Apple is well-positioned, less flashy

Apple isn’t the same company it once was, and that’s ok as they seem aware of their position as market leader, rather than the upstart they once were. While they may not be overwhelming critics and consumers with new devices, they are making appropriate moves for a company in their “middle age.”

This is by no means a condemnation of Apple. Every single move I’ve described above is justified by two circumstances in particular.

First, as a general rule, challengers pursue interoperability while incumbents strive for incompatibility. This is Strategy 101: seek to fight battles where you have the greatest advantage. When Apple was making the iPod, it’s advantage was a superior device; making that device interoperable with Windows let Apple fight the portable music player battle on its terms. Today, though, Apple already has dominant market share: better to make its devices exclusive to its ecosystem, preventing rivals from bringing their own advantage (superior voice assistants, in the case of Alexa and Google Assistant) to bear.

Secondly, the high-end smartphone market — that is, the iPhone market — is saturated. Apple still has the advantage in loyalty, which means switchers will on balance move from Android to iPhone, but that advantage is counter-weighted by clearly elongating upgrade cycles. To that end, if Apple wants growth, its existing customer base is by far the most obvious place to turn.

In short, it just doesn’t make much sense to act like a young person with nothing to lose: one gets older, one’s circumstances and priorities change, and one settles down. It’s all rather inevitable.

via Apple’s Middle Age at Stratechery by Ben Thompson

Build your own index fund using blockchains

Another tool (in beta) for better managing money on your own, Prism lets you setup an index on your own. From  the post How Blockchains Will Disrupt Mutual Funds…You Build Your Own at Never Stop Marketing:

Prism is the world’s first trustless platform for creating portfolios of assets.

Designed and built by ShapeShift, Prism uses smart contracts deployed on the Ethereum network to bring custom portfolio management to everyone.

You can create and rebalance your own portfolio, as well as browse the public portfolios of others and follow them.

So that is exactly what I did.

Now, my one issue with the site (at the moment) is the relative limited number of coins that it supports. I had hoped to create a broader index of coins, but there are only about 25 or so coins (if you have ever used ShapeShift, you will see the exact same coins).

Why value investing doesn’t work like it used to

Models change and strategies need to be adjusted, especially as some models are exploited. What worked for Billy Beane when he built the A’s as written about in Moneyball doesn’t work any longer because all teams are aware of the value of looking for high OBP, undervalued players.

Here’s Ben Carlson with a post When Mental Models Fail at A Wealth of Common Sense:

The old mental model for value investing was that you could easily outperform through the purchase of cheap companies. Oakmark portfolio manager and notable value investor Bill Nygren recently gave a talk at Google where he discussed the changing nature of this mental model:

I think one of the frustrations you hear with a lot of value managers today is, what I did 20 years ago isn’t working anymore. I think that’s always been the case. What worked 20 years ago very rarely still works today. Twenty years ago you could just buy low P/E, low price to book value stocks, and that was enough to be attractive. Now, you can do that for almost no fee and the computers have gotten smarter about combining low P/E, low price to book with some positive characteristics – book value growth, earnings growth. The simple, obvious stocks that look cheap generally deserve to be cheap.

When I started at Harris 30 years ago, we were one of the earliest firms to do computer screening to find ideas. Once a month, we would pay to have a universe of 1,500 stocks rank ordered by P/E ratio. As analysts, the day that output came in, we would all be crawling all over it to look at what the new low P/E stocks were. Today, any of our administrative assistants could put that screen together in a couple of minutes. Because it’s become so easy to get, it’s not valuable anymore. I think it’s probably not just investing, that’s through a lot of industries, as information becomes more easily accessible it loses its value.

He ends with a prudent remider:

But you must also have the ability to adapt to changing circumstances to avoid mistakes both big and small. I like the idea of having strong opinions, weakly held. The whole point of a mental model framework is not to be so rigid that you always do things the same way.

Noah Smith makes the case for Bitcoin as gold

Noah Smith makes the case for Bitcoin as a new gold. The problem recently has been that it hasn’t held value well. Perhaps there’s a future where it’s used more in transactions, once fees are decreased, giving it a resurgence in a new manner.

