Speaking of idiots [u]

Those who vote for John Koster are one or more of the following:

  • indescribably ignorant
  • misogynist
  • indescribably ignorant
  • Republican
  • indescribably ignorant

His latest comments made this afternoon’s New York Times. His message to women: get over that “rape thing.”

I failed to mention an office full of idiots. These would be the Seattle Times editors, who endorsed John Koster. Why I didn’t cancel my subscription to this paper a long time ago, makes me question my own sanity.

Apple bites [u]

When I saw Steve Jobs introduce the iPhone in 2007 I, like the up-close-and-personal event attendees, expressed awe and delight. It was a typical masterful performance by the minister of technology-cum-humanities. Here was a single device incorporating those functions we use most in mobile devices. It was a phone, of course. But it was an iPod and it could surf the Internet and both send and receive email. It included a calendar and a contacts list. And so much more.

It’s sometimes difficult to remember the pre-iPhone world. First off, the Blackberry was king of the business world. It had a physical keyboard, after all, overwhelming its tiny screen. There were no Android devices. Nokia outsold everyone. At the time I had a Motorola RAZR, because it was small, mostly. One could have a phone in just about any shape, size, and color. Can you say “fragmented”? The iPhone revolutionized mobile devices. Period. Now everyone has gotten into the act. (Just look at devices today. Imitation is the sincerest form of flattery. But slavish copying? Come on.)

I recall Jobs remarking that Apple had “patented the hell” out of the iPhone. He added that it would take competitors five years to catch up to the original iPhone.

Well, it’s been about five years. Apple secured dozens of patents and has accused Samsung and others of infringement. In several courts Apple has prevailed, though it remains to be seen what ramifications the verdicts will have in either suppressing non-Apple devices and software or extracting license fees from competitors.

Yet, there can be little doubt that Android devices, especially, have eroded Apple’s onetime supreme dominance. I suspect that the Samsung Galaxy III is the number-one challenger to the iPhone. Reviewers give it high marks, with a majority opining that if one insists on the Android ecosystem, the Galaxy is the best there is.

Still, Apple continues to make a ton of money on its iPhone product line, which now features a fifth generation at the top. Once again, pundits proclaim that there is no better combination of hardware and software on the market in the iPhone 5. It’s lighter and faster than its predecessors and now sports a larger Retina display.

But, and you knew this was coming, uncertainty abounds regarding Apple’s future. Its stock price soared above 700 not too many weeks ago; more recently it fell below 600. (It is at $595 as I write.) In particular, how long will consumers be willing to pay a premium for superior products when there are many cheaper gadgets out there? Heck, Amazon admits to selling its new Kindle line at cost or even at a loss, rationalizing zero margins by betting on content-based revenues from its devices.

On the tablet side, Apple maintains its lead. For now. The iPad, according to industry analysts, is by far and away the superior product in the full-size category (displays of around 10 inches). However, Google and Amazon refused to cry “uncle.” Indeed, they have ushered in tablets with smaller “form factors” that have captured bigger chunks of the market. So, Apple introduced an iPad mini a couple of weeks ago. Reviewers give it high marks, though they are generally disappointed in the relatively higher price and lack of Retina display.* Nevertheless, Apple sold out of the product, as consumers rushed to order theirs online at first opportunity. If you want one, you’ll have to wait.

Not a day goes by that industry watchers predict the demise of Apple, especially now that Steve Jobs is no longer at the helm. Can Tim Cook—the engineer, for God’s sake—continue the “insanely great” legacy of the master? Will he be able to say no with the conviction and effect of Jobs? What about the internal politics of the organization? Nature abhors a vacuum. Which of Steve’s “boys” would challenge Cook’s authority and even seek to replace him?

Since the changing of the guard at Apple we’ve heard of unmistakable signs of tension and friction in the upper echelon. Scott Forstall, whom Jobs had put in charge of iOS, reportedly irritated the hell out of other VPs, not to mention those in his charge. But Forstall failed to deliver on two notable projects: Siri and maps. His clock began ticking rapidly when he refused to sign an apology statement for the latter, forcing Cook to append his signature instead. Then one of Cook’s principal hires, John Browett, pissed off retail store employees, curbing their hours and lopping off their jobs. Browett, it was said, wanted to increase margins in all those Apple stores, to hell with customer service. Wrong move, John.

So, both Forstall and Browett were dismissed from their respective positions a couple of days ago, though not exactly kicked to the curb like the Rest of Us. They’ve already made millions and will surely pocket a few more before they turn in their keys.

