Friday, March 19, 2010

Fruit vs. Robot

Fruit v Robot Will Google’s Android operating system overwhelm Apple’s iPhone OS and RIM’s BlackBerry the way Windows nearly wiped out the Mac OS? Yes.  It will come down to the popularity of Google’s free Internet-based applications, and the range of phone manufacturers selling Android phones.

Blackberry still leads US smart phone manufacturers, but after getting messaging exactly right they seem to have stopped expanding the concept.  Apple makes great products, and they have done a good job by combining services and syncing desktops to the iPhone, but seem intent on playing Custer again for quickly growing band of Android Indians, and their online services are not broadly used outside of iTunes.  Microsoft shows every sign of continuing to squander their historic advantages.  Nokia is the big gorilla in phones, but Ovi is too tightly tied to their own products.  And Palm’s best chance is selling to Yahoo!, which isn’t much of a chance at all.

Smart phones depend for their success on how much of the world they can fit into a device smaller than the user’s hand.  The ideal phone would let a user take it out of its box for the first time, turn it on, sign in once and get access to all the data from their laptop or desktop, and their favorite online accounts, plus all the location-based features that only phones or navigation devices can provide.  Only Microsoft or Google have a prayer of pulling this off, and only Google will.

RIM’s BlackBerry devices were the first to fit Microsoft’s Exchange into a user’s hand.  With a fairly simple activation process, a user went from having a mostly empty phone, to having all their email, contacts, calendar, task lists and Exchange notes from their PCs, with them anywhere they went. 

RIM has added web browsers, cameras, music and application support to the BlackBerry line, which now dominate US smart phone sales, but RIM itself doesn’t provide the online services (webmail, music downloads, video sharing, online documents, etc.) that reach most Internet users, so services like iTunes and Google Docs aren’t integrated into the phone’s operating system and those popular services will probably always run more smoothly on iPhone or Android devices. Further, RIM, like Apple, doesn’t license the BlackBerry operating system, which restricts the range of BlackBerry-based products, and leaves the line vulnerable to a single management team’s mistakes.

Apple’s ownership of iTunes (a true killer application) gave the iPhone a great start, and Apple also offers its own email service, web page hosting and services to synchronize data between iPhones and PCs.  The trouble for Apple is that, iTunes aside, Mac users are just about the only people who use the Apple online services, and Mac users make up only around 10% of all PC users.  Charging for some of these service doesn’t help consumer adoption, either, but Apple doesn’t have Google’s ad network to make them all free.  Also, like RIM, Apple has so far not licensed the iPhone operating system, so there are only 3 iPhone models available, and then only through one US carrier.  

Hundreds of millions of PC users, including Mac users, have Google accounts, and unlike some of Apple’s services, nearly every Google service is available at no charge to the user.  The sheer breadth of Google’s offerings, and their free availability, means that even dedicated Mac users will eventually find reason to get a Google account, whether it is to get access to Google Docs or Voice, or because an employer or a school has moved communications to the Google Apps platform.  As Google expands its product range eventually it will only become more rewarding to boot your mobile phone with a Google ID.

If Google’s service advantage were not enough, Android phones are made by several of the world’s largest phone manufacturers, including Motorola, HTC and Samsung.  Instead of 3 iPhones that work with one US carrier, there are at least 11 Android phones, and they’re available through all 4 major US carriers.

What about Nokia?  It still sells half the world’s cell phones, and sells more smart phones than anyone else.  Nokia offers maps, file sync, Exchange-like personal information management, music and photo sharing through its Ovi suite of services.  Nice, yes.  Built for phones, yes.  But built for one manufacturer’s Nokia phones, and without anything like Google’s breadth of services.

What about Microsoft?  Lots of manufacturers make Windows Mobile devices, and Microsoft makes Exchange and offers a huge range of online services.  But Microsoft’s culture is rooted in application sales, not services, and the company’s online services are poorly integrated and less broadly used than Google’s.  They could give Google a run, but they probably won’t.

And Palm?  Yahoo! should buy them now to do for that company’s services what Android does for Google’s.  Any other option for Web OS, and, well….

Tuesday, March 9, 2010

No More Bridge Tolls

martin-aircraft-jetpack-4No matter who you are, you need this.

A New Zealand-based company, the Martin Aircraft Company , is now taking orders for what might be the first really usable (not the same as practical, or even safe) jetpack for around US$90,000.

It even has a parachute system which, according to the manufacturer, will save you “from a catastrophic failure down to a reasonably low altitude,” which may still be considerably higher than you’d ever take this thing.  As pilots say, taking off is easy; it’s the landings that can be tough.