There are essentially three reasons Bitcoin isn’t working out as a currency — twotechnological, and one economic. Technologically, Bitcoin tends to be slow and laborious to use because it verifies transactions in small blocks. That problem isn’t particularly hard to overcome — just use bigger blocks, or use a form of temporary credit to ease the burden on the network. More ominously, Bitcoin relies on people known as miners to verify all transactions, and compensates them by creating new Bitcoins. But soon, this will stop, since the total number of Bitcoins is capped at 21 million — at that point, transaction fees will be needed to pay miners.

It’s very possible that all of these technological problems will be overcome, either by Bitcoin or by rival cryptocurrencies. Lots of smart people are working feverishly on solutions. But there’s also an economic reason why Bitcoin and other cryptocurrencies will never be useful as money. Things that are good financial investments don’t make good currencies, and vice versa.

via Bitcoin Is the New Gold at

How Amazon continues to grow

There’s no doubt that Amazon continues to grow their power in the world of ecommerce. Here’s an interesting look at how they continue to grow their role with each additional transaction.

As crowds build on either side of the platform, the middleman becomes ever more indispensable. Oh, sure, a new platform can enter the market—but until it gets access to the 480 million items Amazon sells (often at deep discounts), why should the median consumer defect to it? If I want garbage bags, do I really want to go over to to re-enter all my credit card details, create a new log-in, read the small print about shipping, and hope that this retailer can negotiate a better deal with Glad? Or do I, ala Sunstein, want a predictive shopping purveyor that intimately knows my past purchase habits, with satisfaction just a click away?

Similarly, the more online buyers and sellers are relying on Amazon to do their bidding or settle their disputes, the less power they have relative to Amazon itself. They are less like arms-length transactors with the company, than they are like subjects of a despot, whose many roles include consumer and anti-fraud protection.

While this may be an argument against the practice, there doesn’t appear to be any change coming. Until there is, there’s no reason to believe Amazon won’t continue to grow.

See the full post From territorial to functional sovereignty: the case of Amazon at openDemocracy.

Disclosure: Long AMZN

Software updates as SEC violations

Could disclosures on software updates be a securities violation? From Matt Levine in Bloomberg:

The U.S. Department of Justice and the Securities and Exchange Commission are investigating whether Apple Inc. violated securities laws concerning its disclosures about a software update that slowed older iPhone models, according to people familiar with the matter.

The government has requested information from the company, according to the people, who asked not to be named because the probe is private. The inquiry is in early stages, they cautioned, and it’s too soon to conclude any enforcement will follow. Investigators are looking into public statements made by Apple on the situation, they added.

While the slowdown has frustrated consumers, U.S. investigators are concerned that the company may have misled investors about the performance of older phones.

It is fun to imagine more extreme hypotheticals. What if Apple sold phones that it knew would explode after one year, and they all exploded and killed millions of people? And the Justice Department looked into it, examined the facts and the law, and said: “You know, this looks like securities fraud. The real victims here are Apple’s shareholders, who had no warning that the phones would explode and kill their users, and who have now lost money when the stock dropped.” If you were an alien trying to understand the U.S. legal system from cases like this one (also opioid casesclimate-change lawsuitsgun control, etc.), you might conclude that its purpose is to protect shareholders from losing money when the companies they own harm consumers. 

via Sergeant Spoof’s Time Has Passed at

Using crypto to pay viewers & other new business models

Jeremy Epstein looks at how Amazon is integrating advertising into their streaming video service, and how it could be applied to crypto-enabled business models of the future:

Let’s leave aside the legitimate fear that now Amazon has even MORE information about you, locked away in proprietary databases, and can manipulate you at will since who cares about that anyway, right?

What Amazon is now doing, better than anyone in the history of TV has ever done, is tie content viewing directly to revenue.

For every show you watch, intro you skip over, episode you quit halfway through…every single click, you are going to earn some sort of crypto-token for it.

That’s right, you will get paid to watch TV. (That’s all we need, right? At least my kids can become revenue generators now.)

Vendors will run AI algorithms on all of the data that you (and others) generate and serve even more relevant ads based on your viewing habits.

You’ll get your content for free and you will get paid to watch it.  Then, you’ll use those crypto-tokens to buy the products that advertisers put in front of you (which is paid for in the same crypto-tokens), all part of the circular economy.

