Great White North Prognostications

Quite simply the analogy for Apple is that of Apple being a cruise-ship where the captain just fell overboard with the keys to the bridge. If you are a passenger on that ship everything is looking pretty good. The chef just put out a fruit display with carved ice decorations and the ship seems to be steaming at full speed to your next interesting destination. After a bit you might notice some crew members are quickly walking around with a panicked look in their eye but they are saying soothing things so you don’t worry. But then you notice them lowering the lifeboats and fleeing. It is only as the cooks and guys from the engine-room fling themselves over the side that you might notice that things are going very wrong.

To carry on this analogy there are a few options. One is that the cruiseship has lots of fuel and hits nothing so the cruise, while uninteresting, keeps going until they run out of fuel or food. Next is another cruiseship pulls up along side and rescues the passengers before disaster hits. Next is they ram right into land and explode. And the most probable outcome is that one of the people from accounting breaks onto the bridge and tries to steer the ship. This will look good and the accountant will be hailed as a hero. But the accountant has a terrible idea of what the passengers want and the ship is doomed the moment a storm comes that the real captain could have handled with ease.

So my prediction is that the iPhone 5 and the iPad 3 are the ship continuing on course. But the accountant is going to have a hand in the iPhone 6 and the iPad 4. These are going to be disasters. I foresee extra buttons on them. I foresee a sudden urge to compare checklists with other products so things like flash will appear. They might even be able to run java. I see someone reaching out to the enterprise market instead of making them come to Apple. I foresee a whole lot of marketing 101 advertisements that don’t portray Apple as Bill Murray cool but as plastic cool. So a whole lot of celebrity endorsements.

So as a stock pick look at RIM now to see Apple in 5 years.

This blog has long bashed RIMM and for good reason.

From a technical point of view the blackberry devices are a great bit of engineering. They don’t seem to break. They have a near nuclear powered battery. Their reception seems exceptional. A great foundation for a great phone. But something is still wrong. For some reason I have been riding in many cars where the driver had a blackberry ring so I was the one answering it. I screwed this up nearly every time. I was suddenly faced with a space shuttle command deck of buttons. I then realized: Why does the black berry look like the command interface of the space shuttle (1970) while the iPhone/Android looks like the command interface of the Enterprise on Star Trek?

I suspect that the answer to the above question lay at the heart of both RIMM and Apple.  While android is mostly following Apple the extra buttons they keep adding seems to be a stupid nod to Blackberry.

But where will this lead? To me the answer is obvious. For RIMM to compete with Apple they would have to release some very very cool toys and completely abandon huge segments of their present marketing/development strategies. They would have to focus on the end consumer and abandon their seemingly incestuous relationships with the Telcos. They would have to take their marketing studies and shove them up the asses of their in-house MBAs. Then they would have to get a dozen art schools to come in and redesign everything. And lastly they would have to get me to want to port my apps over to Blackberry. I can even tell you how to succeed at the last. Give me a great tool that allows me to make iPhone apps that also happens to make Blackberry apps. This might seem stupid but while the Apple tool XCode is getting better it isn’t very good.

So seeing that very few companies have the balls for a reorganization of the above magnitude I doubt that RIMM will do more than try to shore up their defenses. They will “trim the fat” which begs the question of why did they have any fat. They will hire Celine Dion or some such to try and con people into using their products. And they will probably try to figure out ways to make existing even more stuck with them.

But the above is all speculation but here is the fact that I will go by. Blackberry Playbooks are available for sale at Walmart. Holy crap Walmart? The price is the same as an iPad. How downmarket can they go? To me this is an act of shear desperation. Blackberry is has always been an enterprise tool what the hell customer base are they hoping for at Walmart? This smacks of statistics rigging. I can just see the announcement: “We have Playbooks in 10,000 outlets in North America. This is 20% more than iPads and iPhones.”

But again RIM doesn’t have much debt and they are still a profitable company with revenues that I would be proud of if I had a company that big. But so did Sun before they were eaten as did Novell before they too were eaten. RIM is no Enron or Ponzi scheme but what they are is on a long grinding road to irrelevance.

One last dig is about this QNX thing. From a programmer’s point of view I don’t understand. QNX was a small blib on my radar around 1999. It was a cool little OS that was tight as hell. But I don’t understand what positive impact it could have on Blackberry. Personally I would think that they would want to go with Linux, Android, or BSD as those have widespread support and a huge base of potential developers.

