The other half of the story is low interest rates/high asset prices. A year ago federal funds rate was ~2%; today it's ~0%.
Yep! S&P 500 reaches pre-COVID level record high again recently all thanks to U.S. Fed's UNLIMITED Quantitative easing (QE) policy. The aftermath and the side effects[1] are going to be serious concerns now.
[1]: https://en.wikipedia.org/wiki/Quantitative_easing#Risks_and_...
> PE Ratio (TTM) 984.55
Edit - It seems like adjusting for whatever the fed funds rate is might provide a more accurate comparison.
So much of the US economic engine after WW2 up to 2000 was driven by the fact that people were having lots of kids, and the taxpayers back then were borrowing from future taxpayers. That works if you continue to have lots of kids, but now that that has slowed down, plus the increase in labor supply via women in workforce, and outsourcing to other up and coming countries, plus decrease in demand of labor due to automation, makes for a bleak future outlook for many (as opposed to a growth outlook in the decades after WW2).
This is ignoring climate change and its effects. Which can only be remediated with reduced consumption. Which would also cause a reduction in demand for labor.
Even those with "some college" millennials are slightly worse off, but within 5%.
It's those with only a high school degree that have seen a significant hit.
[1]https://www.pewsocialtrends.org/essay/millennial-life-how-yo...
I am quite tired of economic crashes, but I’ve failed to convince enough others to vote and advocate for changes. Those who do care about change are focused on matters other than economics, which I believe to be a mistake.
Unless you're an average citizen of the USA. I swear, I've never seen so many gleaming white and healthy sets of choppers as I have in the USA (particularly compared to, say the UK or Eastern Europe)
Very close to unlimited amount if it gets out of control. See e.g. Venezuela, Zimbabwe, or Russia in early 90s, among other countries.
> can’t work or earn money
They will be able to soon if they still can't. You can't keep the economy shut down forever. So it'll be shut down selectively until Nov 3 and opened completely shortly thereafter. /s
On a more serious note, having lived through hyperinflation myself, people who can work will have their salaries adjusted upward enough to keep them working (and therefore putting some semblance of food on the table), but not enough to keep up with inflation. At least that's how it worked in Russia in the 90s. In Russia, though, the situation was relieved somewhat by the availability of the almighty dollar. You could temporarily protect your rubles from hyperinflation by buying dollars, and then selling them for rubles when you need money. With dollar (and really, all currencies) collapsing, I'm not sure what people are going to do, worldwide. Seems to me that a global inflationary spiral could de-facto reduce everyone's debt obligations to each other. So whoever is owed debts of any kind would take a massive haircut. In the 90s that was the Russian Government. The beneficiaries were people now known as "oligarchs". They borrowed unimaginable amounts of money (with kickbacks to government officials of course), bought up the Soviet factories, mines, and oil production that didn't yet collapse, and then paid back with hyperinflated money, fractions of a kopeck on the ruble.
You could temporarily hold bonds, stock, etc. Many other equity classes out there with high liquidity, which can be converted to cash whenever you like.
Don't get me wrong, I think Venezuela-style hyperinflation is unlikely (unless we get a communist government or something in which case hyperinflation will be the least of our problems, and the economy would be fucked for a hundred years). But higher than normal inflation is very, very likely indeed, and you need to start thinking in terms of what that means for you. The old things like "buying bonds" might cease to work to increase, or even maintain wealth, irrespective of yield, if this gets even remotely out of control.
Inflation to a first approximation is wage rises. "Too much money chasing too few goods" is the traditional formulaion.
Western economies have split. For the majority wages are not rising. For the affluent minority incomes are rising sharply. So we see little inflation in the goods and services bought by poor people, but steep price rises in goods bought by rich people.
The latter are mainly collectibles: stocks and bonds, real estate, artworks, gold and jewels, cryptocurrencies, etc.
We won't see Zimbabwe-style hyperinflation unless there is massive redistribution.
Wage rises are always sub-inflation during hyperinflation. Goods, by the way, and especially complex goods with long supply chains, will also become scarce in all this as inflation makes it difficult to maintain stock necessary to manufacture or distribute goods. That is, that widget you bought today might cost more than you're charging for it when you need to replenish the stock. So you raise the price accordingly, using your best guess as to how much money you will need to still turn at least some profit. And _everyone_ throughout the entire supply chain does the same thing.
