Anton Wahlman

Apple's iPad 2: The Price Is Right

2011-02-28T06:08:00.000-08:00

Apple has invited the press to an event on Wednesday that will include the introduction of the iPad 2. What will be the most talked-about feature of this new device?

First, let's stipulate that most of the hardware specifications of the iPad 2 are known, more or less, thanks to endless blogger speculation: one or two cameras, a faster processor, twice the RAM, some tinkering with battery, screen, thickness and bezel. In other words, in the big scheme of things, nothing too exciting. Do you know many people who have held off buying the iPad because it lacks a camera, dual-core CPU or 512 megs of RAM? No, me neither.

If this was all Apple had in mind for the iPad 2, it would be a snoozer event. One would think that Apple isn't knowingly going to leave it like that.

When Apple planned for the iPad 1, it had no idea about the success it would enjoy with the device in the quarters that followed. It focused on creating a rock-solid product, which could at least skim the high-end of the market. After all, the iPad 1 came at prices ranging from $500 to $830, or as high or higher than the average non-Apple laptop.

By March 2010, Apple probably planned for under 10 million iPads sold over the next 12 months, a goal which it exceeded handily. This time around, Apple is probably looking to sell 60 million units worldwide starting this March.

When you go from planning under 10 million units to 60 million, you can negotiate much better manufacturing prices. Components can also be optimized for cost, to a different degree. Apple is pre-paying for critical parts, such as memory and displays, taking risk out of the contract manufacturers, which pressures the price down. This probably means that despite some minor hardware bumps (camera, RAM), Apple could remove close to $100 in cost from each iPad.

Here is the bottom line: This logic points to Apple making the key feature of the iPad 2 its price, specifically a $100 price cut. The iPad 2 could start at $399 and range up to $699 for versions with more storage or 3G or 4G modems.

What about the remaining inventory stock of the iPad 1? That's easy: Drop the remaining units on hand by $200 to $299 or so as the shelves clear out.

Apple's ability to take cost out of the iPad 2, as well as superior volume discounts achievable at 60 million annual units, poses a nasty dilemma for its competitors Motorola, Research in Motion, Samsung, Dell, Hewlett-Packard and all the others. The various Android licensees will eventually catch up to Apple's head-start in the market, but 2011 is looking increasingly unlikely for Google's Android to match Apple's iPad volumes. Especially with an Apple $100 price cut, the competitors will have to reload for 2012 or take a gross margin hit.

Apple's competitors are unlikely to get off the ground competing with the iPad unless their tablets start at $199, unsubsidized. The two main reasons Apple commands a price premium are 1) the superior shopping experience of the Apple stores, and 2) iTunes. Right now, Android -- and soon RIM and HP -- are unable to match these two key Apple advantages.

Naturally, Apple has several things up its sleeve other than a $100 price cut for its new iPad 2 series. This is likely to include new software and services, such as a revamp of iTunes, enhancements to MobileMe and NFC (near field communications) payments, to be announced at some points throughout 2011. That said, as far as the iPad 2 is concerned, what will dominate the conversation won't be some new hardware specifications -- but rather the $100 price cut.

These theories of mine are not based on any form of "sources familiar with the matter" or anything equivalent. My statements are purely based on combining various classes of leaks published by the major blogging sites, together with my own logic as to how the market works and what is therefore likely to happen. That said, you can read here what I predicted about the iPad 1 more than a year ago:
http://www.thestreet.com/story/10676453/four-reasons-apple-ipad-cant-miss.html

Apple Is Eating HP's Laptop Lunch

2011-02-23T08:20:00.000-08:00

Hewlett-Packard Tuesday night reported a 12% decline in the "consumer" portion of its personal systems group. That's mostly laptops. With this news fresh in mind, I decided to visit 15 of the cafes located closest to the HP headquarters, mostly within a 2-mile radius, to see what the people closest to HP were using in terms of laptops.The survey took me about 90 minutes to conduct, and is, of course, of limited statistical significance. But still, out of the 100 laptops and tablets observed in 15 of the cafes closest to the HP headquarters:

Apple MacBook: 45
Lenovo: 14
Dell: 14
Apple iPad: 9
Sony 6
HP 4
Toshiba 3
Acer 2
Asus 2
Samsung 1

Aside from its statistical limitations, one can, of course, criticize this kind of quick survey from other angles, such as enterprise-vs.-consumer, HP employees or owners don't visit cafes, or don't visit cafes located down the street from HP, or whatever. That said, based on the kind of publicly reported market shares, in which Apple normally scores not too far from 10% and is in a similar category to HP, this kind of quick survey looks like a nasty leading indicator for HP in the laptop sales department.

Why is Apple outselling HP, as well as everyone else, in the laptop category? It's not because of price, because most people can tell that Apple laptops generally start as high as two times that of HP and other laptops. No, people are willing to pay more for Apple laptops as a result of the superior shopping experience in the Apple store, the superior service at the Genius Bar, the easier-to-use services such as iTunes and TimeMachine. Of course, most people know that Apple's actual hardware product design leads the pack by a significant margin.

I decided to visit the largest electronics store located closest to HP's headquarters, within walking distance, called Fry's. It offered numerous HP and other laptops with terrible merchandising, including no Internet connectivity, no batteries, and often missing or incorrect price tags or spec sheets. Product names were incomprehensible and bewildering, such as "XYZ-1200s PQ/55-T" or something similar. Looking at the salespeople and the service desk, I felt like I was about to negotiate the price of a hand-knotted rug on a Sunday bazaar in Damascus. If I were in the market for a laptop today, there is no doubt the deal would happen at the Apple store, and not here.

With Apple clobbering the competition -- HP in particular -- in the laptop department, what's next on the horizon? Let me suggest that laptops built on the Google Chrome OS are likely to take the market by storm, starting this summer and accelerating into 2012. The first Google Chrome OS laptop, which I have had since early December, is superior to its competition in many respects, especially considering that it would probably sell for $299 (my guess). It boots four times as fast as my MacBook Pro and has zero software complications of any kind. In other words, it's basically a maintenance-free laptop, which will likely be sold for the same price ($300) as a comprehensive three-year warranty for a Windows or Mac laptop. With Google Chrome OS, parents and corporate IT administrators would need less time to help children, employees and the elderly fix their PCs.

Apple is eating HP's laptop lunch right now, but with the Google Chrome OS laptops -- built by Acer, Samsung and potentially others -- hitting the market this summer at superior prices and lower cost of ownership, everyone including Apple has reason to worry a lot. Google Chrome OS may just end up the technology story of the year, and nobody is talking about it yet.

Nokia's Big Operating System Choice

2011-01-28T10:58:00.000-08:00

Nokia claims that it will unveil its long-term operating system roadmap on Feb. 11. We all know why this is crucial. Most of us have not seen a Nokia smartphone user since before the last Iraq war, and Nokia smartphones no longer show up on airport radar or sonar systems.

Just by looking around, one must conclude that Apple, Android and BlackBerry have a joint 99% or greater market share, with Nokia being focused on some obscure lagging-indicator geographies in far-away lands.

The U.S. may be in the process of spending and regulating itself into an economic basket-case, but in the area of smartphones, it holds the indisputable thought leadership position. Apple and Google lead the way, with Canadian neighbor BlackBerry still growing like a weed, and the main competitors are Hewlett-Packard (Palm WebOS) and Microsoft -- not some company in Scandinavia or Asia.

So let's handicap Nokia's options for trying to salvage a future for itself. There are four major options at hand for Nokia:

1. Android. Sometimes it's best to not over-think it. Android has already, in a short time, become the most well-developed smartphone ecosystem, despite several important flaws, including lack of corporate/government grade security. Android gives the user the greatest amount of choice with respect to form factors, hardware vendors, and carriers.

Most major smartphone reviewers have been asking for more models such as Samsung's Nexus S, which offers the "pure" Google experience without any value-subtracting interface overlays common to devices produced by vendors such as Samsung itself, HTC, SonyEricsson, Motorola and others. It gives the end user a superior software experience, and upgrades to the latest versions of Android faster than any other device.

In addition, Nokia would be able to enter the market the fastest by offering this "pure" Android experience just as with the Samsung Nexus S. It could do so in a variety of form factors -- portrait keyboard, landscape keyboard, no keyboard, small screen, big screen, etc.

Nokia could also write its own software overlay to Android, as most other major vendors have done. While I think this would be a waste of time, because consumers just don't want it, it's certainly possible.

It is also more than fully possible to do both - first, offer the pure "Nexus-like" Google experience in the interest of go-to-market time, and then add its own "special sauce" some months or a year thereafter.

2. Microsoft. The problem here is that Microsoft defines the end product very tightly. Screen resolution, placement of buttons, and even some of the chips, are determined by Microsoft -- not vendors such as Samsung, HTC, Dell or LG. It is therefore unlikely that Nokia would be interested in this arrangement.

That said, Nokia's new CEO Steven Elop comes from Microsoft, and perhaps he could cut a new type of deal with Microsoft. Perhaps Nokia would be able to get an exclusive version of the OS, where it could differentiate more than the existing batch of products that became available last October/November.

3. Acquire someone. With Palm gone (to HP last year), there is now only one musical chair left that Nokia could reasonably acquire, and that is Research in Motion, which would be expensive. It also would solve almost every problem Nokia has with its position in North America, smartphones in general, and a future OS for both smartphones and tablets, as a result of RIM's recent ownership of QNX.

That said, RIMM stock is way too cheap for RIM to want to sell out at a price anywhere near the current $62. The premium would have to be absolutely astonishing, well over 100%, for RIM to accept such a deal. It is, therefore, extremely unlikely.

4. Continue with some combination of its existing operating systems: Symbian and MeeGo. If Nokia does this, it is equivalent of walking into the desert without a hat and lots of bottled water. Nokia would face a steady continued decline into further irrelevancy.

What would be the stock impact of these choices? If Nokia does any combination of 1 (Android) and 2 (Microsoft), the stock should rally significantly. If Nokia does 3 (acquire RIM), the stock impact should generally be positive, but will depend on the price at which RIM would be willing to sell ($150/share?). If Nokia does 4 (Symbian/MeeGo), one can safely short Nokia all the way down to zero, sort of like Kodak or one of those PC/mainframe companies of the 1980s, the names of whom we have all now forgotten unless we look them up on Wikipedia.

Bottom line: The good news here is that Nokia has good choices, and that they are not mutually exclusive. Nokia has the scale to go with BOTH Android and Microsoft -- hey, HTC is doing it, so why couldn't Nokia?

BlackBerry PlayBook vs. Android Tablets

2011-01-11T14:00:00.000-08:00

Among the numerous thousands of new products and announcements at CES (Consumer Electronics Show) Las Vegas 2011, there were only two that really mattered, in terms of moving the ball forward for the tablet category. These were the first display of Google's Android 3.0 Honeycomb software, showed for the Motorola Xoom tablet, as well as the first hands-on with the BlackBerry PlayBook.

The Android 3.0 Honeycomb software will become available on more devices than I could possibly list, probably no later than some time in the third quarter of 2011. That said, Google's "hero device" is the Motorola Xoom, which is said to become available by March 2011, with additional versions (LTE, etc.) in the second quarter. So what was Motorola able to show at CES, on the Xoom?

At CES, people were not allowed to touch or play with the Motorola Xoom, and it did not carry even an early version of the 3.0 Honeycomb interface. The tablets shown by Motorola and Verizon Wireless simply ran a handful of videos showing what the interface is intended to look like, which is like showing a drawing of a fantasy car. As far as I could tell, these videos were similar to what Motorola had already posted on YouTube.

In other words, from a software perspective, these "demos" were pretty useless. Actually, as I watched the Verizon Wireless representative try to run the video demos in front of me in the Verizon booth, the Motorola Xoom crashed almost every minute. Clearly, the new Google tablet software isn't ready yet.

From a hardware perspective, though, we did find out one thing: The Motorola Xoom tablet requires you to carry an additional power cable, beyond the MicroUSB that powers almost every smartphone in the market today -- Motorola, BlackBerry, Samsung, HTC and others. This seems to be a major drawback of all Android tablets I have seen so far: A new power cable that's different from every smartphone's power cable.

In contrast, RIM showed the PlayBook the way it's supposed to be shown: RIM allowed everyone to -- pardon the pun -- play with it. I loaded up the PlayBook with numerous simultaneous windows, with applications running Quake, high-definition video, and Adobe Flash-intensive web sites. The performance was amazing, with all apps multitasking in separate, visible windows -- just like you're used to on your Windows or Mac PC/laptop. And at no point did any of the multiple devices I tested crash.

The stability of BlackBerry's new ONX operating system is legendary, as it operates nuclear power plants and unmanned military vehicles alike, and this unprecedented stability appears to have translated into the PlayBook.

The PlayBook hardware is also filled with interesting advantages. I immediately noticed that it was the only tablet I have seen to date that uses MicroUSB for charging. This means you need to only carry one charger to feed both your PlayBook and your smartphone of any brand (as long as it's not Apple). In addition, the front-facing camera has a very high resolution that could enable biometric user identification, increasing the security of the device, without requiring a separate fingerprint reader.

How does the PlayBook connect to the Internet and to other devices? Just as with the iPad's launch on April 3, 2010, the PlayBook launches with WiFi. As such, you use the device in a manner similar to most iPad owners. You can tether the device to a mobile WiFi hotspot such as the Novatel MiFi, a Motorola Droid or even the new iPhone 4 for Verizon Wireless.

Later in the year, sometime in the second or third quarter, expect versions of the PlayBook to become available on all major cellular networks such as HSPA, LTE and WiMax. Sprint already announced its WiMax version last week, available no later than the third quarter of 2011. Expect Verizon Wireless, T-Mobile USA, AT&T and other operators to announce upcoming availability of their versions in the second quarter.

In addition to WiFi and 3G/4G cellular versions, the PlayBook offers one additional method of connectivity that will set it apart from most other tablets: The PlayBook will connect over Bluetooth to an existing BlackBerry. This comes in handy for organizations with strict security needs that need to strictly protect information residing behind the corporate firewall. Employees may be prohibited from using WiFi as a result of the security concerns regarding WiFi.

The PlayBook uses a form of Bluetooth that RIM says has been approved by the NSA (National Security Agency). In addition, this allows you to share the data plan for which you are already paying on your existing BlackBerry, and it does so using very little power, saving battery life on both devices. These are all major selling points for the PlayBook compared with Android tablets.

RIM showed how the PlayBook runs Android programs that it claims were converted very easily and quickly. I was told that it could be as easy as one programmer spending only a few hours to do the conversion. If this is true, one would think almost every Android program will quickly become available for the PlayBook. The implications of this appear not to have been understood by the market, or else RIM stock would probably be trading well above $100 a share.

Who will buy the PlayBook? Clearly the enterprise/government market is almost a captive one for RIM given that it will have superior security on numerous fronts. Any CSO (chief security officer) of a company in possession of secrets must be scared stiff over what may come next in the WikiLeaks sagas of the future. Given the choice of deploying the same tablet platform that will be used by the CIA and the largest banks, compared with other platforms focusing on playing Angry Birds (that's a popular game, for those of us who have never played a computer game), what do you think most enterprises will choose? The PlayBook, of course.

In summary, the BlackBerry PlayBook was by far the major upside surprise at CES. It performs flawlessly with no crashes or freezes. It has a fantastic browser that will render many apps unnecessary: Who needs a Facebook app when you have a flawless browser, just like your laptop? And if you still need apps, Android apps are easily converted, so the PlayBook could launch in March with more than 200,000 apps available very quickly.

RIM showed that the PlayBook is the real deal. Expect handsets using the same powerful QNX operating system before the end of this year. In comparison, Motorola's Xoom demo of Android 3.0 Honeycomb doesn't really even qualify as a demo, given that all it showed was a video and people weren't allowed to touch it.

RIM stock is trading at a huge discount to peers. Once the PlayBook rolls out in different versions (3-inch, 4-inch, 7-inch, 10-inch, Sprint, Verizon, AT&T, T-Mobile and other versions), the earnings multiple should expand dramatically. Now that the most secure mobile platform is also the most powerful and most flexible, this stock deserves to trade at a premium to peers, not a discount.

Finally, I expect Apple continue to dominate the tablet market for consumers through the end of the year, thanks to the iPad 2, which should become available in the second quarter of 2011. Thanks to numerous hardware vendors, Android will likely take the #2 spot in the consumer market, and RIM should be the #3 consumer player with the PlayBook, while becoming the #1 player in the security-conscious government/enterprise markets.

The biggest question mark is HP, which is unveiling its new smartphone, tablet and TV products in San Francisco on Feb. 9. If HP's new products were to fail, HP may be faced with no other reasonable option other than to acquire RIM, if it wants to pursue its own platform rather than relying on Google, Microsoft or MeeGo (Nokia and Intel joint project).

If you comment on this article, please state whether you actually viewed the Motorola Xoom demo in person, as well as if you had your own fingers on the BlackBerry PlayBook for any meaningful period of time. Seeing and feeling the real, live, product makes a difference.

RIM's PlayBook Checkmate

2011-01-06T07:47:00.000-08:00

What will be the most powerful tablet advertisement this summer? It could very well be Sprint Nextel's promotions for the Research In Motion's BlackBerry PlayBook tablet running on Clearwire's 4G WiMax network. Why? Because Sprint is the only wireless broadband carrier offering unlimited 4G consumption for a fixed price.

Jim Cramer has correctly made the observation that TV/movie consumption is rapidly moving in the direction of watching Netflix on the Apple iPad. This is true, but unless you are on WiFi, watching Netflix on the iPad can also be a costly proposition. AT&T offers a 2 gig per month iPad 3G plan for $25, which is rapidly consumed if you use Netflix frequently. The real monthly cost could be a lot higher than $25, as you consume a lot more than 2 gig per month.

Here is where Research In Motion's pathbreaking deal with Sprint comes in: So far it looks to be the only iPad competitor offering unlimited 4G use for a reasonable fixed price. We don't have the pricing details yet, but all indications are that it will be very competitive with AT&T, Verizon and T-Mobile -- with one critical exception: unlimited use. This means you can watch as much Netflix as you want, without worrying about overages.

Obviously, it is eminently possible that Apple's and Google's hardware partners -- such as Samsung, LG, Motorola, HTC, Dell, Lenovo and others -- will copy this deal with Sprint, but until they do, it appears that RIM has taken this bull by the horns and launched the first strike. In fact, I wrote out on Nov. 4 that Apple should cut its next deal with Sprint/Clearwire.

Who are the other winners in this equation? Sprint owns approximately 50% of Clearwire, which has the WiMax network offering this unmatched 4G capacity and performance. No other operator has 120 MHz worth of 4G spectrum (Verizon has 30 MHz and AT&T perhaps even less). I wrote on Sept. 28, 2010, that it was most likely Texas Instruments that supplies RIM with the PlayBook's dual-core CPU.

Who makes the baseband radio chips for the RIM PlayBook? Clearly, the EVDO radio, to the extent that it contains one of those (most likely), is made by Qualcomm. The WiMax radio is most likely made by Broadcom. Why Broadcom? Broadcom has approximately 90% market share inside the end-user devices operating on the Sprint/Clearwire WiMax network, so that's a fair guess, although not totally without uncertainty.

Aside from the PlayBook's superior consumer proposition in terms of a fixed monthly price for unlimited consumption, what will be the PlayBook's major competitive advantage over devices such as the iPad and those based on Google Android? In a word, security. BlackBerry is the undisputed security leader with a dominant market share in sensitive government operations and many of the major banks and other high-profile institutions.

The recent WikiLeaks scandals have raised the awareness of government and corporate IT security to new highs. This plays right into BlackBerry's hands, with the launch of the PlayBook as the only security-focused tablet.

There are, however, three major questions RIM must answer with respect to its PlayBook transition. Fortunately, I believe I have the answers:

Will the PlayBook be available only on Sprint? What about Verizon, AT&T and T-Mobile? There is no reason it won't be available on those, too. The probability of announcing all of them on the same day is just tiny. It does not take a rocket scientist to figure out that RIM has LTE and HSPA+ versions available for the other non-WiMax carriers.

Will the QNX operating system powering the PlayBook be available also on future BlackBerry smartphones? Yes, of course. A reasonable development time-line would suggest that QNX BlackBerry devices could emerge around the end of September 2011. The smaller size means battery and heat issues would need to be worked out, but this development has likely been underway for more than six months already.

Does the PlayBook work only in conjunction with a BlackBerry? This is, for most relevant purposes, misinformation and propaganda spread by somebody in order to make BlackBerry look like a fool. It could also be RIM's fault for not explaining it very well. The PlayBook must tether to a BlackBerry via Bluetooth only if it is to operate behind RIM's corporate server firewall, the so-called BES (Blackberry Enterprise Server). This security requirement is simply not applicable to the regular consumer, who can disregard it. For the regular consumer, the initial PlayBook device in March will work just like an Apple iPad in the connectivity department: WiFi. Moreover, even for those particular corporate applications, it is only a requirement for the first six or so months of the initial noncellular (WiFi-only) version of the PlayBook. Once the 4G PlayBooks hit the market this summer, they will also be able to talk to the secure servers behind the corporate firewall directly, without the need to tether to another BlackBerry using Bluetooth. RIM needs to explain this a lot better, but in the meantime people need to understand that there is nothing to worry about here.

In summary, RIM is forging a partnership with Sprint/Clearwire that is a match made in heaven for the mobile Netflix consumer. With Texas Instruments, Qualcomm and Broadcom under the hood, the BlackBerry PlayBook could propel RIM and other stocks to new highs this spring in anticipation of this superior product hitting the market.

Google Chrome OS Is Microsoft's Nightmare

2010-12-23T10:19:00.000-08:00

(Originally published December 20, 2010)

Amid Android's strong success in 2010, Google has been hard at work preparing its "silent killer" attack on the highly concentrated PC operating system market. This was originally announced in July 2009, with further clarification by November 2009. I saw it clear as crystal then, but it was too early for an investment theme. It may still be a little too early, but here it is.

Microsoft's worst nightmare has just started its six-month test-run. Earlier this month, Google began to distribute a pilot batch of laptops running its PC operating system called Chrome OS. The feedback provided by these thousands of users will form the basis for commercial availability from multiple well-known PC hardware makers around the middle of 2011. By 2012, one should expect almost every single PC hardware maker to offer laptops and desktops with Chrome OS.

This is not a review of Chrome OS. I could write one, but why re-invent the wheel, when outlets such as Laptopmag.com have written excellent ones in which I have little to add? Instead, this piece focuses on the broader market implications of this new product.

Let's step back for a second. What are the biggest costs of buying and owning a PC? First, it's buying software. A new PC can be as little as $300, but the basic Microsoft productivity suite -- Office -- can be $200 to $300. A three-year, in-home service contract can also run almost as much. Now that $300 PC is $700.

Once you have bought your PC, the software and in-home service warranty, the most expensive part of the equation starts: time. If you are an employer, you will have to employ an IT staff in order to deal with issues such as printer driver set-up, virus disinfection, application installs, "things that just don't work" and so forth.

But the main cost here is time. How many hours do you spend over the phone with tech support over a PC's three-year life span? I know I spend on average of over one hour a month.

One hour a month over three years? That's 36 hours. What's a price for an hour in average America? $25? Minimum wage is below $10, but a lawyer can be $500. It's obviously an individual issue, but at $25 that's $900 over three years. So let's tally this up:

PC -- $300
Microsoft Office -- $200
Three-year tech support -- $200
Wasted time -- $900
Total -- $1,600

This is the real situation faced by many individuals and IT departments alike -- a $300 PC really costs $1,600. Let's cut straight to the bottom line here: What Google promises to do for many types of users is to dial that $1,600 expense right back to the original $300, or an 81% savings. That's music to anyone's ears -- except Microsoft's.

For those who say I am skipping the obvious, let me explain how Google accomplishes these savings. Basically, Chrome OS hides from the user all of the complexities of managing a PC. Chrome OS seems to basically make it impossible to foul up the PC, making any need for maintenance and tech support obsolete. Google also includes access to its productivity suite, competing with Microsoft Office.

Wait a minute! Doesn't this sound like an Apple iPad? It sure does, but despite the many similarities, there are also important differences for now. First of all, an iPad isn't shaped like a traditional laptop or PC, but that could change in coming months or years. Second, an iPad requires a full PC in order to activate and operate properly -- but that too could change soon. An iPad stores things -- apps and data alike -- locally, but Chrome OS could also evolve in time for commercial launch from "pure cloud" to a "hybrid cloud" architecture, just like Google itself used to do with its Google Gears product.

You can see a pattern here. Apple and Google are ganging up on Microsoft with products that are "idiot-proof" and therefore much more pleasant to use for many people. These two approaches have significant differences today, but are likely to look more similar two years from now.

Google Chrome OS, though, isn't for everyone yet, just like an iPad doesn't replace a PC for most people. For example, people who need high-performance scientific apps, or use it for gaming, will not go for Chrome OS. But many people will be well- served by Chrome OS when it becomes available to the public. Examples include students, general worker bees in the white collar corporate world, and elderly people. The PC tech support costs in schools and enterprises are huge, and how often have you received a call from an elderly relative asking for PC help?

I think that as soon as Chrome OS can be refined within one year from now it has a shot to take more than half of the Microsoft Windows/Office market. Yes, you read that right. I believe that the "special cases" needing the full power and flexibility of the current Microsoft PC portfolio are a minority of the market. Having used the first Google Chrome pilot project laptop for a week or so now, I can say I'm one of them. Yes, the product isn't ready for prime time today, but I think it will be in as little as six months from now. It's not hard to see, at least to me.

If you are Microsoft, what do you do? In theory, Microsoft could simply copy Google's Chrome OS in terms of its revolutionary cloud architecture. The problem is that Microsoft would lose almost all of its revenue and profit margin. Google can do this because it makes up for it with search and advertising. Microsoft doesn't seem like it will be able to make those numbers work anytime soon. Rarely have I seen a bigger problem for a company: It's a combined technology and business model shift. Remember what happened to AOL after 1999?

What about Apple? Its iOS platform is onto an alternative approach at replacing the traditional PC, and is therefore likely to continue to gain significant ground against Microsoft. That said, Apple faces a similar problem to Microsoft for its Mac laptop/desktop business. Seriously, could this mean Apple will someday become a Chrome OS licensee as well? Apple will want to avoid this, but its hand could be forced into making the option available, in order to remain relevant and hold market share. As crazy as it sounds, I wouldn't bet against it. No, it won't happen in 2011, but perhaps in 2012 or 2013.

Speaking of 2012 and 2013, that's when Chrome is likely to start eating into Microsoft's market share and profit dollars materially. Next year will still be a year of testing and early adopters, but Chrome OS will be waiting to blossom.

These technology transitions typically take at least five years to fully play out. Microsoft isn't going away any time soon. But how does Microsoft get out of the death grip of the Google Chrome OS challenge that will start unfolding over the next year?

Pundits Fail to Read RIM

2010-12-17T06:26:00.001-08:00

Yet another beat-and-raise quarter from Research In Motion keeps the pundits scratching their heads. This shouldn't be happening: "I went into my local Verizon store last month, and they told me Android is outselling Blackberry almost 10:1. How could RIM beat and raise?"

This reminds me of the reaction to the 2004 election when left-wing activists in San Francisco and Manhattan scratched their heads in surprise over George Bush's big win: "I don't know a single person who voted for Bush, so how could he win by 3 million votes?" If all the people you poll are on the Upper West Side or the UC Berkeley campus, well...

There was so much commentary on CNBC repeating the mantra that RIM must really be doing poorly because Apple iOS (iPhone) and Android are beating it everywhere, that I forgot to count the instances. So with RIM beating and raising yet again, what is it that these pundits don't understand?

First, these pundits don't realize that in most of the countries of RIM's main competitor is not Apple or Android, it's Nokia. The Finnish company has about one-third of the world unit market for mobile phones, even though its market share in the U.S. is very close to zero. This means that in many countries, Nokia constitutes close to 50% of the market.

The U.S. smartphone market is uniquely warped, as Motorola CEO Sanjay Jah rarely forgets to remind us. In the U.S., almost all high-end smartphones sell for $200, while there is a second tier around $100 and then others at zero, all with a two-year contract.

Considering that most smartphone monthly bills run about $100, or $2,400 for two years, the upfront price difference is peanuts. Who cares if it's $200, $100 or zero upfront, when I'm really paying $2,400 after that?

As a result of this warped U.S. pricing, the market has tilted heavily in favor of the smartphones most expensive to manufacture, most notably the iPhone and high-end Androids. Why not get the best for only $200? This means RIM is more challenged in the U.S. market.

In most parts of the world, however, there is no effective credit system. As a result, carriers don't subsidize smartphones in exchange for a contract. In those countries, consumers buy smartphones by paying "full price" (typically a price close to manufacturing cost) and then pay-as-you-go. For the smartphone buyer in, say, Indonesia, here is what his choices may look like:

Nokia -- $150
BlackBerry -- $250
Android -- $450
iPhone -- $700

For this Indonesian consumer, who may be spending $40 a month on mobile communications services, this now becomes a meaningful price difference, unlike in the U.S. market. A BlackBerry is a relatively easy step-up from his old Nokia, and it's ideally suited for SMS, which is the only non-voice service he may be using.

RIM is growing primarily because it is crushing Nokia in most countries around the world, in terms of market share shift. These RIM gains don't look to abate for at least the next couple of quarters. The fact that Android and Apple are also gaining is beside the point because Nokia's massive losses outside the U.S. means RIM can feast from Nokia's share decline in at least 100 to 150 countries around the world.

Of course, RIM has fundamental product challenges that will need to be addressed very soon. RIM's new OS launches in March with attractive 3G/4G support by the second half of 2011. This will include a similar shift for RIM's smartphones. RIM will have to fight hard in order to attract competitive developer support in the battle, not only against Android and Apple, but also Microsoft and Hewlett-Packard.

If RIM doesn't succeed in this transition, or the transition is delayed, RIM will eventually have a huge existential problem.

In the meantime, however, pundits will have to learn how markets outside the U.S. work in order to better predict RIM's demise as evidenced by their local Verizon stores. And keep in mind, RIM's guidance for the February 2011 quarter doesn't include a penny's worth of PlayBook (tablet) revenue, although it includes all the associated expenses. What does this say about the upside potential for the May 2011 quarter?

Electric Car Demand Could Dwarf Supply

2010-11-22T06:17:00.000-08:00

About 11 million cars are sold in the U.S. each year. The first two practical and moderately priced plug-in electric cars -- the Chevrolet Volt and Nissan Leaf -- are about to be delivered to the first customers in December. Over the next 12 months (calendar year 2011), Nissan will deliver 20,000 Leafs and Chevrolet about 15,000 units in the U.S. market.

The total of 35,000 cars is less than one-third of one percent of the U.S. car market.

Leaving aside the important distinction that the Chevrolet Volt, made by General Motors, is close to a "no compromise" solution with a back-up gasoline engine that picks up after the first 25 to 50 miles, who will be buying plug-in electric cars out of these 11 million annual U.S. buyers? The debate seems focused, almost subconsciously, on single-car households, and the argument goes that almost all U.S. households won't tolerate the familiar "range anxiety" phenomenon.

Let's for a moment assume the debate is right about single-car households: If you are a one-car household, you will simply not buy an all-electric car. This is where the analysis these days typically stops.

But what about multi-car households? In most multi-car households, the second car is driven shorter distances -- to school, shopping, soccer practice and local errands. It is often asserted that a majority of cars are driven less than 60 miles a day. Rarely is the question asked: How many second or third household cars are driven less than 60 miles a day? I would venture to guess close to 99%.

In other words, most households only need one car that can go 60 or 100 or more miles a day, while the second car almost never doesn't. This means that as long as all-electric cars can be price-competitive, the demand in the U.S. alone could be 5 million electric cars a year if one assumes that almost half all cars sold in the U.S. are for multi-car households. You only need one car that can handle a longer road trip; the second car is almost always used only locally.

Are all-electric cars price-competitive? Thanks to the generosity of your tax-paying neighbors, the Nissan Leaf sees its $33,500 sticker price reduced by $12,500 ($7,500 federal tax credit, plus $5,000 in some states) to $21,000. At that price, it appeals to a majority of second-car buyers.

Therefore, as a baseline scenario, we should be able to say with some confidence that as soon as electric car awareness spreads, even without a meaningful public charging infrastructure, U.S. demand for all-electric cars should be about 3 million units a year (a majority of 5 million multi-car households). Even if we too-generously include the Chevrolet Volt into the equation, this means that in 2011 we will have a 100:1 demand/supply imbalance based on these two cars.

Clearly, the supply of all-electric cars will increase rapidly as we move into 2012 and beyond. Nissan has announced that by the end of 2013 it will be making 500,000 Leafs per year, about 200,000 of which will be made in the U.S. Indeed, 2013, will be the year when almost every other significant car manufacturer will enter volume production (more than 10,000 units a year), although there is very little precision to the 2013 numbers outside Nissan.

By 2013, the U.S. will also have a very well-developed charging infrastructure for plug-in electric cars. Already today, most any establishment in control of a few parking spaces is looking to install chargers: hotels, malls, fast-food joints, parking garages, office buildings, apartment buildings, you name it. It is not inconceivable that the U.S. alone may have more than 100 million electric car chargers installed or in planning by 2013. The low cost of these installations (well below $10,000 apiece), and the simplicity of the environmental requirements, should mean that already in 2012 we will have many more electric car chargers installed than traditional gasoline/diesel fueling establishments.

Therefore, by the end of 2013, the U.S. should be seeing the demand for all-electric cars by single-car households go from near-zero to at least 10% to 15% of that part of the market, with plenty of upside potential as people realize they can plug in their cars almost anywhere they stop. All in all, by 2013-2014, therefore, the U.S. alone should drive demand for about 4 million all-electric cars a year.

There are all sorts of legitimate arguments against electric cars, applying to different people in different situations, causing 100% adoption to be unrealistic for the next 10 or so years. For example, people with very large/heavy van needs, trailer-pullers, or classic supercar enthusiasts, are less likely candidates for all-electric cars. Likewise, however, the strongest case for electric car demand comes from multi-car households, where the majority of demand will reside for at least the first two to three years following the current pioneering Nissan Leaf introduction. And as I have said, that part of the market alone should be about one-third of the total U.S. car market.

For the next two to three years, the supply/demand imbalance is so dramatic, with production being well under 10% of demand, that investment opportunities should abound. As to what those companies are, that will be the subject of a separate analysis, and in the meantime I welcome suggestions and arguments.

4 Days in January: The Mother of All Smartphone Clashes

2010-11-16T09:08:00.000-08:00

The new frontiers in personal computing have unmistakably become the smartphone and the tablet. In the smartphone arena, Apple is hampered by its reliance on AT&T, while it is enjoying a supremely successful near-monopoly in the 10-inch tablet segment.

This all changes in January, 2011. Here is a timeline for how it will likely unfold:

Jan. 3, 1pm Eastern: Verizon and Apple announce a CDMA version of the iPhone. Additional versions for T-Mobile and Sprint to follow six months later. This may put the brakes on Android's dramatic market share gains in the U.S., and shore up the competition against RIM and Microsoft.

Jan. 4: RIM provides the final details of the Blackberry PlayBook, which will be found on U.S. retail shelves later in the March quarter. This may just be the highest-performance tablet to date, and you can view the comparison video vis-a-vis the iPad here: http://www.youtube.com/watch?v=s72rGDUn2uo

Jan. 5: Motorola announces a 60- or 90-day exclusive of the Google-optimized Android tablet, initially available on Verizon. Unlike the Samsung Galaxy Tab, which is just now becoming available on U.S. retail shelves, this one is optimized by Google for a very competitive refinement in relation to the Apple iPad. Sometime after March, other OEMs such as Dell, Samsung, Lenovo, HTC, LG and Sony Ericsson will also bring to market versions of the Google-optimized version of Android.

