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Darn, This Is Inconvenient: Apple Is Destroying the Planet to Maximize Profits

How do we describe the finding that the planet’s most widely-owned super-corporation is destroying the planet to maximize its smartphone sales and profits? Shall we start with “inconvenient?” Yes, we’re talking about Apple, famous for coercing customers to upgrade their Apple phones and other gadgets if not annually then every couple years, as the most effective way to maximize profits.

Unfortunately, smartphones require stripmining the planet, as described in this report, Smartphones Are Killing The Planet Faster Than Anyone Expected Researchers are sounding the alarm after an analysis showed that buying a new smartphone consumes as much energy as using an existing phone for an entire decade.

Smartphones are particularly insidious for a few reasons. With a two-year average life cycle, they’re more or less disposable. The problem is that building a new smartphone–and specifically, mining the rare materials inside them–represents 85% to 95% of the device’s total CO2 emissions for two years. That means buying one new phone takes as much energy as recharging and operating a smartphone for an entire decade.

despite the recycling programs run by Apple and others, “based on our research and other sources, currently less than 1% of smartphones are being recycled,” Lotfi Belkhir, the study’s lead author, tells me.

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Here We Go Again: Tech Bubble 2.0 but “This Time It’s Different”

Here we go again, another tech bubble is expanding like a supernova and the financial media is declaring (as it does during every bubble) “this time it’s different.” File Tech Bubble 2.0 under memories are getting shorter or this time is never different:

The “Uber of dog-walkers” is worth a cool $1 billion pre-IPO. Or maybe it’s the AirBNB of dog-walkers, but who cares? Just as any company with no hope of profits skyrocketed once it put blockchain or crypto in its name during the cryptocurrency mania of late 2017, now calling a dead-on-arrival start-up “the Uber of….” is enough to justify a billion-dollar valuation.

A scooter-rental company in a very crowded field of never-will-be-profitable scooter start-ups is worth a cool $1 billion–but heading to a $10 billion valuation because… well, it’s the Uber of scooters.

Meanwhile, Uber and Lyft will never be profitable because their market is already commoditized. Companies only generate billions of dollars of profit when they scale up within a moated sector to become a quasi-monopoly with pricing power and the ability to buy up or crush any competitors. Without a defensible quasi-monopoly, margins are low and pricing power is zero.

The truth is neither Uber nor Lyft will ever be profitable: their fixed cost structure is high, their pricing power is essentially zero and there is no way to establish a quasi-monopoly in a sector with a wide range of commoditized competing transportation options.

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Apple’s Rotten Core

Apple has always been equally an enterprise and a secular religion. The Apple Faithful do not tolerate heretics or critics, and non-believers “just don’t get it.”

So the first thing any critic must do is establish their credentials as a Believer:My first Mac model 0001 was the 21,447th made in week 32 of 1984 in Fremont, California. Now that we’ve established that, we can move on to my profound sense of anguished abandonment that Apple ceased producing the iPhone SE, the only form factor that works for me.

But Apple Faithful are accustomed to repeated bouts of anguished abandonment; it’s just one of the burdens the faithful must bear.

Focusing on the enterprise rather than the religion, Apple’s core–its revenue and profit potential–is rotten. As the charts below illustrate, despite all the happy talk about growing “services,” the hardware-software iPhone generates nearly 60% of Apple’s revenues. The iPhone ecosystem is also the foundation of the “services” currently being hyped as replacement sources of revenue.

The problem is that the proprietary features of the iPhone that have generated strong demand as prices kept rising are reaching diminishing returns. People want the status of owning an iPhone, but there are limits on what the bottom 90% can pay for that status.

The new features of the $1,000 iPhones have also reached diminishing returns. This is analogous with adding memory to a computer or increasing the pixel count in a digital camera: at some point, the added feature no longer has any impact on the user experience.

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Commoditization = Deflation

Apple’s slumping sales growth in China re-energized discussions on the commoditization of smart phones: the basic idea is that once devices, services, goods, platforms, etc. are interchangeable and can be produced/generated anywhere, they are effectively commodities and their value declines accordingly.

