The Devil's Advocate

In A World Where Greed is Good Why Not Look At All The Sides Of the Stock Market?

The End of iPhone Cowboys Could Double Sales in China

You’ll never hear it from Apple  (NASDAQ: AAPL), but ever since the first iPhone was launched, there has been a thriving, extremely lucrative black market in China and Hong Kong for the latest iPhones. Oddly enough, the players in this back-alley world range from well-heeled and opportunistic Westerners to the poorest Chinese locals looking to get their first real taste of American entrepreneurship with a Chinese twist. It’s a world where black-market iPhone prices are updated daily in a manner eerily reminiscent of Wall Street in the 1920s. It’s a world where consumers pay twice the retail price right after an iPhone debuts. With profit margins so high, it’s not hard to understand why this back-alley business has flourished for so long but this world is about to come to a violent halt with the latest iPhone 5.

Now, some will say they’ve been to China numerous times or maybe even lived there for years and never heard or saw anything of this nature. Well, unless you live and operate among the locals in the backstreets of places like Chongqing, China (a rapidly growing megacity of more than 30 million people) you won’t see this black market.  (Most visitors’ exposure to China is limited to highly Westernized cities such as Shanghai and Beijing.) As for those who would assume that Apple would attempt to stop this thriving black market that just isn’t the case.

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Three Issues That Hold Back Facebook’s Profitability

After Facebook’s (NASDAQ: FB) horrific IPO bomb, Mark  Zuckerberg finally emerged from hiding to speak at a recent tech conference and to rally the troops. While his speech was partially successful, it also quietly distracted investors from bigger issues hindering short-term profitability. He did this by raising a hot topic that he knew would, momentarily, distract most stakeholders from FB’s mobile strategy shortcomings: He threw HTML 5 under the bus.

What was the result?

Investors and stakeholders alike ate it up and couldn’t get enough. It was like watching an old man feed seagulls at the beach. The fact that Zuckerberg openly admitted any sort of shortcoming seemed sufficient for everyone at the moment.

So what are the immediate issues that hold back FB’s current profitability? In my opinion they revolve around three key points:

  1. FB’s “Google Assumption” relative to profitability
  2. The true quality of FB’s user base
  3. Rumors of “fake” clicks

Even a Luddite today understands that Facebook’s long-term success depends on a strong, profitable mobile strategy but that’s not what investors should be concerned about at the moment. After all, no one will care about a promising future if it never resolves these issues. FB will continue to carry high expectations but if it cannot resolve these structural issues, the stock will likely go lower – even if the popularity for the social platform does not.

The Google Assumption:

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Amazon Vs. Netflix – In The End, Who Will Reign Supreme As King Of Online Streaming Video?

The famous “Highlander” quote “In the end there can only be one” has been used almost religiously over the decades to describe fierce competition between two rivals. And when it comes to Amazon (AMZN), Netflix (NFLX) and the future of streaming online content, the quote couldn’t be more appropriate. Today Amazon, the online juggernaut, is finally giving Netflix a real run for its money as Netflix continues to try to regain its momentum after failing miserably to execute its “evolutionary” and short-lived business model. It was, of course, a horrible idea that might have been the result of too many 5-hour Energy shots and Red Bull at the same time.

Now the debate centers around whether Amazon can truly capitalize on Netflix’s massive self-inflicted wound and whether Netflix can regain sufficient momentum to fend off Amazon and other competitors. Netflix’s heavy investment into streaming won’t be enough to guarantee its position as king of the hill. Amazon without question has remained on the offensive after watching Netflix fumble the ball. But that won’t guarantee the right to steal Netflix’s heavyweight title either. No, in the end, if there can only be one it will be determined by whichever company can become the undisputed master of three domains: the size of the online streaming content library, genuine interest in becoming the undisputed leader in the space, and successful execution of a results-oriented streaming business model.

Bigger Is Better

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