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Dialectical Materialist

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  • Apple's Samsung Problem [View article]
    Stephen, I think it is interesting that Apple changed CFO's and added a founding member of Blackrock to their board. At the time of these changes, we started seeing unprecedented moves for Apple. They took on debt to leverage foreign cash, for example.

    Over the past couple years they have gradually expanded their strategies for managing their cash pile. Creative stuff like selling bonds in Euros are things that never could have taken place in the Jobs era.

    As they move forward, I expect Apple to get more and more creative with its cash pile. They have some very smart and experienced money managers now to help guide the folks who are more knowledgable about Apple as a company than they are about managing huge sums of money. The progress is likely to be slow. And that is probably a good thing. You want to make your moves carefully when you are managing over $150B. But I think more aggressive moves will be coming.

    Apple doesn't always get it right the first time. In fact they usually don't. But one of their most valuable qualities is that they are constantly seeking to improve. This applies to their cash management as much as it does any of their products.

    The problem of how best to use what was $178B at the end of their last quarter is one that many companies would love to have.

    Etrade got cute with their capital and thought they would goose their returns in the MBS market back in 2008. That mistake nearly sent them into bankruptcy. Apple will not be making the same mistake. They will make small and smart moves which over time improve their return on capital while ensuring the return of capital.
    Apr 18, 2015. 11:19 AM | Likes Like |Link to Comment
  • Apple Watch Pre-Order Sellout: Have The Pundits Underestimated Apple Again? [View article]

    I agree with you. I don't know of any evidence that supports the idea that people are trying to hoard Apple Watches or snatch them up for resale. There are some on ebay, but there is some of just about anything on ebay so that doesn't mean much.

    It is well documented, however, that this is common with iPhones. So the idea that Apple wouldn't allow it doesn't cover all the bases. Apple did release the 5s in China at the same time as the rest of the world, no doubt in part to try and discourage this kind of behavior. But when they were unable to sell the iPhone 6 in China at the same time as the US (apparently because of a regulatory delay), the activity resumed. There are pictures and videos of people being busted trying to smuggle iPhone 6's into China for resale (at a huge markup).

    So the grey market for new Apple products does exist. But I agree with you that there is no convincing evidence that there is a grey market for Apple Watches.

    As to the actual number of pre-orders of the Watch, no one but Apple really knows.
    Apr 16, 2015. 09:15 PM | Likes Like |Link to Comment
  • Apple Watch Pre-Order Sellout: Have The Pundits Underestimated Apple Again? [View article]
    The odd thing about "bought for resale" idea as a way of explaining away early sales is that you can not re-sell anything that does not have demand, and you can not resell anything for a profit unless the item has enough demand to satisfy your markup.

    So if indeed a lot of sales are by those interested in reselling at a higher price, that's actually a bullish indicator for demand, not a bearish one. Case in point, the iPhone scalping that takes place in China.
    Apr 16, 2015. 07:04 PM | 2 Likes Like |Link to Comment
  • Apple Watch Pre-Order Sellout: Have The Pundits Underestimated Apple Again? [View article]
    45Cal, some would take offense to the omission of beer from your list. Me, I like you're list but can do without chocolate.
    Apr 15, 2015. 09:51 PM | 1 Like Like |Link to Comment
  • Apple Watch: Understanding Early Sales Data [View article]

    It is clearly not a representative sample. I don't think there is a debate about that. But it is a data point, and there can be some extrapolation.

    And let's remember that this is not the author's methodology, it belongs to the company that announced the figures.

    I don't know how Slice produced its final numbers, but they have some other data to fall back on. For example, they know how many big screen TV's were bought by their members, and they can compare this to what we know about total big screen TV sales. They can do the same for shoes, or barbecues, or anything else.

    So Slice almost definitely has a good idea of how representative their group tends to be. It's possibly that they see their members buying about 1% of total tech items in the country. If that were the case, they could multiply their results by 100 and come up with a rough approximation of US orders.

    There is a wide margin of error, but the data is not as useless as you claim.
    Apr 15, 2015. 10:32 AM | 3 Likes Like |Link to Comment
  • Apple Watch: Understanding Early Sales Data [View article]
    KenC and JMM,

    Thanks for your smart replies. I'm still working out what I think about this new sector and certainly can't claim to have it all figured out. I bet Apple has a pretty good idea where they are going with this, though.

    It will be fun to watch how things unfold.
    Apr 14, 2015. 06:17 PM | 4 Likes Like |Link to Comment
  • Apple Watch Pre-Order Sellout: Have The Pundits Underestimated Apple Again? [View article]
    "Their behavior is the arrogance of socially reinforced stupidity."

    You forgot to add that they need to get off your lawn.
    Apr 14, 2015. 10:28 AM | 2 Likes Like |Link to Comment
  • Apple Watch: Understanding Early Sales Data [View article]

    It's only $10k or so for a watch you will wear every day for a year or two. (If you're answer is "only $10k!!??", then you are not the target for this product.) Many people spend as much or more on jewelry they hardly ever wear. People spend thousands on shoes and handbags. It's hard to reconcile the practicality of upgrading your watch internals with the extravagance of the initial purchase. Some will do it, surely, but it flies in the face of the impulses behind the original purchase. If you can actually afford to spend $15k on a watch this year, you can probably afford to do it again in another 18 months. If that idea seems painful, then you can't really afford it to begin with. (And I am one of those who can't afford it, so I'm not just saying this to be snotty.)

    Of course, Apple could afford to offer the service for free to high end customers and it might be a nice perk. But last year's watch will always be last year's watch. That is the lucrative insanity of fashion. The Apple team has its own fashion experts now. They understand these consumers.

