The Apple -- Google Reader

The split-up of Apple-Google cooperation and rumors about the coming Apple Tablet continue to get a lot of buzz. As if it has been a big secret, Apple and Google have avoided direct competition while fighting multiple battles against King Microsoft. Now that there are growing cracks in King Microsoft's Castle, and, now that the US Government is taking an active stance to push Net Neutrality, and, now that Apple and Google are starting to dominate certain markets, it is necessary that they battle at arms length from one another. The firms will continue to battle King Micro but they will increasingly be forced to battle one another. When they can cooperate to win, they will.

The Apple Tablet is expected to be a wonderful, multi-purpose, but initially expensive machine. It is expected to be a feature rich big brother to the iTouch. A device that is good for listening to music and watching TV but also a good machine for surfing the web, updating social network accounts, reading books and doing normal day to day communication functions. An important point is that "normal" is about to change and Google is going to be the leader in defining what the new "normal" is.

Instead of sending emails and instant messages, it will gradually become normal to invite friends and family over for a "face to face" visit. Google software and the rapid deployment of 4G Internet speed is going to make it natural for tablet users to do "video talk". The deployment of Google Voice will make it easier to control interruption and even access.

The current Google Reader software, available free of charge, will serve as an Internet Gate Keeper, similar to the way Google Voice functions as a Telephone Call Gate Keeper. Add these gate keeping products to a web connected electronic reading tablet and you have a powerful game changing product. As has been shown by the usage of the iPhone as a Kindle book reader, the demand is for an all purpose machine.

Of course, given a little time, new models of the Amazon Kindle, the Sony Reader, the Plastic Logic Reader, the Samsung Reader, and many others are likely to be all purpose machines. In the near future, with only a touch or two of a screen, the owner of an electronic reader will go from a page in a book to a page on a social network. Speech to text and text to speech technology will make it easy to "send a quick message" before returning to reading. With a wireless, fast, light weight, clear device in hand, why not give it voice and video capacity?

I see no reason why Google Reader would not have books as well as its normal blogs and websites listed for viewing. Google has made 500,000 books available through the Barnes and Noble/Plastic Logic program and it has made 1,000,000 books available via the Sony Reader program. Google is "buying" real estate on these reading devices by offering a source of revenue that is not available from anyone else. The Amazon/Kindle program has over 330,000 books available without the assistance of Google and Amazon offers a free Android app. Kindle books are available on Apple Reading devices and on Google reading devices. Why not? The majority of books are sold at competing book stores. The biggest exception is Christian books sold through church sponsored outlets.

The Sony -- Google Reader

Right after Amazon lowered the price of the Kindle II to $299, Sony announced a $199 reader for delivery in September. While the $199 reader must be loaded via a USB connection to a computer, Sony has announced that their plan to offer a wireless reader that will not be limited to one carrier. Indications are that all the cell phone companies are eager to offer wireless service to readers. The indication is that Sony is negotiating to make a service available via the most dominant of cell phone systems, world wide.

Amazon is probably paying very low wholesale rates to Sprint. The download of Kindle books is quick. On the other hand, a Sony -- Google Reader or an Apple -- Google Reader with minute by minute updates of news, blogs, and email --with or without phone call service-- would likely require a cell phone type of contract per user.

The recent brouhaha between Google and Apple in regard to the Google Voice App was possibly staged. The whole purpose could have been to demonstrate that the days of extra charge for text services are over. It has been a marketing feat for cell phone companies to extract extra payment for text messages. By demonstrating that Google and others can easily circumnavigate AT&T, the mind of the market place has been opened. A great opportunity has been presented to software developers, who can now write software that will save consumers billions of dollars. Yes Billions! Last year, AT&T made more than $30 Billion and Verizon made more than $26 Billion. My guess is that more than 10% of those profits came from extremely high margin text services.

Chrome OS skepticism abounds. Critics enjoy reminding us that IBM, Sun Micro, Borderland, Red Hat and many others have tried and failed to wrestle even a tiny sustainable piece of operating system share. Apple has been the great success story but MS still has something like 90% share. The story in the mobile market place is different. The mobile market is much more fragmented and this is where the growth is. Most importantly, software programs are routinely being written for multiple browsers. The MS strangle hold is being forced loose.

The coming combination of HTML 5, Chrome OS and 4G speed is going to be a game changing event. For example, with the above in place, Google Reader will be able to assemble a complete full color magazine for you daily or even multiple times daily. Instead of having a link to a web page that you might like, you will in effect already have the web page inserted into your personal magazine. Moving around the web and from phone call to book reading will be a seamless experience.

