Note to Subscribers: New subscriber information available at the bottom of this article.
Apple has announced the release of the iPad 2 and it is an impressive piece of hardware, very nicely packaged and comes with margin boosting accessories (that are actually pretty slick) such as a magnetic cover. With that being said, the RDF (reality distortion field) and FUD (fear, uncertainty & doubt) absorbed and regurgitated by the tech media is simply horrendous and is an example of how difficult it is to get truly unbiased information (not to mention true grit analysis) these days. I truly believe, as in the political and banking rags, many tech sites simply recycle press releases and marketing material from Apple in lieu or performing critical analysis and independent research. Let's debunk some of the myths that I have found on some popular tech sites.
Myth Debunker 1: Apple's incremental upgrade is enough to kill the competition
Last week I posted a comprehensive piece, The Coming Interest Rate Volatility, Sovereign Contagion, Geo-political Unrest & Double-Dip Recessions: Here’s The Answer To Valuing Global Real Estate Through This Mess. The goal was to outline the literal mess that those who decided to drag us through this “Great Global Macro Experiment”have left us in. Since then, in merely one week's time, we have bore witness to:
- The potentially imminent toppling of another multi-decade, long standing regime, the third in as many months. Gaddafi asserts control amid worldwide dissent - Libyan U.N. mission urges Gaddafi's downfall - Gaddafi son denies civilians bombed - Analysis: Libya could face chaos in post-Gaddafi era. Leading up to the Libyan affair, Tunisia and Egypt fell into the hands of virtually weaponless protesters (at least from a conventional weapons perspective) armed with simply laptops and cellphones (the new age computers and apparently the weapon of choice for those in uprise) to post messages on Twitter and Facebook, amassing solidarity with supporters to converge in certain areas to join the mass protests. Identifying, fearing, and failing to understand the true power of the Internet in toppling a regime, Libya has repeated the faux pas of Egypt in attempting cut the country off from cyberspace - attempting to halt the charge of an African bull elephant with an Acme Walmart (by way of China) fly swatter. It is apparent that Egypt's efforts to isolate its populace from the Internet, although failing to halt the toppling of its regime, did succeed in hiding the futility of such an effort from Quadafi, et. al. This not only forms another basis for contagion, but one that was actually foreseeable nearly a year in advance- see Egypt’s Social Unrest As A Pan-European Economic and Financial Contagion? It Can Happen!!! and First Tunisia, Then Egypt, Now Yemen: Will This Reach The Powder Keg That Is The EU & What Will Happen If It Does? Subscribers should reference Potential Spillover Effects from the Middle East to the EU.
My stance on China's comeuppance for attempting to pack 50 years of growth in to 3 years is still quite unchanged. I am fully aware that many "smart" bankers and analysts have different perspectives, but as I posted a couple of weeks ago, "Currency Crisis! Inflation! Sovereign Defaults! Bahhhh… Who Are ‘Ya Gonna Believe, The Government Or Your Lyin’ Eyes?". From Bloomberg, this morning: U.S. Index Futures Fall After China Raises Banks’ Reserve Ratio
China’s central bank raised reserve requirements for lenders for the second time this year to counter inflation and curb property-price gains.
...Reserve ratios will increase half a percentage point starting Feb. 24, the People’s Bank of China said on its website today in a one-sentence statement. Today’s move came 10 days after China raised interest rates.
And anecdotally on the ground as reported by BoomBustBlogger John:
We import from Asia, V-nam mostly. After Chinese new year factories returned back to:
- 8% devalution in the dong
- New Taxes for using moterbikes and cars
- Interest on loans from 14 to a new 20%
- and more prices controls.
On top of that the real kicker. Business in Vnam had to buy US$ from the black market, the diff was 30% compared to the banks. Business would buy on the black market and get a fake bank reciept at the banks rate and keep the 30% spread & use the fake reciept for accounting, this helped keep their prices down. Now the gov is matching the black, the spread is gone.
We have people on the ground in Vnam. So who is going to pay these new prices that are coming over here right now, higher prices are on their way. Can you say margin compression, possible a big one. Look for shorts in low margin retail, big ticket item retail that are heavy into made in Asia not made in USA.
In reviewing today's headlines, we come across the reliably unreliable Eurozone statistician and forecasting figure failure, again: Euro Zone Economic Growth Below Forecasts:
The euro zone economy grew at the same quarterly rate in the fourth quarter as in the third, data showed on Tuesday, defying expectations of an acceleration.
The European Union's statistics office Eurostat said gross domestic product in the 16 countries using the euro at the time grew 0.3 percent in the October-December period, the same as in the third quarter.
Year-on-year, the expansion was 2.0 percent in the fourth quarter, compared to 1.9 percent in the third quarter.
Economists polled by Reuters had on average expected increases of 0.4 percent quarter-on-quarter and of 2.1 percent year-on-year.
Of course, it is that expected (yet not actually achieved) growth that was supposed to fund the deficits in many of the PIIGS group austerity plans. Export was a major component of this, but if the Eurozone is growing slower than anticipated (big surprise) and the EU members rely primarily on trade with each other, then who will buy all of the stuff to allow these states to pull each other out of the hole. The kicker is that the individual countries' forecasts are considerably more optimistic than the economists' forecasts, which in and of themselves were simply too optimistic. This has been a pattern since the markets collapsed three years ago. Referencing "Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse!" you can see where this is a pattern in country after indebted country in Europe - both in and out of the Eurozone - Greece, Spain, Italy, Portugal, even the UK. To wit...
