Hulu In The Hands Of The Cable Companies Would Negatively Impact Netflix [View article]
Good article that shows that you need both compelling content and competitive distribution ( which is increasingly digital streaming) to be in the video entertainment business of tomorrow. There is no doubt that cable companies buying Hulu can be a significant challenge to Netflix, just as much as emerging content-distribution partnerships championed by Amazon Prime, Google or Apple could.
What I don't understand is why Wall Street gets excited every time Netflix announces how many hours of video streaming it is feeding into the networks. There is a cost to the infrastructure capable of supporting such exponential video streaming usage . As long as the subscription revenue is a constant $8/month but the costs of sustaining that subscription are on the rise ( due to content acquisition and/or infrastructure support), profit erosion is inevitable. Instead of caution, Wall Street exhibits euphoria. Go figure !
'Intel Inside' Will Push Qualcomm, Mediatek And Nvidia Outside [View article]
If you think Apple's IOS will roll-over and let "Intel inside" dominate their customers mindshare you must be inhabiting a different planet.
Ditto for Samsung and BlackBerry. Nokia is unknown, but do they matter ? As to the Asians embracing "Intel inside" + with either Microsoft or Google's OS, the road to market supremacy is so steep it is almost perpendicular.
Both Qualcomm and Nvidia are here to stay. Dislodging them with a media campaign is as likely as GM dislodging Toyota or BMW with its "branding power."
Here's What Happened The Last Time The Fed Owned All Outstanding Treasuries [View article]
Good points Mr. Blair although I am not sure bonds will be decimated anytime soon, especially if they yield >5% and they are of reasonable quality. In order for inflation to spike we need to get deleveraging to run its course.
With public debt so high in most G7 countries as a % of GDP, if interest rates were to jump it would exacerbate government deficits and contribute to grow those public debts even further. Therein lies the real dilemma: higher interest rates will be more damaging than keeping them low, at least for all these overstretched and procrastinating governments.
Japan is in a different situation than the US: most of the public debt there is owned by the Japanese vs, 40% of the US public-debt which is owned by other countries like China, Japan, UK etc...So, if the US$ is devalued further it will certainly penalize those countries ; but if the Yen is devalued more it will cripple Japanese consumption ( eps.consumer imports) while helping boost Japanese exports. However, whether that will result in growth for the Japanese economy is far from certain.
Here's What Happened The Last Time The Fed Owned All Outstanding Treasuries [View article]
World’s stock markets at the moment are subject to levitation caused by central bank policies attempting to foment inflation.
The same central banks ( and the Teflon governments harboring them ) that over the last 10 years delivered financial instability everywhere now believe they saw the light : Turbo- QE !
Japan will now copy the yet unproven US model and wage a more aggressive fight against deflation with "centrally-planned" inflation.
Alas, it might backfire more violently than ever anticipated not only there, but here in the US as well.
Trouble is that in so-called "market-based economies" monetary central-planning doesn't work very well, when working against disjointed economic and fiscal policies. Trying to compensate for deficiencies in the latter with monetarism is a recipe for more ( not less) instability.
We have had increased money supply and lower taxes in the last 10 years relative to the previous 10: where are the jobs and the economic growth that they were supposed to engender ?? We have guided the dollar significantly lower over the last 12 years: where are the reductions in trade-deficit and unemployment that a weaker currency was supposed to create??
Not getting any answers, politicians have abdicated their responsibilities to surprisingly naïve or idealistic central-bankers.
No, QE does not address the imperative for deleveraging that the 2008 crisis precipitated. Debt reduction at the national level ( public + private) is still a major economic drag for all G7 nations. The hard question that no one wants to face is this: can deleveraging be ever accomplished without some deflation ?
QE -- although buying more time for the much needed reforms and policy shifts to arrive -- is increasingly looking like the new thing politicians will love to blame next time the economy stalls.
3 Key Metrics That Show Why We Can't Avoid Recession [View article]
Thanks for a well written and conclusive article.
My view, which I had expressed in a few posts in the past, is simple: QE has only been successful at preventing bank insolvencies but at the expense of transferring debt from the financial sector to the government. By doing so, it has postponed the inevitable deleveraging process and delegated to the “invisible hand” of market-forces the necessary deflationary adjustments . Bottom line : a durable recovery is still at least 5 to 10 years away.
Son has pioneered lower-cost wireless data subscriptions in Japan beyond everyone's expectations. It takes a strategic mindset to disrupt the NTT DoCoMo and KDDI duopoly and he has demonstrated that he clearly has that.