You haven't lived through a hyperinflation and I have. So you'd be wise to listen right about now, and if you're wealthy, you'd be wise to also read up on hyperinflation.
It's not the kind of "managed" inflation you're used to. It is, by definition, out of control completely, and very hard to get out of.
With the current state of the economy, I'm not expecting anything better after a bust.
As someone who has another couple decades until retirement, a drop in asset prices would be great for me personally (though I'm sure it would be painful for many Baby Boomers).
For better or worse I wasn't very liquid when the stock market indexes tanked in March. Another lessons learned: invest in bonds at least a bit, not only to reduce volatility, but also because you'll have some 'dry powder' available to be able to rebalance when you equities take a hit.
Though total returns on bonds isn't too bad:
> The Nasdaq 100 ETF (QQQ) is up an astonishing 25.5% this year during a pandemic and that’s including a 29% peak-to-trough drawdown. But the long-term treasury ETF (TLT) is up 27.3%.
* https://awealthofcommonsense.com/2020/08/why-would-anyone-ow...
I question the validity of this hypothesis, at least in so far that it has a predominant or even major effect:
* https://www.youtube.com/watch?v=K3lP3BhvnSo&t=8m50s
The video cites an US Fed paper on the subject (see Section 3):
* https://www.federalreserve.gov/PUBS/ifdp/2014/1101/ifdp1101....
It's mostly "policy shocks" / surprises that cause changes in bond rates, which may have knock-on effects to other asset classes.
Indexes have gone up and up and hit all-time highs regularly over the decades on their own: there's no need to throw QE magic pixie dust as a cause.
Further, in the past, a much smaller percentage of the population probably had equity ownership: as pensions have given way to private retirement funds (401(k) in the US), and so you have people buying the S&P 500 in their Vanguard accounts.
On the flip side, you have a large population cohort (Baby Boomers) entering retirement age, and they want safer asset classes so are going after bonds, driving down yields. With yields getting lower, anyone who wants returns is stuck with equities.
So you have one group of people bidding up equities for growth towards retirement, and another group bidding down bonds for safety in retirement.
The announcement of the most recent round of QE is one of the "policy shocks" of the kind referred to by the 2014 Fed paper. Prior to the announcement, Apple, S&P 500, and bond funds were at 1-year lows. This month they are at all time highs.
We could stand to do better about wealth inequality...
Expect more angry people electing even angrier people into important posts. There is some incredible short-termism in all this policy.
The people that applies to may be largely rich in any given instance in practice but this bit of pedantry is important as "rich" are not homogenous in their interests.
It's just more in favor now than it was a year ago in investor sentiment
A better question would be whether the expected value of all future cash flows has doubled. Evidently, a lot of people seem to think so. (Whether these people are rational is whole another question)
If there is a finite limit of "investable assets", then the relationship between those assets prices is not necessarily driven solely by sentiment in favor of Apple.
It could be that almost all other assets have seen their expected future cash flows fall while Apple's has slightly risen.
It could be that people's decision is not driven by future cash flows, but some other metric or feeling.
Have Tesla's expected future cash flows increased by 8.6X in the past 12 months? It's stock has gone from $220/share to $1,900/share.
That said said, if Apple bought them for accelerating their self-driving car development, the historical profit margins are irrelevant. The the valuation would still be all about the future opportunities and future cash flows. This relative to other opportunities in the market, as other commenters rightly point out.
In real dollars, or nominal dollars?
It's rather than all other investments are worse, not that this one is real.
A relatively small increase in earnings might also cause outsize increase in valuation, if that increase was not expected or if it signals to the market the company is strong regardless of tumultuous market situation.
The first iPhone had 128MB of RAM and ran at 412 MHz, underclocked from 620 MHz (https://en.wikipedia.org/wiki/IPhone_(1st_generation) ), and there was disbelief that what they showed could be built at all at the time with the advertised battery life.
They likely also didn’t want to commit yet to an API for third-party apps, as they didn’t know what was reasonable there.
Meh. make was genius. Makefiles were genius. pkg_install and pkg_add were genius. PMS was genius. RPM was genius. FreeBSD's ports tree is genius. pkgsrc is genius. Like nearly everything Apple ever did, AppStore is not at all original, not remotely the first, not by over a decade. It is really no different from any other binary package manager. It is Brew for iOS.
