Want to Present Like Steve Jobs?

Few speakers are as anticipated as Steve Jobs. My Twitter feed is already filled with comments from the many people watching his WWDC keynote today.

Clearly nobody would be interested if he didn’t provide stellar presentations (performances?) to accompany his company’s stellar products; here is a great presentation that illustrates just how he does it:

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Why I’m Done with the Stock Market for Good

Oh so close! I was holding a stock, waiting for a positive earnings release, with the full intent of exiting stock ownership for good once I saw a nice bump to reward me for my time and risk. Instead, I watched a combination of a bear market, overly optimistic analysts and a heavy short position drop my stock 50% in 2 days.

This was so typical of my experiences on the market: years of careful effort and minor gains, more than erased in seconds on the stock market.

Now before you start to think this is purely emotion, remember that I was already planning on exiting before my recent calamity, and here are some reasons why:

1) Given Enough Time, the Market Used to be a ‘Sure Thing’… NOT Anymore!

When I entered investing ca. 1998, this is what the trend on the Dow Jones Industrial average looked back to approximately the time of my birth:

Plot of the DJ Industrial Average from 1972-1998

Sure thing right? Little burp back in ’87, but if you look at any 10 year period you are still in the money.

Now look at plot of the market over my ~12 year trading career:

Plot of DJIA from 1998 to Present

Hmmm… not such a sure thing. Lets assume I made all my purchases back at 8000, and not at 11,000 and 14,000 like I actually did, and I actually had an index fund (and not a bunch of crappy tech stocks). My potential gain was about 10,000-8,000 = 2,000 or about 20%.

Guaranteed funds provide a compounded annual growth rate (CAGR), but relatively low rates (low single digit), so it is worthwhile understanding what kind of CAGR this gain translates into. To get a 20% gain over ~12 years, you would only need a CAGR of 1.88%. You can EASILY have found a GUARANTEED fund that would have returned more than this! Keep in mind I am already using a best-case scenario, not including this notable stock that I did invest in:

NT Stock Plot fot the Last 10 Years

2) So if you were a lot smarter than me, and stuck with index funds, you at least saw some gains right?

Again, not so fast!

The Dow Jones is based on the US dollar value of stocks. What has happened to the value of the US dollar since 1998? At the start of 1998 $1 US would purchase about $1.44 Canadian.  Today, they are trading close to parity, meaning that the USD has actually depreciated about 40%.

Lets see what happened to the $8000 USD we invested in the DJIA index fund: we used about $11,500 Canadian to purchase that $8000 USD, rode it up to $10,000 USD which is now worth $10,000 CDN! We have actually lost $1,500! That isn’t even counting the opportunity cost of that money.

3) Give it your full attention, or not at all.

I only worked one or two stocks where I could play close attention to the nuances of the particular business, and the market that they were in (think Apple). I found that even with this detailed focus, I still couldn’t keep track of all the important metrics that could have a significant impact on the stock (like exchange rate trends, short position, the macro market trend).  I could never put in a sufficient amount of money in to create the gains that would justify my time. For example, even though I kept buying AAPL from $120, all the way down to $80, and all the way back up to sale at $185, I still didn’t make any money due to interest charges, trading charges, and exchange rate fluctuation! I was so surprised come tax time that I had to perform the calculations 5 times to convince myself the net was $0!

4) Analysts are a flaming pile of crap.

I think only meteorologists are paid for being so consistently wrong, and compared to stock analysts, they are oracles.

That is why I was planning on getting out of the market for good, and focussing on low risk money market funds, guaranteed funds, or bricks of cash under the mattress. Now I have to wait and see if the stock can dig itself back out of its hole.

*^#&^#)

Will Carriers Finally Get Their Piece of the Apple Pie?

“Better coverage… fastest network… fewest dropped calls…” Which mobile carrier am I talking about?

ALL OF THEM

There is a huge gap in the current capacity and the demand that is being created by new high-bandwidth mobile devices like the iPhone, iPad, RIM smart-phones, Androids, Nokia Nxxx’s, MiFi/RocketStick 3.5G/4G devices used with laptops/netbooks, and Kindles. This capacity gap is inspiring another internet arms-race, just like the catastrophic that contributed to the ‘.com bubble burst’ of 2000/1. All of these competing wireless carriers are upgrading their wireless network capacity many-times over (10-100x+). The main difference –this time– is that demand exceeds supply… for now.

Dilbert.com

Right now, customers are very much choosing carriers based on the phones available, but this will soon change as cachet devices like the iPhone are made available on multiple networks. Then people will start switching from one to another because they are dissatisfied with the service (probably because a carrier is picking up high bandwidth users faster than their network engineers can deploy capacity). Then we will reach an equilibrium…

Then What?

Well, until recently, the answer would be –like any commodity market– a race to the bottom. The raging ‘red ocean’ of the wireless market would lead to the survival of the cost-cutting fittest. Just like pork-bellies, barrels of oil & even computer RAM, the winners will be those that produce a common unit for the lowest cost. The only people making real money (margin anyway) in this scenario will be those who can create differentiated products: handset makers & those that own the content (Apple and Apple respectively – I kid).

But then ‘net neutrality’ & the FCC got a big kick in the nuts courtesy of Comcast.