It likely won’t be Amazon that will find a way to pay you, as they’ve shown they are happy to keep your data in exchange for finding ways to sell more, but there are new business models, made possible by crypto and blockchain.

via Amazon Shows How You Will Get Paid in Cryptocurrency to Watch TV at Never Stop Marketing…

Look outside public markets for true diversification

From a post on diversifying from The Humbe Dollar, based on Harry Markowitz’s 1952 research paper on the subject.

For instance, he explained that the number of stocks you hold is far less important than the number of types of stocks you own. A portfolio of 60 stocks might appear to be diversified. But if all 60 are technology stocks, there is still quite a bit of risk. Today, this might seem like commonsense, but at the time it was a major revelation.

Markowitz ultimately won a Nobel Prize for his work, and there’s no question it was brilliant. Today, however, there’s even more you can do to manage risk in your financial life. Here are five ideas to help you think more comprehensively about diversification:

Diversify your tax rates
Diversify your investment products
Diversify your financial relationships
Diversify the timing of your purchases.
Diversify the timing of your sales.

While this post at the Humble Dollar focuses on public market investments, diversifying can be taken much further. With easier access to alternative investments, it’s easier than ever to diversify among a large number of investment products. The trick is doing so feasibly and with proper risk management.

via Five Ways to Diversify – HumbleDollar at HumbleDollar

What would Winston Churchill say about stop losses?

Here’s a post on stop loss orders from the Abnormal Returns archives. Tadas looked at what a number of others have written about using stop loss orders, including Justin Wilcox:

He goes on to note a better way traders should frame their thoughts about stop loss orders:

One thing that has helped me immensely is to not think about stops from the view point of the exit of a trade gone bad, but to view it as simply the exit from a trade. The execution of the plan you have for the trading day should effect where your stops go more than anything else.

And Eddy Elfenbein:

The lesson for investors is that your thesis can be right but it may take a long time to see it pay off. I remember Peter Lynch saying that his stocks did best in the second or third year that he owned them.

He concludes with what Churchill may have said about stop loss orders:

No one pretends that democracy [stop loss orders are] is perfect or all-wise. Indeed, it has been said that democracy [stop loss orders are] is the worst form of government [risk management] except all those other forms that have been tried from time to time.

via Winston Churchill on stop loss orders at

Kodak’s dubious attempt at blockchain

Here’s Kevin Roose in the New York Times on Kodak’s ‘dubious’ attempt at blockchain and their KodakCoin.

In theory, photographers will be able to upload their images to a platform called KodakOne, create a blockchain-based license for each image, and use web-crawling software to scour the internet looking for copyright violations. Instead of using dollars, photographers can have clients pay them in KodakCoins.

KodakCoin’s initial offering, scheduled for Wednesday, is expected to raise as much as $20 million. But there are few details about what that money will be used for, or why a similar system could not be built without the blockchain. There is also a more obvious question: Why would photographers want to be paid in digital tokens, rather than cash?

In several calls with KodakCoin leaders, I couldn’t get straight answers to these questions. And KodakCoin’s white paper, a technical document that details the plans for the currency, is a 40-page mishmash of marketing buzzwords and vague diagrams…

When we first heard about this project, we questioned Kodak’s ability to make this happen and don’t think any better of their chances now:

First, despite the name, KodakCoin is not actually a Kodak project. The company behind the offering, WENN Digital, is a California-based affiliate of a British photo agency that specializes in paparazzi photo licensing. Under their licensing agreement, Kodak will not receive any direct revenue from the public offering. It will receive a minority stake in WENN Digital, 3 percent of all KodakCoins issued and a royalty on future revenue.

Cameron Chell, a lead adviser to the KodakCoin project, told me that the initial offering represented a “seminal moment” for Kodak, and that the company’s interest in blockchain technology was a savvy long-term investment

Now, about those coins. You might think that a digital currency that is trying to “democratize photography and make licensing fair to artists,” in Mr. Clarke’s words, would be easily accessible. But because of regulatory requirements, KodakCoins will be available only to so-called accredited investors in the United States. An accredited investor is defined as a person with a net worth of $1 million or more, or an annual income above $200,000.

How many cryptocurrency-obsessed millionaire photographers do you know?


via Kodak’s Dubious Blockchain Gamble at The New York Times