Edward Harrison

Can Apple Stop the Android?

Another great point, Mart. The scenario IS indeed flipped in that regard. Apple is the Wintel of digital media/smart phones if you will, as I said in the post. That is why I pointed out the software-hardware tie-in. To me, this is crucial in keeping the advantages you mention. And, again, this is why the Android threat is significant.

The Apple stores you mentioned are another sign that Apple is a great consumer products company whereas its competitors are technology companies and that works to Apple's advantage.

I agree, you can't write off Apple. They face a threat but they are in the driver's seat now. I hope my article reflects that point of view.

On Nov 22 10:28 AM Martin Hill wrote:

> Edward,
> Everyone seems to focus on the software and media part of Apple's
> ecosystem but the story is even more compelling than that.
>
> This is the challenge for all iPhone competitors: Joe Public walks
> into their local Electronics store and what do they see? Row after
> row of iPhone compatible iPod dock equipped clock radios, stereo
> and speaker systems, cases etc and then when they get to the checkout
> counter rows of iTunes Gift cards (which can be used to buy iPhone
> apps just as easily as music or movies). Then they jump in their
> car and 70% of the time they’ll find an iPod dock connector option
> with steering wheel integration etc. Heck if they jump on a plane,
> chances are their seat will even have an iPod dock.
>
> Then they sit down in front of their TV and what do they see, dozens
> of ads from banks, fast food companies, etc all proudly showing their
> iPhone apps and of course hammering home the point that it is only
> on iPhone that you’ll find an app for just about everything. Then
> of course, they go to play their music on their PC and again 70-80%
> of the time, it will be iTunes that they fire up – all ready to sync
> with that new iPhone they’ve been lusting after.
>
> You were actually right when you said it is looking like the 1990s
> all over again, but this time it is Apple not Microsoft that has
> the overwhelming majority share of software and hardware peripherals
> (and profits) and Android and Microsoft and Nokia and RIM and the
> rest are the ones fighting with each other to get developers to create
> for their platforms. It is not enough to have good phone hardware
> anymore – Apple has proved that it is the ecosystem that wins the
> game in the long run.
>
> I’m not saying that Android won’t prove to be good competition, but
> I am saying that you’d be foolish to write Apple off at this point
> in the game.
>
> -Mart

Can Apple Stop the Android?

Those are fair comments. So, I would agree with that, yes - in particular because it is still early days for Android.

One thing you didn't mention in your comments - so I'm curious to hear your thoughts - is the belief that Apple's competitive advantage lies in large part due to network effects and the tie-in between the iPod (Touch)/iPhone and iTunes/AppStore. If the average consumer owns an iPod or iPhone, she is hard-pressed to use anything but iTunes(/Apple App Store). This is by design - not just to control quality, but also to exert control and prevent competition and garner the profits from network effects.

This is one reason why Apple upgrades software with the express intention of breaking tie-ins for phones like the Palm Pre. This is also a reason that Apple exerts tight control over the AppStore and will not allow other AppStores to flourish.

If Apple can maintain the overwhelming market share (in Music downloads and Digital media Players/Smartphones), it gets huge network effects. This is the source of a lot of their profits.

The real threat to Apple's profits from any competitor - Android included - lies in reducing Apple's share significantly enough in either hardware or software so that the network effects inherent in the harware-software tie diminish.

Google's strategy in breaking Apple's stranglehold is to present a platform to a bevvy of manufacturers who were starved of one to compete successfully in the Smartphone race. The reason we have seen such an uptake of Android is that all of these manufacturers want a piece of the hardware profits that Apple is getting. The potential network effects (cross-manufacturer Apps common to the Android platform) from a large installed base make Android an obvious choice. This is a principal reason that the potential splintering of Android is something of concern.

Moreover, many of these same manufacturers also are in related markets (Tablet PCs, Portable Media Players, Netbooks, PCs, etc). The concept that they can use the same platform across all of their markets has to be enticing from a cost perspective - and again in terms of network effects.