Jan. 6: Hewlett-Packard announces its new WebOS-based smartphones and tablets. Widely recognized as having one of the most attractive smartphone interfaces when it was first announced two years earlier, the Palm WebOS suffered from weak hardware. This time around, the smartphone hardware should be more competitive, and a tablet should complete the lineup.

You heard it here first. The new competitive reality will be announced on these four days in early January.

What the Feds Can Learn From Amazon

2010-10-22T07:36:00.000-07:00

Amazon reported spectacular September quarter results -- sales up 39% and profits up 16%, from a year ago. At the same time, the U.S. federal government concluded a September fiscal year-end with a $1.3 trillion budget deficit, or $325 billion per quarter on average.

More than any other retailer in America, Amazon has its sales spread across every single zip code, every single neighborhood. Its spectacular growth in revenue and earnings comes as a result of its superior knowledge of what works in terms of selling to the American people. Clearly the federal government, with its record deficits and abysmally poor results in terms of stimulating business and employment, could learn a thing or two from Amazon's methods to achieve economic growth.

What is Amazon's secret sauce? The key to Amazon's success is that it conducts a never-ending series of experiments in terms of what works and what doesn't. Basically, here is how they do it:

Amazon divides its customer base into two. Try method number one on the first half of the base, and then try idea number two on the second half. Measure the outcome. Then apply the more successful method to the entire customer base. Repeat with a new experiment. Repeat, repeat...

This relentless pursuit of improvement, by conducting a never-ending series of experiments on 50% of the customer base, has made Amazon America's most successful retailer. So how can Washington DC learn from Amazon to improve economic performance, maximizing growth and prosperity?

The answer is easy, really: Divide the U.S. into two parts, each applying the economic policies and principles of the two political parties. Each political party will get four years to start, with a veto-proof majority, in each of these two new Americas.

Let's give Obama and his fellow geniuses the first draw: They can pick up to 25 consecutive states, out of whom at least 23 need to be geographically consecutive if they also pick Hawaii and Alaska. The Republicans get the other 25. Then let the competitive race begin, just like it works at Amazon every day, in pursuit of economic performance.

The federal government in the 25 Democrat states would implement Obama and Biden's vision for rising marginal tax rates, stiff corporate taxes, increased capital gains taxes as well as on dividends, detailed regulation of all business activity, government-defined health care, massive government spending on just about everything (except police and military). Basically, a three-step economic plan: If it moves, tax it. If it continues moving, regulate it. If it stops moving, subsidize it.

On the Democrat side of America, there would be unrestrained stimulus. The government would spend as much money as the government departments want. There would be no shortage of money because taxes would be raised at every step of the way. Alternatively, the Democrat government would just print the money, so-called "Quantitative Easing." Printing money was so successful in Zimbabwe and Argentina, as well as in Germany in 1920, so why not try it here?

Obama would probably introduce a new, simplified income tax form, with only three lines:

1. How much money did you make last year?
2. How much have you got left?
3. Send it in.

In the Republican 25 states, led by -- say, FedEx CEO Fred Smith as President and Rush Limbaugh as Vice President -- there would be no income tax, business tax, sales tax or any other tax except that every person between the ages of 25 and 65 would have to pay $4,000 per year. With a total population of around 150 million people, that would imply approximately 100 million such adults and therefore $400 billion in tax revenue. This would be four times JFK's 1962 federal budget of $100 billion. It would pay for national defense and federal law enforcement, but nothing else.

On the Republican side of the 25 state fence, there would be no business regulations, and people would be free to do whatever they want to do -- or not to do, and build, start a business, buy, sell, whatever -- without any red tape. No permits, no bureaucracy, no forms to fill out. You make money, you get to keep it -- just send the government $4,000 per year. No income tax form, no sales tax to calculate, no accountants or lawyers to hire.

If we Americans would organize ourselves to conduct this Amazon-style experiment, what do you think would happen? After the first four years were over, we could measure the results. Which side had more economic growth? Which side saw more prosperity? It is clear that there would be some sort of a result, from which we could learn.

If Washington DC is serious about improving the performance of the United States, it would immediately put in motion a plan to implement this experiment, as Amazon does every day. As I write this [Oct. 21], President Obama is having dinner with Google in Silicon Valley. He could start by asking Google's management where they would choose to put their headquarters if the country were so divided into two new 25 state countries.

Amazon has shown the way, with superb performance -- 39% revenue growth and 16% profit growth this September quarter alone. It is time for the federal government of the United States to follow Amazon's example and divide itself into two, for a similar experiment of two different economic policies.

RIM's PlayBook -- An Android Tablet?

2010-09-28T05:27:00.000-07:00

The most important thing about Research In Motion's new PlayBook tablet announcement isn't the form factor -- a 7-inch screen tablet -- but rather that there may be a possibility that the brand new operating system from RIM's recent QNX acquisition could be modified to run Google Android applications.

No, RIM didn't say that this will be the case. But a description of the QNX OS architecture by QNX CEO Dan Dodge appeared to hold out the hope that this new OS could easily be modified to run Android apps. As to whether RIM would actually bake this capability into a future version of the QNX OS is, of course, entirely unknown.

This does beg the question, however: If it was possible, why wouldn't RIM open up the possibility? While RIM didn't say that its new OS could be easily modified in order to run Android apps, it didn't completely deny it either. I think the capability is in the cards, and we should find out in 2011. It sure would make for a blockbuster leap into the Android marketplace with over 100,000 apps!

Android-app compatibility or not, the important part of the PlayBook announcement isn't at all that it's a tablet, but rather that this is a brand new OS. Blackberry's current OS is, at its core, well past its prime, and I experience this every day because all of my BlackBerrys take close to half an hour to reboot, and they crash and freeze frequently.

Make no mistake about it: The new QNX OS will power not only the PlayBook tablet, but also the BlackBerry smartphones starting perhaps in late 2011, but for sure by 2012.

Much has been made about the connectivity of the PlayBook. It's not that complicated, actually. Just like Apple's iPad, the Playbook will first launch with WiFi + Bluetooth. The version which adds cellular connectivity (3G/4G) will arrive later, just like the iPad 3G did.

Seeing that this is a brand new OS, it takes some time to integrate the 3G/4G drivers, and then the carriers as well as the Federal Communications Commission need some time to certify these PlayBook 3G/4G versions. It is a reasonable expectation that the 3G/4G versions of the PlayBook could arrive in the third calendar quarter of 2011.

For the first time, a BlackBerry product will have a non-removable battery, and for the first time in years, a BlackBerry product will be lacking a MicroSD card. In other words, it will be again taking cues from the iPad. The apps processor looks to be from Texas Instruments, but that is not 100% confirmed, even though most signs point to TI.

The PlayBook's RAM is a whopping 1-gigabyte, or 4 times compared to the iPad. Storage versions are 16-gig and 32-gig in the prototypes I saw, but those could change in time for the first-quarter production. Apple offers 16-, 32- and 64-gig for the iPad, and at least my iTunes library doesn't fit in the 32-gig version.

Based on the specs and the impressive description of the stability of the brand new OS, the PlayBook looks like a class-leading product, for a 7-inch tablet. But therein lies the rub: It's just 7 inches. I think it's a mistake for anyone to offer "only" a 7-inch tablet. I think what people primarily want is a 10-inch tablet, which can be used as a laptop replacement as long as the software evolves sufficiently. A 7-inch tablet will probably not be a laptop replacement for more than a very few people.

Perhaps RIM will offer a 10-inch version of the PlayBook soon enough. There aren't any signs that this will happen, even though logically speaking it would seem easy for RIM to make one of those too. If in the end the PlayBook was to be deemed a failure, I believe the cause would have been that it was a 7-inch tablet instead of a 10-inch.

Count me as a skeptic. While it is true that all the signs are that this will become as good a 7-inch tablet as I have seen, I also think most people will be buying 10-inch tablets. For this reason, I don't think Steve Jobs is losing sleep over RIM's first PlayBook product. But I've been proven wrong before.

What about the stock? Not only the new PlayBook tablet, but more importantly the all-new OS, should make RIM much more valuable than it was Monday morning. Those who believed RIM was in trouble had better start covering because it looks like RIM will now be offering a much wider range of products starting in 2011 and increasingly in 2012, based on an all-new and seemingly very capable OS.

Sept. 27, 2010, was without a doubt the most important day in RIM's Blackberry history since the launch of the first Blackberry in 1999.

Top 3 RIM BlackBerry Myths

2010-09-24T09:57:00.000-07:00

Despite posting strong August quarter results, and providing solid November quarter guidance, RIM stock is keeping close to its 52-week lows. While RIM has its fair share of challenges, mostly as a result of a severely aging operating system which keeps crashing, freezing and just isn't as capable as Google's Android and Apple's iPhone, there are also some myths that present RIM in a too unfavorable light.

Myth #1: BlackBerry competes with Android and iPhone. BlackBerry is sold in 175 countries. In most of these countries, BlackBerry has zero competition from Android and iPhone. In some of these countries, Android and iOS are available, but are not available on a pre-paid basis -- which is close to 80% of the world's cell phone sales. In most of these countries, iPhone in particular -- but also Android -- are just too expensive for most people. An unsubsidized iPhone may be $700 and up, whereas an unsubsidized BlackBerry can be had for $250 even in a Best Buy vending machine at an airport or at a Las Vegas casino.

The truth is that it is only in a relatively small number of countries out of the 175, such as the U.S. and the U.K., does BlackBerry compete with iPhone and Android -- and even in those countries, BlackBerry is available from numerous operators on a pre-paid basis and is a lot cheaper than iPhone and many Android devices. Yes, I know there are some exceptions, such as Sprint's Boost and Virgin Mobile brands, but this is true in most of these 175 countries.

Americans also don't often appreciate that iPhone and Android are more competitive in the U.S. than in most other countries. Many desired features of iPhone and Android simply aren't available in so many countries. For example, Google Voice is only available in the U.S., and even Apple's signature iTunes store for some products, iBooks and other critical features are not available in all countries.

In reality, BlackBerry's main competition in a majority of the 175 countries is Nokia, and to a lesser extent basic old-style cell phones from Samsung, LG, Sony Ericsson and Motorola. In this fight, BlackBerry has been gaining market share every day.

Myth #2: New subscriber count guidance is fishy. On the conference call a week ago, RIM stock reacted negatively after management stated that its policy was to move away from subscriber guidance. While this may sound suspect at first, there is a really good explanation for it.

An increasing degree of BlackBerries sold worldwide are to people who don't use email. This may sound doubly fishy to a U.S.-centric analytical crowd, but the fact is that most people in the world have never used email or for that matter a PC with a browser. Their equivalent of our email is SMS. As a result, they use their new BlackBerry for massive SMS volumes, but not email or web surfing. For this reason, they don't need to "subscribe" to RIM's Internet service.

The result of this is that BlackBerry ends up selling more and more handsets to people who don't show up in subsequent statistics. BlackBerry gets a good margin on the handsets, and may up-sell these people to email and other Internet services some time down the road, but for the near future, these sales go into a de-facto black hole with the only certain money collected up-front. And this shows up in revenue and profit growth, but not subscriber growth.

For this reason alone, it made sense for RIM to stop giving out these "subscriber" numbers -- they just don't matter as much going forward, as they did in the past when almost all BlackBerries sold were to people who were living in "modern" countries where everyone used BlackBerry for email. The revenue and profit numbers will simply speak for themselves.

Myth #3: Tablet as "companion device" is a joke. The only thing about most of the reporting to date on the subject of the BlackBerry tablet that's a joke, is the inconsistent reporting itself. Commentators have made fun of this "companion device" concept as something quaint and reminiscent of Palm's failed 2008 "Foleo" product, which ended up stillborn.

The alleged definition of this "companion device" concept is that the tablet won't have cellular connectivity, but rather only WiFi. In other words, the same thing as approximately 80% of all iPads sold to date. Are these commentators criticizing the iPad as a joke too? Of course not, but this only reveals that they apparently don't know what the heck they are talking about. Clueless, and shamelessly so!

A WiFi-only iPad is also a companion device, in that it will only connect to the cellular network using a device offered by Sprint and Verizon Wireless such as the the Sierra Wireless Overdrive, the HTC EVO, the Samsung Epic (all on Sprint), the two Palm devices Pixi and Pre Plus (both on Verizon Wireless) and the Novatel MiFi (on both Sprint and Verizon Wireless). There is nothing wrong, quirky or otherwise quaint about this approach. Some consumers prefer it; others don't. Clearly the vast majority of Apple's iPad sales -- probably around 80% -- are in this "companion device" format.

To further show how insane the commentary has been with respect to the prospect of a BlackBerry "companion device," let's take the initial comments made about the Samsung Galaxy tablet, introduced a couple of weeks ago and expected to become available by November or so. Initially, it appeared that this Samsung tablet would only be offered with a cellular subscription, i.e., the opposite of a "companion device." The bloggers screamed bloody murder! How dare Samsung not offer a WiFi-only -- i.e., a companion device -- version?

Only a few days later, commentary from Samsung appeared to have suggested that a WiFi-only version was indeed also going to be offered. The tech bloggers shouted a big sigh of relief. Well, gee, how about some of the same feelings for BlackBerry alleged similar approach, then?

Of course, we don't know what the BlackBerry tablet will look like, when it will be offered or any other details for that matter. But can we please have any consistency in the criticism of it, even on the terms assumed by the commentator assailants? You can't have it both ways. You can't praise Apple and Samsung for offering the exact same "companion device" concept -- and in Apple's case be extremely successful in doing so -- while at the same time criticizing BlackBerry for it allegedly planning to offer the same concept.

Perhaps BlackBerry will offer its tablet in both kinds of versions, just like Apple does, and which Samsung apparently will do? If so, will these early inconsistent critics give up and recognize that BlackBerry will have a device for every person's preference? I think the real answer is that these commentators don't really know what they are talking about, and they never stopped to ponder their (lack of) analogy with the other tablet products offered.

The bottom line is that while BlackBerry has huge challenges in terms of an urgent need to come up with a brand new operating system, it has been unfairly vilified for several things where BlackBerry is in fact doing a lot better than the critics suggest. The basic revenue and EPS numbers support this. If BlackBerry can only get away from an operating system which takes me almost half an hour (yes, I kid you not) to reboot, and which doesn't crash and freeze all the time, it can continue to have a great and rapidly growing business, deserving of a much higher set of multiples.

For this turnaround to work, it would help if the negative myths around RIM are crushed. That said, its flaws and challenges aside, RIM isn't the first player on the world stage to be misunderestimated.

VoIP-Smartphone Revolution Is Coming

2010-08-27T07:26:00.000-07:00

For all the talk of dramatic change in the smartphone landscape over the last two or three years, they pale in comparison to the impact of what's next: The shift from circuit-switched voice to VoIP, or Voice over Internet Protocol. This has been talked about for 10 years, but the stars are finally aligning to hit with full force right now. Here is why:

The average U.S. smartphone monthly bill is approximately $100, plus tax. Of this $100, approximately 2/3 goes to an unlimited voice plan, and the other third to a broadband data fee for service ranging from 2 gig to unlimited.

Think about this for a moment. All the excitement of new and old apps alike, ranging from email to simple Web browsing to Facebook, Netflix, Dropbox, Twitter and numerous games -- is covered by one third of what you pay every month. In the other corner, the 100+ old app of simple phone calls eats 2/3 of your bill.

This may have been justified until recently, but Skype is now available on the iPod Touch, iPhone, iPad and other platforms. Other VoIP apps are, too, including Vonage, Fring, Truphone, 8x8 and others. Most recently, Google announced on August 25 that all calls to U.S. numbers will be free -- at least until the end of this year.

Do you now see what is so wrong with this picture? Once you bother using any of these apps -- Skype, Google Voice, Vonage, Fring, Truphone, 8x8 or any of surely many others already (or soon be) available or soon -- you are paying 2/3 of your monthly smartphone bill for nothing. Pure waste.

Did you wake up yet? I have just pointed out that a multi-trillion dollar industry may stand to lose 2/3 of its revenue once people invest in a smartphone and click to install one or several of these VoIP apps.

Of course, as with almost all changes in technology, this will not flow through the system as soon as a solution is available. It will take years to play out. But once there's a crack in the Hoover Dam ... and you can't plug it ... do you really want to invest against this trend?

Who will be the winners and losers in the market, as a result of the imminent VoIP smartphone revolution? The answer is divided into two parts: Smartphone makers and network service providers.

First, smartphone makers. There are only two devices in the market today with the ability to take advantage of the VoIP smartphone revolution, not forcing you to also pay for a traditional circuit-switched voice plan. The most interesting example is the Apple iPad. It is to my knowledge the only GSM-ecosystem device in the market with significant smartphone capability, that you can buy with a data plan only, and not have to pay for any circuit-switched voice.

All you pay is $25 per month for 2 gigs worth of data, and then you use Skype. This makes the iPad the cheapest smartphone in the market today, in terms of the monthly service fee. Yes, really. Compared to the iPhone, it saves you $70 per month, or $1,680 over two years. You hadn't thought of this, had you?

Of course, the iPad is a huge device and most people aren't going to use it "as a phone" because it doesn't fit in most pockets. But Apple has "a device for that" -- the iPod Touch. The current iPod Touch, of course, runs Skype, and you can use it with a separate data modem such as the Novatel MiFi (available from Verizon Wireless, Sprint and Virgin Mobile) or the Sierra Wireless Overdrive (available from Sprint and its partners). These types of plans start at $25 per month, mimicking AT&T's iPad data plan.

We all know Apple will be announcing a new iPod Touch on September 1. Today, the iPod Touch is the only device in its class, feeling just like a smartphone, but lacking the cellular modems of every other smartphone in the market. Apple could simply mimic the iPad and equip the next-gen iPod Touch with the same kind of embedded HSPA (or EVDO or WiMax or LTE) data modem as it has already done with the iPad. If so, it would be a pure VoIP machine, in the right size for a traditional smartphone.

If Apple were to unveil such an improved iPod Touch device, it would be the only company offering a smartphone with a monthly bill two-third lower than every other smartphone on the market. If Apple were the only company doing this, it would punctuate the sales of every other handheld communications device in the market. At that point, Apple could sell well over 100 million of these units per quarter, on a global basis. Indeed, this is at the core of my bull case for Apple stock.

That said, why would Apple be the only company offering such a device?

Of course it wouldn't. Every other smartphone maker can easily jump into this game. Every one. Skype and Google Voice, among others, could run on every OS, every device. Nokia, SonyEricsson, HTC, Motorola, RIM, Samsung, LG -- one wonders what excuse any of these companies has for not already having launched such a product.

Indeed, I will go so far as to say that the failure to launch this product represents nothing short of gigantic malpractice by all of these managements. The first company bothering with this would catapult its market share like nothing we have seen in the smartphone world to date, including the iPhone and Android.

Interestingly and paradoxically, while Apple is the only company having offered devices able to take advantage of this trend thus far -- iPod Touch and iPad -- it may be the only company restricted from launching the killer product I described above (iPod Touch with data-only modem). Why? Because its agreement with AT&T may prevent it from creating a product that so closely competes with -- and whose sales would completely punctuate -- the iPhone.

That said, if the well-publicized rumors of AT&T's deal with Apple ending by January 2011 are true, this restriction will soon be history anyway.

Conclusion on the smartphone side: Anyone stepping up to the plate and bothering to make this VoIP-only machine will be a winner -- if they do it in time. Anyone who doesn't, or takes too much time figuring this out, will go the way of the horse-and-buggy and mainframe. While Apple has the early lead here, this lead could be vaporized in a nano-second by Google and its partners -- or by anyone else.

What about the service providers? The lion's share of revenue and profit from the traditional cellular service providers comes from circuit-switched voice. With this business collapsing into the corner of Skype, Google Voice and others, it would appear to present an impossible equation for these companies. Yes, data revenue will continue to grow like a weed, but that may not be enough to replace the profits from the legacy voice business. In this light, I don't see any reason to be long any of those companies -- AT&T, Verizon, Deutsche Telekom and others.

Only one company stands out as a zero-loser in this new VoIP telecom world: Clearwire. It's the only pure 4G play, with not a penny of circuit-switched voice revenue to lose. Its network has the lowest latency -- critical for VoIP to work well -- and offers the most capacity for VoIP. As all other cellular network providers see their revenue fall by two-third over time, Clearwire's revenue should mushroom dramatically.

Perhaps Clearwire will fail anyway -- the perils of being heavily leveraged -- but if that doesn't happen, it may be the only wireless company left standing with revenue growth. Either way, it makes it a most attractive acquisition target.

So there you have it, folks: The mobile VoIP revolution is up for grabs for any smartphone maker willing to cater to this market, and Apple has the fragile early lead with the iPod Touch and the iPad. On the service provider side, this will be a blood-bath for all of them except the VoIP-only network play: Clearwire.

"Net Neutrality' Is Akin to Socialism

2010-08-24T11:24:00.000-07:00

Someone has to say it. The debate surrounding so-called net neutrality proposed policies reminds me of a heavily Marxist-influenced student protest from 1968. It's all about keeping private property in name only, while regulating the product so that it can only be provided in a way defined by the government. In other words, it's a regulated utility which may just as well not be a private enterprise at all.

The "debate" regarding net neutrality is in fact no debate at all, reading 99% of the commentary on the matter. It's equivalent to the debate surrounding "rent control" in many cities, say 50 years ago. Just prohibit private property owners to run their businesses the way they want, and the consumer will benefit unequivocally and proportionately the argument goes. The government bureaucrat proposing to rob Peter and give the monies to Paul can always count on the support from Paul.

We all know what a brilliant idea rent control was. Indeed, applying the net neutrality principle to all of society, as it was ostensibly done in the Soviet Union, really catapulted the standard of living forward to new consumer friendly heights -- not.

So what is net neutrality? It's the idea that it will be illegal for anyone to purchase preferred access on broadband networks -- wired as well as wireless. All bits must be treated equally. No special privileges for anyone. A fine principle, taken straight out of Cambodia's "Killing Fields" and of every other socialist utopia attempted over the last 100 years or so.

Indeed, why limit the net neutrality legislation to broadband networks? Shouldn't all products and services in society benefit from the egalitarian principle of nobody being able to purchase a preferred service or product? Take an airline, for example. Let's establish an air neutral policy of prohibiting business class and the practice of charging people based on supply and demand for seats. Each airline seat will have a fixed price and there will be no multiple classes of service. Air neutrality will prevail in the same nirvana as on the net utopia envisioned by the Federal Communications Commission.

What are the most important products in society? Food, shelter and clothing. Without them, we would die relatively soon. We can manage without broadband, air travel, and even health care in many cases over an entire lifetime. Let's apply the net neutrality principle to food. Nobody should be able to buy "preferred" food of higher quality and better taste than anyone else. This dictates a government bureaucracy dispensing identical rations to all citizens. Think Mao's Chinese cultural revolution and great leap, and 50 million dead.

The net neutrality principle applied to shelter? Equal apartments to all. Nobody should be able to pay for a better house than anyone else. That is, except for the political elite. Did you ever pay a visit to a Moscow suburb in the 1980s?

How about the net neutrality principle applied to clothes? Nobody should be able to pay up for something differentiated or better. Government must ensure neutrality in clothing, with everyone in adult school uniforms. Think North Korea or China in the 1950s, again. I can't wait!

I could go on and on showing how the net neutrality principle is simply a warmed-over Marxist wet dream. The sad part here is that these madnesses of Marxism sometimes make it into policy, such as the innocent-sounding "rent control" which managed to destroy the living conditions in many U.S. cities for decades until they were phased out, allowing for entrepreneurial freedom and individuality.

Owners of broadband networks need to have the freedom to provide access to their properties on whichever terms they see fit, just like owners of hotels and airlines. If the consumers demand and are willing to pay for usage looking like net neutrality, chances are those service providers will find it in their best interest to supply services in that fashion. You can always get together with like-minded investors and build your own net neutral network if you think the incumbents aren't doing what they should.

We just can't have a situation -- at least not in a free non-North Korea-style society -- in which government bureaucrats dictate the manner in which private companies provide services. If this happens, we must ask ourselves why the government doesn't just expropriate Comcast, AT&T, Verizon, Time Warner Cable and others. If a private company isn't allowed to design and price its product in any manner its shareholders see fit, we simply aren't a free country anymore.

Back in 1944, Friedrich Von Hayek, who later came to receive the Nobel Prize in economics in 1974, published his most-read book -- "The Road To Serfdom" -- in which he explained that government control over the private means of production must spiral into a lack of political freedom. If people don't have control of their private property, they cannot fund political pluralism.

Hayek's book became a favorite behind the Iron Curtain, passing hands in brown envelopes because its possession could yield a labor camp sentence or worse. In the current net neutrality debate, we should heed Hayek's warning and praise the right of owners of property to be free from socialism enacted through the back door. If you like government-mandated products and services -- from food to clothing, shelter and transport -- you will love net neutrality. Those of us who value the freedoms afforded to us through our exercise of private property rights will fight net neutrality just like Ronald Reagan fought the Evil Empire.

Advocates of net neutrality tend to be the same people who complain that there hasn't been enough broadband capacity built. If broadband networks are to remain privately owned, net neutrality legislation will only serve to disincentivize investment. If the government told you how you had to use your house, offer services in your hotel, or whatever, how much would you invest in such a building? Probably next to nothing. You surely wouldn't expand. This is basic incentive theory, folks. If the government will punish you for making an investment, you're not going to do it. Enacting net neutrality legislation is simply one big discouragement of investment.

Superior Protection for Your iPhone 4

2010-08-17T12:55:00.000-07:00

So you've paid $299 plus tax, perhaps bought a MobileMe membership, a car charger, an international travel charger and a superb Motorola S305 stereo Bluetooth headset, for the market's finest handheld computer design -- Apple's iPhone 4, 32-gig version. All in, you're out more than $500 plus over $100 (inclusive of tax) per month for a two-year contract. The iPhone 4 is an engineering piece of wonder all right, the new decade's equivalent of the finest Leica camera design.

The problem is now twofold: (1) You have this thing -- the iPhone 4 -- on you all the time, doing everything imaginable from text and visual communications, to reading books, listening to podcasts and engaging in business productivity; and (2) because you depend on it for almost everything, you're toast if it's destroyed.

What's the most likely reason your iPhone will suffer a hardware failure? Dropping it onto a hard surface, such as a marble floor or a sidewalk.

So what should a responsible iPhone 4 owner do to protect the two-year investment? If you're serious, may I suggest the Otterbox Defender case. It is the Mercedes 600 of iPhone 4 cases, and the price is $50 plus tax. Bottom line -- it's extremely well worth it!

There really isn't an easy way to describe the physics of the Otterbox Defender multi-layer case, except to say that it naturally adds some bulk to the very thin and narrow iPhone 4, while giving it more protection than any other case I've seen. Much of the exterior is covered in a rubber that's neither too slippery, nor too rubbery. Oh, OK, some people may have wanted it more rubbery for better grip, but that would have caused complaints among those who want to get it in and out of a pocket with ease.

Once you've spent about a minute getting the Otterbox Defender case onto your precious iPhone 4, you feel extremely secure that nothing will hurt your investment short of dropping it in the ocean or having it run over by a John Deere tractor. You would have no problem dropping it from eight feet onto a marble floor, or a regular sidewalk. Mission accomplished.

The only remaining question is whether you need all of this extreme protection. I vote in favor, but Otterbox also sells two cases of lesser protection for $35 and $20. I am not going to argue with anyone choosing either of those two because they will also provide protection superior to most other cases.

All responsible iPhone 4 owners should have a case that provides protection at least almost as good as as the Otterbox Defender. If you can't find it in the Apple store or from AT&T, you can always go to the source and order it from Otterbox.com.

Clearwire's Sweet Package

2010-07-21T13:57:00.000-07:00

Engadget has published a story which has since traveled around the blogosphere, on the subject of Verizon introducing bandwidth caps on data usage.

There are two initial points to be made about this story:

No. 1. Verizon has already had a data cap for years. It's 5 gig per month, with overage charges.

AT&T recently lowered the cap for certain devices such as iPhone and iPad to 2 gig per month, but those devices are also charged less, typically $25 per month instead of $60 per month for the USB modems.

No. 2. Verizon started telegraphing this move already last December, and it is reasonably believed that this new pricing change will happen in time for the anticipated Nov. 15 launch of LTE.

Those two formalities aside, the main implication for investors from this anticipated move by Verizon is with respect to Clearwire. Clearwire is mostly associated with WiMax, a technology that has been losing momentum in the market for almost 18 months now, in favor of LTE. The main point I am making here is that it mostly doesn't matter for Clearwire whether it is offering service using LTE or WiMax.

Clearwire's main asset isn't WiMax technology per se. It's spectrum. Spectrum means capacity, the ability to offer service to more people doing more things, simultaneously.

Whether this is done using LTE or WiMax basically doesn't matter, at least for the time being given that these two technologies have similar performance.

Specifically, Clearwire has 120 MHz of spectrum on average across the major markets where it has launched, or will soon, be launching service. In comparison, Verizon has closer to 30 MHz worth of spectrum where it will be launching LTE.

In addition, Clearwire's spectrum is "un-paired" (referred to as TDD) whereas Verizon's is "paired" (referred to as FDD), which in practice means that Clearwire's spectrum can be utilized a lot more efficiently.

The bottom line on the spectrum is that Clearwire has approximately four times Verizon's spectrum, and it may be at least 50% more efficient, so that means six times. This makes all the difference in the world in terms of Clearwire's ability to compete and to do so with competitive pricing.

Practically speaking, the only thing you need to consider when judging Clearwire's ability to compete with Verizon, AT&T, T-Mobile and the others is: Can they offer more data for less money, or not? The answer to this question is very simple.

Clearwire is offering unlimited data for anywhere between $30 and $60 per month depending on the device you use. The competition is offering anywhere between 2 gig and 5 gig per month for $25 to $60 per month.

A laptop or iPad user doesn't care whether it's LTE or WiMax. The user only cares about getting the fastest amount of data, at the highest quantity, and at the lowest price. This isn't a close contest, folks. If I can get unlimited service for $30 or $60, instead of 2 gig or 5 gig for a similar price, why on Earth would I pick Verizon, AT&T or T-Mobile, instead of Clearwire?

If one brand of gas station offered you unlimited gasoline for $30 per month, would you shop there? Hmm, let me think.

Verizon will surely build the finest LTE network imaginable, given what's got in terms of limited spectrum. I have no doubt that it will perform as well as it as all possible. But if Verizon can't come close in terms of competing with Clearwire on a price-per-bit basis, I don't see why anyone would serve its laptop with a potentially much more expensive modem.

Nota Bene 1: Sprint owns approximately 55% of Clearwire.
Nota Bene 2: Clearwire offers service also under the Sprint, Comcast and Time Warner Cable brands.
Nota Bene 3: Google is an investor in Clearwire. Imagine what they have in mind.

iPhone 4 Recall: A Useless Idea

2010-07-13T10:01:00.000-07:00

The rumors about an Apple iPhone 4 recall has to be one of the most useless ideas in recent technology memory. There is nothing about the design flaw that could be fixed in any recall, short of rebuilding the phone from scratch or redesigning a whole new phone, which would take one year or perhaps more. It would be totally counter-productive for Apple and its customers alike.

There is really only one solution which makes any remotest sense, and that's for each customer to do what each customer should ALWAYS do with ANY smartphone of value ANYWAY: Use it with a protective cover, such as Apple's own so-called bumper product, available at the Apple store for $30 apiece. Numerous other protective covers/sleeves should soon become available from many other companies, such as privately-held Otterbox, to pick the example of what's considered to be the best in the business.

So far, Apple has rejected the idea of giving away its $30 bumper for free, but with the journalistic drumbeat on high gear, free bumpers may just be inevitable. Interestingly, most consumers seem thrilled overall with the iPhone 4. Just ask any sample of your friends who are proud iPhone 4 owners. I can't find a single iPhone 4 owner with a serious complaint. They either avoid pressing the finger on the critical antenna spot, or they have a cover such as Apple's own bumper.

The people who had the phone from the very first moment it became available, before the widespread reports of the antenna issue never seemed to notice it until it became a big media story. Since then, it has become more of a party trick for those without a protective cover: "See, look at what happens if I put my finger right here."

It's something you would probably have seen in terms of a Hugh Hefner or Austin Powers party trick ca. 1967. In reality, it's simply not an issue for the way you're supposed to handle the product, and consumers are extremely happy with the product by all accounts.

Specifically, iPhone 4 consumers tend to report much better Internet speeds, particularly upload speeds. Let's say you take a photo or a video with the new high-resolution camera, and you want to upload it to some web site. This now goes much faster with the iPhone 4 than with the previous iPhone 3GS version, and for that matter many other smartphones. So much for an antenna reception problem!

Bottom line: Sensational journalism is often unfair. I feel for Apple. Let's all hope ambulance-chasing lawyers don't get their pound of flesh from this non-issue. We don't need another John Edwards.

RIM, BlackBerry: Pluses and Minuses

2010-07-07T13:00:00.000-07:00

Research in Motion traded above $70 in early May; now it's below $50. This article seeks to accurately assess RIM's competitive position.

First, the pluses. As I see it, RIM has three primary pluses in the market today:

First, the vast majority of the world's handheld computer users do so on a pre-paid basis, unlike in the U.S. RIM offers its products on a pre-paid basis in many countries, unlike Apple and Google/Android. As long as the large majority of the world's consumers cannot buy iPhone or Android, RIM should do pretty well against its main competitor: Nokia. Once Google and Apple decide to attack this lion's share of the world-wide market, RIM becomes vulnerable.

Second, most U.S.-centric pundits and portfolio managers have spent the last couple of decades PC-savvy and web-centric. As a result, they believe that the average consumer primarily looks to the handheld computer purchase to replicate the PC desktop web experience. While this is true among one billion people, it's not true for another five billion people. For the majority of the world, there is no laptop or web browser as reference points, but rather a Nokia cell phone with SMS being the primary medium of communication.

In this context, the BlackBerry looks like the ideal step-up from that old-fashioned Nokia phone. It's the best SMS machine, available on a pre-paid basis, and in order to reduce SMS charges the BlackBerry offers its superior and proprietary BlackBerry Messenger app, which has proven to be very addictive around the world.

Third, RIM's focus on large enterprise and government is unlikely replicated by its less focused competitors, whether Google or Apple or any of the others. There is a reason RIM has a near-100% market share in government/military and nearly as large market share in the most demanding large enterprises such as the heavily regulated banks. It's almost as if RIM needs to be valued like two separate companies under one roof: One defense contractor, and one consumer-computer-mobile company.

While we can all agree that RIM has its competitive challenges in the consumer space, its superior focus on security should enable it to dominate the largest enterprises and the defense departments for years to come. Last time I checked, defense contractors tend to be very profitable businesses deserving of healthy valuations.

On the downside, RIM has three main things to worry about:

First, the operating system is far behind Apple and Google in terms of its fundamental elegance and capability. Just compare installing an app, and then view its richness, between these platforms. Installing an app on a BlackBerry often takes a long time and can be followed by all sorts of screens of approvals, agreements needed to be signed, after which it may crash and bring down the whole system.

Sometimes it works, sometimes it doesn't. For those of us who use multiple competing products based on different operating systems, these competitive discrepancies are obvious. Does anyone at RIM walk around comparing its products with iPhone and Android all day long? In a company such as RIM, literally thousands of employees should be forced to do this constantly.

Second, BlackBerries fail all the time, and they are a pain in the neck to restore. Half the time you need to do something, the device freezes or shows the horrific hour-glass for who-knows-how-long. This didn't use to be the case some 4-7 years ago, when most BlackBerries operated only the "core" apps such as email, but it has increasingly become a problem when consumers, despite the unfriendly app install process, start loading 30+ apps onto the devices.

In this process, every BlackBerry owner knows how to reboot the device, because you end up doing it almost every day -- which brings me to the next point: It's probably a sign of an unhealthy operating system if it takes 5 minutes to reboot, when an iPhone or even a Windows 7 laptop takes only 45 seconds.