The twin moves bode well for the company, I think. Apple will have fewer vice presidents, more collaboration, and, most important of all, Jony Ive assuming design responsibilities across both hardware and software. It’s a shame this didn’t happen sooner. Eddie Cue, who redeemed Mobile Me, transforming it into the now-workable iCloud, will now be in charge of “services” on all fronts, including iBooks and education; he’ll also assume responsibility for maps and Siri. Craig Federighi, an exceedingly bright and seemingly amiable fellow, takes over iOS from the prickly Forstall. He continues to head up Mac OS. I look for even greater integration between Macs and iOS devices.

Cook understands that Apple can ill-afford to rest on its laurels. Like circling sharks the competition is ready to exploit any perceived weakness and move in with a presumed “killer” this or “killer” that.

Microsoft is the latest to join the circle. It certainly has the capital to invest. The bigger question is whether or not it possesses the imagination and proper instincts to take on Apple or Amazon or Google. Those traits have been profoundly lacking thus far. A long string of ridiculous comments by CEO Balmer give ample evidence of Microsoft’s cluelessness. Will customers now flock to the Surface or to the myriad other hardware devices running Windows 8 or RT? Or, is Redmond too late to make a difference.

Those who wish to sell Apple short, in multiple senses, will likely regret the posturing. Apple has more talent than its counterparts. It combines hardware and software, and will do it more elegantly and seamlessly moving forward. Jony Ive is the best in the business. And don’t forget all that cash.

Will Apple deliver brand new products over the next few years? I don’t know. The 800-pound gorilla is “television.” Jobs tantalized his biographer with a reported epiphany. So far, however, there have been no significant indications that another revolution is underway in the living room. I don’t believe Apple will produce its own TV. If it does move in this direction, I’d bet on a monster Apple TV that will be as simple to use as asking Siri where you live.

For the most part, I expect Apple products to just get better and better and better.

_____________

* As to the pricing of the smaller iPad, I have a hunch. I would think it a no-brainer that Apple will equip the next generation of the device with the Retina display. However, Apple is loath to raise prices on an established product. Rather, it improves each new iteration, leaving prices intact. I have seen some estimates that Apple’s margin on the iPad mini is between $50 and $100 a unit. The Retina display will surely cost more to produce, which means that margins will shrink—unless Apple figures out a way to enhance production efficiency, and, I suspect, the device was rushed for the holiday season, which did not give the company sufficient time to perfect the design+manufacturing process. Currently the mini is priced between the larger iPad and the iPod Touch. I’m guessing it will stay that way, even with the better display.

America’s dystopian future

That’s the clear initial takeaway from a new book by Chrystia Freeland. She’s writing about Plutocrats, with the dismal subtitle: “The Rise of the New Global Super Rich and the Fall of Everyone Else.”

The author recently appeared on Bill Moyers’s show with Matt Taibbi. Though she acknowledged that the 50s and 60s were good for most Americans, with incomes rising for an expanding middle class, Freeland dismisses talk of returning to those “relative halcyon days,” when labor unions meant something and workers could count on a job paying family wages.

I may have more to say about the book in subsequent posts, but for now I will emphasize a couple of points Freeland makes. First, the new super rich are indeed global, having multiple homes in disparate places and transacting business in the splendid offices and luxurious hotels of Dubai, Hong Kong, New York, London, and increasingly in the BRIC nations (Brazil, Russia, India, and China). She tells us that these über wealthy have more in common with each other, no matter their provenance, than they do with their neighbors, using the term very loosely. While they may express nostalgia and perhaps even an emotional attachment to their native countries, the super rich are in the business of exploitation, regardless of geography or cultural barriers. Their obsessive goal is to make money, lots of it. The second point has to do with Americans, both as workers and consumers.

Steve Jobs famously remarked to President Obama that the manufacturing and assembling of Apple products “aren’t coming back.” I would add: if they were ever here to begin with. The reason is much simpler than the explanation proffered by Jobs: workers in  Asia and more recently Brazil and India have the requisite skills but charge only a small fraction of U.S. labor costs. For example, the U.S. Bureau of Labor Statistics estimates that China employs about 100 million in “manufacturing,” and the average hourly wage is $1.86.

If we allow ourselves to think outside our American box, we might appreciate the benefits of increasing globalization. The developing nations are getting richer, though it may be at our expense. Consider this excerpt from Freeland’s book:

“There are going to be one billion consumers joining the middle class in Asia. I think for us to reduce unemployment, exports are going to be a key way to do it,” [GE’s Jeffrey] Immelt told me. “It’s this country’s only destiny just because most of the consumers are some place other than here.”