So from a technical point I am going to say: QNX Huh?

And a human point I will say:Walmart Huh?

Oh one last point. There seems to be some kind of Bay street love for Blackberry. They keep blah blahing about it being a great Canadian company and that Canadians should love them. But keep in mind that Canadians don’t like the sort of people who use Blackberries: Lawyers, real-estate people, government types, and yes bay street types. I don’t see doctors, artists, bakers, or other nice people using Blackberries.

My theory is that this recession will be nasty but short. People are losing confidence in the various markets including money itself. The success of the various markets and the usefulness of money are all based upon confidence. But enough general economics. The key difference between this recession and all others is the common use of technology for communications, modeling, and analysis. This is different from every other bust in history including the tech bust. The tech people were using modern technology but the rest of the world were still using fax machines, telephones, and couriered documents. This time people are using email, blackberries, google, along with a host of other tools. Information is moving much faster.

Basically this disaster was caused by a lack of information. People trusted the old ways. What were the rating agencies doing? What is hidden in all these OTC things? What kind of reserves do the companies issuing CDSs have? What exactly was backing the various MBS? These are all questions that we are quickly finding the answers to. People are both able to find this information but are also able to realistically demand this information be quickly made available.

Other key questions that people are now asking are: Where do I find a new source of credit? Where are the best deals? Along with many other financial questions where the answers may not lay with the old school players.

So the key to a functioning market is open information. The existing market became horribly dysfunctional as huge chunks of it were either incomprehensible or hiding in a sea of fog. As people are now demanding ever greater access to timely information the trust in the markets should return as fast as this information becomes available as well as the money rushing to the areas of investment that avail themselves most to the levels of transparency demanded.

In past recessions people might have taken months or years to get these new patterns of business going; this time around it might be one google search and an email away.

There is a catch. It is a famous concept that Generals fight the last war. I suspect that people will look to the past recessions including the great depression to find their answers. It looks like huge public spending on infrastructure will be a cornerstone of the new White House; I suspect that the time involved will be glacial as compared to the speed that could be achieved by simply opening up the information to the investing public. This lack of awareness of the advantages of letting the market in on what is happening is exemplified by the Fed’s refusal to say who has received what. I suspect that the various insiders know exactly who received what but the general public does not. Thus the general public cannot trust the market. Even the insiders might not be completely sure thus squirreling the entire exercise of having an open market.

As a simple example of the openness needed yet probably not forthcoming; companies like GM will insist that as much as possible be hidden during their inevitable bailout. They will argue that the Unions and their competitors would take advantage of the information. But I suspect that the Unions and competitors know every detail anyway. GM will really be trying to avoid embarrassment. I suspect that the management have made such huge blunders, one after another, that even their own employees would be chasing them around the parking lot with pitchforks let alone the tax-paying public. But beyond embarrassment this openness would not hurt anything but the egos of the GM management. If we don’t find out what went wrong, how can we avoid doing this all over again?

I suspect that out of my usual stocks that some will recover along with the rest of the market but that others will be huge underperformers.

Apple will probably have a bad quarter this time around as will Google. But not terrible. Then when people have money they will flock to them.

Microsoft will also have a slightly dissapointing quarter but their customers won’t flock back but they will do sort of OK.

RIM will bomb this quarter and basically never recover drifting along with people saying that they are a buyout target. They will never be a buyout target as I think their brand will be a hasbeen in less than a decade and they will have nothing to offer but outdated infrastructure.

SUN will have a slightly bad quarter but this will be more do to their generalized rot as opposed to anything else. They too are not much of a buyout target for the same reasons that RIM won’t be a buyout target.

Canadian banks will eventually get some bonus or kick from the government so in the long term they will do well as usual, but for the short term I smell pain pain pain.

Back to Google. I believe that the ad world will discover that in the recovery quite a few of their customers tasted the Google koolaid and won’t ever be coming back. So all old media will be be wailing and gnashing their teeth come the recovery. A few old media outlets will reinvent themselves into either extremist media or actually focus on what people in their areas want and thrive. So most old media will suffer the death of a thousand cuts from bozos like this blog. Again, some will hope to be taken over but who the hell wants a 100 ton printing press going into the age of electronic ink?