Comments on: Is Apple recession proof? The answer is “no”, but…

By: Louis wheeler

Louis wheeler — Sun, 14 Dec 2008 00:33:42 +0000

Wes M said: “The above post is a lot of right-wing talking points built on garbled “facts” and whatnot.” There is a great deal of Free Market Economics in my explanation. We will have a test case, coming, to prove whether I am right or not. I am projecting a long term economic travail, the length of which depends on how much the government interferes in the economy. Every solution which Obama has talked about will produce bad results. This is not necessarily a Right Wing issue, because President Bush has been following Keynesian Economics with these bailouts. It just won’t produce the results he wants. The market wants to readjust and every government intervention and bailout prevents that. Why? Because of the mal-investment caused by prior decades of government interference must be washed out of the economy. Businesses must fold, uneconomic projects must shut down, bad loans must be written off the books and government interference and institutions dissolved. Fannie Mae and Freddy Mac must close up shop; CRA must be repealed. President Hoover was a Republican and he wrecked the banking system in 1930 creating a Liquidity Problem. He shut down a third of the banks by 1932. FDR continued with Hoover’s interventions and adopted new wrinkles of his own such as make-work projects and a Fascist control of the economy. Both inflated the money supply to pay for them. The issues are a little different now, but the government is trying the same cure. It has been known since the Sixteenth Century that increasing the money supply eventually causes price inflation. John Maynard Keynes promoted a theory in the 1920s that the government could use Monetary and Fiscal policy to control the economy. That idea crashed and burned during President Carter’s administration where we had high inflation, high taxes, high unemployment and a stagnant economy. Since we are going down the same path, we can expect the same results. This is not a Democrat or Republican thing; both parties are adopting bad economics. Companies like Apple must adjust to this bad economy. Guessing wrong will have serious consequences. I am guessing that you know nothing about Free Market Economics or history. You may have been taught Keynesian Economics in College, but so was I. It took living through Carter’s Administration and seeing Reagan’s solution which cured me of my Keynesian delusions. I wonder if you will learn from this coming economic debacle. Or will you constantly blame the wrong parties, as you do now?

By: Ian Betteridge

Ian Betteridge — Sat, 13 Dec 2008 20:56:23 +0000

Wes, for what it’s worth, I think you’re completely right.

By: Wes M

Wes M — Sat, 13 Dec 2008 18:53:39 +0000

The above post is a lot of right-wing talking points built on garbled “facts” and whatnot. Sigh, refuting everything here would take far more time than it is worth. However, the major points. The great depression did not get extended because of too much stimulus but because FDR tried to balance budgets and cut spending in 1937 when the economy was still sickly. Aminty Shales repeatedly misrepresents what happened during the depression. Likewise, the rap that Obama is a socialist comes from such a bizarre distortion of his record and positions (he’s was the most conservative of the three major Democratic Party candidates), it’s hard to even begin to correct. (But just think… anybody thinks that a budding socialist would appoint Larry Summers and Timothy Geithner has stretched the definition to beyond recognition.) And we shall not talk about nationalizing American business without someone explaining to me how Republican lawmakers setting wages for an industry as a condition for a loan isn’t a bigger infraction on free-enterprise.

By: Louis wheeler

Louis wheeler — Thu, 11 Dec 2008 21:32:54 +0000

No company is safe from the depredations of its government. The Obama administration could attempt to “Nationalize” all American businesses, although that is less likely than other socialist acts it has planned. This “recession” would normally last a year if the government did nothing, but some things that Obama is planning could extend that. Forcibly unionizing American businesses through the “Card Check Plan” will force many marginal companies out of business. “The power to tax is the power to destroy.” “Neither life, nor liberty nor property is safe as long as Congress is in session.” Then, we will have double digit Price Inflation when the economy starts to recover, perhaps, in late 2009 and through out 2010. This is due to the money supply increases from the current bailouts and Obama’s payoffs to his cronies. All this will be very difficult for US citizens and companies to adjust to. I won’t go into the international ramifications; those are down-right scary. That said, the relative rankings of tech companies could change during this recession. Apple’s prices are currently in line with Dell’s and this is likely to remain so. If Dell lowers its price substantially, I expect Apple to do likewise. But, Dell may choose to lower its product quality as it lowers its price. That I don’t expect Apple to do. Both HP and Dell are skimping on quality now. The issue is not about price alone. Apple currently appeals to the top half of the consumer market. These people will still have secure jobs; they are less likely to change their buying habits. Unemployment is currently lower than it was during most of the Clinton administration, but the Obama administration could change that for the worse. President Hoover, a major interventionist in the markets, gave us 18.7% unemployment in 1932 and FDR got us up to 24.9% by 1937. How high is Obama aiming for? The Enterprise and Government markets are the ones which will be hit the hardest by this recession. Apple is not greatly involved in them. Polls show that the Enterprise expenditures will be half of what it was last year. Some companies will not be acquiring IT hardware this year. Many of the Small to Medium sized Businesses will be forced to compete by delivering better products or services, rather than lowering their price. This is especially so, because of the looming price inflation ahead. Companies may need to build in an extra profit now, because Price Inflation hits profit margins worse than a recession does. They may need to upgrade for lower costs to avoid higher taxes that Obama has planned. Apple’s Macintosh delivers a lower Total Cost of Ownership than PC’s because Mac’s have a much longer useful life. Canny SMB companies have been counting on that for years. Many PC’s will be junk before we get through this financial debacle. Even though Obama has said that he does not intend to end the “Bush Tax Cuts” early, they will end, unless prevented, in 2010. It seems unlikely that Obama will extend them. This will cause a massive tax increase, so I expect another recession in 2011. The correct word for this period will be a Stagflation–a stagnant economy combined with high price inflation. Read up on Jimmy Carter’s administration to get a clue of what that was like. Of course, this depends on how faithfully Obama copies FDR’s “New Deal.” Herbert Hoover and FDR kept the Great Depression going for ten years. Then, they blamed the consequences of their intervention in the economy on the “business cycle.”

By: Ian Betteridge

Ian Betteridge — Thu, 11 Dec 2008 10:20:23 +0000

Oh yes – sooner or later, in business, everyone dies…

By: Jared Earle

Jared Earle — Thu, 11 Dec 2008 10:14:43 +0000

Recession Proof? No, but they have a shitloaf (sic) of cash in the bank so they can weather out the worst of it. The worry is at what point do bad sales actually start hurting them? "On a long enough timeline. The survival rate for everyone drops to zero."