But enough about the safety details.  Put 10% down today, take delivery in a year, and don’t tell Anthem Blue Cross what you’re up to.

Monday, March 8, 2010

A Hellenic Way to Finance a Country

IMG_1205 (300x400) Much has been made of investment banks helping Greece hide its growing pile of debt and propensity to live beyond its means while at the same time benefiting from its problems by being short CDS, or in banker vernacular ‘buying protection’. In fact Goldman was doing what any well run bank would do; finding a solution for a client (banks like to be thought of as solution providers) and actively managing its risks.

The trade was this: Goldman and Greece entered into a currency swap contract on an existing liability Greece had in Yen.  Greece issued a bunch of bonds denominated in Yen at the turn of millennium and back in the 90s when the Euro was a lot weaker.  Greece exchanged the Yen it raised through the bond sale for Euro, and spent the proceeds on ouzo, olives and BMWs.  Because of the depreciation of the Yen (Euro strength), Greece had achieved a massive gain (i.e., cheapened the cost of debt). 

Normally when you enter into a cross currency swap the agreement is to exchange cash flows at the current spot rate. The NPV of paying Euro (swapping a Yen into a euro liability) and receiving Yen is $0.  The difference in the interest payments pays for the forward appreciation/ depreciation of the currencies.  Let’s assume at the time of the bond issue the exchange rate was 100 Yen/ euro.  At the time of entering into the currency swap contract the Yen/euro exchange rate was 120.   Greece entered into contract by setting the exchange rate not at 120, but at 100 Yen/euro.   Say they swapped a Yen 100 billion liability, then using the current spot rate of 120 Greece would have owed Goldman in the future Euro830 million and would have received Yen100bn at maturity of the swap and bond.  The Greeks had done well, reducing the effective Euro cost of borrowing by 20%! 

Now what the Greeks did was to actually exchange at the old spot rate so they owed Goldman Euro1 billion and would receive Yen100 billion (if they had done the swap at the current spot rate Greece would have reduced the amount it owed by Euro170 million).  Goldman then paid Greece the present value difference of Euro1 billion less Euro 830 million upfront.  The variations on this type of deal could be not to upfront the payment, but reduce Greece’s annual interest payment in Euro to Goldman. 

Somehow under the budget rules this extra amount Greece owed did not show up.

However Goldman now has a massive credit exposure to Greece in the event Greece fails to make good on its scheduled payments in Euro.  To hedge the risk Goldman bought credit protection on Greece in the CDS market (which is the equivalent of being short Greek bonds).  Then Goldman has no exposure to Greek credit but has lent them billions.  (Goldman probably bought protection from AIG!).  So, Goldman was not betting against Greece, it was being prudent by protecting itself and hedging the risk of Greek credit.

These trades and similar ones likes it were done on a massive scale by many banks.  The bad thing for Greece is that not only did it hide the borrowing, it was actually really expensive borrowing because of the frictions in the trade and the very, very large profits made by the banks......

-by a Guest Author

Saturday, March 6, 2010

Bringing the Fun Back to Auto Racing

Big auto racing seems to have lost some of its zip. Indy and Formula One cars just follow each other around the tracks while sanctioning officials sue each other and pursue strange fetishes. NASCAR racers have traded Jack Daniels for manscaping and PR flaks, and their cars no longer bear any relation to what you can find in a showroom - they are like silicone implants without the breasts.

Fortunately for racing fans, there is the 24 Hours of LeMons, where amateur drivers race $500 cars for a full day and night, where winners take home a sack full of nickels, and where cars may be dismantled in front of the fans for enough violations of the sport's entertaining rules (as the pig and chicken graphics on the LeMons website suggest, some cars are involved, others are committed).  If NASCAR, F1 and Indy are tired sitcoms, LeMons is a chaotic Japanese reality TV show.

Some LeMons cars are raced to win. Many are there to entertain, so you get entrants like this BMW 3-series that has been converted with a Ranchero body.

Races are held all over the country, and the sport is growing quickly. Not exactly a 'green' sport, but a lot greener, more democratic, and probably much more fun than what big racing has become.  How soon before Fox starts showing this stuff on weekends?

Wednesday, March 3, 2010

Too Expensive for Vending Machines

flight attendant

Japan’s penchant for fetish has created another collectible item, as people are paying up to $18,000 for JAL flight attendant uniforms.  No word on what people are paying for the furloughed stewardesses themselves.