Like most Apple things, they weren't the first. Their genius isnt being first, it was spit polishing things to be simple for the masses. Over the years, they have lost a bit of that vision and turned googly with new products not quite replacing old products (how many times has photo sharing and backup been redesigned) but comparing the whole suite to components is a bit unfair.
if Apple had launched the app store with the iPhone, it would have had no where near as big of an impact as it did by waiting just a year. they created the demand first.
and no, Cydia was launched 5 months before the app store.
My only point is that the AppStore is not the Second Coming. It is and it only is a package manager. Just like all the others that came before it. And nothing more. It is not some searing example of genius. It is one package manager among countless. That it includes a payment system is an irrelevant detail.
What Apple did that is amazing is creating a community of developers out of nothing and gave them excellent tools to create software for their platform. It seemed overnight that the ocean of Windows applications, mostly due to obsession with backward compatibility, was no longer all that special.
An old engineer friend of his asked Holt about several topics, and I think his answers were interesting, including what was baked into early Apple that made it succeed at what it was trying to do over the years.
https://louisproyect.org/2015/08/28/steve-jobs/
(The beginning of the blog post are comments by the old friend about the Jobs movies, followed by Holt's two replies).
I think only Google probably had the image of superior products(Search, Maps, Mail) which rivalled/beat Apple but that has been kind of tarnished now.
[1] http://damniwish.com/wp-content/uploads/2012/08/car-sticker-...
[1] https://www.statista.com/statistics/272698/global-market-sha...
The biggest qualm with Google was their incoherent product strategy like what happened with Gtalk, Reader etc.
If anyone had the brand value to push a smartphone OS, it was Google. Once Android started going mainstream, they could have chosen a different strategy for the high end models.
I singlehandedly moved my entire extended family into the iOS space because I got tired of dealing with Google's bullshit messaging apps. I'm not going to waste my life teaching non computer literate people how Hangouts/Meets/Talk/Duo/Allo work.
WhatsApp came along and took the messaging space, while Skype and Hangouts and Talk or whatever couldn't figure it out. And Facetime was the only decent video calling option that didn't need to be troubleshooted.
It was ridiculous that I couldn't easily send a contact to anyone in the world until WhatsApp came around. Then I didn't have to worry about who had what phone, I sent them a contact in WhatsApp, they got it for free and it worked.
Look at the messaging space now. Messenger, WhatsApp, iMessage. Google should have led this space with evolution of Gtalk.
Even for users, as it used XMPP we would have had an open platform where we could have just plugged in our own favorite messaging apps with it.
That's my point though - the features that HN users find valuable (XMPP standard) are not the same as what most consumers do.
XMPP I consider as an advantage personally as with lock in to platforms like Messenger/WhatsApp we complain about the total control these companies have. In an XMPP world, at least you could have had more control over clients and the ability to talk to a different Jabber server from the same client app.
I agree though that the XMPP bit, no normal user cares about.
After all, ads earn them revenue. You can have product differentiation where your devices don't have to necessarily earn by ads. A very good example of this is Amazon. They have two versions of Kindle, with the ad free version costing more.
GP is claiming that Apple is doing better in the phone space, because Z>X. But the appropriate comparison is not Z vs. X, but (Z+0) vs. (X+Y).
For high end devices, maybe some of the services could have been considered paid off for before and could have skipped ads. That way, even Google gets 'Z' from phones.
This just cuts into privacy as a marketing point for iPhone.
By giving it out almost-free to OEMs, Google solidified the majority marketshare as the cost leader. That is much more strategic than dumping capex into manufacturing against an already established quality brand.
Carriers finance the new model at a seemingly low rate ($15/mo.) then charge more on the wireless service. I can get the $15/mo phone, but only at the $60/month plan not the $35/month plan. If I don't pay, the product is worthless (no service).
You can calculate the amount of housing or auto debt that is out there, but have always wondered how much 'iPhone debt' is outstanding w the wireless carriers?
I don't know the history of mobile phone contracts before the iPhone but i feel like that was Apples innovation (or they made the best use of it), rather than the product being so good that everyone had to spend ~$800-$1000 up front for one. Not that it isn't a good product, just without a phone contract it would have sold far less at the premium price point.