If you have ever made a phone call using walkie talkie technology, where there was a half-second latency factor, and where you could not speak without cutting off the incoming message, you know how annoying such a call can be. In the email and Internet 1.0 world, we have always had to deal with very long delays. We send and email or even an "instant message" and we do not expect to get an immediate answer. The system under development now, in particular the Google Wave system, which will begin a very gradual release to the public in late September, will take the Internet to the next level. As one person types his message, the receiver will see each character print. Using text to voice and voice to text, those who now type slowly will type at conversation speed!

The cohorts that will benefit the most from Internet 2.0 are likely to be the old and the young. The young who cannot yet write will talk to the computer and the old who can hardly see to read will listen to the computer. In the previous sentence, I naturally reverted to the word computer. Again, basic hand held readers are going to morph into power handheld computers!

Bio-engineered Teeth!

Yesterday, in response to the cash for clunker program and the dying post office monopoly, I wrote the following: In 1911, Thomas Dixon completed "The Root of All Evil", his third novel in a trilogy that attacked populist socialism. History does not actually repeat itself but it certainly does rhyme with itself. Today, US citizens are collectively borrowing billions of dollars and raising future tax requirements by billions of dollars to buy old autos from individuals for $4,500 each. It is wonderful and ironic that "The Root of All Evil" can almost instantly be downloaded onto an Amazon Kindle for only 99 cents or onto a Sony Reader for FREE! Once again, FREEDOM will triumph over socialism! The "Group Think Socialist" incorrectly believe that the purchase of the clunkers will help the environment. In fact, this car buying subsidy will increase the number of miles driven and the gasoline burned for many years to come. On the other hand, the total savings, including environmental savings, from electronic delivery of news and mail will be enormous. (visit http://stocksorbonds.blogspot.com to read the entire article) Today, I call forth the ghost of Thomas Dixon in response to socialized medicine. There will never be enough money to provide all the health care we would like. We cannot repeal the law of scarce resources. We can only hope to make the most of the resources we have. If one objectively looks at the trillions of dollars that have been lost and the environmental damage that has been done because of the US Postal Service Monopoly, one must appreciate the silliness of proposing increased government control of health care. (The postal service monopoly would have lasted many more decades if the AT&T monopoly continued.) Our socialist leaning, power hungry, elected officials want to direct the spending of trillions of dollars. Their latest "land grab" is to fix the health care "crisis". The "crisis" that they have created in reality and in perception by throwing money at a financially busted Medicare and Medicaid system and by repeating the mantra that 45 million Americans are uninsured. In the meantime, publicly funded and privately funded research is rapidly discovering health miracles. For the first time, scientist have bio-engineered an organ, a mouse tooth. In only 45 days, they can now grow a tooth from a few cells extracted, engineered and replanted. Before long, growing other replacement organs will be achieved. Yes, eventually, even the human heart. That is, unless the government gets in the way. People are healthier today because the knowledge of good sanitation practices has been spread and because we have discovered treatments and cures for diseases. In preparation for "going back to school", millions of children are getting physical check-ups. Many of them are being seen by nurse practitioners and their parents are paying about one third the "doctor rate". The price of quality medical care will fall if the market is allowed to work. From the investment angle, we should note that at the bottom of the recession, the ten year growth in manufacturing jobs in America was negative 3.7% and the ten year growth in Health Care jobs was 2.4%. Home Health Care jobs increased by 5% and auto manufacturing jobs fell by 6.7% (Pew Research). For long term growth, it is clear that heath care growth will exceed manufacturing growth, but growth and profits often diverge. Ford Motor shares have increased about 500% since hitting bottom. The rebound in auto sales will continue even after the cash for clunker deal is over. During the past three years, the fleet of cars on the road has aged and it will be replaced. Manufacturing jobs in America have declined for one reason only, labor priced itself out of the market. As a result, Ford and others have been forced to jettisoned labor and to substitute capital. The classic rules of economics do not go away. Monopolies, including labor cartels, are seldom "natural", markets adjust. The auto situation is one of higher sales with lower costs, which means fat profits. In a few months, shares of GM and Chrysler will come to market. Brokers will be pushing those shares. The time to buy is now. It will be years before grown teeth will be a service delivered at a profit. If you know of a good way for investors to participate in health care delivery, I'm all ears. In the meantime, I will encourage investors to purchase Ford and other consumer cyclical stocks. The recession is over; the world did not end. The in-trade betting is that the congress will not find the votes to raise the massive amount of taxes that their health care proposals would require. Indeed, the in-trade odds that the massive cap and trade tax proposal in any form is less than 50/50 for passage. The future is bright because innovations are flowing forth. Government imposed monopolies and oligopolies stifle innovation. The change from $3 per minute long distance calls to free long distance calls would never have happened if the AT&T monopoly had been allowed to stand and the price of postage today would probably be double. Sure the change has not been all fun and games. Change is naturally hated by most of us. It is difficult to move outside of our comfort zones, but it is important to keep moving in the right directions as best we can. Keep in mind that in today's dollars those $3 phone calls are the equivalent of perhaps $10 or more. Jack