On Nov 22 08:04 AM Martin Hill wrote:

> Edward, we'd appreciate it if you held off on the "Apple fanatics"
> slurs. It would be nice to maintain a mature discussion on this topic.
>
>
> You say that "this is looking like a repeat of the Macintosh-PC Wars
> of the 1990s which Apple lost" and "one company cannot compete against
> 100s".
>
> There is a reason that we all disagree with these arguments and that
> reason is the iPod and the iTunes Store.
>
> With over 70% market share, Apple has obliterated the 100's of heavyweight
> competitors in both the media player and music store markets worldwide
> and in doing so, has proved that industry-leading design and vertical
> integration can and has trumped the massed ranks of competitors.
>
>
> Now it is the iPhone platform that has the hundreds of thousands
> of third party programs and hardware peripherals and it is Android,
> Windows Mobile and Symbian that are struggling to compete against
> the new defacto standard in apps and peripherals for media players
> and phones.
>
> Apple is not the same company it was in the 90s, but it is the same
> company that defeated Microsoft, Sony, Dell, Toshiba etc this decade.
>
>
> Considering this, wouldn't you agree that as a previous poster said,
> perhaps the title of this article should have read "Can Android stop
> Apple?".
>
> -Mart

Can Apple Stop the Android?

I really don't like the way Apple fanatics try and defend the company with blinkered admiration. Try to take a balanced objective view, which is what I am trying to do given the fact I am not particularly fond of Google. I have to protest pretty vigorously about your characterization of what I am saying. I am NOT saying Android will take 90% share. I am not saying Android will wipe the floor with the iPhone. It is much too early to make a statement of that sort. After all., I did mention the potential splintering of Android. And, the iPhone is still a superior product from a ease-of-use perspective and that wins in the consumer market.

I am saying that Android is Apple's first true test in a market it has dominated. I believe Android will win a large percentage of the smartphone market - especially in the lower price range (even Droid is being discounted to $120 already). It is not obvious that Apple will continue to dominate in the same way given a credible threat like Android which has significant manufacturer support. It is the handset maker support which makes this similar to Wintel - that is the ONLY comparison I am making.


On Nov 21 02:16 PM Troy Jensen wrote:

> Had to weigh in on this article. Actually, it's a cry to everyone
> jumping the gun on Android WAY WAY too early. My background is in
> Technology back when getting a 56k connection was the big deal, and
> (at times to my financial detriment) in mobile for years and years
> - I saw around the corner on mobile, albeit a little too early.<br/>
>
> Then Apple introduced the iPhone, and presto... disruptive technology
> Exhibit A. I use both an iPhone and for kicks, got the Droid to play
> with.
>
> Let's dive in from a REALISTIC perspective:
>
> 1. Discount market share at your own peril. Apple owns this space,
> and Android's market share figures, granted impressive when thrown
> out in a year-over-year percentage increase figure, are still minuscule.
>
>
> 2. On the subject of discounting important data, iPhone owns the
> demographic that skews both younger, and more affluent. I ran an
> advertising agency for years and years. That is one powerful demographic
> to dismiss - I use Android daily, and at this point it has nothing
> close to the experience iPhone has when it comes to this demographic.
>
>
> 3. Can anyone truly think right now Apple is resting on it's laurels?
> If you do, you are foolish at best, delusional at worst. I can't
> say anything more except just hold onto your hats for 2010 and the
> iPhone. I can't trade on that information legally, but I can squirm
> in my chair in excitement. If anyone doubts, please refer back to
> this blog posting by Q2 2010...Apple is a VERY aggressive company,
> and they aren't simply kicking back, counting market cap and cash-on-hand
> figures and watching Android with nonchalance. TRUST ME.
>
> 4. Android is in the weeds with their App Store. This is a serious
> problem, and it is being addressed in a haphazard fashion.
>
> 5. THIS IS NOT A REDUX OF MS versus APPLE! People, please understand
> this important point. There will be no 90% market share holder in
> this vertical. Rather, we will see several strong players. It's human
> nature to believe history repeats itself...there is a comfort in
> that. Stop with the comparisons. This is an entirely different paradigm,
> and Apple and Android will share large pieces of the market share,
> along with others yet to emerge. It's simplistic and comforting to
> continue to refer to the Windows - Mac scenario when forecasting
> the mobile space today...but totally and completely irrelevant. I
> use a far more dynamic model that accounts for many other factors,
> and actually weights historical trends at the low-end. This is an
> entirely different space, and should be analyzed as such.
>
> BOTTOM LINE - Android will gain market share, mostly at the expense
> of the weaker players in the space. iPhone will have another groundbreaking
> hardware and software introduction in 2010 that will further garrison
> their position as the leader in the space. AT&amp;T is indeed an
> achilles heel for Apple, but in looking at some of AT&amp;T's moves
> in short-term financing, they are quietly going to try and push hard
> to address this issue in 2010. And if they don't, Verizon and others
> beckon in 2011.
>
> And let's not forget the other introduction we can expect in Q2 (Q1
> isn't gonna happen, according to my sources - Jobs is still pushing
> for perfection) - the Apple Tablet. Long rumored but a reality once
> Steve has it right, this is going to be a 8.0 on the Richter Scale.
>
>
> Or, and I quote from an Apple insider, "Apple is about to revolutionize
> mobile computing for the second time in two years."
>
> This post isn't meant to discount Android - I love it, to be frank.
> They have a lot of market share to grab easily ahead, it is a fantastic
> experience and mobile operating system. It may even equal or slightly
> exceed iPhone market share longer-term. But there is absolutely,
> positively, 100% NO CHANCE this will be a repeat of the Windows-Mac
> market share eventuality. Apple knows this, and frankly so does Google.
>
>
> And to even make the comparison is just misguided reliance on historical
> trends. Period. And THAT is the STRAIGHT truth on this subject.
>
>
> Gotta say cheers to all the posts, both sides of it....good discussion,
> this is what SeekingAlpha is all about!

If U.S. Stopped Issuing Treasuries, Would It Go Broke?

Exactly! A sovereign which borrows in its own currency can never voluntarily be bankrupted. It's different for Spain, which has no sovereign currency.

The real issues in a fiat currency regime are inflation, devaluation and taxation. All the talk of national bankruptcy assumes a gold standard environment.

On Nov 20 02:57 PM Tack wrote:

> As long as debts are denominated in its own currency, a government
> can never default. That's the beauty of having a reserve currency
> or borrowing in your own currency, whatever it may be.
>
> Any discussion of "IMF loans" is nonsense. The reason the IMF has
> made bailouts to other countries is because they borrowed money in
> currencies other than their own, so when their excahnage rates collapsed,
> they needed more dollars, euros or whatever was the basis of the
> loan.
>
> Take the exchange-rate issue out of the equation and add a printing
> press, and technical defaults are impossible.

If U.S. Stopped Issuing Treasuries, Would It Go Broke?

The one thing you missed about fiat money is the obligation is merely to repay in kind with more fiat currency. There is no alternative payment (gold or silver). So in this sense there is no technical constraint on the redeemable upon demand payment.

Inflation and currency devaluation are the constraints, not bankruptcy.


On Nov 20 02:00 PM bob adamson wrote:

> One the face of things you and Mr. Wray are not missing anything,
> Mr. Harrison. The key, though, is that a US dollar (or Euro, Pound
> etc.) has attributes that a bond or other security issued by the
> US Treasury (or by the corresponding foreign government agency) does
> not have and these attributes matter.
>
> While such a bond is a store of value it is not legal tender or,
> in the technical sense, a medium of exchange. Is this significant
> for the purposes of the thrust of your article? Arguably, the answer
> is maybe not if, for example, on a one-off or occasional basis the
> US Treasury simply recorded electronic bank credits to cover new
> government obligations or redeem outstanding bonds. Even here, the
> assumption is that the value of legal tender issued for these purposes
> is not significant measured against the total values of either government
> bonds generally or legal tender generally. Why, therefore, would
> it matter if the US Treasury issued a significantly greater amount
> of legal tender rather than bonds (than described above) to cover
> government debt as it became due?
>
> The difference for purposes of our discussion between legal tender
> and other forms of government debt is that the government promises
> to pay for legal tender on demand while, for other forms of government
> debt, it promises to make payment at some future date on the terms
> specified in the debt instrument. This distinction is masked by the
> fact that in all these cases the Treasury’s obligation is simply
> to pay dollars (either on demand or as specified) but the timing
> is critical. It is also masked by the fact that no one expects a
> run on the US Treasury.
>
> What is somewhat lost sight of, however, is that US government bonds
> generally do not represent an obligation of the US Treasury to make
> immediate payment in legal tender and these bonds are not really
> part of the international current balance of payments equation in
> the immediate sense that US dollars are. For these purposes, the
> bonds are latent while dollars are active. When such bonds are issued,
> one often characterizes this as an act of monetizing debt but, for
> purposes of our discussion here, it would be more accurate that such
> issuance is characterized as a latent monetizing of debt because
> actual monetizing will only occur at some point in the future if
> the Treasury redeems the bond for cash that is not derived as actual
> government revenue. So What?
>
> This only would become significant if domestic and international
> users of the US dollar became concerned that the US legal tender
> they hold was in imminent danger of significant devaluation by a
> large expansion of that legal tender on the market. A wholesale conversion
> of debt into legal tender, by increasing the supply of US legal tender
> significantly within a short period, could have this effect (a simple
> supply and demand issue). Government bond issues, because of this
> latent aspect discussed, mutes and defers this reaction.
>
> In short, the US debt ceiling does mean something as it is seen as
> an implied undertaking by the US government’s agencies that there
> will be acceptable limits on the creation of US legal tender from
> time to time into the future.
>
> I am sure there are more concise ways of saying the forgoing but
> I don’t have the facility with the technical terms for this purpose.
> That said, have I missed something?

Jobless Claims: The Slow, Inexorable Decline

Tom, the fact that I use inexorable in the headline does show I am more optimistic about jobs than Rosenberg who I have often quoted. Amongst finance bloggers, I tend to be more bullish on the near-term economy. So, its not negative bias here, but perhaps positive bias.

I have said before that I think jobs numbers could surprise to the upside in the coming months. However, I am still cognizant of the underreporting problem which I have highlighted in some other posts.

So what I am trying to say in this particular post is that these two data points are at odds with one another and bear watching to see what the medium-term trend will be (longer-term I think the economy may roll over, but that is another story).


On Nov 20 07:47 AM Tom Armistead wrote:

> Inexorable is a strong word. I'm glad to see that you are applying
> it to the decline in layoffs.
>
> That would put the spotlight on hiring, at which point you resort
> to a presumption of under-reporting of small business job losses
> to maintain a properly negative attitude.
>
> The US has more houses than we need and more registered cars than
> licensed drivers - more cars than we need too. With two main sources
> of employment still weak due to oversupply obviously a recovery in
> employment will be slow. But there is no need to resort to presumptions
> of under-reporting to make the news more discouraging than it is.

Jobless Claims: The Slow, Inexorable Decline

The 22% number seems incredibly high on its face so I am a bit skeptical. But, I don't follow his numbers enough to have an opinion, but I do applaud his efforts to help us make apples to apples comparisons on inflation and unemployment.

10% unemployment today really is not the same as it was 30 years ago.


On Nov 20 04:56 AM Donald Ingram wrote:

> Edward - Do you consider John Williams at shadowstats numbers to
> be valid? Or bogus? His methodology relies upon the 'old' system
> of calculating the numbers. He puts under/unemployment a little north
> of 22%. This to me on the ground seems a little more realistic than
> the governments latest.

