Wednesday, December 24, 2008

The Benefits of a Standardized MicroUSB

We all have the same problem: At least one drawer full of obsolete and duplicate chargers for cell phones, digital cameras, music players, gaming devices and similar gadgets. Almost every time you switch or upgrade your cell phone, you need a new wall charger, a new synchronization cord for your PC, and a new car charger. The average American upgrades the cell phone once a year, and replaces it even more often because of lost/stolen/destroyed phenomena. The end result is that we end up with several obsolete chargers every year.

This massive waste and expense is about to end. Most cell phone brands agreed in September 2007 to standardize on MicroUSB for wired connectivity and chargers. Other devices such as photo cameras, video cameras and gaming devices are likely to follow. The first MicroUSB cell phones started hitting the stores approximately mid-2008. I conducted a survey in a few cell phone stores in recent days, and came to the following conclusion: Sprint (S) and Verizon Wireless (VZ) have already implemented MicroUSB in over 50% of their cell phones. AT&T (T) and T-Mobile remain under 20%. I estimate that we will be at 100% MicroUSB by the end of 2009, perhaps with the exception of the iPhone.

Apart from un-cluttering our drawers and making our lives easier, the standardization on MicroUSB will have at least two other benefits:

There will no longer be any point in including a charger in the box with every new phone sold. Once you have your initial MicroUSB charger, car charger and synchronization cable, there will not be any point in getting another one for a long time. Every time you upgrade your device from that point, the salesperson can ask "Do you need a charger to go along with your new cell phone?" At that point, assuming you haven't lost or destroyed your old MicroUSB charger, your answer is likely "no." This will enable cell phone box packaging to be much smaller, with all of the environmental and cost benefits that go along with those savings. Just look at what Apple (AAPL) has done with creating small packaging for their products; now turbo-charge that miniaturization approach.

According to Nokia (NOK), the energy wasted from inefficient cell phone chargers – drawing too much power while not actually performing the charging function – is equivalent to two medium-sized power plants, when serving three billion cell phone users. In a world where every cell phone will be using the same kind of MicroUSB charger, and where they are not included in the cell phone box, there will be a market for people striving to buy the most energy-efficient chargers. For starters, on November 19 this year, Nokia, LG (LGERF.PK), Samsung (SSDIF.PK), Motorola and SonyEricsson agreed to a common energy rating system for cell phone chargers. This will have a meaningful impact once all cell phones are MicroUSB and the chargers are not included in the box, but rather sold separately. People will deliberately shop for those chargers that will minimize their electricity bills, something which wasn't possible or practical in the pre-MicroUSB world.

What's the bottom line for cell phone and related stocks? I believe it will have a positive effect. Prices will come down, reflecting the lower cost of industry-wide standardization. People will be more prone to upgrade when they are making an investment in a standards-based technology that will require fewer accessories being purchased over time. On the other hand, one near-term risk is that consumers are now postponing purchases of pre-MicroUSB cell phones before their favorite phones include this interface. One such example is the Blackberry 9000 Bold, which was among the last pre-MicroUSB Blackberries to be launched. With the Blackberry 8900 Curve about to be launched also by AT&T, some consumers have held off on buying the 9000 Bold because they don't want to invest in one more pre-MicroUSB device. If this theory is true, the pent-up demand for the 8900 Curve is unusually strong for a new Blackberry this time.

Thursday, December 18, 2008

Government’s Ponzi Scheme Beats Madoff 1000x

By now we have heard about Bernie Madoff’s $50 billion Ponzi scheme, where the life savings of at least hundreds of people – perhaps thousands – went up in smoke. We are all being told that this represents the biggest Ponzi scheme of all time, by a wide margin. Right?

Wrong. Madoff’s Ponzi scheme isn’t even close to the biggest one ever, by far. The biggest Ponzi scheme is one in which we are all victims, to the tune of close to $50 trillion – not billion. It’s the unfunded liabilities of the US Federal Government, particularly Medicare and Social Security.

How does it add up to $50 trillion? In a classical Ponzi scheme, the government has promised pay-outs of monies under the guise of “Social Security” and “Medicare” (among the two largest schemes) for whom taxpayers will be on the hook in the future. What about the Social Security “trust fund?” It consists primarily of IOUs denominated in government bonds, to be paid for by future taxpayers. Madoff would only have been so proud to be in charge of this giant scheme.

There are just over 100 million households in the US, although only approximately half of Americans are significant Federal income taxpayers. What that means is that some 50 million Federal income taxpayers could be the ones carrying the burden of funding this $50 trillion Ponzi scheme. That’s $1 million per taxpayer, folks. If the government expands the tax base to 100 million people, it’s $500,000 per person. That’s the average net worth of all Americans. Everything we own is spoken for in the government’s $50 trillion Ponzi scheme.

What’s the bottom line? Sure Bernie Madoff is a giant crook, but even this giant pales in comparison to the Ponzi scheme in which we are all victims to the tune of anywhere from $500,000 to $1m each. One can also suspect that this number will increase further, because the government may be expanding its activities into further areas of society, including health care, the banking system, industries such as automobiles, and so forth. Are you enjoying the service you receive at The Post Office? At your airport’s TSA station? Then you will increasingly love the world of entitlement socialism, built on these giant Ponzi schemes.

There are many things of which we can be critical of President George W. Bush, such as the new Medicare Ponzi scheme, the bailout mania, the general insane increase in government spending (all with massive Democrat support in Congress). However, for what it’s worth, President Bush warned against, and tried to do something about, two of the biggest problems of all time: He tried to (1) Put the lid on the corrupt Fannie Mae and Freddie Mac that led to the mortgage crisis, and (2) Convert Social Security from a Ponzi scheme to a private 401(k)-style savings account. In future years, historians will look back at those who opposed President Bush’s reform proposals in those two areas, in the same way we are now looking at Bernie Madoff, except this Ponzi scheme is 1000x larger.