Export what? GE is a major outsourcer of jobs. Indeed, most legacy industrial firms domiciled in the U.S. have exported production to other countries, where labor is much, much cheaper. Also, we’re not doing so well in our balance of exports and imports.

But capitalist economies, both global and domestic, depend on people buying things. And despite severe obstacles we Americans strive to do out part (source: BLS).

 

 

How can we continue to buy if our wages remain stagnant? Well, we borrow.

 

Isn’t massive debt how we got into our current mess? Indeed.

Moreover, our perceived need to pay down our debts following the collapse of the housing bubble impeded economic recovery. We weren’t spending and we weren’t saving. We were deleveraging.

These three components—debt, income, and buying—and how they interact pose problems. We cannot continue to finance purchases through debt, and our savings rate sucks.

 

Since Reagan assumed office, Americans have saved less and less of their wages, dropping below two percent in 2005. There are no signs that U.S. wages for the Rest of Us will increase any time soon, if ever, so to keep buying we’ll borrow more and save less over time.

The biggest problem of the three is income. We don’t have enough of it. That’s the Rest of Us, I mean.

Berkeley’s Emmanuel Saez estimates that 93 percent of the income gains during the meager recovery have gone to the upper one percent.

 

Well, that top one percent includes the plutocrats Freeland discusses. They’ve got most of the money, and insofar as we borrow to finance spending, we owe them our dollars too.

Yet, even the plutocrats realize that ultimately there must be buyers for their goods and services. They can’t simply trade amongst themselves, as if I’ll do your laundry if you do mine. GE’s Immelt suggests that those buyers will not be Americans. Rather, they will be Chinese, or Brazilian, or Indian, or even African.

Whoever buys needs income. Since Americans, for the most part, aren’t getting any more, those foreign (to us) buyers will need higher wages. I suspect that’s happening. Our incomes will remain stagnant or decline while those of the Chinese et al. will grow.

Globalization without government fetters will tend to even out wages across the planet. As always, those who desire work will have to bring something to the table, whether it be skills, brains, the right wage, or, more likely, some combination of all three.

And speaking of brains, here’s another quote from Freeland’s book:

“It is no longer about brain drain, or even brain gain,” Dr. Wang [Huiyao, founder and president of Beijing’s Center for China and Globalization] said. “It is about global brain circulation.”

Meanwhile, the plutocrats will exploit the combinations. They don’t care about geography. Increasingly, that means that they don’t care about the American as either worker or consumer. They need sufficient productive capacity and demand, and they will find it wherever.

Welcome to dystopia.

Join the queue for hue?

If you’re already willing to pay a premium for quality Apple products, why not fork over a hunk of change for “the best” LED on the planet? And you can even control it wirelessly. You’ll be able to acquire your very own at an Apple store near you.

Apple’s stores will begin carrying the hue on Tuesday, priced at $199 for a starter pack with three bulbs of 600 lumen and a hue bridge to connect the bulbs to a home network.

Each bob offers all shades of white and a variety of color, and they use 80 percent less power than a traditional light bulb while providing the equivalent of a 500 watt bulb. A huge introduction pack can expand to up to 50 individual bulbs, and each bulb is priced at $59.

The line begins forming at 5 o’clock. Don’t know what day, though.

Screwing the neighborhood

I know, most of us don’t think that our local real estate agent is the quintessential villain. They just sell houses, right?

But I don’t mean to vilify the woman who just sold you a brand new home. She spent time shepherding you around suburbia in search of that “perfect” house in the “perfect” neighborhood within a short drive of the “perfect” school. Chances are she earned her commission and gained a satisfied customer.

I’m talking about all of the real estate agents put together, along with the mortgage brokers, banks, and city council members. But I repeat myself.

My family spent almost three decades in a city fashioned willy-nilly by what I’ll call ‘the real estate industry.’ It was a small town when we arrived, with fewer than 5,000 official residents. Today it is the second largest city in Snohomish County, with a population over 60,000.

Marysville, Wash., is the poster child for how not to allow the purveyors of dirt and sticks to run amok. It is as if the industry concocted a chunky goo of politics-cum-real-estate and simply spread it over expanding acres of soil once home to strawberry fields. No building exceeds two stories.