Obama's Fears of a Double Dip Recession Are Nonsense

I don't know if you always go by Mr. Ed, Jr,. but son, that's a name I like!

There is some serious political posturing going on here, especally as it relates to the Japanese and Chinese Obama just visited. But, I have been on this issue for a year now and I do believe he is telling us what he truly believes.

The question is: what is he actually going to do policy-wise? The guy is all over the map, looking to please a wide-range of political constituencies, so you really never know what you're going to get. What ever it is, I am betting it will be based more on political calculation than real desire for meaningful policy because that's how I have come to see the Administration in their year in office.


On Nov 19 09:59 PM Mr. Ed, Jr. wrote:

> "Barack Obama has now come clean about his thinking on why his administration
> has decided to focus first on reducing the deficit and next on jobs.
> He fears a double-dip recession will occur if foreigners lose confidence
> in the U.S. dollar, causing interest rates to spike."
>
> Whatever would cause someone to believe that this is what he is really
> thinking and concerned about ? Because he mouthed the words ? <br/>
>
> Bet that what he says has absolutely nothing to do with anything.
> That is why it makes no sense. We have a President who truly believes
> he casts a spell on us when he speaks (For some, that is true). The
> words are only meant to soothe and comfort, while he pretends to
> be pragmatic and moderate. His actions are something altogether different.

Obama's Fears of a Double Dip Recession Are Nonsense

For the record, I am not a Keynesian. It's almost like an insult, actually. While I am proposing a Keynesian solution here, I really don't identify with Keynesianism.


On Nov 19 12:55 PM Tony Petroski wrote:

> I happen to know that the madman, MHFT, could not have written the
> comment above because I've seen it in many places, the same comment,
> and besides, I had lunch with him in San Francisco this morning at
> the time the comment was posted.
>
> It's delicious to see the Keynesians turning on each other.
>
> Mr. Harrison. The basic mistake that all Keynesians make (you) is
> to assume that money spent by anyone is equivalent to money spent
> by those who know what they're doing, like Joe the Plumber.

Financial Crisis: Ten Issues that Haven't Disappeared

Thanks for the well wishes. I am not 100% but much better. Stay healthy!


On Nov 13 07:41 AM Maxe Paul wrote:

> Hope you are feeling better Ed. Keep up the good work.

Ambac: Now It Warns of Bankruptcy?

Just to be clear, this is the parent company filing for bankruptcy.

Labor Market Still Grim, But the Worst Is Over

I think you're on to me, Dialectical. I am the most bullish bear. I try to call it as I see it. Just because I have a particular view doesn't mean I should twist the data to fit that view.

My bearishness stems from my fundamental belief that economic policy is creating unsustainable debt-fueled growth. But it is not clear when this unsustainability will be made manifest once and for all. In the meantime, I take bull markets and cyclical upturns at face value, cognizant of the underpinnings in regards to debt and leverage.


On Nov 08 05:25 PM Dialectical Materialist wrote:

> I can't figure out if you are the most bearish sounding bull I have
> read or the bullest bear. You have a tendency to paint a really
> ugly picture of the economy and then say that the recovery is moving
> forward. And the odd thing is that I mostly agree with you. I think
> that both the rampant recovery folks and the apocalyptic crash camp
> are probably both wrong in the long run.
>
> Having said that, I'm not sure I agree the "recovery" will be "sustained"
> in the short run. We are a long ways away from gaining traction
> due to the number of unemployed and its impact on consumer spending.
> So while I think we'll pull out of this, I think we are in for a
> very long period of sluggishness.

The Imminent Collapse of Municipal Bonds

You make some fair points. Obviously, one reason Munis are attractive has to do with the tax free status for many investors and that gives it a yield pickup over Treasuries.

The question you ask which is most interesting has to do with the seniority of the bonds and the security of the income stream to investors. general obligation bonds are obviously of more dubious security than bonds funded by specific income streams. I would expect there to be a dichotomy in performance based on this factor.