The Plan is Coming Together

I'm writing this on my gmail gadget. Many separate programs are being pulled together by various new software gadgets. Now that standardization is getting real, hundreds of thousands of gadget software programs will be written over the next 2 or 3 years. We are living through a great paradigm shift! I hope you are aware enough to make the best of the opportunity!

Post Office Demolition -- Brick by Brick -- The Bank Angle

The US Postal Service just experienced a one year decline of 20 billion pieces of mail. Monopolies are not natural; like Feudal Castles, they eventually are breached. By granting and protecting the Postal Service monopoly, our government has allowed an inefficient beast to eat up more than its share of our incomes. This unionized beast overcharges its customers while maintaining small offices that should have been closed decades ago. A beast that robs from the poor and gives to the rich (the politically connected and powerful elite). The rich can easily afford 44 cent stamps, but 44 cents per piece is highway robbery to the poorest among us.

Today, a new iPhone app became available that will allow customers to "deposit" checks to their bank by phone. LINK. To make a deposit, one simply uses ones camera phone, takes a picture of the check and sends it to the bank with the account number attached. In 2006, USAA Savings Bank began offering this service via desktop computers attached to scanners. My guess is that less than 5% of all desk top computer owners use scanners (I'm sure that more than 5% own combination printer/scanners, but owning and using are two separate things.)

The smart phone market share is only 2%, but this market is growing faster than kudzu. In two years or less, a majority of cell phones users will have upgraded. My guess is that in less than a year, there will be more people using the "scanners" in their pockets than people using scanners at home. The pace of demolition of the Postal Service Monopoly is speeding up.

The service has put 700 post offices on its closure list. Of course, our elected representatives will battle to keep some of these open (bring home the bacon to the district even if the little old widow has to pay 50 cents per piece). There is one county in Pennsylvania that has 68 post office locations! (Do you suspect that a local representative was the head of a certain committee?) In addition to the closings, a large number of offices will be converted to limited service locations -- places where you can buy stamps and send mail but where there is no receipt or sorting of mail.

Forrester Research has done a study of electronic readers. The study concluded that reader sales would jump sometime next year when Forrester expects the $200 price level to be breached. The study went on to say that sales would soar a year or two latter when the $100 price level is breached. Forrester is one of the best in the business but they have already recorded a big miss here. Sony has already announced that one of its new readers will breach the $200 level in September. My current guess is that phone companies will offer subsidized readers for less than $100 during the coming winter "reading season".

In 1911, Thomas Dixon completed "The Root of All Evil", his third novel in a trilogy that attacked populist socialism. History does not actually repeat itself but it certainly does rhyme with itself. Today, in the USA, we are collectively raising taxes in order to buy old clunkers from individuals for $4,500 each! Is it not wonderful and ironic that "The Root of All Evil" can be quickly downloaded onto an Amazon Kindle for only 99 cents or onto a Sony Reader for FREE! Once again, FREEDOM will triumph over socialism! The "Group Think Socialist" incorrectly believe that the purchase of the clunkers will help the environment. In fact, the subsidy being offered to buy cars will increase the total number of miles driven from many years to come. On the other hand, the total savings, including environmental savings, from electronic delivery will be enormous.

So, while our government continues to heavily subsidize the car industry (in more ways than one) and while it continues to force Americans to overpay for the physical delivery of mail, the market is both tearing post offices apart brick by brick and reducing our reliance on cars.

Electronic banking is "preparing for take-off". Electronic delivery of books, newspapers, magazines and mail is "preparing for take-off". The consumer savings are going to be significant and the investment returns are going to be fantastic!

Google Growing in China!

While Microsoft is busy trying to catch Google in the USA, Google is building a potentially huge business in China. I'm reminded of the swashbuckler spoofs where the champion uses one hand to fight and the other to sample from the fruit bowl.