Third, getting your BlackBerry to interact with the PC is a bureaucratic nightmare compared to an iPhone. The average consumer needs to run three separate processes: (1) Back-up, (2) Synchronize and (3) Media Sync (with iTunes). Due to its complexity and lack of intuition, most BlackBerry owners I know run only one of these three.

In contrast, getting "everything" done between your iPhone and iTunes requires only pressing a single button, once, upon which all backup, synchronization and media management occurs. Same thing for restoring your device -- one button click for iTunes/iPhone, whereas you need to take a day off from work, or sacrifice a weekend, in order to get your BlackBerry back into its original state with all the numerous apps you have downloaded and configured.

Conclusion: The tech support costs for BlackBerry are astronomical. Over the last eight years, I for one have spent on average two hours per week troubleshooting my BlackBerry for any of dozens of reasons, amounting to a small European vacation every year. Perhaps this is justified in The Department of Defense with its gigantic IT department, but the average consumer runs for the hills into the arms of the iPhone very quickly.

Bottom line: The sentiment surrounding RIM stock is as negative as I have ever seen it. This is part justified based on the problems resulting from the operating system and the various problems it causes. That said, RIM can thank the large pre-paid market consisting of people with no PC/browser experience, as well as its de-facto defense contractor status, for what will probably continue to be several prosperous quarters ahead. On balance, and in combination with the humble valuation and negative sentiment, this should prove for a strong rally in the stock as long as the new BlackBerry 6 operating system interface rolls out -- on time (by September), and assuming it's any good.

Entering the Era of 3 Smartphones a Person

2010-06-03T13:07:00.000-07:00

The thesis of this analysis is that there is a small but rapidly increasing group of Americans who will soon end up with not only two smartphones, but three. In most cases, this arsenal includes a Research In Motion Blackberry and an Apple iPhone or iPod Touch, and, starting tomorrow, the Sprint HTC EVO 4G as the Google Android tool of choice.

Let's first go down the smartphone memory lane. There have been three stages of smartphone evolution over the last 11 years:

1999-2004: Two devices! In the early days, employees were issued a Blackberry from their employer, but they still carried a separate cell phone. Yes, I know phone-enabled Blackberries didn't hit the market until March 2002, but it wasn't until late 2004 that Blackberry launched a competitive phone.

2005-2007: Consolidation. This was the time when people consolidated their cell phones and their Blackberries into one, and RIM saw record increases in its stock as a result. Blackberry came to totally dominate the smartphone landscape. The market effectively "regressed" to where it had been only a few years before, in the sense that people went back to carry one device -- except now it was a Blackberry instead of a Nokia or Motorola in 1999.

2008-current: The iPhone Revolution. Almost no professional can get rid of the Blackberry as the compliance-approved and superior text/email messaging device, but it became time to also carry the better entertainment device with iTunes and all the apps, the iPhone.

"Dual carry" has become almost the norm among many professionals.

Now now, in June 2010: We are beginning the "Tri-Carry" era and I will argue below that initially, this will mean that the third device will be Sprint's HTC EVO 4G for three reasons: (a) Unlimited 4G WiFi tethering, (b) the best Android experience to date and (c) a far lower monthly price than competitors.

U.S. mobile phone penetration is approaching 100%, but that is still low compared to a few other countries that are starting to approach 200% -- Hong Kong, Taiwan, Germany, Russia, Italy, the Baltic/Scandinavian countries and others. These being averages (and we know there are still many people without phone service at all), it means that many people already dispose of two or more handheld communications devices.

In most cases in the U.S. today, as I described above, this means a Blackberry -- often provided by an employer -- and an iPhone.

So what's next? Purely anecdotally speaking, at no point since the three iPhone launches in 2007, 2008 and 2009, have I spoken with so many people who are going to be in line for Sprint's HTC EVO 4G when it goes on sale tomorrow morning, June 4. Unlike the first-day buyers for a new iPhone, who already tend to be owners of a previous iPhone, the stated intended buyers of Sprint's HTC EVO 4G come from all walks of life. There are three primary reasons the demand for the Sprint HTC EVO 4G appears uniquely strong:

1. Unlimited 4G WiFi tethering for $30 per month. No other phone on the market has 4G tethering at all, and the price of $30 per month for unlimited service looks even lower today than it did before yesterday's AT&T announcement of metered pricing. People want to connect their iPod Touches, iPads and laptops with one wireless data subscription, and they strongly prefer unlimited service -- no 2 gig or 5 gig per month cap, above which overages must be paid. The Sprint HTC EVO 4G simultaneously connects eight such devices, and there is no worry about overage charges.

2. The only 4.3-inch Android smartphone on the market. With Blackberry a must-have, the iPhone being unavoidable as a result of the AppStore and the iTunes ecosystem, Android has firmly established itself as the "third OS" and many people feel they need to get first-hand experience on what this means. If you are going to make the jump, why not do it for a device with the largest screen size by far?

3. Price. The Sprint HTC EVO 4G has its service plan priced below almost all other smartphones. The $110 per month (plus tax) gives the user unlimited calling to other cell phones, unlimited SMS, unlimited data on the device and unlimited WiFi tethering to up to eight other devices such as iPod Touch, iPad and laptops. The only other 4G (WiMax) WiFi tetherable device on the market -- the Sierra Wireless Overdrive -- costs $60 per month, so this means that the $50 per month residual ($110 minus the imputed $60) buys you the biggest Android experience.

So $50 per month for the best Android device on the market? It's hard to resist, given that most smartphone plans cost more -- and they don't have unlimited 4G WiFi tethering.

Here is the bottom line: There is a stratum of the U.S. consumer who is already carrying two devices -- Blackberry and iPhone (or the WiFi-only iPhone experience in the form of the iPod Touch). Sprint's aggressive pricing of the ONLY 4G smartphone-capable of WiFi tethering to up to eight other devices with unlimited monthly service means that we will soon be seeing people carrying a third smartphone to satisfy the modern "iPad Generation" person's needs.

Watch Sprint sell out of the HTC EVO 4G fast tomorrow morning.

AT&T Metered Plan Good for RIM, Clearwire

2010-06-02T10:00:00.000-07:00

In a somewhat stunning about-face from the recently implemented unlimited data plan for the iPad, AT&T announced the effective end to unlimited data. Gone are the days when you could stream Netflix to your cellular device such as Apple's iPhone or iPad 3G for a fixed monthly fee -- at least on the AT&T network.

You see, this pricing action by AT&T will now serve to highlight Clearwire's superior spectrum position, which enables it to offer unlimited data service for $60 a month when using the Sierra Wireless Overdrive "mobile WiFi hotspot" and $30 when using the equivalent functionality on the HTC EVO 4G, which launches in Sprint stores on Friday.

You want your iPhone or iPad with unlimited data? Just pair the iPhone iPad or iPod Touch, with either the Sierra Wireless Overdrive or the HTC EVO 4G, and you're covered. Not only do you have a plan that was better than the new expensive metered AT&T data plans, but your plan remains even better than AT&T's old plan, because there is no 5 GB cap per month.

This is the result of Clearwire's superior spectrum position, which means it has the capacity to offer users more data consumption without hitting the ceiling in terms of capacity. Think of Clearwire as offering a freeway with 10 lanes in each direction, compared with one lane in each direction offered by AT&T. There is just no remote comparison.

Eventually, of course, Clearwire and its 57% majority owner Sprint also will be forced into some form of a metered data plan, but this could take a year or two or more. It just takes a lot longer to fill up a 10-lane freeway than a one-lane freeway. In the meantime, this is a huge gift to the Sprint and Clearwire marketing departments.

The other main beneficiary of this AT&T pricing action is BlackBerry maker Research in Motion, whose devices use complex compression techniques to reduce the amount of data going across the network. Claims vary, but generally it is thought that a BlackBerry consumes three to five times less data to accomplish many tasks, compared with a device such as iPhone or Google's Android.

Practically, this means that a BlackBerry often consumes only 100 to 200 MB or so per month on average, whereas an iPhone or Android may consume around 500 MB to 1 GB per month. These are average numbers I have heard from many people in the cellular operator industry over the last six or so months. To the extent that the consumer understands this, including education by the carrier, this will be a huge boon to the sales of BlackBerry from the perspective of people paying less for data, compared with iPhone and Android.

No longer will everyone pay $30 a month. A BlackBerry user could pay less and not face overages, whereas other smartphone users may end up paying overages. Certainly many smartphone users consume more than 2 GB per month and almost none of those are BlackBerry users.

This AT&T pricing action also plays into what AT&T's chief consumer boss, Ralph De La Vega, said during his presentation at the CTIA trade show in March, when he talked about a new smartphone browser consuming some 2.5 times less data than current smartphones. It seems that what he was talking about was the new upcoming WebKit browser from BlackBerry, which could be unveiled as early as this month and be in stores no later than September.

Eight Economic Problems and Eight Solutions

2010-05-02T12:01:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2008-04-05:

In recent months, numerous people have asked me: What's wrong with the economy, and how can we turn it around? This essay I educate you, once and for all, about the eight main economic problems of today, and their eight solutions, so save this piece and forward to your friends - especially those who are running for office.

There are several problems with the economy. Some are short-term, others are long-term. Some have painful fixes, and some fixes are painless:

1. The falling value of the dollar. Long-term, the value of anything is a function of only three factors: supply, absolute demand, and relative demand to hold. In today's case, the two problems are with supply and relative demand to hold. The supply side is straightforward, with the US central bank simply creating too many dollars. It does so to finance the US Federal budget deficit as well as lending the money to banks and other credit institutions. Relative demand to hold (dollars) is a function of expectations of future economic and political developments. In brief, the market is believing that the US will suffer from higher taxes and more regulations, leading to less goods and services produces, and thus lower demand for dollars.

2. Higher prices on energy and other commodities. This is a similar case to the dollar, but in reverse: Supply is not growing much, but both real demand and relative demand to hold, are both going up. Supply is constrained because it's almost impossible to profitably increase the quantity of things such as energy. Regulations and litigation have caused the US to build not a single on-shore oil refinery or nuclear plant in about 30 years. Demand is growing because countries such as India, China and Russia are growing rich following low taxes, relatively low regulation in many areas, and privatization. Besides, didn't many Americans - including many environmentalists - argue for sharp increases in energy prices so that people would use less energy? At least according to them, $4/gallon gasoline must be a big improvement over 10 or 20 years ago, when the price was close to $1. You can't have it both ways...

3. Too high taxes. All sorts of businesses are leaving the US, incorporating anywhere from Macao to Ireland and Latvia because US taxes have become some of the highest in the world. US corporate income taxes are the second-highest in the world, after Japan. Many countries have zero capital gains taxes, whereas the US is at 15% and Hillbama proposing increases to 28% or 39.6%. The top income rax rates in Albania, Estonia, Hong-Kong and Russia are 10%, 13%, 15% and 17%. If you live in Manhattan, federal+state+local income tax is 49%. Small wonder the US economy is depressed with people fleeing abroad. Tax revenue has gone up for almost all of the last 67 years, with the biggest increases in the last 5 years. 70% of income taxes are paid by the top 5% of income earners. 50% of all taxes are paid by the richest 1% of taxpayers. In other words, the vast majority of taxes are paid by a few people at the top, who in some cases are in the process of moving their money abroad following the (recent and expected future) tax increases here at home, in combination with tax cuts abroad.

4. Too much government spending. As high as taxes have gone through the roof, they have not kept pace with spending. This year, the Federal budget is $3.1 trillion, or over over $10,000 per American. Of this amount, approx 20% goes to the department of defense. Most of the other 80% goes go social security, medicare and medicaid, plus gigantic government bureaucracies that make up new rules and new forms to fill out. The government employs literally millions of bureaucrats, whose jobs are to make it as difficult as possible to start and operate a business.

5. Too many regulations. Many US industries are very heavily regulated. It is illegal for FedEx and UPS to deliver first-class (i.e., regular) mail. Affirmative action laws add bureaucratic cost. Sarbanes-Oxley adds billions in cost and forcing companies to list their shares in London and Hong-Kong instead of NYSE and NASDAQ.

6. Too many lawsuits. US corporations spend more money on legal fees than on research and development. Do you think this is the case in India, China, Ireland and Lithuania? Of course not. A doctor's insurance is now over $300,000 per year. And you wonder why health care - and many other things - are expensive?

7. Too little savings. Americans save a very small portion of their income. Investment can only come from postponed consumption, so to make up for the difference we must borrow or receive direct investment from abroad. Americans don't save enough money because they believe that the big government welfare state will bail them out when they have a problem (social security, medicaid, medicare, disaster relief after a hurricane). In addition, we tax savings more than in other countries with higher rates on capital gains, interest and dividends. This party is all coming to an end as foreigners may become unwilling to lend to Americans or fail to invest here. Hence a key reason for the fall in the dollar's value.

8. Too much property owned by the government. Why is 92% of the land in America owned by various levels of government? Who owns most forests? Who owns 40 miles of beachfront between Orange County and San Diego? Who owns the three airports in New York? The US Post Office? The US is normally considered a capitalist country, and the US President is the leader of the free world, but fundamentally the US economy has more in common with the old Soviet Union and Red China under Chairman Mao, than most people realize. High taxes, high spending and high regulations are measurements of the degree to which a country is a socialist country, but so is the degree of government ownership of the most basic means of production: land.

The solutions to these eight problems are as follows:

1. How to stop the value of the dollar from falling? Print less dollars.

2. How to stop energy and other commodity prices from increasing? See (1) plus allow for new/more supply of energy by allowing people to build nuclear plants, oil refineries and drill for oil. But then again, some have been arguing for higher energy prices for decades, so...

3. How to deal with people and companies fleeing the country to lower-tax places? Cut taxes here at home. We should not have higher taxes than Albania, Estonia, Hong-Kong, Russia and Ireland. In addition to cutting taxes, make them simple by abolishing deductions and not more difficult to figure out than the tip on your restaurant bill.

4. How to deal with runaway government spending? Combine medicare, medicare and social security into one simplified - and much smaller - program called "welfare" which will be there to keep people from starving and perhaps freezing to death (simple solution: put people on buses to Florida, where it's warm and there are plenty of oranges growing on the trees). This would cut government spending by more than half, from $3.1 trillion to just under $1 trillion, cutting the tax burden on a family of four from $40,000 per year to approximately $12,000.

5. How to deregulate? Abolish all laws that don't interpret and enforce private property rights.

6. How to get rid of costly lawsuits? This one isn't lacking in complexity, but basically one key part of the solution is to have the losing party in a lawsuit pay for the other party's legal fees. That alone would probably cut over 90% of lawsuits.

7. How to get people to save and invest more? Cut taxes on saving and investments to zero. Also, by abolishing most forms of welfare programs, people would have a greater incentive to save. This would also attract foreign capital.

8. How to get rid of too much governmnent property? In the finest tradition of Margaret Thatcher and Boris Yeltsin, privatize! They turned two extremely poor economies into economic powerhouses not only by cutting taxes (which was extremely important) but also by selling/giving government property to the public. The US just privatized $20 billion worth of radio spectrum for wireless Internet in March 2008. Bravo! Now go sell most of the 92% of land it owns in this country, the US Post Office, airports, etc.

In summary, all of these cures to our eight economic ills are mainstream Economics 101. Generally, no serious economist disagrees with any of this. It's just that politics itself has its warped biases to do all the bad things. That's why so many economies around the world are operating at dramatically sub-par levels of performance. We may never get the optimal economic system installed - unless I am given dictatorial powers - but I still hope that someone will listen and do at least something in the right direction. The eight points above would do most of the trick.

How Socialism Is Anti-Green

2010-05-02T11:59:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2008-04-02:

On the one hand, it is remarkable that despite the sharp increase in energy prices and the global warming concerns, the major candidates for the highest office are not proposing meaningful solutions. On the other hand, it's not surprising at all - this is the way almost all issues of seriousness are treated in Washington, DC.

Sometimes, the obsacles to renewable, cheaper and cleaner energy reside not in Washington, DC, but in state and local governments. Ted Kennedy's opposition to wind power on Martha's Vineyard is one famous example.

Another good example is solar power, at least in the state of California. It takes 69 signatures from 8 different state and local bodies in California, in order to be allowed to install a solar panel on one's roof. This process takes an absolute minimum of 6 months to complete. And solar power is an alleged top priority to the California government?

Installing a few solar panels on the roof should be a no-brainer decision for most people, but who can take 6 or more months off from work to chase down 69 bureaucratic signatures from 8 government bodies? The solution to this problem is of course to deregulate: No government permit or signature should be needed in order to put up a solar panel on the roof.

As Ronald Reagan said about the socialist prescription for the economy: "If it moves, tax it. If it keeps moving, regulate it. If it stops moving, subsidize it."

Another thing that's been impossible to do for not only 6 months, but 30 years, is to build a nuclear plant in the U.S. It is widely known that nuclear energy is the most efficient technology available today on a sufficient scale to be able to substitute all coal-fired energy plants as fast as we can build them. We could build so many of them that we would make plug-in hybrid and all-electrical cars practical, reducing our dependence on oil dramatically.

But we haven't built a single one of them in 30 years. Why? Because the government has allowed people to file lawsuits against those interested in building them. In other words, the government has given the trial lawyers total veto power to prevent a cleaner environment and lower energy prices.

Again, the solution here is simple: The government needs to cease putting up this total obstacle against the building of clean energy. It needs to inform the trial lawyers that, sorry, a cleaner environment and the most rapid reduction in dependence on oil is a top national security priority, and you can't sue to stop it. In other words: John Edwards, you're out of business - go do something useful instead.

Interestingly, there are several very small U.S. communities, ranging from 50 to 5,000 people, who have continued to see nuclear plants being built to serve them, even in the last 30 years. They're called ships and submarines of the U.S. Navy. Speaking of 30 years, a U.S. aircraft carrier is not only 4.5 acres of sovereign U.S. territory, but its two nuclear plants can also operate for 30 years without refueling. They've been running like this for at least approximately 50 years now, and never an accident. And never a lawsuit.

Cleaner and cheaper energy should be a national security imperative. The ways to get there are to abolish the crazy socialist government policies of making it as difficult as possible to deploy solar power and nuclear power. In addition to lowering energy prices and improving the environment, this would have the additional side benefit of getting the Abdoullahs out of the Mercedes and onto the camel again.

Political speeches are filled with rhetoric about "hope" and "change" but never a sentence about abolishing the socialist obstacles to solar power and nuclear power. This is why it is so sad that the next President of the U.S. looks to be just another politician, as opposed to a businessman who has experience from the real world.

Oh, How Easy To Forget...And How Quickly Priorities Can Change

2010-05-02T11:56:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2008-02-12:

Times go by, and even within a generation, people forget major events.

16 years ago, Yugoslavia was in the middle of a civil war that broke up the country into at least a half dozen countries.

26 years ago, the United Kingdom declared war on Argentina and sent the Royal Navy to war over The Falkland Islands.

36 years ago, Arab terrorists took the Israeli Olympic delegation at Munich hostage and proceeded to murder all of them. A year later, all of the countries surrounding Israel including Egypt and Syria, proceeded to attempt the invasion of Israel.

46 years ago, the US failed its attempted invasion of Cuba at The Bay of Pigs, which was followed by the Cuban Missile Crisis when the world came minutes away from total war.

56 years ago, the US and the UN were fighting a Chinese-assisted invasion by North Korea of South Korea, and General MacArthur threatened to drop a nuke on the enemy, at which point President Eisenhower fired him.

66 years ago, the US had just declared war on Germany, Japan and Italy, and proceeded to go all the way to victory after 450,000 Americans fell.

76 years ago, Adolf Hitler was leading the election campaign for the German National Socialist Workers' Party (Nationalsocialistische Deutsche Arbeiterpartei, or NSDAP), in which he won and became head of the government. The only major world leader who protested and warned that this was bringing destruction to the world was Winston Churchill, an obscure right-wing back-bencher.

86 years ago, the US was experiencing unprecedented economic growth, but the German government thought it was harmless to increase the money supply, so it started printing money, which generated hyperinflation, followed by a depression and 40% unemployment.

96 years ago, the US government was debating 3 new policies that were implemented the following year: (a) prohibition of pot/drugs, (b) introducing the income tax, which previously had not existed and (c) requiring the use of passports for international travel.

Sen. John McCain's very vigorous mom Roberta was born 96 years ago, when drugs were legal, there was zero income tax and passports didn't exist.

Many Americans have conveniently forgotten these historical events. What's more surprising is that some Americans now also see September 11, 2001 - only little over 6 years ago - as a fading memory.

In this context, you may have missed it in all the coverage of Super Tuesday, but Director of National Intelligence Mike McConnell gave his annual national security threat assessment to the Senate Intelligence Committee last week.

For anyone who still doubts that the United States and our allies are in a fight for our existence, Director McConnell's testimony should put those doubts to rest.

Here's part of what he said:

"Al Qaeda is improving the last key aspect of its ability to attack the U.S.: the identification, training, and positioning of operatives for an attack in the Homeland. While increased security measures at home and abroad have caused al Qaeda to view the West, especially the U.S., as a harder target, we have seen an influx of new Western recruits into the tribal areas since mid-2006. We assess that al Qaeda's Homeland plotting is likely to continue to focus on prominent political, economic, and infrastructure targets designed to produce mass casualties, visually dramatic destruction, significant economic aftershocks, and/or fear among the population.

We judge use of a conventional explosive to be the most probable al Qaeda attack scenario because the group is proficient with conventional small arms and improvised explosive devices and is innovative in creating capabilities and overcoming security obstacles. That said, al Qaeda and other terrorist groups are attempting to acquire chemical, biological, radiological, and nuclear weapons and materials (CBRN). We assess al Qaeda will continue to try to acquire and employ these weapons and materials -- some chemical and radiological materials and crude weapons designs are easily accessible, in our judgment."

What priorities will change after the next terrorist attack? Who will be blamed for failing to stop it? Will we blame our unguarded borders against Mexico and Canada? Will we blame the lack of biometric IDs? Will we blame the insufficient ability to wiretap suspected terrorists? Will there be calls to do what we did with the Japanese during World War 2? (internment camps)

I don't know what will be the precise dynamics in the media spin, but what I do know is that the political debate will shift dramatically at that point, and instantaneously, suddenly reminding us of 9/11 and various other turning points in history. We will be "shocked" to find out that we had become complacent and hadn't urgently addressed so many "obvious" holes in our security, such as our unguarded borders and lack of terrorist tracking.

The Greatest Generation vs. The Girlie Man Generation

2010-05-02T11:54:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2008-02-10:

American tradition is steeped in the history of rugged individualism. In social life, kids were taught to not whine or complain, but to focus on serious things and work hard. In economic life, kids were taught that rewards would come to those who do the right thing, and that there was no government hammock for those who underperform. In national security, kids were taught that America will fight for freedom - not surrender to those who are plotting to kill or enslave us.

We used to call the combination of rugged individualism and common defense of our freedoms the hallmark of The Greatest Generation - those Americans who first went to war against Japan, Germany and Italy on December 8, 1941 and then built up the middle America we inherited several decades thereafter. This was possible for a combination of the three driving forces of modern American civilization: Social morality, economic freedom and defense of liberty against the its enemies.

And so it was that America became - by far - the cominant economic power in the decades following World War 2. In addition, we fought wars in Korea and Vietnam, trying to protect small countries who were on paths to freedom, against communist invasion, enslavement and genocide. A third war, following the Iraqi invasion of Kuwait in 1990, is seeing the second tail of clean-up work today.

Almost 67 years after we declared war on Japan, Germany and Italy, I am sensing that the stoic rugged individualism of The Greatest Generation is giving way to something very different. It has been brewing for years with "sensitivity training" at work and "political correctness" at school. Protected classes and subjects have been created, about whom you are not allowed to speak in a certain way for the fear of "offending" someone. Sort of like the Danish cartoons about Mohammed.

We see this most recently in the "celebrity"-crazed culture, where movie stars, singers and other entertainers are suddenly not only endorsing politicians - but also getting significant attention for it. In the past such endorsements would never have happened, and if they did, nobody would take them seriously or give them much attention.

It is a poor reflection of the state of American culture when instead of proposing substantive policies, contenders for the highest office in the land think they can win by surrounding themselves by the people who are featured in the tabloids normally found by the supermarket check-out counters. Supporters of such candidates seem rarely - if ever - capable of identifying any substance advocated by these candidates, but rather such specifics are clouded and cloaked in "change" and other similarly meaningless phrases.

It is a sad statement on the direction of our American civilization when the mentality of our political process has been transformed from the rugged individualism and non-whining of The Greatest Generation, to the whining political correctness - dressed in Hollywood celebrity garb - of this new Girlie Man Generation. So therefore, the biggest question determining the outcome of the 2008 election will be whether The Silent Majority of which Richard Nixon spoke so eloquently, has been transformed from Greatest Generation to Girlie Man.

Why the classics are classics

2010-05-02T11:53:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2008-01-29:

Proper schooling includes the study of the things in life that have withstood the test of time. This includes objects of art (Leonardo da Vinci), literature (Shakespeare) and politics (the Declaration of Independence, the Constitution). These are items in life who are classical because they are each fundamental in their own disciplines.

With the most interesting political campaign in a generation in full swing, it is worth reflecting on the extent to which what is being discussed in these political debates will go down in history 25, 50, 100 or more years down the road as "classical" - or important in the eyes of history.

Let me suggest that at this point in the political season, as interesting as the fights may be from a multiplicity-of-candidates perspective, the actual content of the issue disagreements isn't fought in a particularly classic way. What do I mean by that?

First, let's define what is the classic debate in politics. It is pretty simple, actually. Everything that is done in the world, every dollar that is spent, is either done so by someone who is in charge of himself (or the family/children), or by someone who has taken the resource or forced it to be directed in any other (involuntary) way. That's the government, which taxes, spends and regulates. For this reason, the classical debate in politics is very simple: Should the government tax/spend and/or regulate something, or should it not? If the individual is in control of his property, it is capitalism, but if the government regulates it and/or taxes/spends it, the thing in question falls in the column of socialism.

Almost every viewpoint in politics can easily be analyzed in this manner - capitalism vs socialism. It used to be a big geopolitical struggle between the free world and The Soviet Union, but the geopolitical struggle has now been replaced by the desires of radical islam and of ever-growing government at home.

In this context, the current debate of taxes and spending is pretty pathetic. Let's start with Obama and Clinton. They are both in favor of raising Federal income taxes to well over 40%, raising the capital gains taxes from 15% to well over 40%, and probably also raising the corporate income tax from 35% to that over-40% rate. In other words, doing their best to make sure that the value of all companies on the stock exchanges will see their values tumble dramatically. By reducing corporate profits, and the share of those profits that go to their owners, it is a most basic corporate finance iron law 101 that the values must decline. Hence, a major reason for the stock market decline over the last couple of months. If there is a chance Obama or Clinton may actually raise those taxes in 2009, better sell those shares now before they go down another 20%. This is pretty simple - and prudent - risk management by those who own shares.

The most baffling point about the proposed Clinton/Obama tax hikes is their concurrent reaction to the recent market downturn and fears of recession. Both candidates are in favor of immediate tax breaks to avert a recession!

Hmmm, the economy is going South because of the fear of 2009 tax hikes, so therefore the same people who are proposing those tax hikes now want immediate tax cuts! Why doesn't anyone call these deeply self-contradictory candidates on this evident inconsistency? It should be the first question in every interview/debate.

Unfortunately, the current crop of Republicans are not doing too much better in these departments either. While they pay lip service to avoiding tax hikes, and in some cases propose some (mild) tax cuts - such as a cut in the Federal income tax rate from 39.6% to 30% - they are fairly silent on specifics with respect to overall government spending. This year, the Federal government spends approximately $3 trillion, or $10,000 for each of us 300 million Americans. That's up dramatically from 1962, when the Federal budget was $100 billion, or some $500 for each of approximately 200 million Americans.

None of the leading Republican contenders - McCain, Romney, Giuliani or Huckabee - have the courage to spell out specifically what - if anything material - they would cut from this giant $3 trillion bureaucracy. None of them has proposed abolishing a single government department, as far as I know. None of them points this out in socialism vs capitalism terms. All of them have bought into the principle that big government is here to stay, only that it should grow at perhaps 2% per year instead of 7% or whatever.

What we are left with here is therefore the cowardly Mexican standoff between Republicans and Democrats: Clinton/Obama are unwilling to accurately describe their plans for taxing and spending as a step into a future of socialism, and McCain/Romney/Giuliani/Huckabee are unwilling to admit that they are unwilling to change the status quo by anything but a rounding error.

There is therefore nothing classical about this fight at all.

Rather, the current in-fighting in the two parties focus almost exclusively on personalities and resumes - not actual policies in the context of the eternal struggle between capitalism and socialism. Someone is for "hope" and "change", whereas someone else is for "experience" and "judgment." But is someone willing to take a stand for and against socialism and capitalism?

Not any of the leading candidates, that's for sure. With some degrees of difference in general direction, they have all basically bought into the model of big government, and the debate is about fine-tuning its size. Granted, it is important for the future of the stock market, economic growth and prosperity whether taxes are at 8%, 28% or 48%, but it doesn't address the issue of the very fat $3 trillion annual Federal budget.

There is only voice pointing out that the Emperors have no clothes in terms of the narrow scope of the debate: Ron Paul. He points out that almost all of our $3 trillion budget is unconstitutional and socialist. The original constitution spells out that the only legitimate functions of the Federal government are the maintenance of a judiciary and a defense against foreign enemies. If we had a constitutional government today, it would cost somewhere well below $1 trillion, or well below $3,333 for each of us 300 million Americans.

Example in point: The framers of the constitution had as a key objective to make sure that the government does not get its hands on the education of our children. "Public" (socialist) schools didn't exist until all of the founders of our constitution had died, in 1848, coincidental with Karl Marx's publication of Das Kapital. I'm not a conspiracy theorist, but I couldn't help noticing...

Yet today, the Republican candidates for President (except for Ron Paul) don't propose the abolition of "public" schools. Same thing for other big budget items such as social security, medicaid and medicare. All these things are, in fact, socialist programs and therefore not-so-coincidentally unconstitutional.

So there you have it - today's political debates have been reduced from comparing the classical differences between socialism and capitalism, to emotional nonsense such as whether we need a President who is for "change" and claims to be able to "unite the country." How do you "unite" the views of the person who will see a huge tax hike to pay for some government program with the bureaucrats and the alleged beneficiaries of such a program?

America needs a cold shower of hard and fundamental choice: Should we follow the constitution and dramatically deflate the size of the government budget and its millions of regulations, or should we march forward into full-fledged socialism? We know where Obama/Clinton stand, although they dare not say it. Unfortunately, we also know that McCain/Romney/Giuliani/Huckabee aren't proposing much more than "holding the line."

The stock market has been voting in recent months, and its verdict isn't all that rosy, as it starts to discount the probability of a leap into more socialism in 2009 and beyond. In the meantime, the rest of us can also vote our conscience - Ron Paul.

The Bodyguard Divide

2010-05-02T11:51:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2008-01-23:

I thought I knew how to explain all the differences between the Republican and Democratic candidates for President. From the policies on taxes, regulations, illegal immigration and the Muslim World Jihad against modernity, one can tell the current crop of Democrat and Republican candidates for President apart from a mile away.

Literally, as it turns out.

You can actually tell the Obama/Clinton campaign entourages apart from McCain/Romney/Huckabee/Giuliani crowds, a mile away. Why? The discrepancy in the number of bodyguards.

Obama and Clinton are surrounded by a security entourage fit for a sitting President. This is in part understandable, in the case of Hillary, who unlike in the roaring Monica Lewinsky 1990s sometimes travels with the former President Bill. For the first-term Illinois Senator Obama, however, the swarms of bodyguards appears a bit more mysterious.

Contrast this with the Republican candidates. I met both McCain and Romney on multiple occasions in 2007, and on none of these four occasions was there a single bodyguard in sight. I have heard from others that the story is similar at Huckabee and Giuliani events, with the exception of Giuliani having at least one bodyguard. You don't see some sort of boxing rope at a Republican event (or nightclub/Hollywood red velvet rope when Bill Clinton needs to feel at home).

To quantify this further, ONE of ANY of the top two Democratic candidates have MORE than 10x (probably 20x) as many bodyguards as ALL of the Republican candidates COMBINED. The difference couldn't be greater.

Traditionally, Presidential candidates have received Secret Service protection upon receiving the formal nomination by their respective parties, typically some time in the Summer. Until then, they had none or very little protection. Obviously, exceptions were made for George Bush in 1988 because he was the sitting Vice President, but generally this wasn't so. I was at the Republican Convention in San Diego in August 1996 when we nominated Bob Dole, and he was just getting his first bodyguards from Secret Service around that time.

What I don't know is what it means. Perhaps you the reader can offer some credible suggestions. Does it mean that the threat against the leading Democrats is greater? Nobody wants to harm the Republican candidates? Why?

Leaving Las Vegas

2010-05-02T11:50:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2008-01-10:

With the Nevada primary election for the 2008 Presidency less than a week away, there is one acute issue that every tourist notices in Las Vegas: The nightmarish cab and transportation situation.

Aside from a very limited monorail and some very sparse buses, the only mechanized way to move around Las Vegas is by cab. The cab lines are very long, and the price is approximately 2x compared to Manhattan. In other words, a consumer disaster.

It is also an environmental problem, for all the obvious reasons.

Las Vegas has over 150,000 hotel rooms, and the occupancy rate has been very high in recent years. This means there are probably over 200,000 tourists in LV on any given day. I estimate that each tourist takes 3 cab rides per person on average, per day. That's 600,000 cab rides. At an average fare of $15, that's $9 million per day in cab fares.

Each person waits in a cab line at least 10 minutes on average. That's 2 million person-minutes per day wasted standing in line, or 33,333 hours. At an hourly price of time of $20/hour, that's a cost of $666,666 per day. Even for a big city, that's a lot of waste. Of course, there is also a cost to the environment in the form of pollution.

The solution to this problem is of course simple: Build more Monorail and/or subway. Obviously, there should be a monorail right on the strip (Las Vegas Blvd) and/or a subway under it. There should also be something equivalent right under or behind the hotels on the West side. All of them should connect to the airport - how obvious!

Such a subway/monorail system would eliminate over 90% of the cab use by tourists. At conventions, people would get to/from meetings faster. Las Vegas would be a much more attractive place to visit. Conventions would flock to Vegas, instead of seeking to leave to cities with other attractive features.

So why hasn't this obvious improvement not happened? I don't know for sure, but the only plausible explanation points in the direction of a taxicab mafia of sorts. Taxis are the the only class benefiting from this inefficient transport system, whereas everyone else loses.

So are Obama and Clinton expressing any opinion on this subject? Are they in favor of reducing pollution and cheaper consumer prices? Are they willing to take on the taxicab union?

You guessed it. Of course not. Why try to offend something as important as the taxicab union? By the way, if you don't dare offending the taxicab union in Las Vegas, how will you take on Bin Laden?

I guess the Clinton/Obama solution to the transport congestion in Las Vegas is a much more subtle and macroeconomic one. Let's just raise everyone's taxes just enough to reduce people's propensity to travel to Las Vegas to begin with! Then the cab lines will be a little shorter - wait 5 minutes instead of 10. Then we can make this great shift of healthcare expenses from the individual's pocket to the government's pocket.

But wait - fewer people engaging in commerce, fewer business travelers, fewer tourists.... What happens to tax receipts? Ouch...

At least Romney/Giuliani/McCain/Huckabee/Thompson have a different recipe: Don't raise taxes, but rather prevent the unions from creating sensible and environmentally friendly transport solutions - monorails, subways. This would lower prices for consumers, enable people to move around faster, attract more business travelers and dramatically reduce all sorts of pollution, including noise. Unlike a tax hike, a capitalist solution to obvious problems.

I just hope someone makes this a political issue in next week's primary election, or in the November general election. I guess that's too much for which to hope.

Capitalism vs Socialism going into Iowa

2010-05-02T11:47:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2008-01-03:

I am typing this as my flight passes right over Iowa, the start of the most open presidential election in at least three generations, perhaps ever. At least eight candidates have a reasonable shot at making it all the way, according to the conventional wisdom. The list of vice-presidential candidates is even longer.