By moving the focus to data connectivity (from telephony bundles offered with Smartphones) he is onto something that could also take the US marketplace by surprise. Wireless VoIP is still very much in its infancy. When considering surveillance, irrigation and other monitoring-type applications that require wide-area data connectivity beyond WiFI, his comment of multiple subscriptions per homeowner is not to be taken lightly.
Softbank is getting itself a sweet deal while Sprint is eliminating financial risks : Kudos to both, and to Apple’s iPhone for being the inspirational matchmaker.
If Sprint executes well without the mind-numbing blunders of the past before Hesse was brought-in as CEO (Nextel purchased for $34 B only to be written off ; and chasing Wi-Max with Clearwire against LTE) I believe they might surprise many people.
3-5 years down the road, when Sprint's ARPU becomes comparable to that of VZ or AT&T, Softbank would have acquired them at 50 to 70% below their potential value .
You are among a few people writing about Sprint who "gets it".
Sprint has made 2 disastrous technology blunders in the past (Nextel and Clearwire) and they have been in a mopping mode since. The first one is being phased out ; and the second one is being revectored to LTE while still holding significant - and underestimated - spectrum value. Both of these problems will be left behind in about a year. The "network vision" risk described by some is totally misinterpreted: it is about an engineering project long overdue to remedy disparate networks and technologies due to these 2 blunders. Consider it as the "final touch" in the major clean-up of the above 2 monumental mistakes.
Now for accountants looking at Sprint's financial performance, what is yet invisible is the impact of iPhone on improving its fortunes. There is no doubt that in both wireless revenue growth and subscriber market-share gains Sprint will outperform both AT&T and Verizon in 2012. Since they can't deliver comparable operating margins quickly, they are rightly focussing on growth.
What is less obvious is the impact of prepaid iPhone sales (without the $450 subsidy/phone) that Virgin Atlantic will have on its operating margins. If the experiences of European cellcos serve as a guide, there is a huge untapped opportunity there. Furthermore, Sprint's rivals cannot retaliate easily without disrupting their existing rigid ( and dangerous) business-model relying on locking-up the customer with a contract against his/her wishes. A time-proven and tested formula for guaranteed backlash.
Stay tuned... Sprint is undergoing a makeover. What is important for them is to stick to the plan and execute it without distractions. Shareholders will certainly take notice sooner or later.
Financial Fitness: A Key Requirement For A Durable Recovery [View article]
You are both raising an important point : will the Fed, as a central bank, always be able to control interest rates or, could it lose that power to the market forces, like in Spain or Italy recently ?
Japan had to practice ZIRP + QE for 20 years to fight deflation, and still hasn't managed to breakout into normalcy, despite a strong export-oriented performance. What are we going to have as a counterforce ?
Simply put, the Fed is not the answer anymore: it cannot indefinitely come to the rescue of political procrastination in deficit curbing.
Another way to describe QE is that it swaps cash for bonds but does not increase the amount of "spendable" money by the public. The banks are flooded with liquidity to prevent insolvency but their assets remain unchanged, unlike those of the central bank. But that bloating of central bank assets ( by some $16 trillion worldwide last I looked) is neither inflationary nor depreciative of the currency .
The confusion would diminish if the expression of "printing money" was not misused so widely. Japan's central bank has been deep into QE since the early nineties and continues to do so to avert deflation, but that has not debased their currency as the recent exchange rates testify.
The problem QE causes is that it defers deleveraging in the economy, hoping that defaults or inflation would at some point in the future accomplish that: it brings current stability at the expense of future instability. In other words it buys time for politicians to do the right things, especially strive for fiscal rectitude: selling dreams was never made easier.
AT&T And Sprint: First Move Towards Cutting Smartphone Subsidies [View article]
The reality is that Smartphone subsidies are on the rise because newer Smartphones cost increasingly more and the trend is nowhere to be reversed anytime soon.
The iPhone subsidy is a tad under $450. Not sure what the volume discount from Apple is, but I doubt it is so large as to discourage Apple's own direct (store or web) sales, especially as the unlocked variety opens-up the gates for the "global" phone when the LTE version is introduced....
So, in view of the competitive pressures ( Sprint's 40% of new customers that iPhone attracted is a lot more remarkable than you seem to appreciate) that Carriers are making upgrades more costly is both reasonable and understandable. The alternatives of increasing subscribtion costs (ARPU) or extending contract's duration by a few more months, are both a lot more difficult to do.
The real question we should be raising is "what will carriers do when subscribers prefer to buy their phones without subsidies" and, then demand that they be exempt from contracts and have the freedom to choose data plans as they please. Remember that data plans don't get encumbered with number portability and that churn is still the #1 nightmare of all Carriers ...