Microsoft just inked a deal with Yahoo. To "buy" control from Yahoo, Microsoft will give Yahoo about 90% of all search revenues for the next 10 years. Microsoft has spent billions of dollars re-engineering its search engine a dozen times. By all accounts, the latest iteration is about as good as Google search. The trouble for Microsoft is that search is sticky; consumers will not switch unless they have a strong incentive.

Baidu, with the huge advantage of Chinese government support, holds a dominate 75.7% share in China. Google has fought hard to achieve a 19.8% share. All others combined hold 4.5%.

The hype in the USA about Microsoft's Bing search engine tends to focus on the US market only. When one looks at the global market, one realizes that a three-way battle is heating up. The worldwide search share numbers are: Google 68.9%, Baidu 6.9%, Yahoo 6.5% and Microsoft 2.3%. Combining Yahoo and Microsoft into one gives us Microhoo at 8.8% but Baidu only recently took second place from Yahoo, so its growth rate is clearly faster. Furthermore, Google is about to take a significant leap forward in China. Two of the major Chinese cell phone providers have announced Android based phones. The use of Android software does not assure the use of Google search but, again, while Microsoft is battling so hard in one place, Google is surging forward in another.

The most wonderful feature of Android phones is that they do not force the owners into proprietary services. Last week, Apple suddenly decided to ban the Google Voice app. While Google will do a web page workaround, this action by Apple (surely backed by AT&T) confirms my opposition to buying an iPhone.

Billions of dollars have been spent by Americans on text messaging. What a shame? The cost of text messages to the phone companies is incredibly close to zero and getting closer to zero daily. Indeed, the cost is probable negative in the sense that text messages use up much less bandwidth than the phone calls they replace. Google and other are giving consumers the ability to send free instant messages via the web rather than $5 per month and more text messages. It is easy to see why consumers around the world are increasingly opting for Android based phones. See Here.

The service that will explode over the next several years is text to voice and voice to text translation. Have you ever wished you could remember the details of a phone call? Perhaps a customers order was not exactly clear upon reflection. Perhaps you even forgot the customers full name! Was it Jim's nephew or uncle that should be added to the prayer list? Google is not running around talking about recording your phone calls for you. The reason is obvious. People are already paranoid about Google knowing "too much". There are multiple fears exerting influence here. One of them is the good old basic fear of change, kainotophobia. About 5 centuries before the birth of Christ, Nehemiah battled a strong case of kainotophobia. Link.

We fear the new but when we realize the benefits overwhelm the risks, we move forward. One of the Google Voice features that will grow in popularity until it becomes the new norm, is the recording and transcribing of phone calls. In the future, you will routinely search your phone records as easily as you search the web today.

Yes, Google is growing in China, but, more importantly, Google continues to offer new, free services to you, your friends and your neighbors. Google is in business to make money, but while it invites customers to come for a visit and to stay awhile, Microsoft is busy trying to bully or buy its way into more relationships. Microsoft now owns a small piece of Facebook and a small piece of Yahoo. Microsoft is not going away, but the most dramatic growth will continue to be achieved by Google.

Banks Continue to Truck!

On March 5th, a number of banks appeared to be headed for bankruptcy; what a difference a few months can make! Sure, you will find naysayers who continue to believe that we will soon see Armageddon, but banks shares have soared because their future is growing brighter day by day. The lowest price I paid (in friends accounts) for BAC shares was $6.16 but the shares fell all the way to $3.17. Today, these shares traded at $15.64. The brave sole who bought on March 5 has increased his investment 5 times and the economic recovery is just underway. The shares purchased at $6.16 are worth 2.53 times as much.

BB&T shares which traded at $13.32 less than 5 months ago, traded at $23.66 today. Wells Fargo shares has gone from $8.12 to $25.80, a "three bagger"!

As was noted several times in my postings on Facebook, the rally in bank shares and the rally in consumer cyclical shares tend to happen in close proximity of one another. Ford Motor actually bottomed about three weeks prior to the banks and has rallied concurrently. Ford has gone from $1.58, February, to $8.30 today. Wow! already a 5 bagger! Only a few people I know purchased Gannet Newspapers while it was in the $2 per share range but in 5 months, it has jumped to the $7 range.

Ford, Gannet and the banks have a long way to go before we can say that their businesses have fully recovered. The share prices will continue to lead the way. The share prices will peak long before profit peaks are reached, several years from now.

I encourage you to mix in a few "solid bets" along with shares of banks and consumer cyclical stocks. You should be sure to keep some Google shares in your accounts. Google is in the leader in the move from Internet 1.0 to Internet 2.0. The number of ways that you will ultimately use Internet 2.0 is unknown, but there will be many.