In our generation, we have seen only one majorly consequential presidential election - one in which policy changed dramatically - and that was Ronald Reagan's 1980 landslide against Jimmy Carter. Those of you old enough to remember the sorry state of affairs in 1980 will appreciate the change away from 15% inflation, 20% interest rates, 10% unemployment, rampant street crime and Iran holding the US embassy hostage for 400 days. Today's 2% inflation, 5% interest rates, 5% unemployment and the ability to cross Fifth Avenue without being robbed is not the historical norm. Try to appreciate it, perhaps for a change.

I don't know whether this election will prove nearly as consequential as the one in 1980, but with the unprecedentedly large number of candidates, the ground is fertile for stark contrasts. Let's start with the democrats:

John Edwards is running a campaign which blends the 1948 Karl Marx Communist Manifesto with Vladmir Lenin's 1917 revolutionary words and a trial lawyer's obsession with suing every company for any reason. His rhetoric centers around "not negotiating" with business owners, because the taking of their property isn't realistically going to be voluntary. In other words, do what Lenin did in 1917 - just take or regulate private property into oblivion, creating a socialist state.

There is one exception, of course - the trial lawyers, who will help bring about the end of all non-lawyer private enterprise by suing them so they have to shut down or be unable to compete. In John Edwards' world, that's the only Kosher form of private enterprise.

Clinton and Obama are masters in the art of talking a lot but saying nothing. They talk about all of the things that are wrong with America - people not buying health insurance, people polluting too much, people being too racist, and so forth. They wow to "fight" for health, "fight" for the environment, "fight" against racism - basically, "fight" for everything and everyone, except Iraq, where it isn't Kosher to fight. These "fights" are each defined as a new government program, because Clinton has very well-meaning plans for your life - pay for health care! Reduce that carbon footprint! Don't harbor those racist thoughts! Beacause you can't fix your problems on your own, we need to tax you so that we can employ a few million new government bureaucrats in order to tame your habits.

Welcome to the Western European welfare state. You know, the one with 10% unemployment, mimicing Jimmy Carter. It would be 1976 all over again.

I can't tell any material difference - or any at all - between the proposed policies of Clinton and Obama. Talking in platitudes of "change" and "experience" doesn't constitute a policy difference. They both want to "fix" social security by increasing taxes on those making over $100,000 per year. They both want to "fix" health care by making it mandatory to pay for it, and if you can't or won't pay for it, someone else will be forced to do so - either your employer, or the government. And you know where they get their money - prices on products, and your tax bill.

As for Iraq, they both say we have to leave, but not before some time after 2013. Perhaps. As for winning against Al-Quaeda, what do you mean? 9/11 was a loooong time ago. Britney Spears wasn't even in rehab then.

The republicans are a bit more interesting, because at least they don't speak only in platitudes ("I'm for better education, and we have to do something about the environment").

Mitt Romney would be the first President in 3 generations with solid Wall Street experience, hopefully a welcome change. Clearly a competent man, but his record as governor of Massachusetts is a bit sketchy, with tax increases and forcing people to buy health care insurance. Having made hundreds of millions of dollars, he would be viewed as just a rich guy buying himself into the office. Sort of like Jon Corzine.

Rudy Giuliani is the real deal on almost everything from economics to foreign policy. He has vowed to personally press the execution button if we capture Bin Laden alive. He also doesn't carry all of this annoying abortion baggage surrounding many other republicans. This means he could win California and New York, securing the whole election.

Mike Huckabee is the best speaker, and he has humor. Unfortunately he shares, at least in part, a fatal flaw with all of the democrat candidates - he failed Economics 101, as he doesn't seem eager to support tax/spending cuts, deregulation or free trade. Nevertheless, he can out-debate anyone on style and humor points.

John McCain is obviously the foreign policy candidate, and like it or not, he has an independent streak, refusing to support Ethanol subsidies while campaigning in Iowa. With terrorism and rogue regimes not going away anytime soon, we couldn't go wrong with a war hero in charge. The last two were very successful - Generals Eisenhower and Grant. One only wonders if young Americans who don't remember Jimmy Carter's 1970s stagflation will want to vote for a 71-year-old fighter pilot who spent 5.5 years being in a Vietnamese torture chamber.

Fred Thompson is the Ronald Reagan character, not because he is an actor, but because he is a bit lazy and comfortable with his mainstream right-wing ideology. He doesn't have plans for you. He just wants to try to cut the size of government while burning Al-Quaeda's ass. Not a bad place to be.

All of this brings us to the most interesting candidate - Ron Paul. He is like the kid in the fable who insistently points out that the emperor has no clothes. Federal employees? Fire them. Taxes? Abolish them. Regulations? No communism in America. The welfare state? Unconstitutional. The monetary system? Back to gold. George Washington and Thomas Jefferson would have been proud.

In coming hours, days, weeks and months, there will be a lot of election-year noise, and for good reason. Just remember that noise may not equal results. In the election 40 years ago, 1968, Richard Nixon pointed out that the loudmouths don't always win. Rather, the silent majority tends to win. The bigger question in 2008 is whether the silent majority now looks like a generation or two without good knowledge of history and economics. Have we gone from the greatest generation - represented by Ronald Reagan - to the tabloid/celebrity-obsessed generation represented by 40 channels of television garbage?

One Solution For Two Americas

2010-05-02T11:46:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2007-12-01:

There have been numerous political disagreements in the US since its founding. The 1861-65 civil war is obviously the most famous and pronounced. More relevant to today, the modern ideological debate in the US started as contrasting responses to the October 1929 stock market crash and the depression that followed. With a brief interruption by World War 2 and foreign-policy zig-zaging in the 1950s in response to the communist invasions around the world (Eastern Europe, Korea, Cuba et.al.), this remains the heart of the domestic political debate in the US to this date.

One can argue that an additional division in US politics emerged in response to 9/11. This division is along two dimensions. First, whose fault was it? Second, what should we do about it? One side argues that 9/11 and associated acts of terrorism (such as the first World Trade Center bombing in 1993) is simply the fault of the obvious perpertrators (religious extremists) and the people who finance them (the oil-rich Wahabbis, principally in Saudi Arabia). The other side argues that the US provoked these and other attempted acts of terrorism by helping to liberate Kuwait from the 1990 invasion by Iraq, stationing troops in Saudi Arabia. Coincidentally, that's Osama Bin Laden's argument.

As to what to do about it, regardless of fault, some argue we should go after them, and others argue for kumba-ya therapy (Dennis Kucinich, assorted self-proclaimed foreign-policy experts in Hollywood).

Aside from this recent foreign-policy wrinkle with a homeland security twist, the main portion of domestic policy discourse concerns the US 78-year old argument of whether our economy should have more or less taxes and regulations. During these years, this country has seen Presidential and Congressional elections vascilate around 50% for each side. Yes, Nixon and Reagan won land-slides in 1972 and 1984, but most elections have been fairly close, some to the extreme (1960 and 2000).

With the country close to 50/50 in terms of opinion about what to do with taxes and regulations, why not divide the country into two? One half of the country would operate a big government, where most people were employed by the government and/or paid close to 100% in taxes. All forms of business, to the extent any wouldn't be completely and directly owned by the government, would need special government permits to offer products and employ people. In schools, it would be offensive to be better than other students, speak correct English, or remember history. Government-provided health care would mean that whomever needed health care would need to go abroad.

In the other half of the US, the regulatory environment for all businesses would be similar to the laws regulating Apple and Google, which is to say essentially no industry-specific regulations at all. Elementary schools would be private, just like our farms and better universities. Each family of 4 would pay a flat annual federal tax of no more than $4,000 with no need to disclose income or claim deductions.

With these two Americas, is there any doubt which one would florish, and which one would collapse? We have, of course, seen this before. East Germany vs West. North Korea vs South. The 3 Chinas until "big" China started turning capitalist some 25 years ago. The UK in the 19th century vs the mid-20th century vs Margaret Thatcher. Jimmy Carter's America vs Ronald Reagan's.

It seems relatively well-understood, even by Nancy Pelosi and Harry Reid, that full socialism as in the Soviet Union, was a really bad idea for economic progress. So why isn't it that they recognize that 50% socialism is half a cancer? Why not take it down to zero as soon as we can?

The federal government has so severely watered down the ability of any state to distinguish itself, that it is effectively meaningless for a person to try to play the state arbitrage and move to a freer state (say, in the South) compared to the more repressive higher-taxed states in the North. This is why we may need to divide America into two in order to be able to once again display the benefits of capitalism to those many among us who have never seen the contrast between capitalism and socialism up close. Most young Americans today have never experienced hardship in the form of living in North Korea, the old Soviet Union or Cuba, among other places. Even most of the poorest Americans have access to food and opportunities not dreamed of by people less than a century ago.

With prosperity comes laziness. In today's America, it has become easy to take prosperity for granted. This, in combination with having the government in charge of the school system, where history is seemingly not taught in favor of sensitivity/minority training, is the kind of societal poison from which empires such as Rome, Britain and soon perhaps the US will fall unless corrected.

The wrong country, at the wrong time?

2010-05-02T11:43:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2007-10-09:

Ponder for a moment a place where 92% of the land and 99% of the radio spectrum in the air is owned by the government. In this place, people pay a 35% income tax plus another 9% to a local government. On what's left of this money, people invest and the corporations are then taxed another 35% of the remainder. Then you take the remainder of that and invest in the stock market or in a bank account, and that's taxed at 35% again. Then let's assume you die - the government again collects as much as 52%. When you buy something along the way, the sales tax may be 8%.

In this place, you need a permit to do just about anything. You can't build a house or add to an existing one, on the little (8% of the total) private land there is, without a permit. You need a government license to cut hair, administer funerals, fish and if you want to drive a cab in the country's largest city, you have to pay over $400,000 to obtain a permit. That would buy you a top-of-the-line Rolls-Royce, but in this case it's just a "medallion" which is the misleading name for a meaningless government permit. While delivering packages is legal, delivering first-class main in competition with the government is illegal.

In this place, you are governed by 170,000 pages of tax law, and you can't decide which medicine or other substances to put into your own body. If you talk to someone at work or in school in the "wrong" way so that they claim to be upset, you can be sued or fired.

This place has a special tax on wages that's paid into a "retirement fund" managed by the government. This "fund" takes all of its annual receipts every year and spends all of it it on current retirerees as well as on general government spending, so there is really no fund beyond the hope that future generations will continue to pay higher and higher tax rates. In other words, a pyramid - or ponzi - scheme.

Indeed, central government spending is rampant at $10,000 on average for every man, woman and child per year. This amout has been rising every year, rain or shine. In 1963, it was $500 per person per year.

What is this country? The Soviet Union ca 1980? No, it is today's United States.

Despite that we are a heavily over-taxed and over-regulated country bordering on socialism, Congress and several presidential candidates are arguing for higher taxes, more government spending and more regulation. The government can't deliver our mail on time, protect our Southern border from a daily invasion of thousands of people, or process a passport in less than two months, but it needs more of our money to hire more people and take over the health care system. Karl Marx and Vladmir Lenin would be proud.

There are only two important issues worth discussing as America goes to the polls again next year. The first one is how we will protect us against those who have decided that if you're not of the right kind of religion, you must be killed. These are the people who attacked the World Trade Center in 1993 and 2001 and are plotting to cause even greater harm the next time.

The other issue is whether the US economy should be made freer so that we can compete with China, India, Eastern Europe and other places where taxes are being cut and capitalism is on the march forward. If one is to believe and extrapolate the lame behavior by the US congress and by many of the presidential candidates, we are instead marching in the direction of Cuba and North Korea. It doesn't look so good, does it?

A $30 trillion government asset sale to pay for the abolition of social security

2010-05-02T11:39:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2007-09-17:

Presidential memo:

Fundamental problem: The 74 year-old social security system is a ponzi, or pyramid, scheme with no individual private sector investment value. It has created a multi-trillion dollar liability for the US government.

Political problem: Within the confines of the government's income statement, a solution can only come from lowering benefits or raising taxes -- neither of which is politically possible.

Fundamental and political solution: Massivie privatization in the form of selling US government property, particularly some part 92% of the US land mass owned by the US government as well as the 99% of the spectrum in the air currently unutilized, underutilized or mis-allocated to useless tasks. The proceeds from this asset sale would go into IRA or 401(k) style accounts compensating for an abolition of the entire social security system. I calculate that some $30 trillion, or $100,000 for each US citizen, could be raised from this asset sale. These proceeds would go into IRA accounts for each person.

Narrative:

The 1933 establishment of the social security system created a gigantic long-term economic and political dilemma for the US taxpayer. When introduced, it effectively constituted a welfare hand-out because recipients in the first few decades received benefits far in excess of what they had paid into the system. In fact, the earliest recipients had not paid in anything to the system.

When a scheme of this nature is attempted by a private citizen, we call it ponzi, or pyramid, scheme. Someone gets a lot of money in the early phases, while the later entrants are left holding the bag. The later entrants have paid in a lot more money into the system than is available for distribution.

Within the confines of the social security system itself, there are only two ways to continue this system. First, you can cut benefits. This can be done in two ways. You can simply reduce the payouts per year, or you can raise the retirement age -- or both. There are good reasons to do both. By reducing benefits, we recognize the social security system for what it is and always was -- a ponzi scheme. People simply have to acknowledge that they should have never relied on it in the first place, realize that the taxes paid in previous decades was a form of welfare, flush away the spilled milk, and move on.

Increasing the retirement age is a very logical thing to do, for the obvious reason that people are now capable of working longer and they live longer.

The problem with both of these approaches is that they have effectively proven politically impossible. As with anyone who has come to expect that a government subsidy will continue, recipients of social security will fight tooth and nail to kick the can of taxpayer burden down the road onto the next generation.

The other side of the equation is the tax used to fund the payments. As the number of retirees grows, the benefits grow, and people live longer, these taxes would have to grow until they eventually reach 100% of all production and income in the country. As Ludwig von Mises wrote in 1920, "The Santa Claus Principle will eventually liquidate itself." This approach puts the US on a fast track to becoming a 100% socialist state where the income tax returns would be very simplified:

1. How much money did you make last year?
2. How much is left of it?
3. Send it in.

That is, unless it was just taxed at source to the tune of 100% at which point every person in America would rely for every bread crumb, every unit of housing, every piece of clothing on government handouts either in the form of a check or in-kind. Basically, it would look like a classical socialist/communist country, most of whom have faded away (North Korea and Cuba being the two remaining stragglers).
In other words, within the confines of the levers available to the social security system itself, there is essentially no solution likely to happen, except those who create political chaos or a gradual leap into total socialism. And that's the future for which we are now on auto-pilot, barring a radical change of direction.

Therefore, the only solution must come from outside the social security system itself. This solution is no different that any other person who is spending too much money, making too little money, but doesn't want to change those parameters. To prevent this person from bankruptcy, there must be an asset sale in order to fund the gap between too high expenses and too little income.

Fortunately, the US government has just the kind of assets that could and should be sold in order to yield a politically realistic solution to the social security ponzi scheme.

Let's begin by looking at an aerial map of the 50 United States. Guess what? 92% of it is owned by the Federal Government. As the crudest measure of the degree to which a country is a socialist country, this high percentage ought to be outright alarming. Social security ponzi scheme or not, the government shouldn't own 92% of the land. Fortunately, this at leaves us a fantastic source from which to fund an end to the social security system. What is this 92% of our country worth? There is no easy answer to this, to say the least, but the GDP of this country is around $15 trillion per year, and the underlying asset base is many times that number. Assuming that the asset yield is 10% per year, our national assets are worth $150 trillion. At a 5% yield, the assets are worth $300 trillion. Of that underlying asset base, a significant portion is the land value itself. One can therefore assume that the government's holdings are worth at least several tens of trillions of dollars. How much of the 92% would or should be sold, and what would the sale actually fetch? There is no way of telling for sure, of course, but there should be no reason not to start with at least putting a price tag on a few trillion dollars' worth of millions and millions of acers, from sea to shining sea.

The other major US government asset is lurking in the air all around us. Currently less than 1% of all sub-75 gigahertz frequencies have been sold ("licensed") to private industry for its most fruitful use - interactive IP Internet, which is where almost 100% of Silicon Valley's innovation resides. Most frequencies are either unused, withheld by The Pentagon, underutilized by churches and schools, or gravely mis-allocated to outdated technologies such as terrestrial broadcast television. 91% of US households have either cable TV or satellite service, rendering terrestrial broadcast television a complete waste occupying the finest beachfront property from a spectrum perspective. In 1994, the US government sold relatively unattractive spectrum at 1.9 gigahertz to entities which later became T-Mobile and Sprint PCS for tens of billions of dollars, contributing to the decline in the government budget deficit in the following years. In 2006, there were more sales of equally inferior 1.7 and 2.1 gigahertz spectrum, raising many more billions of dollars. In 2008, we expect the sale of the 700 megahertz spectrum to raise perhaps much more than $10 billion dollars. And yet these sales are tiny, constituting small slices of less than 1% of the total spectrum that could be sold. The overall value of all spectrum is hard to estimate, of course, but if less than 1% of the spectrum has yielded well over $100 billion in previous sales, much of it before the advent of the Internet, the other 99% of the spectrum may just be worth at least $10 trillion.

So there you have it: Selling government land and spectrum each have the capacity to yield at least $10 trillion. Let's say $15 trillion each, or $30 trillion in total. Given a US population of 300 million, that's $100,000 per every man, woman and child - $400,000 for a family of four.

How would we funnel this $100,000 per person to each individual? Fortunately, we already have very good systems available for this, in the form of IRA accounts and 401(k) accounts. They are largely similar in all relevant aspects. The government would simply open up an IRA account for anyone not already in possession of one, deposit the proceeds from the actions of the sale of government land and spectrum, until each account eventually looks like some $100,000 in addition to what it was before.

Once these accounts have been funded, the government could simply abolish the social security system. No slow phase-out, just abolish it. We would have undergone a transition to a fully private system in a very short period of time. Social security would never again become an economic or political problem. The social security "tax" would go to zero immediately, yielding the largest tax cut in US history. Talk about a boon to the economy!

There would be other benefits with this system as well. First, by transfering ownership of land from the government to the private sector, it is evident that it would be put to better use. Second, the privatization of the spectrum would be a boon of olympian proportions to our technology and communications industries. Internet speeds now achieved by fiber-optic cables (gigabits) would be achievable wirelessly in the air. Just imagine what this would do to individual and corporate efficiency, as well as for homeland security.

Privatization was key to the success for Margaret Thatcher and Boris Yeltsin alike. It transformed stagnant economies into booming ones. It created vibrant stock markets and gigantic leaps forward in terms of wealth, where there was economic paralysis before. Privatization ought to be the answer to the social security crisis that's creeping upon us right now here in the US, too. It cannot be done from within inside the social security system itself, but rather it has to be funded from auctioning off the largest swaths of government property, to the tune of some $30 trillion. Fortunately, the assets are there to do it. The only remaining question is who the President will be who decides to save America by applying capitalism to our biggest national balance sheet problem.

2008: 1976 all over again?

2010-05-02T11:07:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2007-09-04:

The analogy is far from perfect, but there are some similarities. Having come from a couple of Middle East wars (1967 and 1973 vs 1991 and 2003), major acts of terrorism (Munich 1972 vs 9/11) and dramatic spikes in the price of oil, the next major election looks to be won by people who have a fanatical desire to raise taxes and spend every penny.

In 1976, it was Jimmy Carter and his congressional cheer-leaders who did their best to punctuate US competitiveness and embolden our enemies. Inflation and interest rates both hit double digits, economic growth went negative, the stock market declined and people's savings evaporated. It was the only real economic crisis we have had since the 1930s.

32 years later, we are better off in one respect, and worse off in another.

We are better off now because so many countries around the world are making the strongest economic progress in almost a century, perhaps in all of recorded history. The former Soviet Union and its occupied territories such as the Baltic states all the way down to Albania have implemented flat taxes from 10% to 17%, leading to rapid economic growth of which we could not dream when the Iron Curtain came down in November 1989.

In India and China, privatization, liberalization, deregulation and spectacular tax cuts have caused an economic boom not seen since the US became the world's superpower in the 100 or so years before the 1930s. Countries who were trying to battle mass starvation under Indira Ghandi and Mao Tse Tung in the 1970s, are now major food exporters - not to speak of every iPod, iPhone and iMac. It is clear who, and when, world leaders learned from Ronald Reagan instead of Jimmy Carter.

Therefore, while the US may suffer from tax hikes and insane new regulations - including making the entire health care system into an arm of the same people who now dish out services from the windows of the US Postal Service - we are at least operating in an international environment where capitalism has never been as wide-spread as today. Our own domestic consumption may collapse, but at least our companies - largely operating out of Chinese and Indian facilities - can still generate the goods and services the rest of the world will buy in mushrooming quantities. Milton Friedman, Ronald Reagan and Margaret Thatcher may be banned from history classes for our young people because their achievements don't fit the socialist planning utopia of America's teaching class, but they are the heroes whose ideas and leadership have brought life and growing prosperity to literally billions of people around the world.

In another dimension, our position in 2008 could be dicier than in 1976. The cold war was of course filled with the ultimate danger, but at least the Russians loved their children too, as that song went whose name I don't remember right now. Unfortunately, today's enemy doesn't love its children at all. It strapps bombs around them, while thinking about the 72 virgins soon to be enjoyed as Allah's grand prize for killing an infidel. Or a few million of us. One of these days, one of these religious fanatics will walk across the Mexican border, get a driver's license in LA, and drive to NYC with something very lethal. At this pace, we are clearly living on borrowed time. On December 8, 1941, President Roosevelt joined with a united congress and country to destroy our enemy to the last millimeter. Today, many Presidential candidates generate the biggest applause lines when they promise to "bring our troops home" so that we can achieve a "political solution."

Oh boy. Every time I see John Edwards, Hillary Clinton or Barack Hussein Obama, I see the ghost of Jimmy Carter redux. Let's leave our fanatical enemies to therapy, while we tax the US economy into a state of socialist paralysis. Sadly, there is a significant probablility that this part of history will repeat itself 32 years later. I guess this is the political equivalent of every generation making its own mistake. As kids, we do something stupid and we learn from it. As adults, we vote for Jimmy Carter and then we sober up with a Ronald Reagan. Will it happen again in 2008 and beyond?

If it does, that spells a disaster for the stock market down the road. Taxes and regulations have been as certain to kill an economy as sustained rain storms have been certain to kill a forest fire. As Ludwig von Mises wrote in 1920, when he predicted most of this, "The Santa Claus Principle eventually liquidates itself." Now that's a lesson for Obama, Osama and Chelsea's mama.

So what about about George Bush Jr in all of this? The conventional wisdom, at least in the left-wing media, is that he is inarticulate and suffering from low intelligence. Interestingly, they also claim that he is basically taking his orders from Vice President Cheney, whom not even the leftists accuse of being inarticulate or unintelligent. So either it matters that President Bush is inarticulate and unintelligent, or it doesn't. You can't have it both ways.

Besides, if you leave someone in charge of something - such as your money with a fund manager - what matters isn't whether the fund manager is articulate or smart. What matters is if he is right. Being articulate and smart may get you through school and may make you popular in the finer circles of Uptown's cocktail parties, but it is all in vain if you are not right in your decision-making. I know plenty of fund managers who are inarticulate and perhaps not all that intellectually impressive, but who deliver spectacular results because they are right. Who would you rather have running your money - someone who is articulate, intelligent and wrong? Or someone who is inarticulate, unintelligent but right? That doesn't mean George Bush has been right on everything, but it should tell us to at least focus on the right metrics. A few decades from now, we may have a verdict.

It is always easy to criticize a manager, as there will inevitably be mistakes of all kinds, not the least in execution. Even the best fund managers are only right just over 50% of the time. But imagine if Al Gore and his fan club would have been in charge in 2001 and beyond - would we have been better off to dramatically raise our taxes, impose all sorts of new regulations, socialize major parts of the economy and patted the terrorists on their backs and offered them therapy? It sounds to me as if the alternative to what actually happened over the last 6 years would have been poverty followed by death. So with all of his many faults, perhaps George Bush was a lot better than the alternative after all...

Nothing wrong with chaos and civil war in and around Iraq

2010-05-02T11:05:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2007-01-28:

From the most right-wing Republicans to the most left-wing Democrats, there appears to be a common theme in terms of wanting to avoid “chaos” in Iraq. By this, people tend to mean civil war between Shia and Sunni muslims, dragging Iran, Saudi Arabia and Syria into a larger regional war, and so forth. This is supposed to be a terrible thing, something we must prevent at all cost.

Wait a minute! Not so fast. What’s so wrong with a little bit of chaos – or civil war, or outright war, between various muslim factions in and around Iraq?

Let’s first review some history. We went to war in 2003 to finish the job 12 years after we chickened out in 1991. After we kicked him out of Kuwait, Saddam was on the ropes, ready for the plucking. The Iraqi army surrendered to Italian television crews and prayed for the US to come liberate them. We were indeed greeted as liberators. However, Colin Powell and Jim Baker advised George Bush-the-older that going all the way to Baghdad would somehow be unnecessary, too difficult.

So what did we get? Well, we got the opposite of chaos. We got stability. Saddam was stable in the saddle in Baghdad, left free to let his extremely brutal police state conceal all sorts of activity, including paying for suicide bombers to attack Israeli shopping malls and serve as host to terrorists on the run from the US military.

This stability was no good. There have been lots of stable regimes who are not good. Hitler’s regime was stable. Tojo was stable. The Soviet Union was stable for 70 years. Castro alone has been stable for a whopping 48 years. North Korea has been stable for 54 years. All of those regimes were at some point very stable, and all of those regimes were at some point lethal threats to the US, and needed to be removed or neutralized.

9/11 happened while there was relative stability in the Middle East. The Saudi regime, which fed most of the hijackers, has been stable since the 1920s. Extremely wealthy and not particularly in love with the US people, this could be characterized as a very lethal regime if you are an American, especially if you happened to be sitting on a high floor in The World Trade Center on 9/11.

So much for the need for a stable Middle East!

No, what we need instead is a lot of chaos and civil war in the Middle East, especially in and around Iraq. There are several key reasons why we haven’t been attacked here at home after 9/11, something which everyone (including me) thought impossible in the days and weeks following 9/11. One such key reason is because we have created a mess in Iraq. If we had actually “succeeded” in Iraq, bringing about some sort of functioning democracy, squashed the violence, etc., then the bad guys would have left Iraq and now be on their way to blowing up The Empire State building and the US Congress. The bad guys need to be kept busy in Iraq, not in Brooklyn.

For the US, chaos in Iraq is nothing to fear. To the contrary! What we want is a massive civil war in Iraq, which will hopefully spread to almost all of their neighboring countries – particularly Saudi Arabia, Iran and Syria. The bloodier the better. This will keep the religious nutcases really busy for a long time – hopefully long enough for me to live in peace and freedom until I am 100 here in the civilized world, or until the religious nutcases have erased themselves off the map to the last man, whichever comes first.

Think about it, what they are arguing about in this so-called “sectarian violence” or “civil war”: They are arguing about what happened to Mohammed, or who came after him, or something like that – whatever – 5,000 years ago. Or some time a really long time ago anyway. If that’s what those jokers are arguing about and killing each other about, I say: Good riddance! People who argue about useless fantasies and religious BS of that nature are not positive to the human gene pool. So let them fight with each other. To hell with stability; long live chaos and civil war in and around Iraq.

The sole root of all Middle Eastern conflict is found in religion. Sunni Moslems hate the Shia and vice versa. And some or most Moslems hate the West and the Israelis because we are not some form of Moslem. None of these problems will ever end until people stop taking religion seriously, or become outright atheists, which is the logical and rational conclusion anyway. In this context I don’t see why the rest of us should be particularly concerned about chaos and civil war in and around Iraq.

One wonders if this isn’t actually fully understood by our political leadership already, but that they are too afraid of pointing it out in public. It may not pass the politically correct test in the French-dominated culture of the diplomatic corps. One can’t help but wonder if Dick Cheney is the guy who has understood most of this all along. After all, he is the guy who was part of the team who took the decision in Spring 1991 to not depose Saddam, and was given the opportunity to correct that mistake of 1991. In other words, he is the only one left who learned from the key mistake of 1991: favoring Middle East stability over chaos and war. However, just like everyone else, he doesn’t dare to say it that way, but rather plays along with the same refrain of everyone from right to left, that we somehow need to prevent chaos and civil war in Iraq and beyond. It should come as no surprise that the politically correct premise is, as is typical, completely the opposite of the truth.

Dumb and Dumber: John Edwards and New Orleans

2010-05-02T11:03:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2006-12-28:

Notorious trial lawyer John Edwards announced his candidacy for the 2008 Presidential election yesterday in the 9th Ward of New Orleans. Yes, this is a city which is still defined by “Wards” and “Parishes.” Court houses also have ceiling fans.

It is hard to figure out who is the bigger idiot here: John Edwards, or the people he visited. Let’s start with the people he visited. These people are playing Russian roulette every day, as they live below the water level, protected by fragile levees. They blew up in August 2005 and it will of course happen again. We are paying for it, supposedly to the tune of $200 billion, or as much as the Iraq war costs every year or two.

If you have any IQ at all, you should not be living in New Orleans. It is similar to playing Russian roulette. Move to some place where you’re not going to be under water some day again. Colorado comes to mind, as does Kentucky or Vermont – basically, almost anywhere but New Orleans. As it stands, knowing the socialist leanings of the US government, the rest of us will have to pay the bill again the next time there is a flood in New Orleans. This should simply not be allowed to happen. People who choose to live in New Orleans should not be subsidized. Likewise, people who choose to play Russian roulette should not obtain free government life insurance, either. The fact that I’m paying for these morons makes me sick to my stomach. $200 billion divided by a million or so people in New Orleans; that’s $200K per person, man woman and child. How about giving me a $200K tax refund instead? If the American population did this math, they would instigate a revolution and plow New Orleans into the ocean, or donate it back to the French.

Perhaps it was for this reason that New Orleans was a good fit for John Edwards to announce his candidacy to be the leader of the free world. This is a guy who wants to tax people who make money and give it to those who don’t. Talk about rewarding bad behavior and sinking the economy. Just take a look around the world. John Edwards clearly didn’t notice what was going on in the Soviet Union for decades, or for that matter China and India. He wants to go where they were in the 1980s, 1970s, 1960s, 1950s and so on. If that’s what he likes so much, he should move to North Korea or Venezuela, as they are two examples of today’s deviants.

Message to John Edwards: We don’t want your taxes, crazy regulations and insane lawsuits. Crawl back to North Korea or Venezuela or some other place where you will feel at home, and bring a Karl Marx book to read on the plane so you can perfect your party membership test skills. You may have announced your candidacy in New Orleans, which seems to fit your common IQ level, but please don’t poison the rest of the country’s gene pool and our bank accounts.

65 years ago: A different level of resolve

2010-05-02T10:59:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2006-12-09:

On this the 65th anniversary of Pearl Harbor, after which the US declared war on Japan, Germany and Italy, we may consider the effort it took to achieve victory.

By the way, Japan attacked us, following which the US landed in Morocco to fight the Germans, then cutting across to Sicily. Only thereafter did we start bombing the Japanese. Granted, we fire bombed the major Japanese cities to complete oblivion - over 110,000 Japanese were burned to death one night in March 1945 alone - and we topped it off with the world's first two nukes in August 1945. The US never put a soldier on Japanese mainland soil. You may recall the Japanese government surrendered on the deck of The Missouri with General MacArthur looking over their shoulders.

Anyway, lesson learned - bombing worked. At least in Japan.

In World War 2, some 440,000 Americans died in combat. That's in less than 4 years, or about 100,000 per year - 8,000 per month. In contrast, after 3.5 years in Iraq, that number is less than 1/100th as large.

World War 2 achieved victory against 3 countries, at least 2 of whom wanted to kill us. 65 years after Pearl Harbor, we have any number of members of a religious death cult who want to kill us. Hitler and Tojo were unsuccessful in their attempts 65 years ago, but will we be as lucky this time? What will it take to win 65 years after the most recent attempt?

The US population was half of today's 300 million, and 440,000 Americans died in combat. This is equivalent to almost one million today. Will we raise an army ten million men strong and see 10% of them fall in battle, in order to achieve victory today?

It is tempting to hesitate now. But what will we say if the enemy manages to explode a nuclear bomb each in New York and Washington? That we didn't expect it? That we didn't act boldly or quickly enough to disarm the enemy? That we thought it was perfectly okay to let Iran and North Korea develop nuclear bombs?

As the war ended in 1945, the lesson was that Hitler should have been stopped years before he invaded Poland in September 1939. Have we remembered this lesson?

America #1

2010-05-02T10:57:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2006-11-26:

Greetings from the humblest of corner offices overlooking Rockefeller Center Plaza, the home of our great nation’s big Christmas tree. Construction of the Rockefeller Center started in 1931 and all the buildings East of 6th avenue were complete by 1940, just in time to redirect the construction efforts to the war against the axis of evil – Germany, Italy and Japan.

As the war ended and the US had bombed the dictator regimes of Hitler, Mussolini and Tojo into submission, all parties killing some 50 million people in the process, the great industrial power of the greatest country on Earth redirected its productive capacity from making bombs, airplanes and tanks, to feeding its people and launching the great consumer era.

It didn’t take long for America to show why this country not only wins on the battlefield, but also wins in capitalistic commerce.

In 1951, the average American ate 50 percent more than the average European. Americans controlled two-thirds of the world's productive capacity, owned 80 percent of the world's electrical goods, and produced more than 40 percent of its electricity, 60 percent of its oil and 66 percent of its steel. America's 5 percent of the world's population had more wealth than the other 95 percent, and Americans made almost all of what they consumed: 99.93 percent of new cars sold in this country in 1954 were U.S. brands.

By the end of the 1950s, GM was a bigger economic entity than Belgium, and Los Angeles had more cars than did Asia — cars for a gadget-smitten people, cars with Strato-Streak engines, Strato-Flight Hydra-Matic transmissions and Torsion-Aire suspensions. The 1958 Lincoln Continental was 19 feet long, and Elvis was King.

In 1950, 40 percent of Americans had never seen a television program; by May 1953 Boston had more televisions than bathtubs. In 1951 a Tennessee youth was arrested on suspicion of narcotics possession. The brown powder was a new product — instant coffee. Folks did not eat foreign food, except French toast.

Unlike today, when everything edible, from milk to spinach, has its moment as a menace to health, in the 1950s everything was good for you. Cigarettes? Healthful. Advertisements, often featuring doctors, said smoking soothed jangled nerves and sharpened minds. X-rays were so benign that shoe stores installed special machines that used them to measure foot sizes.

In Las Vegas, downwind from some creative atomic weapons tests, government technicians used Geiger counters to measure fallout. People lined up to see how radioactive they were. It was all part of the fun. What a joy it was to be indestructible! But, people somehow knew without a warning label that bleach was not a refreshing drink.

Few things except for the culture of “The government owes me x” has changed more for the worse in recent decades than childhood. The lives of children used to be unsupervised, unregulated and robustly physical. Even in the 1970s, when I grew up, admittedly on the other side of the planet, kids were always outdoors — I was pushed out the door at 7:30 in the morning and not allowed back in until 4:30pm unless I was on fire or actively bleeding.

America’s dominance isn’t what it used to be. Decades of high taxes, runaway government spending, Medicare, Medicaid, Social Security, insane litigation, political correctness, Eliot “Gestapo” Spitzer and most recently Sarbanes-Oxley have kicked this society’s dynamism into a far more humble and dull setting, seeing its growth rates lag behind other more capitalistic countries such as Hong-Kong, China and most recently India. Those economies are still small – the US grew more the last five years than the size of the entire current Chinese economy – but over time, the US will fall behind if it continues to shoot itself in the foot.

One statistic alone says it all: In the first 9 months of 2006, Buick sold more cars in China than in the US. The defense rests.