    The problem and opportunity of wearable tech is that it ceases to be just style and becomes actual fashion. And fashion must address the high end consumer in order to be taken seriously. This is just the beginning for Apple. All its wearable tech in the future will have an everyman price point, a business class price point, and a runway model price point. The era of fashion-tech is upon us.
    Apr 14, 2015. 01:44 AM | 14 Likes Like |Link to Comment
  • Apple Watch: Understanding Early Sales Data [View article]
    If only there were some event where Tim would have everyone's attention taking place just after the Watch launch weekend...
    Apr 14, 2015. 01:11 AM | 3 Likes Like |Link to Comment
  • Apple Watch: Understanding Early Sales Data [View article]
    Ken, I think the idea you are describing seems very practical and logical and certainly feasible.

    But my prediction is that no one will care. Or I should say few will care. The newer watches will get thinner and there will be little design tweaks that will give away whether you have an older watch even if it is running modern horsepower under the hood.

    People think the only way anyone will buy a $10k watch, for example, is if it can be upgraded. But to some, the idea of wearing last year's $10k watch will be ridiculous. The point of buying a $10k watch is to show the world that you can. And buying this years' model will be much more popular than souping up last year's.

    So that leaves the low end of the market. And there again a great majority of consumers would probably prefer just to buy the latest and greatest and ditch the old one. If the iPhone 4s could be upgraded to the iPhone 6 chipset, I think few people would bother. It's not a perfect analogy, since there are screen changes to consider. But won't there also be some screen changes in the newer watches. Resolution may not change much, but the underlying display tech surely will. Newer watches will have more efficient displays with better color saturation (or something).

    So I don't want to dismiss the concept entirely. I think the design points to upgradability. But I also think the watch is fashion piece. As such the upgrade path won't be as popular as one would think.
    Apr 14, 2015. 01:08 AM | 7 Likes Like |Link to Comment
  • Apple Watch Pre-Order Sellout: Have The Pundits Underestimated Apple Again? [View article]
    "Clothing is a necessity in our modern, civilized society. Accessories are not."

    You are missing the point. What other necessities are there in our "modern civilized society"? Is a telephone a necessity? A computer? Is electricity a necessity?

    Everything that helps define what it means to be modern and civilized was once an oddity and later a popular extravagance. That's how it works.

    In the developed world in the 21st century, a smart watch is not yet a "necessity". Smart phones are rapidly becoming a normal part of daily life, though, and that is the last stage before becoming a necessity. It does not take much of an imagination to see that wearables are simply the next incarnation of mobile.

    "Has anyone spotted anyone under 30 years old wearing a wrist watch in the last 15 years?"

    Actually, I have been looking for watches lately. I drive by a university campus several times in a normal work day. I often see the swarms of students changing classes. I have been testing the idea that young people don't wear watches, and it doesn't hold up. There may not be as many around as when I was going to school, but they are still easy to spot.

    Of course, many of these could be fitness bands. Which is kind of the point.

    The next time you are around a crowd of younger folks, look for watches and bands. You may be surprised at how many you see. I know I was.
    Apr 13, 2015. 12:41 AM | 2 Likes Like |Link to Comment
  • Apple Watch Pre-Order Sellout: Have The Pundits Underestimated Apple Again? [View article]

    The marketing knock on Apple is one that I don't get. SA is an investment site. Even if one attributes much of Apple's success to marketing, knocking the company for it on an investment site is like knocking a baseball team for its great base stealing on a sports betting site.

    Whatever you think of the value of marketing, it's clear that marketing success is related to a company's financial success. And to investors that is what truly matters.
    Apr 13, 2015. 12:30 AM | 5 Likes Like |Link to Comment
  • Apple Watch Pre-Order Sellout: Have The Pundits Underestimated Apple Again? [View article]

    The problem with trying to talk about what is "necessary" and put it into modern context (and thus ceding that toilet paper is a "necessity") is that any number of modern trappings can be categorized as a necessity. In lots of places, especially rural ones, owning a car is considered a "necessity". And in this context, smart phones are quickly becoming a "necessity".

    The only thing you really need is water, food, and shelter. After that, you are into trappings of modern society. Not even clothing is a necessity if you have adequate shelter. But I wouldn't want to base my investing on the idea that people don't really need clothes, so they may stop buying them.

    Apr 12, 2015. 12:18 PM | 1 Like Like |Link to Comment
  • Apple Watch Success Not Limited To Unit Sales [View article]
    I remember an interview I heard (or possibly read) years ago with Netflix CEO Reed Hastings. This was back when they were engaged in a price war with Blockbuster.

    Hastings was asked what mistakes he had made that he may have learned from.

    He responded that he thought they took Netflix public too early. It gave the competition (Blockbuster) a look at their books. It allowed the competition to see that there was a lot more money in the Netflix model than they had assumed. That prompted them to copy Netflix more quickly than they might have otherwise. So Hastings said he wished they had kept the numbers private for longer while they built up their lead a little more.

    So I hope the connection to Apple is obvious. I think there are many reasons why they are reporting Watch sales under "other". But the value of hiding their revenue and product mix from the competition should not be underestimated.
    Apr 10, 2015. 09:44 PM | 3 Likes Like |Link to Comment
  • Strong Earnings To Drive April Dividend Hike At Apple [View article]
    They would have to bring the money home first. So they borrow against it instead. At low interest. The interest payment is tax deductible. They end up making good use of the overseas funds, albeit indirectly.
    Apr 9, 2015. 01:05 AM | 1 Like Like |Link to Comment
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