In the case of Apple’s iPhone, many observers see diminishing returns on the latest model’s features as the price point (around $1,000) now exceeds what many customers are willing to pay for the status of owning an Apple product and the declining differentiation of the iPhone when compared to other smart phones available at a fraction of the iPhone’s price.

Commoditization doesn’t just affect the top tier of the food chain; it affects the entire food chain. The commodity $400 smart phone has diminishing returns over the commodity $200 smart phone, and the $200 smart phone has diminishing returns over the commodity $100 smart phone.

Commoditization ravages price and profitability. Once the production facility is paid for by the first run, the cost basis of future production drops, enabling the producer to reap profits even as price plummets.

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US firms hiding $1,400,000,000,000 in offshore tax haven

US corporate giants, such as Apple, General Electric, and Microsoft are hidden nearly $1.4 trillion in dozens of offshore tax havens. That is $1,400,000,000,000.

The companies also used more than 1,600 subsidiaries in tax havens to hoard and move money around outside the reach of fiscal authorities. At the same time, the corporations keep on taking benefits from government support in their home countries paid by taxpayers.

The huge profits that major corporations have reported they are holding offshore, partly because of the high taxes they say they would have to pay for shifting the profits back to the US.

Read more: US firms hiding $1,400,000,000,000 in offshore tax haven

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Are Tech Giants’ New Buildings Signs of the Top?

When banks build new gleaming headquarters, that generally marks the top of the bank’s fortunes. There appears to be some sort of hubris in constructing a monumental new headquarters that shouts “we’re rich beyond all conception” that angers the stock market gods.

For this reason, we should ponder the glamorous new headquarters Facebook just completed and Apple’s “spaceship” campus that is under construction.Google’s plans for an ultra-modernist headquarters were recently tabled by the city of Mountain View, but the grandiose plans themselves may count as hubris to the stock market gods.

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Apple Gold Demand – Bloomberg View Misrepresents GoldCore

Apple Gold Demand – Bloomberg View Misrepresents GoldCore 

Bloomberg View’s Mark Gilbert misrepresents our widely read Apple gold demand
– CNBC quoted extensively and favourably from our market update
– Gilbert quoted selectively from our piece to misrepresent “gold bugs”
– Silly gold ‘bug’ name calling shows bias against gold and towards stocks
– “Gold bugs” and “stock roaches” can peacefully coexist
– In these uncertain times diversification is what remains vitally important

In his column on Monday, Bloomberg columnist Mark Gilbert made reference to our Market Update released last Friday – Apple Major New Gold Buyer – Propel Gold Higher?. Our piece was very widely read – Apple being the sexy tech and investment story of today. It was picked up very widely including being quoted from favorably and extensively by CNBC.

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Gilberts article, Apple Watch Won’t Rescue Gold Bugs’, describes our analysis as “breathless”. It suggests to us that he may have not read our entire piece and the many qualifications and caveats in the piece. If he had read the entire piece and the important context and substantive points made, it is unlikely that he would have described it with such negative bias. (more…)

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The Payments Problem Apple Pay Doesn’t Solve

[The Following Post By Bitcoinomics Chief Editor, Justin O’Connell]

Originally appeared at Bitcoinomics

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Apple announced its payment product, Apple Pay, this week, and it was immediately touted by JP Morgan Chase’s Chief Financial Officer Marianne Lake as the future of payments. But is it all its made out to be by Apple executives and their partners on the project? Lots of questions remain, such as the fact Apple Pay will only be available in the United States at first. Once it is made available beyond US borders, the question remains – will it be adopted as a payment method in places where Apple penetration is lackluster? (more…)

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Clearing Billions in Profit Is About to Get Much Harder

The math of netting $1 billion is daunting.

The mainstream financial media nearly wet its collective pants with excitement in reporting that the planet’s corporations paid $1 trillion in dividends in 2013. What they didn’t report is that clearing billions in profit is about to get much harder.

As a refresher, let’s look at what it takes to net $1 billion in net profit.

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