Yet at least New York City after decade of Guiliani and Bloomberg in the Mayor’s seat could have had an even worse record. The 4.1% unemployment rate is the lowest on record, and the city's credit rating is at the highest level ever. With crime down 20 percent since Bloomberg took office — after a 57 percent reduction during the Giuliani years — the FBI rates this as the nation's safest large city, which is one reason for the sharp increase in applications to Columbia University and New York University. Welfare caseloads, which totaled 1.1 million a decade ago, are under 400,000. In 2005 the percentage of high school students graduating on time was the highest since the city began keeping that statistic in 1986. Bloomberg credits his crusade against smoking with the decline in heart attacks that has helped make the life expectancy of city residents higher than that of the rest of the nation.

Neither America nor New York City are perfect, but we are still #1. It feels good to be #1. In Europe, on the other hand… oh well, they’re still debating the proper etiquette for surrender, how not to offend women forced to dress in bee-keeper suits, and why it should be illegal to work more than 35 hour a week (presumably by employing a work hour Gestapo).

Minimum wage, maximum unemployment

2010-05-02T10:56:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2006-11-11:

With the elections now over, we now hear that one of the first laws that the new congress will pass is an increase in the minimum wage from $5.25 per hour to $7.25.

Why only $7.25? Why not $10 even? Why not $20 or $100? Heck, let's just make it $1,000 so that everyone is on par with the country's best attorneys. Or $1 million a day, like the best hedge fund managers.

Of course, for anyone with the slightest common sense, and for others with a passing grade in Economics 101, we know that a minimum price on anything causes more supply than demand - in this case labor.

At the current minimum wage of $5.25 there are relatively few people who are priced out of the market. At $1,000 an hour, we would have 99% or more unemployment.

The point is that you don't make anybody worth $7.25 (or any other number) by making it illegal to pay him or her less. All you do is make him or her unemployed, unless of course someone is willing to break the law. Now that's nice - creating criminals out of people who want to hire fellow citizens. Perhaps this goes hand in hand with those who think it is perfectly fine for people to walk across the Mexican border without permission. All of those illegal immigrants who work in the US automatically create a criminal out of every employee. In either case, however, people would rather be a criminal than unemployed. The difference is that in the case of the illegal immigrant, the employer doesn't risk much that the employee will turn in the employer to the police, because the employee faces deportation. In the case of paying a US citizen below the minimum wage, however, the employer would have to think more than twice because the worker only loses his or her job if the police is told.

The minimum wage falls into the same category of counterproductive social experiments as alcohol prohibition 1920-33 and the current war on drugs, which started softly 1914 and was intensified under Richard Nixon and again under Ronald Reagan.

Alcohol prohibition 1920-33 didn't do anything to reduce alcoholism, but it made almost every American adult into a criminal, and it created mafias, violence and police corruption. The war on drugs, well - same thing.

So here we go again - the government setting a price where it has no business being involved at all. Raising the minimum wage will not add a penny to a person's pocket who is making $5.25 today. It will only make this person unemployed. 180 degrees counterproductive.

The only sane thing to do is of course the abolition of the minimum wage, period. This would create employment opportunities for those not worth $5.25 an hour.

The minimum wage is the mirror image of the maximum price, another government favorite insanity. It has been applied at times in the past for things such as gasoline (1973, 1979) and rental apartments. All you got was of course a shortage of gasoline and apartments. Pretty obvious to anyone with the slightest common sense or listening to the first hour of Economics 101. Now there is talk about setting maximum prices on prescription drugs and (again!) gasoline. Will they ever learn?

Where did the hurricanes go?

2010-05-02T10:53:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2006-11-09:

Several months ago, l watched Al Gore's movie on the world going to hell in a handbasket as a result of global warming, in turn a result of pollution. This movie was filmed mostly at the end of 2005 or early 2006. The climax of the movie is when Al Gore points out that the Earth has become warmer over the last 30 years, and that 2005 was the warmest year yet (at least since the Bronze age). All of this heat is supposed to be the cause of the hurricanes that devastated Florida and the Gulf Coast in 2005. I remember Al Gore wagging his finger and implying that it is just going to get worse and worse unless we "do something."

Now here is one point: What happened to the hurricanes in 2006? 2005 was bad and allegedly the result of these nasty global warming trend, in turn caused by pollution. By this token, 2006 should have been even worse. More pollution, warmer climate, more hurricanes.

I have no idea whether 2006 was warmer or colder than 2005, but I do know that our cars got cleaner in 2006 as they have in each of the last 30 years. And I do know that the hurricanes somehow took a vacation. Perhaps they come back again in 2007, but for the moment I don't hear Al Gore pushing this particular argument. I mean, if 2005 was the worst year because there were so many hurricanes caused by the warm weather as a result of the pollution, then 2006 must have been the best year because there weren't any hurricanes caused by cold weather as a result of reduced pollution, right?

I don't think so, either way, but at a minimum the recent data does undercut Al Gore's argument as much as anybody else's. My memory isn't the best, but I do remember the logic as it was presented less than a full year ago, and things now look to have turned 180 degrees.

Speaking of degrees, Global Warming may have been the theme of the last 18 years, but it was only in the 1970s that many of the same people (Al Gore himself?) warned about the new ice age. I remember distinctly that when I was in school in 1980 we were taught that we would have to move to Africa because "not even in Spain would it be warm enough to grow oranges." The cause of this new ice age? The same one as global warming, of course: Pollution. No matter whether the Earth becomes warmer or colder, the cause is always the same.

Yeah, and during the bronze age and the ice age... Looooots of industry, lots of pollution!

Ever thought about the simplest physical facts? At night, it gets colder than during the day, at Winter, it gets colder than Summer - and vice versa. And what's the reason for that? The sun, of course. That's some radical temperature differences between night and day, Summer and Winter. Why can't global warming (the 1988 to present fad) and the new ice age (the 1970s fad) simply be the result of the sun's emitting power not being 100% even? Perhaps it is just a bit stronger at times, and weaker at other times? I am not a scientist, but it does make sense that such fluctuations better explain what's going on in terms of temperatures on Earth, than this pollution business.

Think about it: There was no industry until some 200 years ago. And the temperatures on Earth went up and down before 1800 anyway. Then pollution increased until the 1970s and then temperatures went both up and down for those almost 200 years. And then after 1970 our environment has been getting cleaner every year, first allegedly causing a new ice age and now more recently causing global warming. Hey, the logic doesn't hold.

Swedish Democrats gone nuts

2010-05-01T08:00:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2006-10-17:

There they go again! After Sweden finally rewarded itself with a non-socialist government for the first time in 12 years, the sniping has started. The new opposition, aided and abetted by the eager left-wing press, is of course focused on meaningless stuff such as whether some cabinet member once upon a time hired a maid or babysitter (not Kosher in Sweden, where everyone but the Royal family is supposed to do their own dishes). The fact that only half the country works in a real job, and that half of those in turn work for some useless, indeed counter-productive, government job, has never concerned the socialists. They are arguing whether the new minister of finance once paid a babysitter $1,500, slightly less than $1,500 or slightly more than $1,500, during a year in the 1990s. Gee.

Instead of engaging in this jealous nonsense, people ought to be thanking these household employers for putting money in the pocket of high school kids or recent immigrants. Those are groups of people where unemployment is even higher anyway. Talk about the world being upside down! Small wonder that country has been going under for the better part of the last 35 years. If you pay people to not work, and then criticize people for employing fellow citizens, is there any surprise you end up with unemployment? Hmm, let me think…

We're winning the war!

2010-05-01T07:58:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2006-04-26:

34 years after Nixon went to China to talk some sense into Chairman Mao, the so-called ping-pong diplomacy, unmistakable evidence proves the final nail in the coffin in our war against international communism: The first Hooters has opened in Shanghai this week, to be followed later this Summer by 3 more, including Beijing.

Why aren't we opening a few of these in Saudi Arabia, Iran, Iraq and Syria? Clearly, that would loosen up some of their kooky antics. Generally, I believe the U.S. has been focused too little on allowing the appeal of modern American cultural commercialism to persuade those kinds of folks to rid themselves of all of that religious nonsense.

May I suggest we tell Rupert Murdoch and Charlie Ergen, among others, to direct their satellites to those countries, beaming loads of HBO, MTV, The Shopping Channel, Discovery, The History Channel, Showtime, Starz, FOX and MSNBC to all of those seemingly angry and bored people covered in bee-keeper suits. Hey, maybe a little CNBC could make them into good capitalists, opening up accounts at Schwab and watching Jim Cramer's MAD MONEY religiously instead of bending over on a carpet five times a day and listening to some dude making noises akin to a cow with stomach ache.

Much more productive! I bet those regimes would be gone in a quarter, replaced by a massive Hong-Kong asking for their MTV and tax cuts, getting government off their backs. And then they will look with admiration to what Ronald Reagan did 25 years ago as opposed to what Mohammed did 2500 years ago, or whenever it may have been. Boyakasha! Respek.

“Values” vs. science in the mind of a Liberal Democrat

2010-05-01T07:56:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2005-09-04:

Over the last year or so, I have had several conversations with various flavors of Liberal Democrats, who profess to be very upset about religious people, presumably Republican such. The Liberal Democrats seem particularly upset about the “science vs. creationism” debate, that religious Republicans in particular allegedly have rejected “science” in favor of “creationism,” which in their mind also carries over into “values” in a broader sense.

On those terms, I actually agree with the Liberal Democrats 100%. It is no news that I find all forms of religion – at least the way the word is typically defined – to be nonsense per definition. But that is not the only thing that’s bothering me in this debate. No, what I find incredibly hypocritical is that the people who rightly find “creationism” and “values” so deplorable are themselves rejecting at least as much science as do the prototypical religious Republicans!

What do I mean by that? Specifically, the Liberal Democrats have all rejected the science of economics! There is no remotely credible economist who says anything but that the most efficient – “scientific” – economic system is 100% pure laissez-faire. Free markets, free trade, the smallest possible government, if any at all. This is nothing but basic Economics 101.

Yet the Liberal Democrats are all rejecting economic science! They are all in favor of ever-increasing socialist intrusions in people’s freedom to own and trade on voluntary terms. Why? Well, the Liberal Democrats believe that their “values” trump the science of economics. In their world, Laissez-Faire economics is also the most efficient economic system, but government policy needs to be guided by their non-scientific “values” in favor of $2+ trillion worth of annual taxes and millions and millions of pages of red tape.

Yeah, the Liberal Democrats are right when they criticize some religious Republicans about “creationism,” but who are they to cast the first stone? At least the debate about creationism has to do with deeply historical nonsense – who cares what may or may not happened some 2000 or 2000 billion years ago? The Liberal Democrat rejection of economic science, however, means that not only I, but billions of people on planet Earth are suffering today and tomorrow from lack of economic freedom and prosperity.

Bad weather, common sense and personal responsibility

2010-05-01T07:53:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2005-09-04:

Is there any personal responsibility left in this world? Or is anything bad that’s happening always someone else’s fault, including the government’s? The Mississippi/Louisiana hurricane Katrina was an act of nature, predictable over time and warned with specificity days before it hit. As a result, there are two lessons here: First, if you live or build in a hurricane-prone area, especially below sea level, you can’t blame your fellow taxpayer if your house blows away or gets flooded. Second, if you have taken the risk to live below sea level in a hurricane-prone area, and every level of government tells you to get out immediately in order to save your life, and then you don’t follow orders, you also can’t blame your fellow taxpayer if you die or face hardship.

People assume different risks by doing different things. Some people smoke, some people do bungee-jumping, others ride motorcycles, some people live on a fault line in California, and yet others stay below sea level when there is a hurricane approaching. Darwinism is a process of weeding out survivors. Part of such survival is intelligence, and in turn intelligence partially consists of judging risk/reward ratios. So Darwinism weeds out weaklings, physically and mentally. Darwinism furthers the evolution of the human race, so with the government subsidizing stupidity, the quality of the human race could decline.

So here is some simple intelligence: If you don’t want to be flooded in a hurricane, you can choose to live in Denver, Minneapolis, Salt Lake City or somewhere like that. However, if you ignore this basic intelligence, and choose to live on the Mississippi or Louisiana shores, perhaps under sea level, don’t complain if one day you get screwed by bad weather.

To summarize: We watch TV and see the pictures of people in and near New Orleans. The evident question must be: What were all of those people doing there? First, why did they live in that nasty place to begin with? Second, why were they there when they had been told they should evacuate and that they may die if they remain? Well, why do people continue to smoke…

Religious rioters are pet crocodiles

2010-05-01T07:49:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2005-05-22:

Shalom! And greetings from Tel Aviv. This is supposedly the center of all religious conflict. Here, some people take religion seriously. More so, than a Disney employee in Orlando taking Mickey Mouse seriously. Why, is somewhat unclear, as God and Mickey Mouse alike are similar objects of wild childish imagination. At least Mickey Mouse makes money for a big publicly held company (Disney), whereas people in the God business seem to always run around asking other people to contribute to their deficit. God is all powerful, but he needs money. And he often goes to war, unlike Mickey Mouse, who is harmless at all times.

But that is not what peeves me today. No, what bothers me is this story of why Newsweek was supposedly irresponsible in writing a story saying that some US military guy at Guantanamo Bay flushed a copy of the Koran down a toilet. That supposedly caused rioting in Afghanistan, where 16 people allegedly died as a result (why precisely? One Afghani guy beat another Afghani guy because of what some American did in Cuba?)

Leaving aside the fact that most Afghanis cannot read, let alone don’t have subscriptions to Newsweek, or for that matter Internet access to http://www.newsweek.com/, this story is completely crazy anyway. The story seems to be centered on whether the underlying alleged fact (flushing the Koran down the toilet) was true or not. So what if it were not true? Every other tabloid writes something every single day that is nowhere near true. Per definition, every other editorial and op-ed writer cannot be true, as they have opposing views and they cannot both be true.

No, the bigger point here is that even if what Newsweek wrote were true, why should the Afghanis have rioted? If someone in Kabul or Teheran or Cairo were to flush a bible down a toilet, would there be rioting in New York, London or San Francisco? Of course not! Why? Because rational people don’t care about symbolic nonsense. That’s the difference between brainwashed religious peasants, and educated people - presumably most people in the West.

And herein is the fundamental dilemma behind peace in the Middle East, and indeed world peace. Relying on people who will riot and kill because someone flushes a book down a toilet, is not a recipe for any kind of peace. Basically, people who riot for such a nonsensical and stupid reason are at the level of an animal, not a human being. Dealing with people who take religion seriously is like having a pet crocodile – maybe it is exotic, but it may prove lethal.

Atheism is not a sufficient condition for peace, but it sure looks a lot better than taking religion seriously, which seems to be almost a guarantee for war. Little kids quickly figure out that Mickey Mouse is a fairy tale. I wish adults would figure out the God fairly tale, too.

Boyakasha! West Side...

2010-05-01T07:47:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2005-04-26:

The debate about what the New York City government should do with the undeveloped area on the West side of Southern Midtown Manhattan is a perfect example of how the insane belief in socialistic land ownership has infected local politics, however predictable. On the one side is Bloomberg with the plan to build a giant sports and convention stadium. On the other hand are a variety of folks that don’t like Bloomberg’s plan, but aren’t really proposing anything, really.

The point here is that they are all wrong. The land should be sold to one or several private owner(s), but they should be free to do what they please with the land. Economic value represents aggregate preferences. This is nothing but Economics 101. Hello???

The highest bidder may want to build condos, office buildings, a mini-Disney, a sports stadium, a shopping mall, or a grand old Red Light District, of which Manhattan has been deprived in the quest of making the city particularly boring for desperate adults. Or any combination of the above. Why is the choice a sports stadium or nothing?

The City should sell the land to the highest bidder and let him/her do whatever they want with it, subject to the basic/normal noise/pollution limitations. Let’s say that turns out to be a $10bn or whatever. It should then cause a corresponding tax cut, particularly on the onerous income tax which causes the millionaires to leave the city in favor of less punitive jurisdictions.

Then, sell The Port Authority and all other government property so as to fund the long-term elimination of the income tax. Oh, and how about firing those 250,000 city employees that make NYC as large a socialist state as many ex-socialist states? Big Government is a cancer, and let the surgery start on Manhattan’s middle-West side with an auction and a major income tax cut! Let Freedom ring!

God is a fairy tale

2010-05-01T07:44:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2005-04-24:

I was watching Meet The Press today, and it was a disaster. Tim Russert's guests for the full hour (!) were some Catholic folks, like a nun, a Cardinal-type, and some other highly religious dude. The occasion was of course the aftermath of selecting a new Pope. The discussion quickly entered such subjects as what God really meant when he created mankind, and the meaning of "communion." To begin with, that's too big a word for me, but the fundamental problem is of course that these were seemingly grown-up adults, educated and all, discussing a bunch of complete fairy tales as if they actually meant something in the realm of reality.

When I was about 5 years old, I developed a great love for Christmas Eve. For this there were three reasons. First, grandma made some fantastic food. Second, my parents gave me all sorts of presents. Third, at 3pm on Christmas Eve, Swedish government television (the only one in existence there at the time) showed a 90 minute Disney cartoon compilation "Christmas with Donald Duck."

At that time, at age 5, I already understood perfectly well that Donald Duck, just like Santa Claus, was nothing but pure fantasy. A pleasant fantasy, but nevertheless nothing that a person of average intelligence would confuse with reality.

Same thing with organized religion. I am amazed every time when people argue about religion, specifically in the context of there somehow being a god who somehow has opinions on what’s right and what’s wrong. This includes wearing certain clothing, eating certain food, or behaving in a certain way. Talk about loony tunes!

As for any form of priesthood, of any religion, it seems like a club of old men incapable of getting laid. Looking like Ku Klux Klan in their pointy hats and robes, they run around with smoke generators and gold chains like the best of rappers, asking 11 year old boys to kneel in front of them and open their mouths and stick out their tongue so that they can… what? Either way, god is all powerful, but the church needs money. Those pointy hats and robes don't come cheap, especially not when combined with all of that rapper bling.

Surely there are many nice and well-meaning priests and the like floating around in every religion, but I never cease to be amazed that grown up adults of at least average intelligence actually take the religious fairy tales seriously. Hundreds millions of people have died as a result. It is a shame.

Moral of the story: I got it already at age 5. Billions of people live for decades and believe in this crap until they die. I must be really smart.

Eliot Spitzer, the evil of our time

2010-05-01T07:41:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2005-04-24:

To what or whom would you compare someone who has added trillions of dollars of cost to the U.S. economy and destroyed entire professions? Darth Vader? A Tsunami? The plague? Cancer? Kim Jong Mentally Ill? NY State Governor front-runner Eliot Spitzer does not possess favorable historical analogies. Through Sarbanes-Oxley (there are two co-conspirators right there) and the insane regulations cooked up in the made-up-"Analystgate" charges in 2002, Spitzer is primarily responsible for having knocked, according to some estimates, trillions of dollars off the net worth in numerous companies, and destroyed numerous lives. For this, Spitzer probably deserves the harshest of verdicts in the history of mankind.

Privatize The Western Hemisphere

2010-05-01T07:34:00.000-07:00

This was previously posted on www.anton-wahlman.com on or before 2005-04-18:

America suffers from numerous problems in terms of the federal budget, slow-growing productivity, etc., related to the size of government activities. Chief among them is the fact that the U.S. governments at all levels owns so much stuff, in particular just plain land. Most of the land in the 50 states is owned by the government, just like in the old Soviet Union. In New York City, the 3 major airports are owned by "The Port Authority." In English, that's "The Pravda Authority." Just like Margaret Thatcher after 1979, a decision needs to be made to sell most or all of this stuff to private enterprise and plain individuals like you and I. The proceeds could be used to pay off ponzi scemes such as Social Security, a.k.a. Socialism Secured, and other forms of counterproductive cancers on the American people. This is what Thatcher did after she got into the seat of power in 1979, and it is what happened in the Soviet Union after the the flag came down on Christmas Day in 1991. Privatization. It is as good as a combination of vitamines, fresh air, clean water, home-made grilled cheeseburgers and a harem of Playboy bunnies. Beats government-owned property any day. Free the Western range, and The Port Authority, from socialism, please.

Beceem's IPO Plans: Positive for Clearwire

2010-04-05T08:01:00.000-07:00

On Friday after the close of market, Beceem filed its S-1, paving the way for its IPO in the coming months. The investors are mostly venture capitalists and some management participation, with Intel being the strategic investor at 20.3% (page 102 of the prospectus). In brief, Beceem is the leading play on WiMax chips, with WiMax being a broadband wireless technology deployed in over 530 networks world-wide to date.

Why is the Beceem IPO significant, and for whom? The Beceem S-1 filing comes almost to the day three years after the only other WiMax-related IPO, Clearwire. Clearwire is the dominant WiMax carrier in the U.S., with service launched in 28 markets to date, such as Chicago, Seattle, Philadelphia, Atlanta, Dallas, Houston and Las Vegas. These 28 markets cover over 33 million homes, which will more than triple to over 100 million homes by December 2010, including cities such as New York, San Francisco, Los Angles and Miami. These launches have all been disclosed in Clearwire press releases.

Here is the correlation: Every single subscriber device ("modem" for short) which Clearwire has been selling to date is based on a Beceem chip. This could be a simple USB modem or a sophisticated WiMax-to-WiFi battery-driven and pocketable converter such as the Sierra Wireless Overdrive. Of course, there are some Clearwire users who don't buy a modem from Clearwire because their laptops already come with a built-in WiMax modem, and those are made by Intel.

What is the correlation "from the other side" - Beceem's revenue going into the Clearwire network? First of all, Beceem sells to equipment makers such as Motorola and a variety of mostly Asian OEMs/ODMs, who in turn sell to Clearwire. Here is the critical sentence in the Beceem S-1 filing, from page 38: "As of December 31, 2009, over 50% of our total revenue was derived from end customers based in the United States."

Well, "over 50%" is how much precisely? Somewhere between 51% and 100%. And what part of this goes to Clearwire versus other WiMax operators in the US? I don't think anyone would disagree about the notion that Clearwire constitutes probably 99% of all WiMax investment in the US at this point. My estimate is that approximately 75% of Beceem's revenue is for deployment in the Clearwire network, splitting the difference between 51% and 100%.

So how is Beceem doing, revenue-wise? 2009 revenue more than tripled over 2008, going from $13.9 million to $43.7 million. This suggests that Clearwire is being very confident in its ability to drive very aggressive subscriber growth in 2010, as these devices produced in 2009 are going into the hands of new subscribers signing up in 2010.

Yes, I know there are numerous caveats here: Clearwire buying modems doesn't mean it will automatically gain that number of subscribers. There is inventory build. There will be other suppliers sooner rather than later. The mix with Intel-based WiMax chips in laptops is unknown. And so forth. But despite all of these caveats, these extremely high growth numbers for Beceem should be a positive sign that something right is going on at Clearwire. The confidence that Intel and the other shareholders have in filing this S-1 suggests that the pipeline for revenue growth in 2010 looks very good.

Here is an example of how the Beceem chip, operating on the Clearwire network, improves the experience for all the new Apple iPad users: Instead of ordering your iPad with an embedded HSPA modem operating on the AT&T network, just get the WiFi version of the iPad and connect it via WiFi to the Sierra Wireless Overdrive 3G/4G mobile hotspot device, powered by Beceem. This means that your iPad download and upload speeds will most likely more than double, while cutting latency (the initial lag after pressing a button, clicking a link, etc) by 70% or more. This should be a very compelling argument for any iPad, laptop or smartphone user.

In fact, this Sierra Wireless Overdrive device, operating on the Clearwire network, simultaneously connects up to five devices, sharing the $60 per month subscription. So you could argue that while delivering performance dramatically superior to AT&T, the cost per Beceem-driven Clearwire device could be counted as $12 per month ($60/5), or substantially lower than a $30 per month per device subscription from AT&T.

Ask yourself the simple questions: Would you like the wireless data network to perform better? Would you like higher speeds? Would you like lower latency? Would you like to get 250 gig per month of usage instead of 5 gig per month? Did you like the transition from dial-up to broadband some 10 to 15 years ago? If you answer yes to any of these questions, you will understand the significance of the Clearwire network and the Beceem WiMax chips powering most of the Clearwire users.

Android's Advantage, For Now: WiMax

2010-04-01T08:45:00.000-07:00

Sprint recently announced it will soon launch America's first WiMax smartphone, the HTC Evo 4G. This smartphone looks much like the HTC HD2 now offered by T-Mobile, but it operates on America's dominant WiMax network, built by Clearwire where Sprint is a 57% equity holder.

Let's establish the WiMax advantage over the current 3G networks operated by all major carriers. Clearwire's WiMax network has at least four major advantages over HSPA (AT&T and T-Mobile) and EVDO (Verizon and Sprint):

1. Speed. Upload and download speeds are higher. How much higher? Here is where it gets tricky. On paper, Clearwire is quoting numbers that are only approximately double that of the 3G networks. That's not the whole story, however. Which brings us to the next point.

2. Capacity. The real speed experience is similar to that of a freeway. What matters is not how fast ONE car can go, but how fast ALL cars can go when the freeway is near capacity. In the case of Clearwire, it has a lot more spectrum at its disposal than its competitors. Clearwire has 120 MHz on average per market. Compare this to what most operators purchased near 700 MHz some 2-3 years ago: around 20 MHz, or 1/6th. This means a 6x wider freeway for Clearwire. So you can fit a lot more subscribers - or have the subscribers do more things simultaneously. This is the bandwidth tonnage that matters in a battle.

3. TDD vs. FDD. Imagine if on a freeway you could dynamically, every fraction of a second, allocate the direction of any given lane. This would mean allocating the width of the freeway to the direction where there was more traffic. Effectively, this increases capacity materially. As a result, Clearwire's 6x advantage over the old networks may feel more like a 10x.

4. Latency. Speed of uploads and downloads is important, but latency is often even more important. You don't want that initial two-second "wait" before things start happening, after you click or press. In my personal experience as a Clearwire customer, I get latency around 70ms, compared to 140ms-280ms with my previous EVDO and HSPA connections. That's a 2x-4x advantage for WiMax, and makes it "feel" like a cable modem as opposed to a second-class wireless citizen.

All in all, until other WiMax smartphones are announced, the first one to hit the market this summer is the Android-based HTC Evo 4G. The superior performance of WiMax will enable users to do things where nothing else can fully compensate in terms of competitive gunpowder.

Sure, the next-generation iPhone from AT&T - and Verizon or other carriers - will bring all sorts of yet-unknown innovation to the table, probably in relation to software, content and services. But without WiMax, any such product - iPhone, Blackberry, Palm, Nokia/Symbian or Microsoft - will be notoriously handicapped in its ability to deliver a proper broadband experience.

You have to ask yourself the following question: Do you accept the premise that the biggest complaint about the current AT&T iPhone is its network performance? If you do, you cannot simultaneously say that the superiority of WiMax won't matter.

WiMax offered by Clearwire - and integrated into various Sprint-branded offerings, because Sprint owns some 57% of Clearwire - reigns alone until the fourth quarter of 2010, when Verizon launches approximately 20 MHz of FDD-based LTE, compared against Clearwire's up to 120 MHz of TDD-based WiMax. Verizon's initial LTE offerings will be primarily USB-based modems and portable WiFi hotspots, such as those built today by Novatel and Sierra Wireless. Some time in 2011, the first LTE-based smartphone will begin to appear, giving Sprint/Clearwire approximately a one-year lead.

We do not know how long Android's WiMax advantage will last. It is eminently possible that a Blackberry, Microsoft or Apple WiMax smartphone will appear on Sprint/Clearwire before 2010 is over, but I also cannot find any evidence for any of those to occur. Nokia and Palm appear very unlikely to launch anything-WiMax even in 2011 or even ever. To the extent that Blackberry, Microsoft and Apple don't launch a WiMax smartphone for the Sprint/Clearwire networks in the coming months, this will be an important advantage for Google with Android.

Verizon's advertisements often say "It's the network." The problem is that in this case, it's not their network. It's Clearwire's WiMax network, offered by Sprint, and with Google/Android powering the initial smartphone.

iPhone on Verizon? Time for Some Logic

2010-03-30T08:21:00.000-07:00

With the latest in a long line of Verizon iPhone rumors recently circulated by The Wall Street Journal, it's worth commenting on the engineering logic and how it relates to a timeline for such a potential event.

First of all, I have absolutely no insight into the Apple and Verizon negotiations or plans to the extent they even exist. Second, I don't know what Apple's contractual obligations are with AT&T, including when, if ever, AT&T's exclusivity ends. But there are at least three reasons there wouldn't be an Apple-Verizon deal of any kind in 2010 or even 2011.

1. AT&T has an exclusive until time X in the future (2012, whenever).

2. AT&T simply agrees to pay Apple more than Verizon would pay Apple in order to ensure continued exclusivity. Using round numbers, AT&T currently pays Apple $600 per iPhone and sells it for $200, eating the $400 difference upfront, taking the consumer credit/fraud risk. Verizon simply may not be willing to pay as much, or AT&T may be willing to increase its subsidy in order to extend its exclusivity.

3. Verizon may just not like Apple's terms on any one or several levels, such as those relating to the AppStore, iTunes, branding, service pricing, whatever. Verizon may be of the opinion that the iPhone would clog its networks and would require some form of variable pricing for bandwidth consumed, just like we all pay for electricity, fuel for our cars and food. Basically, if you consume more, you pay more.

But let's say that none of those three points apply. Let's say that Verizon and Apple are both free to cut a deal, and that they want to do so. What are the semiconductor requirements in order to produce this Verizon iPhone device? There are two scenarios here.

Scenario No. 1: Let's say that Apple and Verizon intend to ship the Verizon iPhone before the middle of 2011. This would mean that the device could utilize the same baseband ("radio") chip currently powering the Blackberry 9550/Storm and 9630/Tour. This is a Qualcomm chip, as Qualcomm has a de facto monopoly in the market today on chips that include the requisite CDMA/EVDO/GSM/HSPA standards for worldwide coverage. This is a product that is technically possible to ship today.

Scenario No. 2: Let's say that Apple and Verizon intend to ship the Verizon iPhone no earlier than the middle of 2011. This would mean that the device could utilize the next-generation LTE-inclusive baseband chip from Qualcomm, which was introduced at the Mobile World Congress trade show in Barcelona in February 2009. Qualcomm stated at the time that it intended to sample this chip around the middle of 2010, which normally means that it could be on store shelves one year thereafter, around the middle of 2011.

Here is a central question to what must surely be part of Apple's negotiations with AT&T and Verizon alike: Will a Verizon iPhone have the exact same hardware as the AT&T iPhone when AT&T's new iPhone version appears presumably sometime this summer? Why even ask the question?

In an ideal world for Apple, it would prefer to make only one kind of hardware, common for both AT&T and Verizon. It would mean that there would be at least a technical path to users switching between networks. It would also open up a theoretical additional path for Apple to sell a device directly to the consumer, without a service contract, just like Google does with its Android Nexus One. For consumers wanting to pay $600 or more for this flexibility, this would be a great thing.

Apple has no problem making such a universal iPhone, either under scenario No. 1 (non-LTE), or under scenario No. 2 (LTE-inclusive), or both. Same thing for Qualcomm. And yet, there are two reasons it would still be unlikely for such a common device to appear in the next couple of years.

Reason No. 1: Cost. This isn't an issue for Verizon because its device must include GSM/HSPA no matter what in order to ensure international roaming. And at that point, the cost differential between a two-band GSM/HSPA chip and a four-band GSM/HSPA chip is essentially zero. However, it's a big issue for AT&T. Why? Because AT&T doesn't want to pay the "Qualcomm Tax" resulting from Qualcomm's de facto monopoly on CDMA/EVDO. AT&T has no reason to include CDMA/EVDO in any device, iPhone or otherwise. So unless Qualcomm is willing to give away this capability for free -- which is possible, but unprecedented -- this probably wouldn't happen.

Reason No. 2: Carrier rivalry. But bluntly, it may just be the case that AT&T and Verizon both want to ensure that their iPhones each are unique to each other, even if Qualcomm was to take the chip cost off the table for AT&T. Perhaps they are both afraid of Apple's power if the same device could be used on other carriers, despite the contractual two-year subsidy lockdown.

One final point is that regardless of what AT&T or Verizon do with the iPhone for the next 12 to 15 months, Sprint, through its 57%-owned Clearwire, has a one-year time-to-market advantage with its WiMax technology. Any iPhone from AT&T or Verizon operating before the middle of 2011 simply cannot compete with the superior performance afforded by the 120 MHz worth of spectrum Clearwire has at its disposal.

The first WiMax phone for the United States is the HTC EVO 4G, introduced a week ago and available this summer. It can simply do things -- such as multiple channels of HDTV -- which no iPhone can do until the arrival of LTE in a handset as early as the middle of 2011.

And even then, keep in mind that the amount of spectrum available to both AT&T and Verizon (some 20 MHz each) pales in comparison to Clearwire's 120 MHz.

If Sprint and Clearwire can bring attractive devices to market to capitalize on this gigantic advantage, all other wireless broadband operators should be very worried. This Clearwire/Sprint WiMax network is up and running in 28 markets today (covering more than 30 million people) and will be covering at least 120 million people by the end of this year. So far, only Google and HTC (in combination) have announced that they are taking advantage of this significant time-to-market advantage afforded by Sprint/Clearwire.

Will Research In Motion's BlackBerry be the next to make the move with Sprint's WiMax advantage?

Blackberry Faces Challenges

2010-03-23T07:01:00.000-07:00

Firms in the enterprise market can be divided into two kinds -- very large enterprises with particular compliance requirements and smaller enterprises in which internal policing is lax.

Research In Motion's BlackBerry dominates the compliance-sensitive, large-enterprise market with essentially 100% market share. The reason for this is relatively simple: BlackBerry has a consistent record of catering to the needs of these companies. What are those needs? They all revolve around security and manageability, but most specifically they revolve around the compliance department and legal exposure.

A large compliance-sensitive enterprise that needs to protect itself against lawsuits needs to police its employees hard. It needs to ensure that the smartphone isn't used for trivial matters such as social networking, entertainment and games, just to mention some red flags. Basically, if you can't do it on your work PC while in the office, you shouldn't be able to do it on your enterprise-provided smartphone.

While it may take some time for the other platforms to match BlackBerry in the policy-enforcement, security and manageability aspects of enterprise needs, BlackBerry faces other threats along the way. Skyrocketing unemployment is one obvious problem. Old BlackBerry devices get recycled in the enterprise, and the employee joining the unemployment ranks often gets an iPhone from Apple, Google's Android or sometimes even a Palm.

Perhaps the greatest threat to BlackBerry is that its enterprise users often are stuck with two-year-old devices that are outdated in their capabilities. They don't have the new 360x480 screen resolution or 256 megabytes of memory, and therefore they can't hold or run many interesting apps. Comparing a two-year-old BlackBerry with a brand new iPhone or Android device isn't a fair comparison, but that's the comparison that people often make.

Technically, BlackBerry's newest devices, such as the 9700 Bold, are very competitive in most areas, but people are frustrated with their experiences with their old BlackBerry in the enterprise environment, causing them to "lash out" in favor of iPhone and Android. This is a calamity RIM must fight with facts and education, not with a completely useless "Love what you do" advertising campaign that was so generic that it could have applied to almost any kind of item in life.

Thankfully, RIM is getting closer to plugging some of its technological challenges. The new WebKit browser should be available as early as the June calendar quarter, although the timing could slip by a few months. The device memory will be bumped shortly from 256MB to 512MB, although frankly, a much bigger boost is needed.

New touch-screens will become available some time before the end of 2010. Two-way cameras enabling videoconferencing will likely hit the BlackBerry within the year. One could only hope for MiFi-type functionality and a WiMax version for Sprint and Clearwire before December.

So what's the competition like? Apple has made strong headway with the iPhone, plugging some security holes last June with the encrypted 3GS. Some enterprises are starting to allow it, although far from a majority just yet. Still, as of right now, Apple is the most credible threat to RIM in the enterprise, as unlikely as that would have seemed even a year ago.