Watch Your Back! or Take Advantage!

If you find yourself in a street fight, it is wise to get someone to guard your back. Two enemies can guard one another's back if faced by an even greater evil. A street fight for bountiful Internet treasures has broken out. Gangs and alliances have been formed. Some of the alliances are stronger than others and every player needs supporters, loyal ones if possible. Consumers should find a good seat an enjoy the fight. Consumers will win as an abundance of new, low priced, delightful services become available. Investors should place serious bets because the winners will enjoy profitable growth for years to come. Investors should remember that Ford, GM and Chrysler investors did very well for many years. The fight is not a fight to the death.

Recent news has been about conflicts between Google and Apple:

Google's Chairman has relinquished his seat on the Apple board of directors.

The FCC is investigating Apple and AT&T for not allowing Google Voice on iPhones.

Google Chrome's market share is biting at the heels of Apple's Safari.

The Google Book settlement is being questioned by anti-trust busters.

Apple is providing reading services for both Amazon and Barnes & Noble.

Google has made a million free book titles available through Sony Readers.

Apple's iTunes service is very profitable but Google's YouTube is rapidly building audience.

Google's YouTube service is offering a new source of revenue to local news stations.

Other recent news has been about the conflicts between Google and Microsoft:

Microsoft is promoting its Bing search engine heavily.

Microsoft is giving Yahoo 88% of search revenues for 10 years in order to boost it's search share.

Microsoft's share of search has risen slightly, in addition to the 20% share that Yahoo will add.

Around the world, Google is gaining market share in the fastest growing part of the market--mobile search.

Google's browser, relatively new with only a small market share, has a steep mountain to climb but the owners are shooting to be King of Mt. Everest.

Google's browser goal is to be "the alternative operating system" on many machines.

Google's share of mobile handsets is growing rapidly; Microsoft continues to struggle in this important market.

Europe antitrust busters are considering a browser checkoff poll to bust Microsoft's Monopoly.

The above is only a snippet of the melee that is in progress. Many a player stands with Google when it comes to fighting the Microsoft OS monopoly only to face off against Google in their prime businesses. There are many complex relationships in play. Google is hiring, but, more importantly, thousands of programers can now write for the very broad OpenCode alliance. Under this alliance, programers can "assemble" the pieces of various other programs to build a great new product quickly. The new product can run on various operating systems.

In the social network area, the melee seems to be dominated by Facebook (Microsoft is a minority owner of Facebook) but "Lost Battalions" (like the 77th in WWI) are attacking from without and within. The OpenSocial alliance includes scores of players, lead by Yahoo, MySpace and Google. While there is considerable overlap, Yahoo and MySpace each bring more than 100 million "friends" to the fight. The combined audience is probably bigger than the combined audience of Facebook and Microsoft products but, again, the important fact is that the "little guys" know their realistic chance of a "win" is through the OpenSocial alliance.

The new MySpace mail system is interesting. It should do well. MySpace even appears to have a relatively easy path to the number two email spot behind Yahoo. So here again, you have Yahoo, MySpace and Google joining forces against Facebook/Microsoft in regard to social networks while battling one another and Facebook and Microsoft for email market share. One of the features that gives MySpace a leg up on Facebook mail is the super rapid search services provided by Google. I would not be surprised if MySpace Mail is not retrofitted to work with Google Waves, which is Google's main replacement model for outdated email systems.

Amazon and EBay are the leading Internet retail businesses but here again Google is making it easier for small players to compete. If you have a website, you can easily add a Google Store. If millions of small players take advantage of Google's free "store front" services, Google will have become a major player in retail.

It continues to be amazing that Google can offer so many neat services free of charge. We all know that there is a current or future revenue stream attached to each of these free services. We know that the demand for free service is much greater than the demand for expensive service. So the combination here is fast growth now and fast revenue growth later.

Putting a high powered computer in your pocket is going to gradually change your life. The Qualcomm processors being put in pockets today are more powerful than the average desk top of 4 years ago! If you computer is more than 4 years old, it is not as powerful as the current pocket computer. Chances are that your 4 year old computer does not have GPS and cell communication capacity built-in.

We are talking about a change that is bigger than all the ramifications of moving from a horse and buggy society to a automobile society. I'm very confident that Google's shares will double and double again over time. Amazon, EBay, Apple and other companies are going to see dramatic growth. As the price of providing service continues to fall, the number of services offered will soar. Most of these will be supported by advertising. Google seems to be the only player that fully appreciates the critical role of advertising in the provision of ultra low priced services.