On Nov 05 08:33 AM GlobalTrekker wrote:

> I guess I am starting to become the contrarian voice in the never
> ending tirades against public institutions and their funding. But
> I believe the intellectual thrust of this article is a tad facile,
> preaching to the choir, as it were, and ignores some distinct features
> of the municipal bond market. Municipal markets may not be able
> to print money, but they have many tools at their disposal to satisfy
> bond holders.
>
> Interest payments are usually very senior in the states' hierarchy,
> and revenue bonds continue to collect tolls, fuel taxes, and utility
> surcharges. These have fallen little. CA and others have risen
> the sales tax 1%, and that's a lot of money in the world's 8th largest
> economy.
>
> Many states actually are cutting back services, so much of what the
> old saws say in this article is untrue.
>
> Also, comparing expenses in 1955 versus nearly 2010 is really quite
> a mental stretch. This is not the same nation as 55 years ago, despite
> what perhaps many readers might wish.
>
> It's always a little surprising to me that people claim to be so
> patriotic but deride all those who work for the nation. Do you really
> have so little regard for the value and services of our nation's
> military, teachers, forest fire fighters, meat inspectors, police,
> firemen, park rangers, state university professors, flight controllers?
>
>
> Factually, the article also falls a bit short: "the investor gets
> only a slightly better return than in Treasuries." Uhm, on what
> planet have you been residing? My Vanguard muni funds have been
> yielding 4.3%, a double-tax-free equivalence of nearly 8%, not counting
> the huge appreciation I've enjoyed. The triple-A rating may be suspect,
> but I'll take my chances. In the CEF muni world I have funds paying
> out over 10% in tax equivalent yields, again, ignoring the far larger
> appreciation received since purchase in the spring.
>
> In all, the muni market is in trouble, like most of the economy,
> but the writers protest too much. The states comprise America, and
> America is filled with potential, creativity, and vigor -- throughout,
> not just in a few Silicon Valley start-ups.

The Fed and Executive Branch's Creeping Power Grab

It is completely relevant. For a number of years now, the executive branch has been trying to usurp power from the legislature. As I recall, declaring war falls to the Congress. Yet, for 50+ years we have gone to war without a formal declaration.

The U.S. is becoming an empire and it has much to do with executive power creep. The 9/11 power grab is very much relevant to remind people that it is not a new phenomenon.

On Nov 04 08:39 AM casey00001 wrote:

> Why even mention Bush at all? This is a blatant Obama power grab.
> Once again Blame it on Bush has no relevance.

Japan: The Problem Is Taxes

Chap, I'm glad you noticed the contrast to my post. This is my colleague Marshall talking, not me! He and I see this issue differently (and Seeking Alpha reproduces most of the posts on my site whether by me, Marshall or guest authors).

Also, AEP is a monetarist I believe and he believes in QE. Marshall sees fiscal policy as more effective and QE as ineffective. I understand you are more in AEP's camp. I think AEP is wrong here on QE because the demand for credit is lacking in Japan and QE just inflates asset prices and produces a carry trade in conjunction with low nominal rates. This is what is happening now in the US as well.


On Nov 04 07:27 AM chap08 wrote:

> Edward, I'm confused, or maybe you're confused. This article seems
> to be by your colleague, but appears under your name without comment,
> so I take it to represent your views.
>
> The article appears to advocate monetization of government spending.
> That is the only way that "Debt is serviced by data entries". If
> Japan are servicing debts through "debits and credits to securities
> accounts and transactions accounts at the BOJ" then that is monetization.
> Otherwise debt has to be serviced by real interest payments to 3rd
> parties. If you are making interest payments to 3rd parties, then
> the debt trap risk that Evans Pritchard discussed is very real. It
> is not "ludicrous".
>
> So, the article advocates monetization of spending. But yesterday,
> in your article on Japan, you said that you were against QE. I am
> curious to know how you could be against QE and yet support monetized
> spending. Although they have different objectives, in some senses,
> QE is just temporary monetization of spending. Please clear up my,
> or possibly your, confusion.