Google is basically nowhere with Android in the enterprise, but this won't remain forever. Expect a traditional BlackBerry form factor, where there is a keyboard but it's not a slider keyboard, to become available in the next few short months from companies such as Taiwan's HTC, in particular. That said, Google's less-than-stellar reputation in the privacy department (Buzz comes to mind) will make the enterprise market a tough sell.

Microsoft(MSFT) has been the most credible competition to BlackBerry on pure technical merits, with great Exchange/Outlook integration. The problem has been in the ease-of-use department, and with crummy hardware. Interestingly, just when Microsoft was ready to close those gaps with BlackBerry, it launched the Series 7 Phone, which is 100% focused on the consumer, and not at all on the enterprise. As it stands, no enterprise would consider a Microsoft Series 7 Phone, which is set to become available by the fourth quarter.

This shift in focus also meant that Microsoft committed suicide in the smartphone enterprise market, because nobody believes that Microsoft will focus on its current 6.5 platform anymore.

As for Palm and Nokia with its Symbian, those competitors are essentially non-factors in the U.S. enterprise market.

The bottom line is that BlackBerry continues to reign supreme in many of the enterprise segments, but the clock is ticking. It needs to quickly adopt the best technological capabilities of the other platforms, such as iPhone, Android and Palm, before market share-losses become material. This race against the clock will play itself out, at least in terms of the critical mind share, in 2010, not in 2011.

iPad Has User Log-In Flaw

2010-03-15T07:17:00.000-07:00

Amazingly, nobody has yet pointed out a severe usage limitation on Apple's iPad that surely will cause grief with the very first reviewers. I'll get right to the bottom line: Just like the iPod Touch, the iPhone and most or even all other smartphones, the iPad lacks multiple user profile logins, including any "Guest" login.

Think of the iPad as one big iPod Touch or iPhone. Once you've entered the password, you're in. And I mean in! You have complete access to all emails, instant messages, the address book and calendar. Contrast this with a laptop: On a PC, you may have, say, four different user logins (father, mother, son and daughter) and one generic "Guest" login. This means you can't see others' emails, instant messages, address books, calendars and any other documents created. Privacy is protected.

So why is the lack of multiple user login or a guest account such a critical flaw on the iPad, when the world of smartphones doesn't seem to have crumbled in the wake of a similar deficiency? The answer should be obvious, but I will spell it out anyway: Unlike an in-pocket smartphone, the iPad is almost naturally a somewhat communal device.

Where will you find the iPad most times? On the table, not in the pocket. What is its main purpose? To surf the Web, among many other things, of course. There is almost an expectation that anyone should be able to pick it up and use it. Just imagine the regular family of four: Residing on the dining table, kitchen counter or coffee table, the kids in the family will be jumping for the iPad at every moment. Will you tell them, "No?" Can you imagine their loud screams?

For the iPad to have meaningful utility to a productive adult, it needs to be synchronized with your personalized data using iTunes and Apple's MobileMe. But wait. By containing all this personalized data, including your emails, address book and instant messages, just for starters, the kids will be only seconds away from destroying your most valuable information -- often work-related -- on the iPad. You can see the headlines right now: "Kid Gets Password to iPad ...." Fill in the humiliating blank.

The fact of the matter is that the iPad is a lot more like a laptop than a smartphone in terms of how you need to protect your information. You wouldn't let your kids use your laptop under your personal login, with access to your emails, address book, documents, and instant messages. This will force parents and others to not sync their personal information -- through iTunes and MobileMe -- with the iPad, at which point the iPad has immediately lost a material portion of its intended utility.

It should be very easy for Apple to fix this critical flaw. In fact, Apple needs to do the same for the iPhone and the iPod Touch as well. You want to be able to lend your iPhone and iPod Touch to someone -- no matter how temporarily -- knowing that all this person can do is to surf the Web, depending on how limited you have set the permissions. The same goes for all the other smartphone systems - Blackberry from Research in Motion, Google's Android, Palm, Nokia and so forth.

Until such time that Apple fixes this critical flaw, however, this gives rise to what I predict will be the biggest complaint about the device, with the possible exception of the much-feared lack of ubiquitous multitasking. As it stands, no user in his or her right mind will dare to synch the iPad with iTunes and MobileMe. And there goes much of the utility of the device. And for those who dare, they have just signed their own personal information death warrant courtesy of their kids.

Someone told me that the solution will be for that family of four to simply buy four iPads. That may even be Apple's secret plan to beat all of its revenue estimates! Please. If there was a more obvious way to upset your new iPad owners, I can't think of one. You have just spent $500 to $830 on a device that's fundamentally less capable than a $300 laptop and immediately you're told that you need to buy four of them in order to protect your personal information. Please!

In the movie "Armageddon", one astronomer declares "We have 18 days!" until an asteroid hits Earth. Indeed, Apple, you have a April 3 deadline to fix this. You can do it. I hope. Or else the reviews won't read so well.

Abolish The FCC

2010-03-02T09:20:00.000-08:00

Once upon a time, when I was a student of economics and foreign policy, we had to learn about government five-year plans to accomplish this or that. "The central government is marshaling the productive forces to build X, Y or Z for the people" and so forth. Fill in the blanks depending on the day or year. In those days, the subject geography was the Soviet Union.

Fast forward a few decades, and we now have adopted the government five-year planning syndrome right here at home in the United States. From the auto industry to the banking industry, student loans, energy policy -- you name it. The Federal Communications Commission is on the case with broadband.

So what is the pretext for this new Soviet-style FCC plan to do something with broadband? The argument goes that broadband is too slow, and that too few people have access to it. Let's first state where we are today. In terms of wired broadband, approximately 95% of U.S. households have access to cable modem, DSL or fiber optics. The 5% that don't basically live in very rural areas where the investment required to pull wires aren't paid for by users.

In terms of Internet speeds, when cable modems and DSL were first launched on a broad scale in the second half of the 1990s, speeds started at little over 1 MB/s. For natural reasons such as distance attenuation with DSL, as well as the obvious fact that investment isn't uniform, speeds have come to vary widely. Some remain stuck around 1 MB/s, whereas others get around 100 MB/s. Most people with a cable modem (priced at around $40/month) get more than 10 MB/s.

Basically, in less than 15 years, speeds have gone up by approximately 10 times on average, while prices have remained the same on a non-inflation-adjusted basis.

On the wireless side, things are more complicated. Ninety-five percent or so of Americans have access to four wireless networks: AT&T, Verizon, Sprint and T-Mobile. Other networks cover significantly fewer cities, but some of them are game-changing. In particular, Clearwire now covers 27 cities (over 30 million people) and will be at 120 million people by year-end. The primary reason wireless Internet speeds remain low today, and are typically capped at 5 GB/month, is the limited amount of spectrum used.

Really the only good thing I am hearing out of the FCC these days is the desire to privatize more spectrum. The FCC is talking about 500 MHz over 10 years. This is excellent, and indeed it should do even more. If you know why Clearwire is the only wireless operator not capping its users at 5 GB/month, it's because the company has an average of 120 MHz spectrum depth per market, which is dramatically much more than its competitors. Privatizing more spectrum is the key to better wireless.

Beyond privatizing spectrum, there is no intelligent role for the FCC.
If we want more broadband investment, the building of broadband needs to be deregulated and taxed less. Investors in broadband are now scared stiff as a result of various threats of "Net Neutrality" legislation or regulation. "Net Neutrality" is akin to rent control for apartment buildings.

As an investor, you want your company to be free to offer any service at any price and in any manner the owners so choose. Any encroachment upon this basic constitutional private property right will discourage investment in broadband.

The FCC's view of broadband appears to be: If it moves, tax it. If it keeps moving, regulate it. If it stops moving, subsidize it. We are now in the last phase, the subsidization phase. Under the guise of "universal coverage" and "stimulus," we are now going to use taxpayer money to build stuff that the market doesn't want to invest in otherwise, in part because of the threat of "Net Neutrality" regulation. It's the simultaneous stick-and-carrot from the FCC.

Whip the industry with "Net Neutrality," but hand it billions of taxpayer funds if the companies jump through certain hoops such as pull cables in very rural areas where the number of Internet users is very small. Think "The Bridge to Nowhere."

How should we encourage a sound broadband industry? I have a simple five-step plan:

1. Remove the treat of "Net Neutrality" and all similar regulations.

2. Abolish the FCC and replace it with a Spectrum Privatization Board, whose sole purpose will be to do what its title says: Sell government property to the highest bidders.

3. Declare that all telecom and technology will be 100% unregulated by the federal government.

4. Abolish all taxes on telecom and technology. The basic telecom tax was instituted in 1898 (yes, 112 years ago) in order to pay for the Spanish-American War. I believe that war ended already, and in fact Cuba has changed regimes a few times since. So we can safely remove this telecom tax now.

5. Repeat the equivalent of 1-4 above on the state and local levels.

Just look at your iPhone bill and you will see how much this nonsense adds to the cost.

The bureaucrats won't like my five-step plan above because it means that 99% of bureaucrats involved in taxing and regulating broadband would have to find real jobs, where they don't parasite upon real people who do real work. However, this five-step plan will encourage massive new investment in broadband, now that this industry would no longer be penalized. Broadband providers would be able to focus on expanding services, instead of worrying about government punishment.

Four Reasons Apple iPad Can't Miss

2010-02-28T14:52:00.000-08:00

February 8, 2010

Here are four reasons why the Apple iPad is a guaranteed success.

1. The stores. The stores are Apple's main weapon. Anyone else can make a tablet for Web surfing, book reading, movie viewing, whatever: Dell, H-P, Acer, Google, Amazon, Microsoft or Lenovo. But none of those companies have the stores. There are two reasons why this is important.

First, this is the kind of product that people need to see and feel in person, in order to decide whether to take the plunge -- it's a new category of product, after all.

Second, Apple has already paid for the stores, and they can easily fit several more products, which means that it is almost a guarantee that any product Apple launches will become an incremental financial success for Apple. People who walk into the Apple stores may or may not buy an iPad right away, but those who don't buy an iPad may walk out with something else under their arm -- a MacBook or iPod Touch, for example.

2. iTunes. Nevermind that iTunes works on a PC of any kind -- including tablet PCs from companies such as Dell and Lenovo or that it synchronizes with every BlackBerry. The public associates iTunes with Apple, and every new product building on the iTunes ecosystem has an automatic head start against the competition.

3. The AT&T deal. Apple did three very smart things with its choice of wireless options:

A) An unlimited plan for $30. This is extremely significant, because wireless carriers such as Verizon Wireless have recently been viewed as unlikely to offer any more unlimited-anything plans. In fact, this may have just been the reason why Verizon didn't get the iPad deal.

B) Pay-as-you-go service. No subscription needed. You buy a month of unlimited service for $30 when you think you need it. The lack of yet another two-year commitment is a very consumer-friendly option.

C) Oh, by the way, if you choose to save $130 by buying the WiFi-only version of the iPad, you can get it with service from Verizon or Sprint/Clearwire. Huh? Yes, by buying a device such as the Novatel MiFi or the Sierra Wireless Overdrive 3G/4G cellular-to-WiFi converters, you can use your iPad (plus four other devices simultaneously) on Verizon or Sprint/Clearwire. You pay $60 per month, but amortized over as many as five devices you could argue that it's only $12 per month per device.

4. The iPad puts Apple on offense in the race to a completely new interface for much of our PC experience. For the last 15 or more years, the PC experience has not changed dramatically interface-wise.

One could certainly conceive that just like the PC market changed dramatically from 1984 to 1995, it is about to change yet again. In this context, it seems smart for Apple to take a chance with the iPad.

Is the iPad perfect? Of course not. Some complaints have to do with things such as the screen and the resulting battery life. A bright color screen yielding 10 hours just isn't the same product as a monochrome screen worth of ePaper yielding hundreds of hours. But that's a design choice, where Apple's choice to make a broad-based Internet-connected device seems like the obvious one. What's not a design choice as such is the lack of multitasking and Adobe Flash, but those things can be fixed.

The bottom line on the iPad: It will be a financial success for Apple, driving traffic to the Apple stores and putting the rest of the industry on the defensive.

Netgear RangeMax WNDR3700 Review

2010-02-28T14:45:00.001-08:00

United States of America, October 2009

If you’re in the market for the most technologically advanced large four-door sedan car, and price is not an object, you buy the Lexus LS600h, which costs around $115,000 but is architecturally similar to a Toyota Hybrid. If you’re in the market for the most technologically advanced WiFi home router, the equivalent of the Lexus LS600h is the Netgear RangeMax WNDR3700, or Netgear 3700 for short.

The Netgear 3700 incorporates Netgear’s new industrial design for many of its home products. It’s a great design where the LEDs are easily visible from multiple angles, and the device can stand vertically for optimal RF performance. At its core, the Netgear 3700 has a 680 MHz processor and allows for the highest performance using two SSIDs each on 2.4 GHz and 5 GHz alike.

The multiple SSID setup is critical. It allows for having two separate guest networks – one on 2.4 GHz and another on 5 GHz. This router also gives priority to video traffic on 5 GHz. Speaking of video traffic, you can plug in a storage source into the USB and share it on the network, thanks to DLNA.

The performance is astounding. Gigabit Ethernet in combination with the 680 MHz processor and the latest 802.11n radio technology from Atheros means that your system’s performance bottleneck will most likely not be the Netgear 3700. Ultimately, the only weakness in the performance will be experienced as a result of range – whether in free space or through walls. Range, however, appears better than any other WiFi router I have tested. I was getting coverage close to 100 yards down the road, with the router inside my home. With WiFi this powerful, it makes you wonder why service operators aren’t going with this technology to build proper operator networks.

The only weakness of the device that I found, is that you can’t plug in your WiMax USB modem as your Internet source. With Clearwire now available in 28 markets nationwide, and some 100 markets targeted for the end 2010, this will soon become the primary Internet source for millions of Americans. They would all benefit from a combination of the Netgear 3700 and Clearwire’s low-latency, high-bandwidth, access network. Hopefully this will be addressed in a software upgrade to the Netgear 3700 soon.

I have been on the Netgear case since June 1999 and I have tested numerous WiFi products over the years. While the Netgear 3700 obviously can’t compete with the Sierra Wireless Overdrive 3G/4G for what it accomplishes in a mobile environment, for a home or business WiFi router, nothing on the market right now matches the Netgear 3700 either in terms or features or in terms of performance.

The price of the Netgear 3700 is anywhere from $150 and $190 depending on where you buy it. While you can save 70% of that kind of price by buying a cheaper home WiFi router, I believe the Netgear 3700 is well worth the one-time premium payment. I give it my second highest recommendation (a 9 out of a 10), with the one caveat that adding WiMax support would make it completely unbeatable. All products like these need to ensure compatibility with Clearwire, and WiMax in general.

Tablet Mania Running Wild

2010-01-05T08:36:00.000-08:00

On the eve of the annual Consumer Electronics Show in Las Vegas, tablet mania is hitting a fever pitch. We may see dozens of tablets launched this week alone, many from the biggest brands in computing such as Lenovo, HTC and Asus. The presumed Apple version in particular allegedly is going to become the new iPhone, changing our lives forever like a Messiah. The lines will go around the blocks. It feels like real estate pre-construction mania all over again.

Before we swallow the new tablet religion lock, stock and barrel, however, let's ask some basic questions:

What will it do that the current smartphones and laptops don't do?
Where will it be used?
Who will afford it?

What will it do that's new? Most people who are the intended purchasers of a new tablet are allegedly already owners of an iPhone, Research In Motion's BlackBerry or whatever, plus a laptop. We can read the news on smartphones and laptops alike -- either by going to the Web sites or by using an RSS reader such as Viigo. If we want to read a book, Amazon, Barnes & Noble and Sony already have the electronic book readers. It's far from clear what the functionality will be requiring a tablet.

Where will you use this tablet? At home, the laptop is easily portable and fully functional, traversing work as well as play. The screen is bigger, a keyboard is handy, and software compatibility is universal. When you walk out the door, the tablet is too big for the pocket, and will you really want to add it as an extra weight in your laptop briefcase?

Who will afford it? Most people are replacing their smartphones every two years, and laptops every three years. The smartphone may be $200 upfront plus $100 to $150 a month. The laptop may be $1,500 upfront (including a three-year warranty and Microsoft Office) and as much as $60 a month for a cellular data connection. Families in turn have multiple existing replacement cycles, not only for the adults, but increasingly also for the children -- unlike only a decade or two ago. Will these families want to enter the treadmill of a third replacement cycle -- $500 or more for the device, plus perhaps a monthly subscription fee? Or will they want to focus on being able to afford upgrading their smartphones and laptops instead?

I have no doubt that tablets will sell at least a few million units. However, it will not be the next iPhone or Blackberry. It doesn't fit in a pocket. It's not going to be more capable than the laptop you already have. It requires another $500-plus outlay. And if it's a book reader, it had better offer better books than Amazon's Kindle does.

This is a tall challenge. It may be more appropriate to mute the tablet sales expectations.

That said, if you're Apple, the stores are already paid for and there is plenty of wall space on which you are encouraged to throw some spaghetti, or a tablet. Go for it; niches all add up.

Apple Should Turn To Sprint/Clearwire

2009-11-04T09:39:00.000-08:00

All the talk about Apple's next U.S. iPhone carrier once the AT&T exclusivity expires appears focused on Verizon Wireless.

There are some good reasons for this: VZW has the reputation of having the best network, partially for its consistency in CDMA/EVDO in combination with its 850 MHz band. With 89 million wireless customers, VZW is 9% larger than AT&T's 82 million wireless subscribers.

Before I get into my argument, I need to make the point that I don't know when AT&T's U.S. iPhone exclusivity ends. All indication is that it will take place no earlier than 2010, but no later than 2012. But really nobody outside Apple and AT&T knows.

Perhaps AT&T will pay for an extension to whatever the current or recent data were supposed to have been. And the rest of my argument is somewhat dependent on when this eventually takes place.

Let's assume that the AT&T exclusivity ends relatively soon, say June 2010. Apple would then have the choice to spread the iPhone to all U.S. carriers, or only some. Which one would be Apple's highest priority?

My contention is that it is in Apple's best interest to make Sprint/Clearwire its highest priority, if it could do so relatively soon, say by mid-2010.

The common suggestion that Apple should go with VZW is misguided: It's not that Apple needs VZW. It's that any carrier needs the iPhone. From this perspective, it can be said that it is the iPhone that makes any carrier. So therefore, the critical question becomes: What does Apple get out of the deal? It doesn't matter what the carrier gets out of the deal, because all carriers will take the deal.

Apple enjoys superior popularity with the iPhone today, but what will it need to do in order to lift the bar on keeping the iPhone "special?" Seeing as all the three main networks outside AT&T -- Sprint, VZW and T-Mobile -- offer service to the vast majority of U.S. households, the only remaining argument of greatest importance to Apple is technology.

What can Apple offer in terms of technology that would be truly special and differentiating? That's the question -- not how many legacy subscribers does a carrier have. People will follow Apple's lead; Apple doesn't need to follow the crowd, i.e., VZW's legacy customers.

Based on this premise of Apple's need to make technology its chief variable in selecting its next U.S. carrier partner, I believe the obvious answer is for Apple to make an iPhone for Sprint/Clearwire. Sprint owns approximately 50% of Clearwire, and the Sprint/Clearwire is a necessary combination because of backwards compatibility with EVDO.

Clearwire chose to build its nationwide 2.5-2.7 GHz network on the WiMax standard, which offers far greater speeds than any 3G technology such as EVDO. Clearwire's almost 200 MHz spectrum means that its capacity to support many users downloading/uploading data is vastly superior to all the other incumbent cellular providers.

What should be Apple's two most important goals with the iPhone working on a new network? capacity and latency:

1. Capacity: From downloading ever-richer applications to video/television/movies, Apple needs to demonstrate that its iPhone platform can deliver more bandwidth-intensive services than competitive devices.

2. Latency: This is critical for real-time communications such as voice and videoconferencing. VoIP services on smartphones are just starting now, but are suffering from generally poor quality as a result of unacceptable latency on today's HSPA and EVDO networks from AT&T, VZW and T-Mobile USA.

If these are the highest priorities for Apple, VZW doesn't give Apple what it needs until LTE makes its advent in handsets. Qualcomm has stated that it expects to sample its "God-chip" -- the 8960 -- in mid-2010. This is the LTE chip with full backwards compatibility to all GSM and CDMA lineages such as HSPA and EVDO.

That in turn means that LTE handsets with backwards compatibility can be launched around the middle of 2011. Budget one year's worth of technology/standards slippage, and we can realistically expect backwards-compatible LTE handsets to become mainstream around the middle of 2012.

What does this mean for Apple? VZW will not offer Apple a technology to differentiate itself against the competition until mid-2011 at the earliest, perhaps mid-2012. But Sprint/Clearwire does, already today!

Therefore, if the AT&T iPhone exclusivity ends meaningfully before mid-2011, Apple would be best served to launch its next version of the iPhone on Sprint/Clearwire.

Imagine the superior services a Sprint/Clearwire WiMax iPhone could offer: Flawless low-latency VoIP, liberating the consumer from traditional voice plans, videoconferencing, streaming television and laptop tethering without that pesky 5GB monthly cap. All of these things are either impossible or performed with subpar quality on AT&T today, and on VZW before it can offer backwards-compatible LTE handsets no earlier than mid-2011.

Sprint/Clearwire is already working with HTC to launch dual-mode WiMax/EVDO Android handsets in coming months. All of these advantages of WiMax performance in the cellular handset will soon be pointing their big guns full ablaze against the iPhone.

4G networks -- WiMax and LTE -- are nuclear weapons in the hands of operators fighting an escalating war for the next-generation services: VoIP and videoconferencing. Sprint/Clearwire will detonate the first bomb in this competitive quest in 2010, using the Android platform. If Apple has the ability to join the party, it needs to do so quickly, instead of following the popular suggestion of joining VZW's me-too EVDO network.

Final clarification: When the AT&T iPhone exclusivity ends, Apple may simply be able to launch the iPhone on all carriers, using all the applicable radio standards in different versions: WiMax, LTE, and 1.7 GHz HSPA+.

But if it chooses only one carrier -- for whichever reason -- and can do so meaningfully before backwards-compatible LTE handset chips become available, it needs to take advantage of Sprint/Clearwire's WiMax network in order to not slip behind competitors such as Android and potentially others such as Palm/WebOS and Blackberry.

LONG: AAPL, RIMM, QCOM and GOOG

Available Today: iPhone Experience From Verizon and Sprint, at HALF the Price!

2009-11-03T08:42:00.000-08:00

It never ceases to amaze me how many real and prospective Apple iPhone users don't know they can get service for half the price, and in some ways improve the functionality.

The lowest pre-tax price at which you can obtain cellular service for your iPhone and laptop today is $130 per month -- $70 for the iPhone and $60 for the laptop.

You can cut that to $60, or more than half, by using the newest 32-gigabyte version of the Apple iPod Touch in combination with Novatel's MiFi device offered by Verizon Wireless and Sprint. In this latter configuration, the Novatel MiFi device provides for ubiquitous service to up to five simultaneous devices, including your iPod Touch and laptop(s).

What about voice service, you say? This is clearly the point at which this "synthetic iPhone" solution will not be acceptable to every single consumer. Using the iPod Touch, you can use any of numerous available VoIP programs such as Skype and Vonage, just to name a couple. Some of these providers have choices between pay-as-you-go a-la-carte pricing and monthly subscriptions. Unlike a traditional wireless circuit-switched carrier such as AT&T, these can take many forms and for many users cost well below $10 per month, depending on the usage pattern.

One objection against the iPod Touch + MiFi solution is that these are two devices instead of one. This is true, but considering that the combined size and weight of these two devices is almost identical to one regular iPhone, this is not a big deal. Furthermore, when you are in your own home and don't need to carry around the MiFi device, you benefit from the fact that the iPod Touch is thinner and lighter than the iPhone.

Surely there are other objections against the iPod Touch + MiFi combination as well, including battery life and multiple chargers.

However, the "synthetic iPod" also confers one other benefit except for giving the user service at half the price: No relationship with AT&T. I am the opposite of those malcontents who perpetually claim to "hate " AT&T, but for those who love their iPhone, but would pick any carrier except AT&T if given the choice, the fact is that the choice is already here!

This should be a huge selling point by Verizon Wireless, Sprint and Novatel -- but for some reason they have never pressed this important argument.

So there you have it: You can cut your iPhone monthly bill in half, and get your service on Verizon Wireless or Sprint, today, by using the iPod Touch + MiFi combo.

A Plan for Novatel's MiFi Comeback

2009-11-02T06:52:00.000-08:00

Following Novatel’s (NVTL) 3Q report and 4Q guidance last Thursday evening, NVTL stock dropped over 25% on Friday. Investors had expected strong MiFi revenue growth for 4Q, but management stated that this was unlikely to happen, despite continued channel sell-through improvement. The culprit was simply an inventory build-up in 2Q and 3Q, presumably at Sprint and/or Verizon Wireless.

Aside from sell-through catching up with inventories by 1Q, there are other more fundamental technology shift reasons why NVTL should see very strong MiFi growth throughout 2010:

1. There will be a WiMax/EVDO version of the MiFi for Clearwire (CLWR) / Sprint (S) / Cablecos. Given the dramatically lower cost per bit associated with Clearwire’s WiMax network, compared to EVDO, the monthly service price should come down, and the 5 GB/s monthly cap could be increased. When could this happen? Given the dual-mode nature of the device, and that WiMax is already, or will soon be, offered in numerous large cities such as Chicago, Philadelphia, Atlanta, Las Vegas, Dallas and Seattle, Portland and Baltimore by December 2009, a dual-mode WiMax/EVDO version of the MiFi is already overdue. It is reasonable to expect availability of this device by 1Q.

2. There will be an LTE/EVDO version of the MiFi for Verizon Wireless (VZ). The rationale is the same as for the WiMax version. In terms of widespread city deployment, it appears VZW is approximately one year behind Clearwire in deploying LTE vs. WiMax. LTE chips are not yet mature, so it is reasonable to expect such an LTE version of the MiFi late in 2010, probably 4Q.

In both the WiMax and LTE cases, the latency of these networks compared to EVDO is much lower, making these networks much more suitable for VoIP. There is an enormous itch by many people to switch to cheaper VoIP telephony, but quality concerns rightfully abound. Do you really want to save $50 per month if the quality of your phone conversations deteriorates from time to time? Probably not worth it for most people.

The key MiFi advantage in a low-latency WiMax and LTE world is that you can use as your handset terminal a WiFi-only device such as the Apple (AAPL) iPod Touch, on which you run your favorite VoIP service such as Skype (EBAY) or Vonage (VG). The stage is now set for a cottage industry of VoIP apps to take advantage of the ability to de-couple VoIP service from otherwise mandatory voice service offered by the large cellular carriers such as VZW, Sprint, T-Mobile USA and AT&T (T). Yet, at the same time, you also support your laptop – or several laptops – using the same MiFi connection, paying one unified price that is much lower than the current captive voice plan rates.

The good news for NVTL is that this mobile VoIP trick is possible already today, with the caveat of EVDO having potential quality issues for VoIP as a result primarily of latency. That said, NVTL can gain early-adopter business from this architecture today, and then grow it dramatically once the WiMax and LTE versions become available during 2010.

There is a third development we can expect from NVTL’s MiFi device in 2010, and that is the transition from 802.11g to 802.11n. In the past, 802.11n has meant unacceptable battery performance for mobile devices.

However, given new single-stream chips such as Atheros’ AligN 802.11n router chip, it is now possible to beef up the performance of the MiFi solution dramatically. The range of the MiFi today is suggested to be 33 feet. With 802.11n, even in single-stream configuration, both range and speed should increase dramatically. The 802.11n speed increase also goes hand-in-hand with the greater capabilities of WiMax and LTE when compared to EVDO.

What is the greatest threat to the NVTL story in coming quarters and years? Given that the market for this MiFi-type functionality should increase faster than almost any product category, the answer is pretty much only one: competition. At its core, the basic functionality of converting a licensed spectrum wireless broadband signal to WiFi is not rocket science. We should expect copycat devices not only from Huawei and Sierra Wireless (SWIR), but also from the handset operators such as RIM, HTC and others as they incorporate this functionality in coming years.

In the long run, the largest part of this MiFi-functionality market will be an integral part of the smartphone hardware/software. That said, in the meantime NVTL has managed to gain first-mover advantage with an unusually attractive and well-designed – indeed iconic – stand-alone product. NVTL should be able to use WiMax, LTE and 802.11n to leverage itself into one of the fastest-growing companies of 2010 as mobile VoIP takes off. With the shares now trading at a severe discount, it looks to me like this may be a superb investment proposition for the next 6-12 months.

LONG: AAPL, RIMM, NVTL

First Look: The World's Thinnest/Lightest Laptop

2009-10-26T09:31:00.001-07:00

Until you have seen the new Sony Vaio X laptop, you haven't seen anything at all. This just blows your mind away. It will be delivered to consumers November 20, and you can pre-order it from Sony now.

This laptop is the thinnest, lightest and most battery-efficient thing on record. When you pick it up, you're asking: Where is the battery? It's so light you have to be careful to not throw it up in the air by mistake. With the small battery, it's 1.6 lbs. With the bigger battery, I think it's 2 lbs or slightly more. The battery life is 2.5 hours with the small battery, and 12 hours with the big battery. And yes, both batteries are included, so for a long flight you're covered for 14.5 hours even without a power cord.

This is a 2 GHz Atom with 2 meg RAM and a 128 gig SSD. The color is "gold" which sounds bad, but doesn't look bad at all in reality. It's a pale gold bordering on silver, but at a minimum it just doesn't look bad at all. For connectivity, it has 802.11n by Atheros and Gigabit Ethernet -- an amazing feat on a device this thin.

The screen is 11.1 inches, which is a little smaller than my normal minimum acceptance of 12 inches. The keyboard is 17mm pitch, which is also smaller than a typical 12 inch laptop. Not ideal, but not terrible either -- compared to other ultra-light netbooks.

The device oozes quality. It seems strong as a rock, similar to the MacBook Air. Yet it weighs essentially half of the MacBook Air. It's not as rounded as the MacBook Air, but with these dimensions and weight, it still makes the MacBook Air seem like a total hog from ancient pre-history. The keyboard feels high-quality, despite being a shade too small.

The price is $1,500, or $300 less than the MacBook Air with a similar 128 gig SSD. As is typical of these prices, they don't include 3-year warranty ($200) and Microsoft Outlook/Office ($450).

The best competition I have seen against the Sony Vaio X are, at the low end: the MSI L2100, which has a 12 inch screen and sells for $400. No SSD or ultra-thin or ultra-light, but still as small as any comfortable laptop has been otherwise. The keyboard is very good. On the high end, the Toshiba R600 is nearly as thin and light as the Sony Vaio X for $3,500, but that includes an industry-first gigantic 512 gig SSD and a faster non-Atom Intel dual-core processor. The weight is 2.5 lbs, battery life 7.5 hours, and it includes a 3 year warranty -- had better be, at that price!

Bottom line: The Sony Vaio X is an outrageously compelling laptop, unlike anything else. It's so thin and light, that one feels transformed to a future science fiction world just by touching it and lifting it up. Some people may find it too small or lacking in CPU power to be a primary office computer, but for everyone else it is only a matter of whether they can spend $1,500 (or $2,150 equipped with 3 year warranty and Microsoft Office).

Microsoft's Debacle – and Google's Challenge

2009-10-14T08:30:00.000-07:00

Microsoft’s (MSFT) recent debacle with its Sidekick device is the ugliest user experience we may have ever seen in wireless. The Sidekick device was the first one to backup and synchronize over the air (the “cloud”) to a central server starting already several years ago. The company behind the device was acquired by Microsoft 18 months ago, and after that point the Sidekick platform fell behind the competition – Blackberry (RIMM) and iPhone (AAPL) to begin with, and more recently also Palm/WebOS (PALM) and Google/Android (GOOG). Yet, the remaining Sidekick users appear to have lost all of their data as a result of Microsoft’s server failure.

What this saddest of technology sagas illustrates is that while cloud sync may be convenient, it is no replacement for making your own daily local backup on your own PC at home. Supplement, yes – replacement, no.

What that in mind, how will the typical consumer fare if he migrates from a Sidekick device to a Google/Android device made by HTC, Motorola (MOT) or Samsung, just to mention the manufacturers that will be in the market on T-Mobile and Sprint before Thanksgiving this year, according to their recent press releases? In particular, consider the following use case: An average consumer has a Microsoft Vista PC using Microsoft Outlook for his calendar and contacts database, or the equivalent on the Apple platform. He is not connected to an enterprise environment such as Microsoft Exchange. He may or may not be fine with any form of cloud sync for reasons of security and/or reliability, but in any case he just wants to do a local backup on his own PC, presumably using a simple USB cable.

This is what every consumer Blackberry user on a Windows OS has been doing for over 5 years. It works as simple as plugging in the cable and pressing “Synchronize” on the desktop utility. It synchronizes and backs up. You could have tens of thousands of calendar and contacts records, and it “just works” in a matter of a couple of minutes.

So does it work on Android phone? As it turns out, in every case except one, it does not. It fails this most basic requirement of security and reliability. Let’s go through the devices one by one:

T-Mobile USA offers two Android devices today, with a third on the way in a matter days or weeks. HTC makes the G1 and the MyTouch, and neither offers local sync to your non-Exchange Microsoft Outlook. If you trust Google to sync over the air, or if you have Microsoft Exchange, you’re fine. As far as Google’s cloud sync goes, how accurate is it for calendar and contacts? Does it still work if you have many tens of thousands of entries?

Hitting the T-Mobile USA stores supposedly on November 2 is the Motorola Cliq, announced on September 10. It works much the same way as the HTC devices, except it adds its own cloud sync software called MotoBlur. I asked several Motorola representatives at last week’s CTIA (Cellular Telecommunications Industry Association) trade show in San Diego , where Motorola focused almost exclusively on this device, and the answer I received was that this service only handles 2,500 entries. That makes it essentially useless certainly for me, and just about everyone I know.

In addition, they described a complicated procedure for uploading one’s contacts/calendar data from Outlook to the MotoBlur cloud service for the initial set-up. What about getting this data out of the MotoBlur service if I change my mind and want to move to an iPhone on AT&T, PalmPre on Sprint or Blackberry on Verizon, I asked? They told me once the data has been sucked into the MotoBlur service, I can’t get it out. Ouch.

Samsung announced its first Android device for the US market, to be available on Sprint November 1. I asked several Samsung reps at the CTIA event if it can sync locally with Microsoft Outlook, and they all told me that it can’t. Basically, same story as with the two HTC devices currently offered by T-Mobile USA. Fail, fail, fail, fail on all these four Android devices.

This brings us to the fifth and final Android device in the US market this month, having just become available on Sprint October 11 – the HTC Hero. Guess what? It actually comes bundled with software that accomplishes this vital task required by most consumers.

So there we have it: 4 out of these 5 current or imminent Android devices are unsuitable for the average US consumer who has a local PC contacts/calendar database such as Outlook, and wants to keep it that way. Cloud sync has been showed to be potentially unreliable (to say the least) and may not even handle larger databases for those of us who have many thousands – or tens of thousands – of entries.

This should be an easy problem for companies such as HTC, Motorola and their current and future carrier partners to fix. It doesn’t require a change to any device hardware, and doesn’t add any noticeable cost. Let’s hope they see the light, or they will find themselves with many unhappy customers, poor reviews and a high return rate.

In the meantime, products such as the iPhone and Blackberry look very good in comparison – at least when it comes to this most basic and essential functionality. I see a marketing slogan for one of these companies in the near future: “Security and Reliability.”