In that scenario, customers would be choosing network and service quality, fulfilling the original goal of deregulation in telecommunications : competition based on merits, and not the deep-pockets of the highly indebted parent companies!
Cell Phone Wars 2012: The Return Of RIM [View article]
I agree with your conclusion that the potential for upside far exceeds the downside. Two reasons : 1) the bulk of the revenues come from outside of the US ( comparable to a Qualcomm), 2) they have substantial and recurring service revenues ( which I thought you should have covered in greater detail..)
The Arrogance Of Lecturing Europe With The Wrong Lesson [View article]
Yes it does. The business model of making money without delivering economic utility ( i.e. better value, functionality, convenience or productivity) is destructive for any society, anywhere and anytime.
Hulu In The Hands Of The Cable Companies Would Negatively Impact Netflix [View article]
What I don't understand is why Wall Street gets excited every time Netflix announces how many hours of video streaming it is feeding into the networks. There is a cost to the infrastructure capable of supporting such exponential video streaming usage . As long as the subscription revenue is a constant $8/month but the costs of sustaining that subscription are on the rise ( due to content acquisition and/or infrastructure support), profit erosion is inevitable.
Instead of caution, Wall Street exhibits euphoria. Go figure !
'Intel Inside' Will Push Qualcomm, Mediatek And Nvidia Outside [View article]
Ditto for Samsung and BlackBerry. Nokia is unknown, but do they matter ? As to the Asians embracing "Intel inside" + with either Microsoft or Google's OS, the road to market supremacy is so steep it is almost perpendicular.
Both Qualcomm and Nvidia are here to stay. Dislodging them with a media campaign is as likely as GM dislodging Toyota or BMW with its "branding power."
Here's What Happened The Last Time The Fed Owned All Outstanding Treasuries [View article]
With public debt so high in most G7 countries as a % of GDP, if interest rates were to jump it would exacerbate government deficits and contribute to grow those public debts even further. Therein lies the real dilemma: higher interest rates will be more damaging than keeping them low, at least for all these overstretched and procrastinating governments.
Japan is in a different situation than the US: most of the public debt there is owned by the Japanese vs, 40% of the US public-debt which is owned by other countries like China, Japan, UK etc...So, if the US$ is devalued further it will certainly penalize those countries ; but if the Yen is devalued more it will cripple Japanese consumption ( eps.consumer imports) while helping boost Japanese exports. However, whether that will result in growth for the Japanese economy is far from certain.
Here's What Happened The Last Time The Fed Owned All Outstanding Treasuries [View article]
The same central banks ( and the Teflon governments harboring them ) that over the last 10 years delivered financial instability everywhere now believe they saw the light : Turbo- QE !
Japan will now copy the yet unproven US model and wage a more aggressive fight against deflation with "centrally-planned" inflation.
Alas, it might backfire more violently than ever anticipated not only there, but here in the US as well.
Trouble is that in so-called "market-based economies" monetary central-planning doesn't work very well, when working against disjointed economic and fiscal policies. Trying to compensate for deficiencies in the latter with monetarism is a recipe for more ( not less) instability.
We have had increased money supply and lower taxes in the last 10 years relative to the previous 10: where are the jobs and the economic growth that they were supposed to engender ?? We have guided the dollar significantly lower over the last 12 years: where are the reductions in trade-deficit and unemployment that a weaker currency was supposed to create??
Not getting any answers, politicians have abdicated their responsibilities to surprisingly naïve or idealistic central-bankers.
No, QE does not address the imperative for deleveraging that the 2008 crisis precipitated. Debt reduction at the national level ( public + private) is still a major economic drag for all G7 nations. The hard question that no one wants to face is this: can deleveraging be ever accomplished without some deflation ?
QE -- although buying more time for the much needed reforms and policy shifts to arrive -- is increasingly looking like the new thing politicians will love to blame next time the economy stalls.
3 Key Metrics That Show Why We Can't Avoid Recession [View article]
My sources say 7.5% !
3 Key Metrics That Show Why We Can't Avoid Recession [View article]
My view, which I had expressed in a few posts in the past, is simple: QE has only been successful at preventing bank insolvencies but at the expense of transferring debt from the financial sector to the government. By doing so, it has postponed the inevitable deleveraging process and delegated to the “invisible hand” of market-forces the necessary deflationary adjustments .
Bottom line : a durable recovery is still at least 5 to 10 years away.
In Sprint We Trust [View article]
By moving the focus to data connectivity (from telephony bundles offered with Smartphones) he is onto something that could also take the US marketplace by surprise. Wireless VoIP is still very much in its infancy. When considering surveillance, irrigation and other monitoring-type applications that require wide-area data connectivity beyond WiFI, his comment of multiple subscriptions per homeowner is not to be taken lightly.
