEgg.

• Motherboard: $80 – AMD 780G based, includes Vista capable 3D and RAID support.
• Processor: $33.99 – AMD Sempron 64 2800+ Palermo
• Case: $55 – InWin with power supply. SSDs don’t put out much heat and the mobo has onboard video and a low watt CPU so cooling isn’t a huge concern.
• RAM: $36 – 2 Gigabytes of no frills Kingston
• SSDs: $395 each – 2x16GB Mtron MSD 6000 Solid State Drives.

So you can build a Vista ready machine, with no drives, for $205. Using two MTron 16GB SSDs in RAID 0 (see motherboard specs) to make one 32GB drive we arrive at a final price of $995. If you can avoid tax and get it delivered by a friendly mutant pigeon you’ll have a sub $1k SSD RAID box (software sold separately). You can get a cheaper case and add a DVD burner if you need it to keep it under $1000.

This machine will play basic 3D games (thanks to the 780G chipset) and should even handle BluRay decoding (again, thanks to the 780G) but the big difference in performance is the result of a ridiculous 200 megabytes per second flowing from the SSD RAID array. That compares to 81 from a WD Raptor and less for a typical desktop drive. The latency will also drop from 8.0 ms to 0.1 ms which is contributes the unusual speed jump when moving to SSDs. In one test Vista boot time dropped from 23.6 seconds with a WD Raptor to 10.1 with a single Mtron SSD.

Reliability:
RAID 0 scares people, and rightly so. If you lose any of your drives you lose all of your data. I have a server running a RAID 0 array in a garage in Pasadena because I needed performance on a budget. And though it’s backed up I get nervous on hot days, wondering if I’m going to have to put in a few hundred miles to get things running again. Solid state drives run cool and they don’t have moving parts so they tend to be more reliable than old style drives. I say tend because they haven’t been around long enough to determine long term reliability.

Overall Performance:
I’ve come to believe that it is the duty of wealthy nerds to benchmark systems for the good of the rest of us. Progressive testation if you will. For that reason I’m going to hold off on building this thing for now. My thesis though is that people are putting far to much emphasis on processor speed considering the bottlenecks created by years of stagnant progress in the hard drive market. I want a disk subsystem so fast that the CPU is pegged at 100% most of the time because it’s not waiting for that noisy relic of a storage device to rotate around to the right location.

Conclusion:
Pros:

• Blazing disk performance due to SSDs in RAID 0 which is important for bootup, virus scanning, web browsing, and overall system snappiness.
• Low power use thanks to SSDs and less beefy processor
• Noise free drives
• No need to defrag – performance not affected by fragmentation due to lack of moving parts

Cons:

• 32Gigabytes is a bit of a stretch for Vista ultimate.
• Lower end components used to keep it sub $1000
• Not a great media/gaming PC though it’ll do basic games and Blu-Ray decoding if you spring for a drive

Image by gek_at2000 – click here for info and yes, I’m aware that it’s not a SSD.

Well, it looks like the speed wobbles got to Bear Stearns, which sold for $2 a share Sunday after peaking at $171 late last year. Jim Cramer of Mad Money fame made an historically awful prediction about the solvency of Bear last Tuesday.

And here is the epic backpedal.

His argument makes a little bit of sense in that those who had money in an account (not stocks) are covered but he should have made that clear considering his audience.

But then why the admission that he can’t be honest because he doesn’t want to cause bank runs? That mentality would explain the near permanent bullish sentiment on CNBC. These hosts would face serious consequences if they level with their audience. It seems like it’s becoming harder to get away with bad predictions with this whole Internet thing to remind us of what was said.

In other news, someone replied to my post about Noam Chomsky’s low tech take on capitalism. Noam’s point, I think, is that a lack of capitalism does not necessarily lead to dictatorship as implied by Hayek’s “The Road to Serfdom”. My economic views are a blend of the Austrian School, Schumpeter (creative destruction), and Andy Grove (accelerating change) so a criticism of the Austrian School wasn’t really a rebuttal of my point.

The Economy: I don’t see how this can possibly be the bottom when you look at what has to happen to housing prices to get them back to normal. As far as how low it will go? I don’t have a take on that. I think I know what housing will do in relation to income levels but who knows what income levels are going to do.

Commodities are falling, which makes sense, but gold is a bit trickier to get a read on. Oil will get you to your job in a car but gold can function as a currency. The deleveraging seems to be affecting both. My guess is that gold won’t get hit as hard as commodities in the short run but as inflation fears ease and the Fed runs out of tools (rates can’t go below zero) people might start to buy into the deflation argument.

So far the Elliot Wave theorists and Austrians are looking pretty smart but they might call the bottom too early if they’re not also looking at demographics, automation, and global wage arbitrage. That said, I’m going to be hugely bullish on this economy once this leverage and speculation is finally unwound.

Just another recession? Bear Stearns is almost dead, stocks are off because of it. Bear is one of the ten biggest securities firms.

The people in charge aren’t saying that this is the worst financial crisis since the great depression. They prefer “since WWII”. I don’t like to write about depressing news because not many people like to read about it, but this is fascinating and terrifying at the same time. I’m just glad I can write about this now without sounding like a permabear.