Why Government Regulation for Internet Service Providers Is Bad News

2009-10-14T08:03:00.000-07:00

Our government has settled on a new formula for regulating industry, and they are applying it to one industry after another. While they haven’t yet made it to the restaurant business, at this pace we may not have to wait too many years for the following to happen: Every restaurant is mandated to only offer food in the form of an all-you-can-eat buffet. The government decides on what needs to be served on this buffet, at a minimum, in order to be compliant. No restaurant is allowed to deny a customer service, and all customers must be charged the same price. After all, eating is no longer one half of an exchange of private property, but a “right” entitling a consumer to his neighbor’s property.

What would happen to the restaurant industry if it were regulated this way? 300 lb people would pay the same as 100 lb dieting models, all while abusing the buffet’s contents. The restaurant owner, unable to discriminate or restrict, would have to raise the uniform price to reflect the heaviest consumer, at which point the price becomes unacceptable to the lighter consumer. Unable to reduce cost because of the requirement to provide a minimum level of content, the restaurant would under-invest in other areas such as kitchen and furniture; yet profitability would suffer despite the higher price. Eventually the government steps in to limit the price restaurant charges for the buffet. Cost then exceed revenue. Bankruptcy follows.

Crazy, you may say. Of course it is! But now apply the mad scenario of the government-regulated lunch buffet to two other industries: Internet Service Providers (ISPs) such as AT&T (T) and Verizon (VZ), and the health care industries, including insurance companies. Let’s take these two industries in turn.

Internet Service Providers (ISP): The drumbeat is on from the FCC and Congress to force companies such as AT&T and Verizon to “open” their pipes to positively anything that any user wants to do. Think the streets of San Francisco, where lawlessness and filth have become rampant. According last week’s AT&T management presentation at the CTIA in San Diego, 3% of its wireless users consume 40% of the bandwidth. Unless AT&T can charge these people more – the more you eat, the more you pay – its economics will collapse under its own weight. Casual users don’t want to pay for the investments necessary to keep a high level of service for those who use the most resources.

Charging people for usage can be a good thing, but for Internet bandwidth it can make for a tough consumer proposition. Most people have no clue how much they just consumed by clicking on a web page. I sure don’t. As a half-measure and compromise, AT&T and Verizon want to “traffic-shape” the consumption by having computers monitor user behavior and throttle down extreme usage scenarios. By doing so, they believe they can maintain flat-rate pricing for at least a bit longer, instead of having to charge per bit. This attempt at establishing order between those who take advantage of the all-you-can-eat buffet, and those who just eat “normal” or even little, is at a bare minimum a property right of the service provider.

Under many so-called “Net Neutrality” proposals, the government would deem such a “traffic-shaped” consumer offer illegal. You see where this is going: The government (FCC and Congress) passes a law proclaiming Internet-In-Your-Pocket a “right”, mandating a uniform level service that must be offered to all, and denied to none. Telcos and ISPs are then forced to invest to meet the demands of high-intensity users paying the same low flat rate as my grandma. Unable to raise prices, profitability falls, turns into losses, and bankruptcy follows. In the end, the government takes over AT&T, Verizon and all the others, offering a taxpayer-subsidized one-size-fits-all Internet that brings us to the level of Cuba’s consumer welfare. That’s the government-regulated lunch buffet applied to Internet service.

Then let’s apply the same principle to health care and related insurance. States and soon the Federal government impose mandates as to what a health insurance policy must cover: Thousands of details for all sorts of procedures, dramatically driving up cost. Because these are state rules, they almost automatically outlaw inter-state competition, in direct defiance of the commerce clause of the Constitution. While all normal insurance companies – car insurance comes to mind – price customers individually based on perceived risk and past behavior, the government forces health care insurance to charge only one price for customers, whether they appear super-healthy or a likely multi-million dollar liability. Put aside the emotion for a moment: As a businessman, would you ever knowingly agree to do business with a customer who you think is likely to lose you money? Of course not. That’s the fastest road to bankruptcy. Yet that’s the essence of the health care “reform” now making itself through Congress.

In the old days of The Cold War, we used to define Communism and Socialism as ownership of the means of production – banks, car companies, etc. The current plans to mandate a one-price lunch buffet for Internet access and health care insurance don’t directly confiscate the shares of the companies providing those services. Rather, the government seeks to use regulation to smother rational economic behavior, forcing the inevitable bankruptcies, surely swiftly followed by a massive bailout of all of those companies. Think Citibank (C), Chrysler and General Motors.

If there is a serious objective to maintain a free enterprise system, all efforts to regulate services and products must be rejected. All price controls must be rejected. And finally, the core principle at the heart of this country’s 220 year legacy – private property, which implies freedom of contract – must be vigorously defended. With the government attacking the Internet service provider market and the health care industry market with mandates and price controls, the opposite is now happening. If the US government now gets its way, profitability in these companies will be dealt a body blow, most certainly leading to lower stock prices on an inflation-adjusted basis.

Blackberry’s 26 Advantages over iPhone

2009-08-10T07:13:00.000-07:00

We all have numerous good reasons to love our iPhone. It revolutionized the handheld business with its AppStore and ease of use interface. Apple (AAPL) will continue to gain ground, and further innovations to its iPhone product portfolio could accelerate its growth even further. The synergies with the Mac computers and the Apple Stores themselves, are real and material.

The advantages of the iPhone are mostly immediately visible. Its differentiating characteristics are extroverted, shouting them right into your face. For the casual observer, these iPhone advantages are very compelling when comparing it to its main rival to date, the Blackberry. However, Blackberry also has numerous advantages, almost all of which are “behind the scenes” and therefore often beyond the comprehension or attention span of most consumers to fully analyze before a purchase decision is made.

One is tempted to draw a political analogy – the flamboyant candidate with the eloquent rhetoric, versus the “boring” candidate focusing on the substance of the intellectual argument. The analogy fails in part as far as the iPhone is concerned, because its “superficial” advantages are real. However, the analogy holds as far as the Blackberry is concerned, because its advantages require a more serious intellectual analysis by the consumer in order to be fully appreciated. For this reason, it is possible that Research In Motion (RIMM) is underestimated as a force in the consumer market as well as the stock market.

Seeing as we already know the strong advantages of the iPhone, ranging from the class-leading AppStore to its beautiful and easy-to-use interface, it is about time that someone lists the advantages of the Blackberry when compared to the iPhone. Below are the top 26:

1. Blackberry can be used on almost every carrier in the world (over 475 of them). In the US, the iPhone is available on AT&T (T) only.

2. Blackberry is available in five form factors – small keyboard, large keyboard, no keyboard, flip phone, and candy-bar.

3. Most Blackberries have keyboards, so you can actually type fast and with no errors. Helps while driving, walking, carrying something in your other hand – all the time. iPhone: well…

4. Blackberry uses standardized (=inexpensive and available everywhere in the world) MicroUSB connector for synchronization/charging. iPhone has a much larger proprietary 30-pin connector.

5. Some carriers such as Verizon (VZ) and Sprint (S) offer unlimited international Blackberry data roaming for $40/month or less. iPhone does not. This could save you literally tens of thousands of dollars when you are abroad.

6. If your Blackberry is on T-Mobile USA, it also offers unlimited WiFi calling from anywhere in the world. This is with your existing number – in and out – so no new special number, procedure, etc. iPhone cannot do this (because it is only on AT&T; only T-Mobile USA offers this), and it can save you well over $100 per day when you’re abroad. Think $1 per minute savings, and you’re on the phone two hours per day. That’s $120/day.

7. Blackberry has expandable memory. iPhone is fixed and sold at 8, 16 or 32 gig only.

8. Blackberry has removable and expandable battery. iPhone is fixed.

9. Blackberry allows programs to multitask. iPhone has limited multitasking.

10. The newest Blackberry screen resolution is 480x360. iPhone is 480x320.

11. Blackberry allows communicating peer-to-peer via PIN identifier, circumventing the email system. No such iPhone equivalent.

12. Skype (EBAY) on the Blackberry? Yes, from anywhere to anywhere. Skype on iPhone? Only if you’re on WiFi.

13. Sling on the Blackberry? Yes, it’s free. Sling on iPhone? $30.

14. Google (GOOG) Voice on the Blackberry? Yes, it’s free. Google Voice on iPhone? Verboten.

15. Blackberry can be synchronized to multiple computers simultaneously, if you have multiple computers.

16. Multiple Blackberries can receive the same email feeds simultaneously, if you have multiple Blackberries.

17. Blackberry can sort the address book entries by company name, so you can scroll down a long list of names you don’t remember, but you just want to see who works for which company. Aside from sorting, the iPhone can take several seconds to search your address book, particularly if you have several thousand address book entries.

18. Blackberry isn’t slowed down by having, say, 10,000 or 100,000 address book entries. Try using an iPhone with 10,000 address book entries.

19. All major instant messengers are available on Blackberry.

20. Blackberry is available with multiple browsers from multiple suppliers. iPhone is available only with its standard Safari browser.

21. Blackberry synchronizes with iTunes – and every other media management program.

22. Blackberry models with 480 pixel resolution and WiFi offer PrimeTime2Go, an $8/month TV service that works as a DVR.

23. Blackberry fits as many emails in the inbox as there is memory available (typically many tens of thousands). iPhone is limited to 200 emails. Yes, iPhone has a remote look-up capability, but that doesn’t do you any good when you’re on an airplane or are otherwise out of coverage.

24. Price: Unlimited iPhone voice/data service, including unlimited SMS, is $150/month. Blackberry can be had for much less. For example, unlimited Blackberry service is offered on Sprint for $100/month, T-Mobile USA $125/month, MetroPCS $50/month, although AT&T/Verizon match the iPhone at $150/month.

25. Prepaid “no contract” flexibility: The AT&T web site says the iPhone is sold with a 2-year contract only, although once upon a time it offered a “contract-free” iPhone if you paid close to $899 up-front for the iPhone itself. In contrast, you can get prepaid no-contract Blackberry service on any old or new T-Mobile USA Blackberry handset for $65/month (600 minutes, unlimited Blackberry/Internet, but no SMS), or you can get truly unlimited-everything prepaid $50/month service from MetroPCS, if its handset selection and coverage areas are acceptable to you. That’s ONE THIRD the cost of the iPhone, and there is no contract.

26. Blackberry is an encrypted military-grade security platform, with 100% market share at FBI, CIA, White House, Congress, Department of Defense, major consultancies and major investment banks. In contrast, iPhone has security vulnerabilities. Please see this document for details as to why the Blackberry is the only platform approved for use in our national security agencies. It compares against the iPhone and Microsoft Mobile platforms (.pdf).

Disclosures: Long RIMM, AAPL and GOOG

Blackberry Price Study: Comparing Cellular Carriers

2009-08-10T07:11:00.000-07:00

This is a comparison of prices between the five major cellular carriers. It focuses on one specific scenario: Unlimited-everything service for a Blackberry, purchased by a regular individual consumer – not an enterprise. I have divided the comparison into three parts:

1. Unlimited US domestic voice+SMS+email/Internet on the Blackberry handheld.
2. Having your Blackberry serve as a modem for your laptop.
3. Blackberry data roaming outside the US.

Let’s start with the cost of Unlimited Domestic Service:

Verizon (VZ): $150/month, consisting of unlimited voice $100, unlimited Blackberry/Internet $30 and unlimited SMS $20.

AT&T (T): $150/month, consisting of unlimited voice $100, unlimited Blackberry/Internet $30 and unlimited SMS $20. In other words, identical to Verizon.

Sprint (S): $100/month, which happens to be the simple all-in price for everything, and also includes GPS and TV.

T-Mobile: The baseline scenario is $125/month, consisting of $100 for unlimited voice+SMS, and $25 for unlimited Blackberry/Internet. However, if you qualify for the $50 unlimited voice loyalty plan, the total is only $85, because you add $35 for unlimited Blackberry/Internet/SMS. These plans also include unlimited calling over
WiFi, a technology not available from any other US carrier.

MetroPCS (PCS): $50/month, which happens to be the simple all-in price for everything.

Using Blackberry as a modem for a laptop/PC:

Verizon: Adds $30 per month for a BIS account; $15 for a BES account. 5 gig/month soft cap.

AT&T: Adds $30 per month. 5 gig/month soft cap.

Sprint: Used to be $30 per month with the customary 5 gig/month soft cap, but was recently discontinued in favor of no such service at all.

T-Mobile: Free on EDGE devices, which is going to be slow. However, for people who intend to use it only rarely as a back-up to other connectivity, it could be a good option. Free is good! Once T-Mobile launches its first HSPA (“3G”) Blackberry soon, expect some form of paid plan to follow.

MetroPCS: Not applicable.

What about Blackberry data roaming while abroad?

Verizon: Unlimited monthly use adds $35, in the form of a $65 plan replacing the $30 domestic-only plan. You can change the plan forth and back at any time.

AT&T: As an individual/residential account, no unlimited plan is available. You have to pay $25 for 20 meg, or a higher amount for a larger plan. The fatal flaw with this approach is that you don’t know how much data you are consuming, so you can easily exceed the 20 meg (or whichever larger number you purchase) without knowing, racking up hundreds or thousands of dollars in a matter of days. If you convert your account to a business/enterprise account, there is a $65/month plan available, replacing the domestic-only $30 plan, but you have to subscribe for a full year, making the incremental cost effectively a $420/year plan.

Sprint: Unlimited monthly use adds $40. You can change the plan forth and back at any time.

T-Mobile: Monthly email and web browser-only use adds $20. You can change the plan forth and back at any time. Keep in mind that this plan covers ONLY email and web browsing on your Blackberry. All of your other applications are not covered. In most countries, use of those other applications cost $15 per meg, which of course is impossible to measure, so just as in the case with AT&T, you can easily rack up hundreds or thousands of dollars in a matter of days, without knowing.

MetroPCS: Not applicable.

What are the main conclusions?

For regular domestic handset use, AT&T and Verizon are the most expensive, with MetroPCS being the cheapest. Sprint and T-Mobile are in the middle.
For using the Blackberry as modem for your PC, power users are best served by AT&T and Verizon. Infrequent or emergency users are best served by T-Mobile. Sprint fails this test.

For using the Blackberry abroad, for the purpose of using data (not voice) services, Sprint and Verizon are the only acceptable choices. T-Mobile and AT&T fail this test miserably, because their customers can very easily rack up dramatically large bills without knowing. This conclusion is of course ironic, because T-Mobile and AT&T are the GSM operators who led in this area only as little as a year ago.

Special award to T-Mobile: As a result of UMA technology (GSM tunneling through WiFi), a T-Mobile Blackberry can be used for making and receiving calls for free, while on WiFi abroad. This saves $1-$5 per minute, depending on the country. All other circuit-switched calling on US carriers, while roaming abroad, is prohibitively expensive.

Bottom line: There is no one Blackberry solution that is optimal, because all US operators each have flaws in their pricing structures. Different users have different priorities. What is clear is that while Sprint and Verizon were behind as little as a year ago, they have now caught up, and at least in the area of international data roaming, they are now the ONLY acceptable choices, by a very wide margin.

One major caveat: This study is only about price. It does not take into consideration coverage discrepancies (what’s great coverage for one person, is another person’s disaster) or handset choices, such as the fact that Verizon and Sprint Blackberries lack WiFi.

Disclosure: Long RIMM.

Euthanasia for Clunkers: The So-Called 'Healthcare Bill'

2009-08-04T22:14:00.000-07:00

“Maybe you're better off not having the surgery, but taking the painkiller.”

-- President Obama (June 24, 2009) – on the topic of health care for elderly people

If the government can’t handle a $1 billion program that’s as simple as giving a $4,500 check to those who trade in an old car, how can it be trusted to administer a $1 trillion program where your life is on the line? Of course it can’t. The Cash For Clunkers program was a 136 page bill in Congress, and the Euthanasia For Clunkers program (the so-called “health care bill”) is around 1,000 pages just for starters. Its main purpose is to kill whatever remaining aspects of private health care, in favor of a Washington DC politbureau which will decide what health care you will, or will not, obtain.

As with every single government program, this massive socialist scheme will naturally generate a vast bureaucracy, cost many times more than what is being promised today, and deliver abysmal services. This is really so obvious that it shouldn’t be necessary to argue the point, but in the age of the Obama Marxist takeover of America, it has become necessary to explain these basics.

We already have numerous government health care programs – so many, in fact, that the government directly accounts for one third of health care expense in America already. If you include indirect spending and control, the number could be closer to two thirds. Some of the larger government bureaucracies include Medicare (for the elderly) and Medicaid (for the poor). Then we have a long list of other special programs for other groups in society: Indian reservations, the military, Congress and children, among others. The elderly and the poor already being covered, the only remaining purpose of Obama’s multi-trillion-dollar government bureaucracy is to cover those of us who already have health care, as well as one new group of approximately 10 million illegal invaders, people who in most cases ran across the border in direct defiance of US law.

In order for the government to take over the health care system, and to cover approximately 10 million illegals, while at the same time not increasing the number of doctors, nurses or hospitals by a single person or unit, someone else needs to get less health care. Who will have to surrender more than taxes in order to balance this equation? Most likely, all of us will pay to some extent, but the elderly will be the prime target. In Obama’s Marxist philosophy, they have out-lived their useful lives and seeing that as in his mind property rights don’t exist, the elderly in particular can have everything taken away from them by the state. After all, “we” ARE the state, in the view of the Marxist. And you can’t sue yourself.

The already-existing government programs, such as Medicare and Medicaid, are already bankrupt and huge failures. 21% of state budgets go to Medicaid alone. Anyone serious about health care reform would start by getting rid of programs that don’t work. If we abolished these huge government bureaucracies that drain private industry, this country would be a lot more competitive with the faster-growing economies around the world. Instead, with Medicare and Medicaid being total failures, Obama and Pelosi are proposing a new and even huger bureaucracy to serve as a super-umbrella-bureaucracy over all the failures. It is rewarding failure with power. Mr. and Mrs. Government Bureaucrat, you’ve failed in everything that you do. You’ve squandered tens of trillions of dollars. Now, let’s give you a gigantic increase in power!

If Obama and Pelosi get their way with the Euthanasia For Clunkers bill, expect all of us, but particularly the elderly, to await that “thumbs up, thumbs down” scene from the movie Gladiator. Need a pace maker? Thumbs down, take a pill. Need hip surgery? Thumbs down, take a pill.

Obama has said as much; perhaps we should listen for a change. When politicians promise nothing but sweetness, light and jingles, it’s time to question and be suspicious. But when politicians basically tell you that they will stick it to you, then it’s time to ring the alarm bell, just like Winston Churchill did in the 1930s. Remember that paperhanger in Austria who moved to Munich and wrote the book “Mein Kampf” in the 1920s? Perhaps we should have listened a bit earlier, no?

There is one, albeit dubious, benefit with the Euthanasia For Clunkers bill, and that’s in the form of “shovel-ready” government stimulus. What do I mean? In order to administer any of these programs, including Cash For Clunkers, there is the need to construct new government offices to house tens of thousands of bureaucrats. It will surely increase employment in the government, with tens of thousands of people being hired to investigate all aspects of your life, so that you minimize your health care expense. What do you eat? We have to change your diet. How much do you exercise? Stop when the dog stops. What do you drive? Make all motorcycles illegal or tax them like tobacco. So the building of these new government bureaucracy facilities will indeed stimulate the construction industry. But the same thing could have been said about Auschwitz.

The EU Stabs Apple In The Back

2009-06-30T09:22:00.000-07:00

First Qualcomm (QCOM), now Apple (AAPL). Remember the GSM vs CDMA phone standards wars some 15+ years ago? The European Union [EU] at that time turned against Qualcomm in favor of the Nokia (NOK)-Ericsson (ERIC)-Alcatel (ALU)-Siemens (SI) backed GSM standard, mandating it in Europe and therefore limiting what would have been an even greater potential for Qualcomm.

Fast forward some 15+ years, and they’re baaack! The EU is now mandating that all cell phones be compatible with 3rd-party MicroUSB chargers by January 1, 2012. I first wrote about this subject on SeekingAlpha on December 24, 2008, and this development is now reaching its final stages of lawmaking in Europe.

This new EU mandate isn’t a big deal at all for essentially every cell phone maker in the world, including Nokia, SonyEricsson (SNE), RIM (RIMM), Samsung, LG, HTC and Motorola (MOT), because they are in most cases already well underway of implementing the MicroUSB standard in all of their products. Just walk into your neighborhood AT&T (T), Verizon Wireless (VZ), Sprint (S) or T-Mobile USA store, and look for yourself – we will probably approach 90% MicroUSB exiting this year.

For Apple, however, this represents an ugly inconvenience. The iPhone uses Apple’s proprietary 30 pin connector, and there is a vast jungle of devices and docks built around this engineering decision. Therefore, it isn’t so easy for Apple to “just switch” to MicroUSB as it was for all the other cell phone makers. Apple at this point has two options:

1. Simply rid itself of its 30-pin connector in favor of MicroUSB. Most people seem to suggest that this is as unlikely as an Obama budget cut. Apple wouldn’t want to jettison its accessory ecosystem.
2. Add a MicroUSB connector elsewhere on the device, presumably on top or on one of the sides. This appears more likely. It does, however, impose cost and an engineering problem with all sorts of ramifications, including aesthetics. Apple would do this kicking and screaming.

It has been suggested that there is a third way for Apple to comply with this new law. That would be to offer a 30-pin to MicroUSB adapter. This has the obvious advantage of not dealing with the painful two alternatives listed above. However, it has two deficiencies: (1) One more thing to carry and (2) It’s not clear whether this would comply with the EU mandate. I think it would be unlikely to comply, because it would be against the spirit of standardization and would require a piece of equipment that would largely negate the purpose of the law. The EU would also seize the opportunity to make life difficult for Apple by interpreting the EU ambition in this way, thereby further favoring their home area companies such as Nokia.

For Apple, “The European Problem” also becomes a global problem, because Apple doesn’t want to design two different iPhones – one for Europe and one for the US. Apple will eventually add more models, but this is an unnecessary degree of duplication it will not want to engineer.

Qualcomm more than survived the EU’s attempts to make life difficult for it, many years ago. Likewise, Apple will more than survive this attempt as well. That said, this represents a road bump in Apple’s product road map, of which I have not heard much to date. It’s over a year into the future, and whatever Apple decides to do, I don’t expect an implementation until June 2010 at the earliest.

There are many political ironies in this story. First and foremost, this is part of an industrial policy in the EU. We are being told day in and day out that industrial policy is such a good thing, despite that it’s been proven to be one of the greatest disasters of mankind. Now, Washington DC gets a taste of its own self-defeating medicine.

Another irony is that Apple, of course, is a product of as much of an industrial policy-free entrepreneurial environment as it gets. If Apple had been run out of Washington DC, it would have looked like the US Post Office competing with FedEx. Instead, Apple has proven itself to be perhaps the greatest innovator of its kind, yielding more success than imagined years ago precisely because of the lack of any
government mandates deciding its business. Walk into any Apple Store, Mr and Mrs America, and you will find that Apple offers its own insurance policy for some $99 per year (“AppleCare”), which is completely privately funded and completely unregulated. And customers love it.

Palm Pre review - June 6, 2009

2009-06-06T16:50:00.001-07:00

Anton’s Palm Pre review

I played with the Palm Pre for a few hours today, at two different Sprint Stores. My review below is not a comprehensive review (go to www.engadget.com and equivalent for that), but it does point out my observations and comparisons.

First, what are the positives?

1. Unlike iPhone, it uses the same standard MicroUSB as the newest Blackberries and for that matter all other new handhelds. This is the standard for the next decade and means a lot of simplicity and savings.
2. The screen is beautiful and it seems to render web pages very well, better than Blackberry version 4.6 anyway (soon-to-be-released 5.0 is another thing). It seems similar to iPhone in the web browsing department.
3. The user interface uses “cards” that is in my opinion better than the iPhone. It is the most elegant operating system on the market today. Extremely impressive, extraordinarily elegant interface. This blows the iPhone out of the water and sets a new bar.
4. The address book seems clearly better than the juvenile and generally limited one in the iPhone, which is only good if you have perhaps 100 or 200 entries. The Pre address book seems capable of handling 20,000 or more entries, such as sorting the entries well (“company name, followed by last name and first name”) seemingly similar to the Blackberry.
5. True multitasking, just like Blackberry, Google/Android and Microsoft – and unlike iPhone.
6. Sprint has a great “everything you can eat” plan for $100/month and it includes the great SprintTV service. In addition, Sprint is the only carrier that can give you a combo EVDO/WiMax modem for your laptop/PC/computer.
7. Over-the-air updates, unlike the iPhone and as of yet all-but-two Blackberries (8350 and 9530).
What are the negatives?

1. The sliding keyboard means it is difficult (impossible?) to use a protective cover of any kind – rubber, silicone, plastic, whatever. Somehow I expect a lot of complaints from people dropping it on the ground and scratching it.
2. The keyboard sure beats iPhone, but it’s not nearly as good as a Blackberry 8300 model and up. It is extremely small and has a nasty edge to it.
3. No GSM/HSPA for international travel, unlike the vital Blackberry models sold at Verizon and Sprint.
4. The battery is small, and is likely to generate inferior performance compared to the Blackberry 8800 models and up.
5. It doesn’t allow for secure communications (PIN-to-PIN) and truly encrypted emails. In other words, just as with the iPhone, Microsoft and Google, it can’t compete with the Blackberry in the area of security. As with all the other non-Blackberry platforms, you won’t be seeing this phone used by the Department of Defense, CIA, FBI, White House, Congress, investment banks and consultancies anytime soon.
6. There is no expandable memory, compared to Blackberry where 8900 models and up can handle 32 gig.
7. It can’t record video, unlike the Blackberry.
8. It can’t be used as a modem for your laptop/PC/computer, unlike the Blackberry.

Bottom line: This is a very attractive phone. In my opinion, it beats the current iPhone (launched July 2008 and expiring June 8, 2009) in every single category except two (no GSM and limited AppStore selection as of yet). The “cards” interface is revolutionary – in a positive way! I have no doubt that Palm will take significant market share with this device, and for good reason. That said, I don’t see why a Blackberry user should switch, especially given that all current Blackberries refresh between July 2009 and November, providing superior hardware with a much-improved browser. By the time we find out the level of maturity of this new Pre platform, the outstanding new Blackberries will be in the market. Now that both Palm Pre and Blackberry synchronize with iTunes, the rationale for getting an iPhone is a lot weaker. Blackberry’s AppWorld is on a path to match Apple’s AppStore, and the Palm Pre shouldn’t be too far behind in coming months. That said, Apple will be introducing new products on June 8, 2009, and that could in turn change the game soon enough.

Should We Have Saved LA?

2009-04-22T01:08:00.000-07:00

We learned two things from the release of the legal memos supporting the EITs (Enhanced Interrogation Techniques):

1. We didn’t come even close to torturing anyone. The kid-glove treatment detailed in these memos is far surpassed by our own military training, especially in our special forces such as the Navy SEALs. Our special forces not only have to look at a bug – they have to eat it.

2. The EITs yielded tangible results, specifically the uncovering of a plot that would probably have killed thousands of people in downtown Los Angeles. Surely more such examples from the relevant 2002-06 period are likely to be revealed in the future.

The latter revelation puts the Obama administration in a very dangerous position, if any journalist would bother to ask him or his amazingly and constantly clueless Press Secretary Robert Gibbs. The President has stated repeatedly and consistently over the years that he would never have approved these interrogations, and one of his first acts as President was to indeed ban them. At least from the President, there has been no lack of clarity on this policy position.

In light of the fact that Obama opposed the methods that saved thousands of lives in this one planned attack on LA alone, this yields a very radical conclusion: Obama is effectively saying that he doesn’t regret that his policy would have killed thousands of innocent civilians working in downtown LA. Even after the fact – when we know with the hindsight of history – that this was the outcome of his proposed policy, he says that it would still have been the right thing to do.

This is shocking. Would someone be angry with George Bush if he had deliberately and knowingly agreed to let 9/11 happen, just in order to avoid inconveniencing a blood-thirsty terrorist who was already responsible for killing 3,000 US civilians? You bet! Hopefully 100% of Americans would have been outraged and called for the impeachment of George Bush, if that had been his policy.

Yet this is now not only the new policy by the Obama administration, but also a confession about what it was willing to sacrifice in the months and years following 9/11. Thousands of innocent civilians working in downtown LA, just for starters. Why isn’t there dramatic outrage about this?

Even for Obama himself, who had proven to be politically cunning in a new and unique way, this is a forfeit of dramatic proportions. Unlike the economic debates, where one economics professor’s word against the next economics professor, can be complicated and confusing to a majority of the electorate, this is relatively easy to understand – and that’s just the historical part!

Going forward, this is a ticking time bomb for Obama in more ways than one. He is now making the same mistake John McCain made in the 2008 election: agreeing to fight with one hand behind his back. McCain – for no good reason whatsoever – decided to campaign with a lot less than half the money of his opponent. In this case, Obama has told us that he is now fighting with less than half of the intelligence he could otherwise have. Why less than half? We know this because the CIA says that it obtained more than half of its critical intelligence on the relevant subjects from the EITs.

This Obama forfeit now means that in the event of another terrorist attack, the rage and blame will show up at 1600 Pennsylvania Avenue immediately, and for good reason. Unlike 9/11, which was a game-changer that had been building up comparatively quietly since the mid-1990s, after 9/11 we now know a lot about the motives of our opponents. They have shown what they will do for a starter, and they say they want to eradicate our entire country, preferably with the heavy hammer of nuclear bombs. Obama’s answer? Let’s not inconvenience the masterminds of these terrorist acts by showing a caterpillar bug to them, so that they could get scared and help us prevent mass murder of innocent American civilians, perhaps to the tune of millions.

Interestingly, CIA Director Leon Panetta has a different take on all of this, when compared to his boss Obama. Panetta advised against releasing these memos, partially because the act to do so was plain outright unnecessary. Even more interestingly, in his confirmation hearings Panatta introduced an exception to this no-EIT policy: Basically, if we have to do it, we will do it. Apply EITs, that is. So if this is the policy, then there really hasn’t been any change in policy, has it? Yes, if Panetta had his way, but that’s not the policy as of January 22 of this year! Obama banned EITs, and with no exceptions. Then again, that’s not to say that Obama couldn’t approve any exceptions as he goes along. Gee, my head is spinning already. Isn’t it sad when the only hope for the government to save innocent lives rests on a hope that it will act inconsistently with its current policy?

Panetta’s desired exception policy has one particular deficiency: He says would like to apply EITs only if they are “necessary.” How will we possibly know if they are necessary? If there is the proverbial ticking time-bomb, is he really saying that we will somehow already know about it, and that’s precisely imminent – but not know enough to diffuse it? That seems like an almost impossibly unique scenario. Isn’t it more likely that we simply capture a really bad guy and we ought do simply squeeze anything and everything out of him, no matter whether we know that there is a ticking time bomb somewhere out there or not? It appears from Panetta’s language that this wouldn’t be good enough. And certainly Obama hasn’t left an exception even for the ticking time bomb, at least not in the executive order he signed, which constitutes the current policy.

The fact that we have now revealed what we did, and thereby identified the outer boundaries of what we have been willing to do, means that it will be all that much harder to get information from any captured terrorist in the future. Let’s say that Obama changes his policy, or that another President reverses the policy – what will this mean for EITs? For one thing, we couldn’t just go back to the EITs as stated in the 2002-05 memos. We would have to apply far harsher methods, because the terrorists now know we were unwilling to hurt them in the past. In other words, the release of these memos only made certain that we will have no choice in the future but to graduate from these almost laughable kid-glove methods, to something that looks and sounds a lot more like actual torture. The irony…

In the meantime, in LA they now know something new about the guy they elected: In Obama’s opinion, he would rather have sacrificed thousands of you in a catastrophic 9/11 attack, than – God forbid! – having the mastermind of 9/11 share a room with a bug. This is comical in its simplicity, but revealingly serious. Regrets, anyone?

Finally, one argument often voiced needs to be killed, once and for all. It is often said by Obama and his supporters that our EIT policy served to recruit more terrorists, and was therefore counterproductive. While in theory we can never know for sure, because you can’t prove what would have happened, or will happen, if you did or do something different, we can know one thing for sure: The EITs became – per definition! – sources of rumor and debate well after 9/11. You could argue it happened five years later, in 2006. So all of these other things, including the first WTC bombing 1993, the attacks in Saudi Arabia, Tanzania and Kenya, as well as the USS Cole, Danny Pearl, the other beheadings and of course 9/11 itself, all happened before it became known that we showed a bug – or waterboarded, or smacked around – a small handful of the worst terrorists in the history of the human race. And after that time? Not a single significant terrorist attack on US soil. With the new policies, we will see how long that lasts. Obama now owns any terrorist attack that we hope doesn’t happen. And he has chosen to fight for us with one hand behind his back. That’s a dangerous political gamble.

iPhone 3.0 event today

2009-03-17T11:55:00.001-07:00

Event ended a moment ago. Bottom line: a yawn. RIMM, PALM and others can sleep safely tonight.

Here are two of the highlights:
1. In one of the demos, the guy on stage was unable to spell correctly while typing on an iPhone. And he was an American, presumably educated, and an experienced iPhone user.
2. They highlighted a new app where the theme is "virtual play date for dogs" in which you can buy virtual sweaters (!) for dogs (!!) for some $0.99 each. Then watch these cartoon dogs "play" with each other. It is becoming easier every day to understand why over 60 million Americans voted for Obama. In related news: George Washington, John Adams, Thomas Jefferson and James Madison are rolling over in their graves.

General George Patton would have sent these people to the front.

One more thing: The iPhone will soon be getting copy/paste. Welcome to a feature the Blackberry has had since inception 10 years ago, 1999.

All these things available this Summer (when the 3rd generation iPhone is launched) as a software upgrade to the previous iPhones and iPod Touches. Presumably, this will be right about the time of the launch of the Palm Pre, as well as many new Blackberries, perhaps operating on OS 5.0. Then add a long list of Google/Android devices by September/October.

Apple's Advantage Over the Blackberry: Way More Memory

2009-01-28T10:28:00.000-08:00

With the Blackberry app store launching by the end of March 2009, a dramatic new problem will emerge with full force: Where is the application memory to run these new applications? In order to understand the magnitude of this problem, we have to look at the mother of all app store pioneers: Apple (AAPL) and the iPhone.

Ask almost any iPhone user what excites them about the iPhone, and almost all of them answer immediately that it's the app store, with many thousands of apps available. Many iPhone users have page after page after page worth of applications that they have downloaded. It seems like iPhone users install dozens and dozens of applications, and I don't see any signs of abatement. We may be entering a situation where most iPhone users love their platform so much because they have hundreds of applications running.

The Blackberry app store is being launched for the obvious reason that it's becoming the critical tool in the competitive tool kit. Without a vibrant developer community, it's very difficult to compete. The analogy with the PC world is pretty strong, and possibly even stronger given that location-based services generate so many more application possibilities that aren't as meaningful in the PC world. Here is the problem: An iPhone has 8 gig or 16 gig worth of memory, compared to a Blackberry, which has 64, 96, 128 or 256 meg worth of app memory, depending on the model. Yes, I know these numbers are not perfectly "apples to blackberries" (no pun intended), because Blackberry has an expansion card slot and the iPhone doesn't, and so forth. But keep in mind that the Blackberry's expansion memory is for multimedia (pictures, music, etc) storage, not for running apps or even containing things such as the address book that synchronizes with Outlook. One can also argue that an iPhone typically contains a lot more multimedia than most Blackberries, but Blackberries also synch with iTunes for DRM-free content, so that gap should narrow as awareness of this ability grows.

Those caveats aside, the SMALLEST iPhone (8 gig) has 32x the application memory of the LARGEST Blackberry (256 meg for the 8900 model). The manner in which most users will feel this dramatic 32x difference is in the ability to install new apps. Clearly, while some Blackberry apps have tended to carry a small memory footprint, one of the attractions of the iPhone is that those apps are very rich in their appearance and functionality, so in order to compete, Blackberry apps may have to become larger in order to be competitive.