People who don’t care about FCC regulations (probably 99.99999% of you) may have missed the recent ruling in favour of Comcast on their ability to control how their customers use the internet (whether they were ‘neutral’ or could treat data from different sources differently).

Comcast, by challenging the FCC’s right to control neutrality, has now set a precedent that would allow carriers to be less ‘neutral’ when providing these over-the-top services (particularly those that make it hard to identify the source of all the bandwidth, like BitTorrent, etc.). This could potentially mean that they can have more control over the internet experience the user has. They could treat websites preferentially (higher speed) that agree to do revenue sharing, or block/restrict the bandwidth to those they don’t like.

The wireless and wireline carriers now have another way to differentiate from each other, aside from the “Better coverage… fastest network… fewest dropped calls…” mantra they all currently drone.

The internet experience could end up being VERY different from one carrier to the next, with an infinite combination of content/carrier/geography relationships possible. A very basic example would be a carrier winning business based on allowing BitTorrent traffic to your cell phone vs. one that does not allow it.

Things just got a whole lot more complicated… will carriers finally get a piece of the Apple pie?

This is Gonna Be HUGE!

This started off as a comment on Kneale Mann’s blog, but then I realized that a lot of my regular readers are probably expecting me to weigh in on the iPad, and why not! Ironically, Kneale’s post is about all the free publicity that the iPad is getting.  🙂

There are a lot of people griping about what the iPad doesn’t have, and its name:

iTablet was the obvious (good) choice IMHO, but it breaks the ‘two-sylabble rule’ of the Apple naming conventions, and the recent predilection for the use of the letters ‘iP’ at the start (iPod, iPhone).  Complaints about the name are missing the real story here:

All the coverage I have read misses just how much this device is going to revolutionize everything! Apple has created a huge developer community and worked them into a lather over the potential of becoming rich, famous, or rich & famous developing the next multi-million-downloaded iPhone app.  Now they provide those same developers a new platform to innovate on.

Lots of analysts seem to think that this is about Kindle vs. iPad, but that misses the point too.  The Kindle is a very well executed specialized reading device which will continue to do well in the segment of eBook readers.  The iPad provides the opportunity for innovations of much greater scope.

Expect big revolutions in:

  • Medical charting and visualization
  • Marketing
  • Gaming
  • Graphic design
  • eBook technology
  • GPS & mapping
  • Education
  • Human interface design
  • How you enjoy video and music
  • Point of sale enablement
  • Retail displays

Just as an example: imagine you go into the local car dealership, and instead of being handed the usual marketing glossies you are handed a iPad with an interior and exterior visualization of your new car with all the interior and exterior features & colours, exactly to order.  The same could be applied to making all the selections for a new home, where colour and material choices can be visualized in a 3D rendered world navigated by intuitive screen gestures and/or movement of the whole device.

The tablet itself is a nice piece of work at a compelling price point (especially compared to the capabilities offered by netbooks), but the real monster unleashed here is the rabid pool of developers who now have a completely new form-factor to innovate on. In 6-12 months, the folks at Apple will look like geniuses (again).

Will Apple Finally Kill the Radio Star?

As I was growing up, the only way I could get introduced to new music was listening to a few select stations that I could pick up in our back-woods log cabin.   Aside from one musically enlightened friend who gave me guidance (thanks!), I was at the whims of these stations DJ’s and program managers for the music I was exposed to.

What is the dynamic today? What brings to my attention the hidden gems that would otherwise hide in my thousands of songs? What tells me what new music I could listen to?

Of the several options I have tried I find myself returning to the Genius Playlist Creator and Genius Recommendations on iPod/iTunes. I suspect that many others of the other iPod/iPhone users out there have done the same.

In some ways this is a great thing:

  • The music is tailored to your tastes (the ‘demographic of one’)
  • It fits with your schedule, and not some time slot defined by radio listener demographics
  • Its location independent (well, ok satellite radio offers this too)
  • You don’t have to hear ‘popular’ songs multiple times a day
  • While the radio station was keen to appeal to everyone they risked pleasing nobody
  • As your mood changes, so can your music
  • You can easily try new music and buy

But there are drawbacks:

  • Your music is now controlled by an algorithm; while its amazing, I notice many song show up VERY often (almost like iTunes is trying push certain artists… hmmm)
  • You are only pointed to new music in iTune’s library; it makes me wonder what I’m missing… does iTunes bother with fringe artists?
  • There is always the risk that Apple decides to actually manipulate the results to promote music not based on taste, but who is paying more to be promoted (hey – this sounds familiar)

I’ve tried the new forms of radio: internet-based, satellite radio, even a brief foray back into local radio, but they are all basically the same formula…  I think they have finally lost me to the ‘demographic of one’.

 

Apple Earnings Today at 5PM, I’m Holding…

I am in for the long term, so I am holding. I expect them to beat estimates today, and there is the potential for Steve Jobs to show up on the call too. Apple continues to be a good news story, and one of the few really well run companies.

AAPL: And Back In Again…

Keeping with my ‘buy high and sell low’ strategy, I am getting back into AAPL.

Seriously, the market pull-back and AAPL profit taking was much less than I expected. It appears people were happy enough with what they saw at the WWDC, and the absense of Steve Jobs’s didn’t get much notice.

As a result, I am making a timid foray back into AAPL at $137, and looking to accumulate more if it drops.

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