Sprint: Headed For Disaster [View article]
Sprint's Unreasonable Post-Deal Valuation [View article]
If Sprint executes well without the mind-numbing blunders of the past before Hesse was brought-in as CEO (Nextel purchased for $34 B only to be written off ; and chasing Wi-Max with Clearwire against LTE) I believe they might surprise many people.
3-5 years down the road, when Sprint's ARPU becomes comparable to that of VZ or AT&T, Softbank would have acquired them at 50 to 70% below their potential value .
Sell AT&T And Buy Sprint [View article]
Sprint has made 2 disastrous technology blunders in the past (Nextel and Clearwire) and they have been in a mopping mode since. The first one is being phased out ; and the second one is being revectored to LTE while still holding significant - and underestimated - spectrum value. Both of these problems will be left behind in about a year. The "network vision" risk described by some is totally misinterpreted: it is about an engineering project long overdue to remedy disparate networks and technologies due to these 2 blunders. Consider it as the "final touch" in the major clean-up of the above 2 monumental mistakes.
Now for accountants looking at Sprint's financial performance, what is yet invisible is the impact of iPhone on improving its fortunes. There is no doubt that in both wireless revenue growth and subscriber market-share gains Sprint will outperform both AT&T and Verizon in 2012. Since they can't deliver comparable operating margins quickly, they are rightly focussing on growth.
What is less obvious is the impact of prepaid iPhone sales (without the $450 subsidy/phone) that Virgin Atlantic will have on its operating margins. If the experiences of European cellcos serve as a guide, there is a huge untapped opportunity there. Furthermore, Sprint's rivals cannot retaliate easily without disrupting their existing rigid ( and dangerous) business-model relying on locking-up the customer with a contract against his/her wishes. A time-proven and tested formula for guaranteed backlash.
Stay tuned... Sprint is undergoing a makeover. What is important for them is to stick to the plan and execute it without distractions. Shareholders will certainly take notice sooner or later.
Financial Fitness: A Key Requirement For A Durable Recovery [View article]
Japan had to practice ZIRP + QE for 20 years to fight deflation, and still hasn't managed to breakout into normalcy, despite a strong export-oriented performance. What are we going to have as a counterforce ?
Simply put, the Fed is not the answer anymore: it cannot indefinitely come to the rescue of political procrastination in deficit curbing.
On Monetizing The Debt [View article]
The banks are flooded with liquidity to prevent insolvency but their assets remain unchanged, unlike those of the central bank. But that bloating of central bank assets ( by some $16 trillion worldwide last I looked) is neither inflationary nor depreciative of the currency .
The confusion would diminish if the expression of "printing money" was not misused so widely. Japan's central bank has been deep into QE since the early nineties and continues to do so to avert deflation, but that has not debased their currency as the recent exchange rates testify.
The problem QE causes is that it defers deleveraging in the economy, hoping that defaults or inflation would at some point in the future accomplish that: it brings current stability at the expense of future instability. In other words it buys time for politicians to do the right things, especially strive for fiscal rectitude: selling dreams was never made easier.
AT&T And Sprint: First Move Towards Cutting Smartphone Subsidies [View article]
The iPhone subsidy is a tad under $450. Not sure what the volume discount from Apple is, but I doubt it is so large as to discourage Apple's own direct (store or web) sales, especially as the unlocked variety opens-up the gates for the "global" phone when the LTE version is introduced....
So, in view of the competitive pressures ( Sprint's 40% of new customers that iPhone attracted is a lot more remarkable than you seem to appreciate) that Carriers are making upgrades more costly is both reasonable and understandable. The alternatives of increasing subscribtion costs (ARPU) or extending contract's duration by a few more months, are both a lot more difficult to do.
The real question we should be raising is "what will carriers do when subscribers prefer to buy their phones without subsidies" and, then demand that they be exempt from contracts and have the freedom to choose data plans as they please. Remember that data plans don't get encumbered with number portability and that churn is still the #1 nightmare of all Carriers ...
In that scenario, customers would be choosing network and service quality, fulfilling the original goal of deregulation in telecommunications : competition based on merits, and not the deep-pockets of the highly indebted parent companies!
Cell Phone Wars 2012: The Return Of RIM [View article]
I agree with your conclusion that the potential for upside far exceeds the downside.
Two reasons : 1) the bulk of the revenues come from outside of the US ( comparable to a Qualcomm), 2) they have substantial and recurring service revenues ( which I thought you should have covered in greater detail..)
The Arrogance Of Lecturing Europe With The Wrong Lesson [View article]