The placement of civic structures makes no sense, with the library way over here, the city hall (converted Allstate Insurance office) up the street, schools scattered near and far, and a post office much too small to serve the burgeoning population.

Amidst the goo are cars, made absolutely necessary by the patterns of development. Forget about walking anywhere.

Consider the above rant a preamble to a story running in this morning’s New York Times. It’s about the mortgage interest deduction.

As it happens, very few of us can benefit from this curiously popular tax contrivance. As the Times tells us:

According to Joseph Rosenberg, a research associate at the Urban-Brookings Tax Policy Center, only about 30 percent of taxpayers itemize, rather than take the standard deduction. And the majority of these itemizers are upper-middle and upper-income households.

Within that privileged category, the people who tend to derive the greatest dollar benefit from the mortgage interest deduction are households earning $100,000 to $500,000 a year.

“About two-thirds of the total benefit go to that group in the 80th through the 99th income percentiles,” Mr. Rosenberg said.

Once again the top income earners have succeeded in depriving the Rest of Us of the revenues we need to actually build a better society. And you can guess who is vigorously defending this unfair tax advantage. The real estate industry, of course. The Times:

Real estate and building industry groups have loudly condemned proposals by both presidential campaigns to shrink the mortgage interest deduction. Central to their arguments is the long-hallowed deduction’s value to the middle class. But a closer look at who benefits suggests that this perception, though prevalent, is not accurate.

First of all, we don’t have much of a middle class any more. Those in the bottom 90 percent make an average of less than $30,000 a year (Saez data).

(We should note, however, that incomes for the Rest of Us were steadily climbing from the end of WWII until—you guessed it—the Great Divergence. There was a slight uptick during the latter Clinton years.)

Now here are some interesting tidbits. The deduction enjoys broad support, even though 70 percent of Americans don’t benefit from it. I’ll suggest the Archie Bunker syndrome: he didn’t want his taxes raised because, he imagined, some day he might be rich. The Times:

Interestingly, despite its concentrated effect, various surveys have shown broad public support for the mortgage deduction. This is possibly because, in part, “lots of people who don’t itemize today may aspire to be itemizers in the future,” said Jed Kolko, the chief economist for Trulia, a real estate listing Web site.

I urge readers to appreciate the inertia effect of the rich preserving their legislative fruits. The Times:

“Policies that give concentrated benefits to a small number of people often survive better,” Mr. Kolko said, “because the benefit is great enough to make them resist changes in it. They have an incentive to organize to protect that benefit.”

The pitch

No one saw it coming. Not the men in the booth. Not the Detroit batters. Not the coaches. Both Joe Buck and Tim McCarver spoke the obvious: Sergio Romo would be throwing nothing but sliders to right-handed Tigers.

And so it was, with Triple Crown-winner Miguel Cabrera at the plate. He got sliders. Away and away. How far would he reach to connect with one? After all, he demonstrated earlier in the game that he could go deep to the opposite field, sending a soaring fly ball into the mighty wind that propelled the ball just over the right-field railing for a home run, putting Detroit momentarily ahead for the first time in the series.

Two strikes. Of course, it would be another slider. But that scheming Buster Posey had something else in mind. A fastball right down the heart of the strike zone. Cabrera was helpless as the pitch sailed safely into the glove. He couldn’t even flinch, so shocked was he by this decidedly non-slider.

That was it. The Giants swept the Tigers, demonstrating to the baseball world that this is the franchise worth emulating.

The Seattle Times‘ Steve Kelley was impressed. He writes:

This is a team America should embrace. The Giants were down 0-2 in the best-of-five NLDS and won three in a row in Cincinnati. They were down 3-1 to St. Louis and still won the NLCS in seven.

The Giants’ organization is just smarter than most.

The Giants are world champions again. You gotta love these guys.

Amen.

 

The über rich

I did not do justice to the super rich in my last post. I grossly understated their income, once we include capital gains. Here’s a chart, again based on Emmanuel Saez’s data, showing the average income of the top 0.01 percent, with capital gains included.

 

In 2007, just before the housing bubble burst and Wall Street descended, the mean income of the top 0.01 percent of Americans reached $36.9 million. Romney’s just a piker.

Would you believe that in 2010 these super rich made about 800 times as much as the Rest of Us, those in the bottom 90 percent? And, not only are the rich richer, they’re paying substantially less federal taxes.

 

You know, we’re really stupid for letting this happen. At the very least, we should not be depriving ourselves of public services because we’re too damn scared to tax the “job creators,” which they’re not.