Friday, October 31, 2014

BlackBerry nearly obsolete?

A Blackberry phone shown at a developer's conference. / (c) Jeff Chiu/API had to chuckle recently when I saw that Research In Motion (RIMM) missed its earnings estimate yet again and is no longer going to be issuing earnings guidance. In addition, the company's founder and former CEO, Jim Balsillie, has stepped down from the board.

 

Longtime readers may remember the battles I had with RIMM, a company I viewed as just a commodity masquerading as something unique. Of course, I don't know if it was doing the masquerading so much as wild-eyed stock bulls couldn't recognize Research In Motion for what it was, just as they were blind to problems at other companies that I and others of like mind have taken to task, such as Gateway Computer and Iomega.

 

Just for grins, I went back and looked at a column I posted on my subscription site on June 26, 2008, when the BlackBerry smartphone maker was trading at around $135 a share. (Back then, for those who don't recall, Research In Motion was one of Jim Cramer's supposed "Four Horsemen" that were supposed to carry the market higher.)

 

At the time I wrote, "Not only is (RIMM's) product becoming more of a consumer item (witness their crowing about consumers comprising about 60% of their phones), but the businesses where RIMM has the most penetration are in trouble. Further, serious competition continues to escalate. As I have said all along, I don't see how a closed system like RIMM ultimately wins, as that never happens in technology. . . . The fact that RIMM finally floundered says to me that it is over for the stock." (Column continues below video.)

To be fair, I had thought it was over for Research In Motion on a couple of previous occasions. But in this case, it was.

 

Out with the new, in with the newer

 

The reason I bring this up is because folks often forget that technology is a game of obsolescence that requires spending a lot of money, and it is very difficult to build a barrier to entry. Microsoft (MSFT) has a rather large competitive barrier, but that didn't stop its stock from selling at 10 times earnings last year. (Microsoft publishes MSN Money.) Google (GOOG) has a pretty good-sized barrier to entry, but many tech companies don't.

 

Apple (AAPL) has a bit of a barrier to entry in its iPod business, but in its other businesses, it really doesn't. Although I did try to take some of the bloom off the Apple rose in my column from two weeks ago, "Is it time to be against Apple?"

 

My point today is not that Apple is RIMM or that I am betting for or against Apple with any investments or trades at the moment. I just think it is useful for readers and investors to see where problems may come from.

 

Again, I want to be clear: I don't think that Apple is as vulnerable as RIMM was, because clearly it isn't. But it could stumble, as today's hot consumer item turns cold down the road. The moral of the story is that, oftentimes, products are just commodities. They are not the unique items people think they are.

 

Rational compared to what?

 

Turning to this week's action, Wednesday's swoon in particular, on the release of the Federal Open Market Committee's meeting minutes, found me looking at my screens and marveling at how simply mind-boggling it is that multitrillion-dollar stock markets worldwide, supposedly full of millions of sophisticated investors, can behave as idiotically as they do.

 

Our market, for example, ignores any and all bad news, is particularly uncritical of good news (such as weather-boosted activity in the gross domestic product), then dies of fright because the Federal Reserve reiterates what it said a month ago -- i.e., that it is not inclined to take any more easy-money action until it sees more signs of weakening.

 

Of course, that is now exactly what equities and the economic data are most likely going to provide, allowing the Fed to get back to doing what it does: print money.

 

Scrambled Eccles

 

It is sheer folly that we have markets and economies that totally revolve around what the "politburo" of the Fed's interest-rate-setting committee (and other central bankers) decides. It is incredible what an all-paper dollar and the lunatics at the Fed, in the form of Alan Greenspan and Ben Bernanke, have created.

 

Meanwhile, it is almost comical that so much attention is focused on presidential races when the morons at the Fed have all the power, yet are left unchecked to do trillions of dollars' worth of damage and ruin lives as they warp the economy and financial markets.

 

The reason markets are the theater of the absurd is because fiat money is no better than confetti, and all kinds of bizarre events take place when money means nothing. This makes the stock market somewhat uninvestible, even though there are plenty of equities that aren't very expensive. Of course, there are pockets of lunacy -- largely momentum favorites, i.e., the so-called "social networking" sector.

 

It is likewise amazing that a company such as Apple has such cultlike admiration that idiot analysts' price-target upgrades are treated as legitimate news items. To be sure, this is the environment we've been in for a long time, and the one we must deal with. But occasionally events conspire to make it seem so absurd that it provokes a rant like this one.

 

Everything to be gained

 

One of the potential positives from the pending potential stock market selloff is that we will see how high bonds can rally. Perhaps the bond market is going to have a failed rally somewhere along the way that will be instructive and allow us to get our teeth into the idea that a bear market has begun.

 

After all, that is what we are going to need to eventually get rid of the Fed and establish some sort of sane monetary standard in this country. We need inflation and a bear market in bonds, which will also weaken the dollar, all of which will help people come to the realization that the Fed is the problem. We can only hope we get there sooner rather than later so that the insanity will end.

 

On the air

 

For my latest interview with Eric King, regarding stocks, the Fed, and the metals market, interested readers can listen in here.

 

At the time of publication, Bill Fleckenstein owned stock in Microsoft.

News.Yahoo.com

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