What does this mean? It looks like this clash of Blackberry's app store vs the very small app memory will mean many unsatisfied users who will be lighting up the customer service switchboards like a Christmas Tree. Many people aren't likely to understand why they can't download/install/run all of these new apps, and their devices could start to freeze up, and their old emails and instant messaging conversation could be wiped to free up memory.

This is both a challenge and an opportunity for RIM (RIMM). The challenge will be all the unhappy customers calling to complain about the lack of ability of their current devices. The opportunity will be to start selling new Blackberries with an app footprint equal to, or greater than, the iPhone. Such a "forced upgrade cycle" is not free, and it is unclear how consumers will react to this. Either way, for Blackberry to go from 256 meg or less worth of app memory in its devices, to 16 gig and more – a 64x increase – will mark Blackberry's most important generational shift in the company's history.

The installed Blackberry base is now approximately 20 million. Ask yourself: How many of these will use the Blackberry app store as the excuse to go to another platform such as iPhone, Android and Palm, versus how many will upgrade to another Blackberry containing some 64x more memory than your current Blackberry?

How We Solved the Gas Price Problem

2009-01-22T07:53:00.001-08:00

American memories are apparently becoming shorter and shorter. Various misguided references to the alleged causes and cures of The Great Depression aside, people don't remember that we once upon a time, less than 100 years ago, didn't have a Federal Income Tax, that drugs were legal (and then alcohol prohibited), and that inflation and interest rates were double-digits less than 30 full years ago.

Among the most recent things to be completely forgotten are the high gas prices, peaking in July 2008 with nationwide averages over $4 per gallon and people in California paying $5 on occasion. Politicians and pundits blamed this on "speculators" and called for the government to "do something." Toyota (TM) Priuses were selling at MSRP or higher.

Less than six months thereafter, gas prices had fallen by over 50%, and Toyota Priuses now come with $750 rebates to make them move. Never before did gasoline prices fall so far, so fast. Not even close.

What was the government program that fixed this economic problem? The answer is none at all. The government didn't lift a finger to solve this problem. It let the market do its magic, curing the issue with its own natural self-healing mechanism first described in Adam Smith's The Wealth of Nations [1776]. Sure, there was a lot of huffing and puffing about what people suggested the government should do, but in the end the government did nothing. The problem just went away. No government intervention solved the problem.

Think about it: The one recent problem which the government left to the free market to solve, got solved in record-short time. Contrast this to the ever-ballooning demands for the government to "do something" about the financial and economic crisis. The demands from almost all ends of the political spectra suggest that we drop all economic common sense and instead spend money we don't have.

Think about it again: We got into this mess by borrowing too much, spending too much, and making too many loans. What's being proposed? Let's spend even more, borrow much more, and make even more loans. It's like an alcoholic trying to cure a whiskey bottle's hangover by drinking a whole case worth of whiskey the next morning. If there ever were a more self-evident disaster outcome guaranteed, I can't think of one.

The free market cured the high gas problem in less than six months without the government lifting a finger or spending a dollar. Likewise, the free market would cure the imprudent debt bubble by allowing it to be pierced, seeing prices falling, wages falling and allowing bankruptcies and foreclosures to clean up the imprudent investments into orderly liquidation. Adjusting wages to demand, would guarantee full employment as with any other market price.

In a free market, the current recession would probably be cured within a year or two, and it would allow the government to cut expenses instead of increasing them. Only by dramatically cutting the size of our government, so that we can eliminate the deficit and start paying back the debt, can we restore sanity to our financial and monetary equation, which includes saving the value of the dollar.

As it stands, we are on a path that will put us in Germany's World War I surrender rail car and its 1918-20 aftermath. We will be left with a debt burden so great that the only way out will be massive inflation, as we essentially default on government bonds. Germany was left with a huge war debt after World War I, but because the debt was not denominated in British Pounds or French Francs, Germany simply inflated itself out of its obligations, causing dramatic mis-allocation of resources, societal chaos, the rise of Hitler and the bloodiest war (World War II) in its wake.

In our case today, the debt-explosion path that we will apparently be pursuing, will most likely also mean a massive inflation when we eventually print the money to pay off the bond buyers (read: The Chinese). China has one of the soundest economies in the world today, with low or nonexistent public and private debt, and high growth, but it has invested its surpluses largely in U.S. government bonds. Whoops! All that the Chinese worked for during the last decade, will go up in smoke. And in the wake of the Chinese losing their savings invested in U.S. government debt – another war? We are clearly playing with fire, taking on all this debt to finance unprecedented levels of government spending.

Obama's Alternative Inauguration Speech

2009-01-19T10:36:00.000-08:00

My fellow Americans, change has arrived in Washington. Not as much in the area of foreign policy and homeland defense, because I realize that my predecessor and distant cousin Dick Cheney had it right in the hours and days following 9/11 when he set this great Republic on a war footing to defeat the enemy and protect the homeland. Seeing as I would rather not have another 9/11 – or worse – on my watch, the change will come primarily in the area of economic policy, where my predecessor presided over many failures and set a dangerous course for this country, particularly in the last year.

My new administration promises a clean break with the failed policies of the past. In the last eight years, government spending grew to new heights, from $2 trillion per year to over $4 trillion this year. This stratospheric rise in the growth of the US government’s burden on the people is nothing less than a crime against our beloved constitution and the intent of the Fathers of the 1776 Declaration of Independence. In recent times, the US government has failed to impose on itself any of the restraints that have made this country so special for so long.

To the contrary, the US government is now engaged in a long list of activities and spending not authorized by our most fundamental governing document. Working with Congress, I will seek to restore the US government to its constitutional limits in my first year in office. What this means in practice is a rapid shut-down of all government departments except the Departments of Justice, Defense and Homeland Security. This means that all these other unconstitutional creations of the 20th century, such as the Departments of Education, Energy, Commerce, Health and Human Affairs, Interior will all cease operations in this glorious year of 2009.

The Federal government’s budget deficit, which the first time exceeds $1 trillion, will also be eliminated this year. Yet, I will also abolish all of the destructive and unjust taxes that have mushroomed over the last 95 years in particular: the income tax, the death tax, the capital gains tax, the corporate tax and the dividend tax. These tax cuts will once again make the US economy competitive with the countries around the world where economic growth and liberty has recently exceeded our own.

My first budget, which I intend to deliver to Congress already this afternoon in the hope of a speedy approval, will authorize total Federal expenses of less than $1 trillion over the next year, which is an amount ten times greater than President John F. Kennedy’s 1961 budget. This will fund an efficient Federal judiciary, our military defense, and the ongoing war against terrorism.

What the new budget will not do, because it is being returned to its constitutional limitations, is to send checks – to anybody or anything. If you or your company has an addiction to receiving money from the government, this will be the year when you sober up. It will not matter whether you are rich, poor or in-between – the time of government spending money on you are now over. Every single government program providing services or sending out checks, will come to an end. You and your company will live in the freedom of keeping what you earn and receive in voluntary help from your friends, family and any charitable institutions, but the mirror image of this blessing of freedom is that government will not support anybody or anything. I am breaking the back on welfare state dependency and entitlement by going cold turkey on all recipients, large and small.

This restoration of the constitutional legitimacy of the US government will be funded by a simple flat tax on US adults: At $1 trillion in total annual Federal expenses, a number which may end up even lower, it represents a flat $5,000 tax on each of our 200 million US adults. There will no longer be any need to file an income tax return, keeping any receipts, paying a tax preparer, or equivalent. This flat $5,000 tax will be due in monthly installments of $417, equivalent of $13.70 per day.

I expect the impact on the economy from this simple flax tax to be profound. People will be able to work as much as they want, and invest in any way they want, knowing that every incremental dollar they earn will be theirs to keep. All of the lost productivity resulting from tax-avoidance and the administration associated with corporate payrolls, will remain with us only in the form of an unpleasant memory, similar to the memories of living behind the Iron Curtain and Berlin Wall before 1989. Small business will be able to form without any bureaucratic hassle. The entrepreneurial spirit will be unshackled from all red tape, bureaucracy and tax disincentives.

My plan to cut over 75% of all Federal government expenses, and fund the remainder with a flat $5,000 tax, will also help cure political corruption in Washington DC. Lobbyists come to us because we have money to spend, and they seek to maximize their share of the pie. My cold turkey approach to restoring the US government to its constitutionally legitimate size will make almost all lobbyists obsolete: If the size of the pie is zero, there is nothing for which you can lobby.

So in closing, I can say with confidence that the 75% or greater reduction in size of the US government will bring about a rebirth of the era of freedom, rugged individualism and self-reliance. It will allow the US government to focus on its constitutionally narrow purpose of securing the property rights of our individual citizens, and to protect our country from those who seek to do us harm. This focus will enable us to perform these duties better. With this, I salute our constitution, our Founders and our Declaration of Independence. Now let’s get on with it. Thank you, and God Bless America.

The Benefits of a Standardized MicroUSB

2008-12-24T07:18:00.000-08:00

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.

Government’s Ponzi Scheme Beats Madoff 1000x

2008-12-18T08:48:00.000-08:00

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.

White Spaces, In Contrast

2008-10-28T12:56:00.000-07:00

The white space debate, for all its technical complexity, is otherwise very simple to judge. So many frequencies remain unused or dramatically underutilized – either in space, or in time, or both. A cognitive radio should therefore be able to fill in these blanks with useful stuff, such as Internet access akin to WiFi, WiMax, HSPA, EV-DO and LTE.

Most of these frequencies are between 150 and 850 MHz. This makes them particularly complementary to most of the cellular frequencies, who start at 850 MHz in the US (soon 700 MHz) and at 450 MHz in some other European countries (although mostly 900 MHz). Most other cellular frequencies reside between 1700 and 2200 MHz, while WiFi and most mobile WiMax launches are between 2300 and 2700 MHz.

These lower frequencies are used for things such as old-fashioned broadcast television and military applications. Some of those military applications have limited geographic scope, and many of the allocated television channels are also not used in most areas. Those are cases where this spectrum ought to be privatized outright, under any circumstance. At a minimum, this spectrum can be repurposed for as long as no interference is proven. Basically, there is no downside to trying. In this respect, the advocates of white space use legalization are 100% correct.

However, the white space argument is even stronger and ought to be taken at least one full step further. Over 90% of American households have cable TV, satellite TV, or some other form of non-terrestrial broadcast TV such as wired TV from a telco (Verizon FiOS, AT&T U-Verse etc.). This percentage has also been increasing. With only a few remaining households taking up this valuable real estate in the air, it’s beginning to look like the “bridge to nowhere.” Basically, we are foregoing an untold billion dollars (perhaps trillions) in consumer welfare just so that a tiny single-digit percentage of households can get to watch a handful of channels without paying for TV from cable/satellite/telco. This is a shameful exploitation of government property, at a huge expense.

The solution is of course very simple: The government a long time ago should have told the TV broadcasters that the game is up. No more any free ride. No more exploitation at the public trough. This is valuable real estate, which, just like almost all government property, should be sold to the highest bidders as soon as possible. Just this February, the sale of a few tiny thin slices of the 700 MHz spectrum fetched $20 billion. Imagine what the spectrum all the way down to below 200 MHz would fetch?

This idea isn’t new; I have been proposing it for years. The rebuttal has always been that this is somehow politically impossible. I have never understood this argument, because we talking about less than 10% of households who are exploiting the other 90%+. Any politician worth his salt ought to be able to explain that the only thing standing in the way of vastly more available, capable and lower-priced wireless broadband are a bunch of people who refuse to get cable/satellite/telco TV, just like the rest of us.

Some say those 10% are unusually poor, and need access to free TV. To this I say: If they are that poor, they are probably watching too much TV, and working too few hours. Daytime TV is also a bad influence, culturally. Besides, those same people who insist on watching free TV, are also the same people who smoke and drink for a lot more money than it would cost them to pay for the same kind of cable/satellite/telco TV subscription that the rest of us do. People shouldn’t have to run around and pay for each other’s entertainment habits. What’s next – government-subsidized movie tickets, opera passes or ballpark games? Wait – don’t give the new Congress any ideas…

Fund Manager Game Plan 2008

2008-10-28T08:33:00.001-07:00

The plural of anecdote is data. Following many conversations with the nation’s savviest fund managers, I have discovered how we explain the timing of the 2008 market decline. It is essentially a two-step process:

First, once Obama won the Iowa caucuses in early January, it was time to start selling shares in anticipation of some probability of the risk that he may win on November 4. As the year progressed, this probability has been increasing, intensifying the market sell-off. The idea is that if you thought it were a 100% probability that Obama may win on November 4, you wanted to be in 100% cash (or 100% short, or some combination thereof). Right now, the www.intrade.com odds are close to 87%, which would indicate you may be in 87% cash, having left 13% on the table for now, in the market.

Second, assuming Obama wins on November 4, you would be in 100% cash by November 5, at which point you have a few weeks to transfer the money abroad before it would come under Obama’s 2009 IRS jurisdiction. If you transfer your money abroad by December 31, you would avoid a frontal collision with confiscatory socialism.

This is rational human behavior. The only irrational thing about this situation is that McCain has mysteriously failed to point it out.

No Such Thing As Redistribution

2008-10-28T08:04:00.001-07:00

Language often contains subtle biases. Take the current spat over “spreading your wealth around” for example. The debate has finally moved into the area of Marxist philosophy, in which Obama is said to favor “redistribution of income” and/or “redistribution of wealth.”

One of the problems with this description is that the word “redistribution” assumes that something has been distributed to begin with. It hasn’t. Something was earned, not distributed. Therefore, the government can’t redistribute something that wasn’t distributed in the first place. Someone made the money, and now the government is seeking to take it. That’s more like legalized theft, not some soft-soapy and obfuscating “redistribution.”

I don’t understand why McCain is choosing adopt language that resides on Karl Marx’s home turf. It’s the right thing to do to tie Obama to Marx’s socialist economic philosophy, but no need to let him off the hook lightly by giving him the benefit of a misleading choice of words.

Conversation With an Obama Volunteer

2008-10-26T19:29:00.000-07:00

I wish this account were an “Only in The People’s Republic of Palo Alto” story, but it probably isn’t. It happened this Sunday afternoon, nine days before the election. I was walking up University Avenue and encountered three young ladies on a street-corner. Normally I don’t engage political activists, but this time I made a rare exception. I’m not completely sure why, but it may have had something to do with the fact that these three young ladies were dressed like my favorite Olympians – the women’s beach volleyball teams. Not quite as tall, and at the very most half my age. This is my best recollection of the 5 minute encounter:
Obama Volunteer (OV): Want to help Obama become President? Any questions we can answer?
Anton Wahlman (AW): I do have a question. Can you explain how Obama differs from Jimmy Carter on one or several issues?
OV: Carter who?
AW: Jimmy. Our country’s 39th President.
OV: Oh, I have no idea. We were all born in 1990!
AW: But surely you have studied history?
OV: We sure have. That was back when America was oppressing the African-Americans, right?
AW: Probably not, but what I had in mind were things such as unemployment rate, interest rates and inflation.
OV: The unemployment rate has never been higher than now; haven’t you seen the news about the crisis on Wall Street?
AW: The last reported figure was 6.1%. 30 years ago it was close to 10%. Is Obama going to do anything different from Jimmy Carter?
OV: Carter was probably very old. Obama is just so cool. He will make it so entertaining. What else did you ask again?
AW: Interest rates and inflation.
OV: I’m not sure either of those is that important. They may have been important before, but this election is about change. Besides, I’ve never heard of an inflation problem.
AW: Well, we haven’t had much inflation in the last 25 years, but it went well above 10% some 30 years ago.
OV: So what does that have to do with the change Obama is proposing?
AW: The point is that if he is going to spend all the money he is promising, and if he isn’t going to raise taxes on 95% of the people, and the other 5% move their money abroad, he eventually has to print the money. And that means record inflation.
OV: Not under Obama it won’t. That’s what change is all about.
AW: That defies gravity. Are you saying that the world will levitate once Obama is sworn in on January 20?
OV: Inflation is more in the head of people if they talk about it on TV. I think Obama is so smart that if he prints a trillion dollars, he just won’t tell anyone. So inflation won’t show up. That’s the new politics will have in the future. Don’t you see I’ve got “Change” painted around my belly-button?
AW: Amazing. So what about interest rates? Under Carter I seem to recall they hit 18% or more.
OV: Who uses them?
AW: Uses what?
OV: Those interest rates.
AW: Well, let’s see – the biggest credit purchase tends to be buying a house.
OV: Dude, we live in the Stanford dorms.
OV #2: And if you need money, mom and dad will send us some. I think we should just abolish interest rates anyway. Besides, weren’t they the cause of the financial crisis?
OV #3: Our political science Professor pointed out that interest rates are only a tool to exploit the poor and the African-Americans. They should just do away with them. So that Carter stuff you’re talking about, it wouldn’t apply. Anything else we can answer?
AW: I think I just got my confirmation. But wait! I just wanted to ask about what you think of foreign policy after 9/11, whether Obama will make sure no terrorists walk across the border from Mexico?
OV: 9/11, that’s such a long time ago. Is it relevant anymore?
AW: 9/11 was in 2001, seven years ago.
OV: Exactly. I was starting Junior High around that time. Getting away from 9/11 is part of change.
AW: So are you drawing any conclusions of what happened on 9/11?
OV: I dunno. I guess we were a bit late to install reinforced cockpits.
AW: That’s it? What about Islamic extremism? Do you think they want to kill us, or not?
OV: They won’t now! Obama is basically President of the whole world. Everyone loves him.
AW: Alright, have a nice day girls. One day, you too will grow up. In the meantime, read some history, take Economics 101 and perhaps even 201.

Who Is John Galt? We'll Soon Find Out

2008-10-26T15:19:00.001-07:00

For those of you who wonder how our country will play out after November 4, look no further than Ayn Rand's 1957 novel Atlas Shrugged. In that book, anti-business policies in the form of higher taxes and more regulation caused the major captains of industry to go on strike, shutting down wealth-creation as we know it. That's the essence of Atlas Shrugged, and that is – at least directionally – what we may face if such policies are enacted in coming months and years.

Actually, "shutting down" isn't the only option for investors and businesspeople anymore. Back in the 1950s, when Ayn Rand authored Atlas Shrugged, the US constituted an extremely large share of the world economy. In 1951, the average American ate 50 percent more than the average European. Americans controlled two-thirds of the world's production, owned 80 percent of the world's electrical goods, and produced more than 40 percent of its electricity, 60 percent of its oil and 66 percent of its steel. America's 5 percent of the world's population had more wealth than the other 95 percent, and Americans made almost all of what they consumed: Over 99.9% of new cars sold in the U.S. in 1954 were U.S. brands. By the end of the 1950s, GM was a bigger economic entity than Belgium, and Los Angeles had more cars than did Asia.

There were very few other advanced, functioning economies. The US captains of industry had no ships to sail, no destinations to go. In this respect, the world has changed radically not only over the last 50 years, but perhaps the most dramatically in the last 15: The rise of the Asian economies from India to China, Eastern Europe and Russia, as well as Dubai as the Hong-Kong of The Middle East. Over 3 billion people now have cell phones – half the world's population. Cell phone penetration is Moscow is 176% -- the average Moscowite has 1.76 cell phones.

For this reason, unlike the industrial shutdown in Atlas Shrugged, we could simply see a giant emigration of capital, businesses and eventually people. This has started already, with individual investors and investment funds winding down US-domiciled investments in preparation for international transfers if the US becomes filled with anti-business, anti-rich and anti-Wall Street policies. Most Silicon Valley companies have already been locating an increasing percentage of their workforces abroad.

16 years later, Ross Perot would have called this "The Giant Sucking Sound." In Western Europe in the 1950s, they called it "The Brain Drain." People from all over the world, looking to get ahead, were moving their money, their businesses, and themselves, to The Shining City On A Hill – the place where the business climate was better. We saw it in our universities, we saw it in Silicon Valley, and we saw it on Wall Street. Well, I hope you captured those memories on your home video camera, because the new anti-business climate in America will make them only a memory.

Some Republicans used to make a big deal as late as 2007 about our immigration problem. Now they will have to focus on describing our emigration problem. In 2008, the emigration of our capital started, and it belonged to John Galt.

Why is McCain Playing Defense on This Market?

2008-10-26T15:18:00.001-07:00

His other forward-leaning arguments aside, McCain has been playing defense on the recent decline in the stock market. His defensive posture, insofar as he doesn't have much of a posture at all on the stock market, can subconsciously be interpreted to mean that he feels a bit guilty about it, and therefore avoids the issue. It's become the millstone around his neck.

This is the wrong tactic for McCain! The argument he should be making is that one contributing reason for the market's decline this year is that the market participants dislike Obama's plans for taxes, spending and regulation. Imagine the political narrative if at least half of Americans had come to believe that this is a reason for the market decline?

The merits of the market causality argument can be debated until the end of time. Obama supporters would disagree that his tax, spending and regulation plans are contributors to the market decline. Free-market people will claim that the argument is basically axiomatic in its logic. The point here, however, is not with the fundamentals of that market causality argument – even though I think it is indeed axiomatic in its logic – but rather one of political tactic. By failing to make the argument, McCain is essentially ceding this election season's most valuable real estate to Obama because of a lack of resistance on this crucial issue. This is probably majority of the reason why McCain fell behind in the polls starting in mid-September.

McCain's failure to blame some part of the stock market decline on the market's fear of an Obama Presidency is an even bigger omission than McCain's failure to rebut Obama's linking him to George Bush: I never once heard McCain rebut Obama on this issue – such as in the TV debates – by reminding people that the only one in this election who has ever run against George Bush is actually John McCain, in the 2000 Republican primary. McCain conspicuously fails to rebut Obama by reminding the American people that he sat across the table from George Bush on live TV and basically called him a scumbag. Nobody else has done this.

At this point, McCain's failure to link Obama as one contributing factor to the market decline, will likely cause McCain to lose this election. That is, unless he starts to make this argument his central one for the last 10 days.

The Difference Between 1993 and 2009

2008-10-12T06:55:00.000-07:00

At the center of Senator Obama's tax policy argument is that by raising taxes on the top 5% of income earners, we are only returning to President Clinton's 1993 tax increases. Let's for a moment leave aside that Obama really is looking to raise taxes on social security (above incomes of $103,000) and on everyone's capital gains, regardless of income. Rather, the Obama argument goes that because we had a relative economic boom following the 1993 tax increase, it's perfectly safe to raise taxes in 2009 as well.

Wrong. There is a major difference between 1993 and 2009 that Obama and McCain alike are both failing to articulate. In 1993, the U.S. was one of the world's lowest-tax countries, with Europe mostly at much higher rates, and most of the Asian economies too underdeveloped to be alternatives for investments and businesses. Eastern Europe was under a cloud of uncertainty and instability following the rapid demise of The Soviet Union on Christmas Day 1991. The 1993 tax increase left the U.S. as the leading free-market economy, albeit at a smaller margin than before.

As we enter 2009, the U.S. position in the world is extremely different than it was 16 years earlier. We are no longer the low-tax beacon of the major industrialized world. Numerous countries in Western Europe, Eastern Europe, Asia and elsewhere now have lower capital gains taxes than the U.S. The same goes for top marginal income tax rates, where Albania is at 10%, Estonia 13% and Russia 17%, just to mention a few. Here in the U.S., the current top rate is 36% for Federal, and if you live in NYC or California, you probably pay very close to 50% all-in. Our 15% long-term capital gains tax can't compete with the 0% rates in many other countries, but don't forget that many capital gains taxes aren't long-term, at which point you will pay 36% or higher.

The effect of the current high-tax policies is becoming an increasing disaster. There has been no employment growth in places such as Silicon Valley in the last decade, because U.S. companies are choosing to locate more employees in lower-tax areas such as China, India and Eastern Europe. Have you noticed the lack of IPOs in the U.S. this year? For the first time in 30 years, there were no venture-backed IPOs. This has a significant impact to the standard of living here at home.

In this context, it is strange to listen to Senator McCain saying repeatedly that he wants to "Keep taxes low." Well, if taxes aren't low, why does he want to keep them? We have some of the world's highest capital gains and income taxes, so we are hemorrhaging investments and human capital to those places where they are not taxed as much.

So what is the 2009 recipe to strengthen the U.S. economy? Clearly McCain is wrong about "keeping taxes low" because they are already way too high. As for Obama, he proposes an outright train wreck in terms of forcing investors, businesses and high-wage earners abroad. Rather, we should once and for all abolish the capital gains tax – whether for short-term gains, or long-term. We should also become competitive with the fastest-growing economies in the world by cutting the top Federal rate to below Albania's 10% rate. Given that some U.S. states and local governments have combined rates of around 10%, it would be appropriate to abolish our Federal income tax altogether. This would stop the hemorrhaging of investments, businesses and talented individuals leaving our country.

What about the budget deficit, you say? Wouldn't abolishing the income tax and capital gains taxes reduce tax revenue? Of course it would. So the answer is to cut government spending correspondingly. The Federal budget now exceeds $3 trillion, or $10,000 per U.S. citizen, of which the Department of Defense is little over 20%. Big ticket items are Medicare, Medicaid and Social Security, for starters. Medicare and Medicaid in particular, are hugely inefficient and unnecessarily bureaucratic ways to induce people to over-consume health care services, and should be abolished in favor of lower taxes that would lead to a booming economy. The list goes on, but the Federal budget can be cut from over $3 billion to around $2 billion immediately, followed by another cut down to $1 trillion over time as Social Security payments dwindle in favor of a private 401(k)-style private system. The government can also raise funds by selling property, including land. After all, various agencies of the U.S. government is by far the largest property owner in the country, and could fill several years worth of budget gaps by auctioning off vast amounts of lands and buildings no longer necessary when we cut off the bureaucracy and the socialist apparatus currently consuming our tax dollars.

The Financial Crisis Explained

2008-09-18T10:30:00.000-07:00

1. Why did the financial meltdown happen?

2. Who is to blame for it?

3. What, if anything, can be done to fix it?

I know many of you don't have the patience to read more than the absolute minimum, so I start by giving some of the briefest answers possible:

1. Cause? The price of housing - and therefore mortgages - was too high, which in combination with high leverage (such as >30:1) caused those institutions who bet on the wrong direction of the market to go bankrupt in an accelerated fashion.

2. Blame? Most of the blame is simply in the hands of those who were too optimistic on the housing/mortgage market. Those who shorted those markets made lots of money.

3. Solution? Basically nothing. Asset bubbles happen every few years (remember the Internet boom 1999-2000?) and they will happen again. Prices must simply be allowed to adjust down.

Here is more detail:

Why did the financial meltdown happen? In and around 1997, the US Congress – supported by President Clinton – did two things. One was the real estate capital gains tax cut, which eliminated the capital gains tax on primary home real estate held over two years up to $250,000 for a single filer and $500,000 for a married couple. This may be the biggest tax cut ever, and it made real estate the most favored investment class. Small wonder, then, that real estate prices rose in an unprecedented manner for approximately ten years in a row. At some point, however, as in any bubble rising, it went too far. It became easy to see at some point after year 2000 when in many places it had become cheaper to rent than to own, pointing to over-inflated prices.

Around the same time, Congress was persuaded to pressure the mortgage industry to provide loans to those it claimed it had been unjustly denied loans in the past – the poor, blacks, et.al. The mortgage companies were basically told to make loans with lower standards than in the past…or else. If they played ball, unlimited funds would be available from Freddie Mac (FRE) and Fannie Mae (FNM). If they didn't play ball… well, John Edwards is a great trial lawyer going after those evil big corporations.

At the center of what turned into a highly unsound feeding frenzy were Freddie Mac and Fannie Mae, ostensibly private companies but ones where the leadership were politically appointed. Basically, these two institutions were run by political hacks from both parties, feeding the mortgage industry with billions of dollars earmarked for loans to those who previously didn't qualify for home ownership.

Around 2003, Fannie/Freddie admitted that their financial statement couldn't be relied upon, and it's not clear that they ever put them in order since. There were several proposals from The White House in recent years to change this system drastically, but efforts to do so were rebuffed by Congress and in particular Chris Dodd and Barney Frank. As long as home prices kept rising, these highly unsound practices didn't bother most people. In fact, the companies who originated the mortgages managed to sell them to Wall Street firms such as Bear Stearns and Lehman Brothers (LEH), who were looking to obtain higher yields on their proprietary trading portfolios. Leveraging up over 30:1, this became very profitable for those firms, until the bubble burst. Remember, at 30:1 leverage, you are bankrupt at as soon as losses exceed 3%.

Who is to blame? If by blame you mean losing money, obviously everyone who were long real estate after the peak in or around 2005 are to blame. But losing money isn't illegal; it happens in the market every single day – for every buyer, there is a seller, but the market only goes in one direction. Per definition, after the fact, every trade has a winner and a loser. What about doing something illegal? If there is something illegal here, I haven't seen it. Lots of stupidity and the usual bubble mania, but those things aren't illegal.

Certainly Congress is at fault for having created the monster organizations Freddie Mac and Fannie Mae. Neither one should have been created to begin with, because the government has no legitimate role in conducting commerce. It is equivalent to the government starting airline companies for the purpose selling subsidized airline tickets. In addition, the pressures Congress put on the mortgage organizations to make loans to those who didn't deserve them were extremely complicit in this debacle. Some of the investment banks shot themselves in the foot by taking on bad mortgage paper and leveraging up, leading to their demise.

What's the solution now? Sadly, the milk has already been spilled, because some people who didn't deserve mortgages already received them, and others bought homes at prices too high. There is simply no painless solution to this fundamental situation; prices must be allowed to fall. Those who are heavily exposed – indeed leveraged – to overvalued financial instruments, will have to take losses and some may go bankrupt.

One final word of caution and moderation: We had a 10-year real estate boom in which more wealth was created than in any previous boom or bubble. In the last 18 months, we have given back some of those gains, but far from all. Booms and busts do happen, but as with the Internet boom a few years earlier, on balance more wealth was created than destroyed as the bubble burst and some of the gains given back. It's happened before, and it will happen again – just like Summer turns to Fall, Fall turns to Winter… bubbles and business cycles are part of economic – and therefore human – nature.

Why Hillary Voters Switch To Palin

2008-09-14T21:17:00.000-07:00

In recent days, the argument has been made by the angry left that the women who voted for Hillary will not consider voting for Sarah Palin because their policy positions are mostly in opposition to each other. Left-wing feminists have said things such as “Palin has only a chromosome in common with Hillary” and equivalent.

This theory would be correct if all women voted for Hillary because of her policy positions to begin with. I doubt that is the case. Hillary's policy positions were 99% identical to Obama’s – and for that matter John Edwards'. Some people voted for Hillary because they disliked Obama’s personality. Other voted for Hillary because they really liked Bill Clinton. But others also voted for Hillary simply because she is a woman. It is that latter group which could very easily fall into Palin’s lap. Clearly, far from all Hillary voters will do so, but it probably doesn’t take more than 5%-10% to swing this election in McCain’s favor.

So there you have it: Some women voted for Hillary because she is a woman. Therefore, it should be no mystery that Palin is picking up many of them.

Talking To Our Enemies

2008-09-14T20:32:00.000-07:00

(originally published June 2008)

64 years ago this morning, the largest military operation in history was unleashed from the British Isles onto Normandy, France. As the sun rose on Omaha Beach, ten thousand vessels carrying over a million soldiers approached the German-controlled and fortified beaches. Within two days, these brave men had established a defensible beach-head, marking the beginning of the end of the Nazi regime. The war in Europe would end eleven months later, only days after Hitler's suicide. D-Day was a majestic triumph for Generals Eisenhower, Montgomery and Patton - as well as the political leadership of Winston Churchill and F.D. Roosevelt. Unprecedented in history, most of Europe has since seen a lack of traditional military conflict for over 63 years.

Only months after D-Day, the US fought a fully-fledged naval battle against Japan outside the Philippines. It remains the last such battle fought, and will likely remain so for the rest of history. Technology has made it impossible to launch not only large invasions in secret (such as D-Day), but also to have a naval battle that's basically not over before it's even started.

What does this mean? It means that information technology and the dispersion of destructive power have made wars particularly expensive. Sure, you can always win a war, but they may not be worth launching, even if you win. Witness the high cost to the US of removing one of our contemporary Hitlers, in the form of the Butcher of Bagdhad, Saddam Hussein.

This leads to the present problem of how to depose today's most destructive and dangerous regimes, who threaten the survival of the free world. Regimes in North Korea, Iran, Cuba and Venezuela engage in some combinations of enslavement of their populations and aggression against their neighbors and other countries. Left unchecked, these regimes are on paths to kill millions of people, perhaps many here at home.

Military options against these countries carry high risks and costs. North Korea could wipe out South Korea and perhaps other countries with conventional weapons alone. Nuclear weapons could kill 10 million New Yorkers in one second. Iran may be as little as a year or two from developing those weapons as well. It is starting to look like these situations resemble the cold war, when the US had no military power to take out the Evil Soviet Empire: Mutually Assured Destruction (MAD).

So how did we take down the Evil Soviet Empire? Apart from the fact that it collapsed under its own Obama-nomics weight, we - or rather, Ronald Reagan - engaged in a very public diplomacy to embody our moral superiority over the enemy. Speaking of Obama, it now looks like this is the one limited area where he is actually taking a book from the Reagan playbook, and suggesting we talk to these dicators without preconditions. This is opposed by the Clintons as well as McCain and many others.

The recipe for potential success here is for the current and future US Presidents to realize - just like Reagan did - that we have moved into the TV mass media age, and that it is time to stop hiding. Instead, the US President should fly immediately to Iran and insist on a debate with the leadership - live broadcast on TV for everyone to see.

The point here is that we are now talking to these regimes, but only at lower levels of government, through back-channels and behind closed doors. This is useless. Our enemies can lie, continue to make preposterous claims and break any promises made. It does not help their own peoples to get the courage to depose their oppressors. Obama may have proposed the idea in principle, but McCain may be better in pulling it off, in the form of his most-beloved town-hall debate format. Now, if he only could support the idea to begin with...

This tactic may work in Iran, where there is TV and people have some knowledge of the rest of the world. It would probably not work in North Korea, where until earlier this year a cell phone call carried the death penalty via hanging in public. There is no TV.

No, when it comes to North Korea, a very different form of US Presidential diplomacy is needed. Specifically, the kind employed by an ex-President. And I'm not talking about Jimmy "The Naïve" Carter, who screwed up the North Korean situation to begin with, in 1994. No, rather I'm talking about Bill Clinton.

Former President Clinton needs to take Mr Party Boy leader of North Korea - Kim Jong Mentally Ill - to a weekend in Las Vegas, focusing on the more expensive late-night establishments. Think Eliot Spitzer's preferences, $5,000 an hour. Lots of them. I say, spend $100 million on the weekend. A long weekend.

Then, at the end of that long weekend, Bill Clinton needs to whisper in Kim's ear: "Look, either of the following two things will happen now: We will take a risk and remove your country and its residents from the face of the Earth. Cheney will press the button himself. Or we have option #2 for you."

Kim: "What's option #2?"

Clinton: "That this weekend will never end. We have made available an island in the South Pacific, where we have built a copy of The Playboy Mansion. Hef himself has made sure to guarantee a rotating staff of 500 of his finest friends and acquaintances. I have the pictures and videos of all 500 on this iPod Touch right here, so you can see for yourself right now. We will ensure you will live out your dreams for the rest of your life. All we require is that you never leave the island or have any outgoing communication to the rest of the world. Deal?"

Kim: "Beats a nuclear bomb falling down on my head. Where do I sign up?"

Clinton: "Just follow my lovely friend Monica into that oval room. She will help you use the pencil. Here is a cigar, too."

Conclusion: Deadly world crisis averted.

Alrighty, so it may happen slightly differently, or he may be more suicidal than interested in a good time. But it's worth trying, no?

Nixon turned Red China from foe to friend by going to see Chairman Mao in Peking 1972. Reagan took General Secretary Gorbachev to task in the mid-late 1980s, with several personal TV-broadcast meetings, and stood personally at the Brandenberger Tor gate in Berlin demanding that Gorbachev "open this gate" and "tear down this wall."

Where is Reagan when we need him yet again?