In fact iPhone phone contracts seemed to spawn a trend in getting many other products on credit (and over paying for them).
Also, I seem to remember Apple pushing mobile network providers hard to almost subsidise the cost of the handset around the 2012s, when they were still competing at market share with Android phones.
I'm willing to bet the adoption of smartphones and regular upgrades wouldn't be happening at nearly this scale if all customers had to pay $600+ up front.
Over 24 months, the difference between a $650 phone and a $250 phone is minor.
Less so with the cars, the vast majority of cars sold are with relatively thin margins.
And houses aren't sold by a single business, it's just the law of supply and demand.
I would add Nespresso as an example: They've definitely managed to mass-market a luxury good (outrageously expensive coffee pods)
How's that different from all kinds of clothing brands?
The exclusive nature is part of what supports the luxury brand. One case study: how ray ban managed to recover their "luxury" status by removing low cost, high volume items from their catalogs.
I'm not talking exclusive to rich people Armani's here, I'm talking all the mass market luxury brands. Heck, even Nike's $200+ sneakers...
"they managed to do something that was previously unimaginable in business theory - create a mass-market luxury good."
Is not about that. It is about the (perceived) impossibility of a mass-market luxury good.
But "mass-market" is a term for broad appeal/sales (dictionary: "the market for goods that are produced in large quantities"), not for over-the-top revenues.
And as for that, more people have Nike shoes than have an iPhone. But even if 1/15 as many had, it would still a mass-market good, with luxury price / appeal.
"just works and doesn't waste hours of my time" != "luxury"
But it is. The customer isn't you, the tech literate professional; their target customer is the average person on the street.
Apple doesn't want their device ecosystem to be inclusive to the things that confuse, defraud, or frustrate non-savvy users: unethical or unqualified repair, advanced (mis)configuration, side-loading apps, etc.
Back when I worked as an IT tech, upwards of 80% of issues I dealt with were caused by one of those confusions that are completely solved by a walled-garden approach. It might not be your preference, or my preference, but there's no denying the utility it has for others.
I had a 2015 MacBook Pro that had died recently and like you Apple Care had expired. This is my work laptop and was not be able to earn anymore income until it was operational again. I did all the basic troubleshooting myself resetting PRAM, etc and nothing helped. I contacted Apple support and they had me do the same tests and some additional ones without success. This all happened two weeks ago and due to Covid-19 the area I’m in has no in person support available. The only solution offered was to wait until Apple stores open or buy a new one.
I tried to find third party to help with no luck. I decided to take a crack at repairing myself by buying individual parts from Amazon. I soon realized this isn’t as simple as it should be. I had to buy Apple specific tools to open the MacBook case and then realized even the SSD on a 2015 MacBook Pro is a proprietary version so I had to buy a specific over priced version to replace the drive. I felt like the last thing they wanted was for the customer to try and repair the laptop.
Nothing ended up working. So, I had to buy a new one. I thought I could at least use this current MacBook Pro to get some trade in discount. Nope, they offered zero trade in since it didn’t turn on even though it was in excellent physical condition. I ended up buying a new one from Amazon and restored data from a previous timeline backup.
IMO, The least a company this wealthy could have done is offer a small discount considering the times we are in. I was very disheartened with my experience.
I hope you upgraded to a 16 inch one! Sounds like a good update anyway.
I did, and it hurts looking at my previous one I loved right across from me considering the price I paid for the new one. "Well, at least I have Touch ID now" is what I keep telling myself.
Now that I think about it, I could probably get away with a Hakintosh setup. I didn't consider it with everything going on.
One thing that is pervasive in the US, is financing of expensive things (relatively speaking) through "easy" monthly payments.
The only reason their luxury good is sustainable is exactly because people have to join it to be able to communicate with their friends, and can't leave.
I have an iPhone, but I communicate with my friends using WhatsApp, Facebook Messenger, Signal, and Skype as well as iMessage.
Some of them have android phones, and some of them have iPhones. And some of the iPhone users use Facebook messenger, Signal, and WhatsApp, to communicate with me
I only use FaceTime to communicate with certain in-laws, and the some of my extended family and some local friends use Amazon Echos for video.
Apple managed to create a luxury product - the iPhone (differentiation) at mass-market scale (low cost base) which has driven the majority of their profitability since it's launch.