For some reason, when I read news articles weird analogous cartoons appear in my head. In this case I’m picturing a bunch of crusty old bankers, crammed into a shopping cart, headed down a perfectly smooth slope, picking up speed. The average person on the street knows we’re in a recession. But if you watch Bloomberg (live feed – much better than CNBC but not as good as some blogs) and read the best finance blogs you know that what is happening right now is basically a 100 year financial storm. It’s really really bad.

Why doesn’t the guy on the street know what’s going on? Because if Ben Bernanke said what some know there would be panic. Bernanke keeps referring to this as a sub prime problem. That’s not the whole story. These loans are going bad because of one simple reason: Home prices were too high. Homes bought with subprime loans were too expensive and homes bought with prime loans were too expensive. The loans were a means to an over priced end. Bernanke is shooting the messenger because the messenger is expendable. Now he’s just about out of messengers to shoot and things are still falling apart. His credibility is the only thing holding things together at this point which might explain why people are applauding during his live speech in DC right now. It’s a bit like a laugh track.

My take is that this housing correction, by itself, would cause a pretty nasty recession. But we’re adding on super leveraged derivatives, unregulated hedge funds, over extended consumers, inflation, and the death of dollar hegemony as BRIC emerges and competes for jobs and resources. My tech brain tells me that IT automation(onshore outsourcing) is probably a bigger concern for balanced wage growth than China or India.

In other words, housing is the trigger that’s allowing all of these other painful inevitabilities to unravel at the same time. Housing never would have been allowed to get so out of hand by the Fed if they weren’t trying to delay the inevitable. A look at the home price to income/rent ratios back in ’04 was enough to know that we were in a classic bubble and the Fed had to know this. The fact that they did nothing lends credence to the notion that they were aware of the systemic problems now rearing their heads.

My guess is that rates go to zero and the Fed loses a tool to “stimulate” the economy. Odds of a 1% rate cut are at 50% right now so we’re not far off from ZIRP (zero interest rate policy). Japan ran into the same problem almost 20 years ago and couldn’t stop deflation.

So the only question remaining, assuming things continue to deteriorate (which looks likely): Will US ZIRP lead to inflation or deflation? If we see deflation the Austrians win. From Mises’ Human Action:

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved. (p. 572)

Mises was probably a bigger contributor to the Austrian School than Hayek but he never won a Nobel Prize.

Photo by DarthLen

From the Union Tribune comes an article titled “Experts’ forecast sees no recession” which is peppered with quotes like:

Don’t worry, be happy,” said Edward Leamer, director of the forecast, the state’s best-known economic report.

and

Leamer jokingly defined “recession depression” as a “psychological disorder” in which people are unjustifiably depressed about the threat of recession.

And now some thoughts from the comments section at Calculated Risk. It’s the best housing/econ blog in the land not simply because of the article content. The comments that accompany the articles are often written by anonymous bankers and some are convinced that there are former fed employees making the rounds due to their unusual insight.

The Fed has decided to force-feed Treasuries into the system instead of cash. Probably because every time they force-feed cash, the banks run out and buy Treasuries :-). I think ndk is right: The objective is to reduce the spreads, especially those between MBS and Treasuries, by increasing the supply of the latter. More supply = lower price = higher yield.

This appears to be an non-inflationary approach to lowering the spreads that has everybody panicked. Give them points for creativity…
By making Treasuries less attractive, it drives money into other lending markets… Which may help get those markets un-stuck.

Tim, they’re trying a bunch of new and innovative things during one of the most stressed and unique moments the financial markets have seen. Each action they’ve undertaken has been cleverly aimed at bringing stability to specific areas of chaos. Each time, chaos has spread to a new market and caused greater problems. This is Krugman’s chain crises and the face slap theories.

This is another face slap. Judging by this morning’s action in commodities and currencies, the market was hoping for a rate cut face slap instead. Treasuries are selling off as would be expected.

There are two primary risks to this creativity that I can see. The law of unintended consequences is the most obvious. The other is that by resisting market adjustments and implicating more and more of the world in the disaster, they’re making price discovery even more difficult and confusing. This could prevent needed adjustment, or spread Ebola elsewhere.

Essentially, they’re repeatedly telling the market it’s acting irrationally and wrong. If the Fed is correct, huzzah, and they did a brilliant thing. If they’re wrong, we’re not all that much worse off for it. Probably.

That is an admittedly wonkish discussion but the wonk-free summarizations in newspapers tend to oversimplify and are also typically (coincidentally?) over optimistic, and distorted world views can be problematic if you’re trying to invest.

Click for info on baby eating cash photo.

Some interesting points from P.J. O’Rourke on the Daily Show about what Capitalism is and what it is not. He’s a bit nervous at first but things pick up a bit after two minutes.

Some interesting quotes:
About Adam Smith’s role in free markets. “He dug the basement, for the house… that we’re about to be foreclosed on.”
“He believed that it was better for us all to be bad than to have one bad person in charge of us all.”
“A free market vibrates between fear and greed. And we’re headed towards fear.”

I guess, in a sense, you could look at Capitalism as the only economic system that works given dysfunctional mammals as inputs. Communism looked great on paper but assumed that we were inherently selfless creatures. I guess that begs the question: If, in the future, we’re all endowed with brilliant robotic therapists, unleashing our inner potential for charity, would Communism then be a good idea? I have a feeling that nobody would starve in that case but the selection of robots at Wal*Mart would be diminished.