Ever since the summer of last year, I have been one of the very few - if not the only - commentators that have warned of impending margin compression in the current NASDAQ and general market darling, Apple. This is not speculation, it is basically a foregone conclusion. In addition, it is really not difficult to surmise. Apple enjoyed virtually competition free dominance in the graphical smartphone arena for nearly three years, but the onset of Android has not only brought heavy competition, it has brought competition that is superior in many areas. Competition, almost by definition, means margin pressure. It's simple business logic. Despite what appears on the surface to be common sense, Apple afficiandos from consumers to investors to analysts to arm chair pundits fail to grasp what should be considered a very simple concept. I have spend considerable digital ink attempting to illustrate this last year...
The Harlem Community Development Corporation and AAREPNY hosted a breakfast symposium on real estate last Thursday in which I was the keynote speaker. The audience consisted of bankers, developers, investors, lawyers... the usual fare. I fear I may have rained on the optimism parade with my presentation, but I also feel a few salient points were communicated. I have included portions of the presentation here for the blog readers to peruse. One of the main themes of the presentation was that of "lost decades". How likely is it that we can have 20 more years of housing price declines? Note: The "74%" reference below is a typo, the Japanese residential index did not drop that far.
Let's see if any of this sounds familiar, as excerpted from Wikipedia:
This is my response to an inciteful insightful comment posted by GJK313. It is in reference to an article which readers can find here, titled "FASB Surrenders - America Win". I suggest readers read the aforelinked document in its entirety before moving on. Notice how this is written by economists and analysts, not real world investors that are investing THEIR OWN CAPITAL! When I state "own capital" I mean their money, and not that of their clients. I cannot fathom how anyone who had their own money at stake would ever want more ambiguity in pricing assets, in lieu of less.. Let me pick this apart...
In response to the post "Japanese Downgrade Illustrates Potential Paths To Contagion", several readers have suggested that the Pan-European sovereign debt issue may be overblown since Japan has been moving along for over 20 years and its debt to GDP is twice that of my of the troubled EU nations. I want to shed a little light on this topic. To begin with, it is not so much the aggregate debt-to-GDP levels that should cause alarm, but the delta of said levels (to be discussed in my next post on the topic). Even when looking at the aggregate debt/GDP levels, one must take a look at the actual debt in question.
Japan, Greece, Italy, Belgium, Ireland, and Canada have some of the largest public sector debt in relation to GDP. Japan, Greece and Italy have public sector debt-to-GDP topping over 100% versus 68% for Euro zone and 31% and 27% for Asia and Emerging markets, respectively.
BoomBustBlog is just about the only financially orientated publication that declared for nearly a year now, the inevitable conquest of Google's Android OS and ecosystem. I feel our highly contrarian research and analysis has been proven correct beyond a shadow of a doubt. Fresh off the heels of "If You Need More Proof Of Apple’s Inability To Keep Up With Google’s Android & Over 100 Other Android Hardware Vendors…" and Sony's widescale adoption of the Android platform, we have Nokia's apparent capitulation and what could be the (inevitable) assimilation into the "Borg". After all, they are just the largest manufacturer of phones (both feature phones and smartphones) in the world - that is, at least they are for now.
(Reuters) - Google's Android dethroned Nokia's Symbian as the most popular smartphone platform in the last quarter of 2010, ending a reign that began with the birth of the industry 10 years ago. Research firm Canalys said on Monday phonemakers sold 32.9 million Android-equipped phones in the last quarter, roughly seven times more than a year ago, compared with Symbian's sales of 31 million. The landmark piles pressure on Nokia as it struggles to reassert itself at the top end of the mobile handsets market. The success of the open-source Android operating system, which has become the standard for most phone makers, leaves Google well placed as cellphones are due to surpass computers for accessing the web. Among key players in the industry so far only Nokia, Apple and RIM have not resisted using it. ... Canalys said the overall smartphone market grew 89 percent from a year ago in the fourth quarter, with all vendors in total selling 101.2 million smartphones.
Stephen Elop, the Nokia CEO, is quoted as saying during the firm's latest conference call (via endgadget):
Contiguous Rich Client Computing: The ability to perform normal, daily computing tasks that include:
- 3 dimensional, full HD media production and consumption,
- full, high optics including still and HD video in 3D,
- productivity tasks via Office suites,
- real time multimedia collaboration aka videoconferencing,
- the ability to store, retrieve and transfer data at the terabyte level, wirelessly and quickly
- the ability to seamlessly transfer computing sessions and states from device to device, ex. from cell phone to notebook to desktop to large screen monitor
... all in a device the size of a 4.5 inch, 5 oz. cell phone. Sounds delicious right? Sounds like tasty pie in the sky? Well, its quite possible, and it is what the major manufacturers should be working on right now. Let's run through a quick history of the last 20 years of that tasty pie in the sky. Please expand to full screen.