- Clash of the tech titans: Apple dings Facebook on privacy
- And now Facebook is striking back with… class warfare?
- Coming soon: An internet where Facebook and Google aren’t as powerful
- The real reason the Fed will cut interest rates five weeks from now
- Awaiting the G20… another advantage to our preferred gold ETF… obsessing over the Fed’s “jibby-jabba”… and more!
Apple is an elitist company. Who knew?
In recent months a urination match has broken out between two of the U.S.-based tech giants — Apple and Facebook.
More than once, Apple CEO Tim Cook has been outspoken about Facebook’s, shall we say, casual concern for the privacy of its users. “We’re not going to traffic in your personal life,” he told MSNBC last year. “Privacy to us is a human right. It’s a civil liberty.”
According to The New York Times, Facebook CEO Mark Zuckerberg became so incensed that by last November he ordered his top lieutenants to use only Android devices and not iPhones.
Cook spoke out again as recently as a few days ago. “If we accept as normal and unavoidable that everything in our lives can be aggregated, sold or even leaked in the event of a hack, then we lose so much more than data,” he said during a commencement speech at Stanford. “We lose the freedom to be human.”
In response to Cook’s latest salvo, Facebook is playing the envy card.
It’s not Zuckerberg firing back, but rather Facebook’s “Vice President for Global Affairs and Communications” Nick Clegg.
Clegg was a lifelong politico in the United Kingdom. He worked his way up to leader of the country’s third-largest party, the Liberal Democrats, and the post of deputy prime minister in a coalition government with the Tories a few years back.
In other words, Clegg is a card-carrying member of the global power elite.
Clegg in 2011, speaking at the World Economic Forum in Davos, Switzerland — because of course. [World Economic Forum photo]
But in the post-Brexit reshuffling of Britain’s political order — the referendum was three years ago this week — he couldn’t even hold onto his seat in parliament.
And so Clegg landed his current gig last October. If you can’t exercise political power, might as well cash in big and work for a tech firm with quasi-governmental reach and authority, right? (As a Wired headline on Drudge said just this morning, “Facebook Acting Like Country — Not Company.”)
Clegg didn’t call out Apple by name. He didn’t have to.
“Some other big tech companies make their money by selling expensive hardware or subscription services, or in some cases both, to consumers in developed, wealthier economies,” Clegg said during a speech on Monday in Berlin. “They are an exclusive club, available only to aspirant consumers with the means to buy high-value hardware and services.”
In contrast, Clegg said, “Facebook was founded on a simple principle: We want to connect the world. And you don’t do that by charging for admission.”
The part about unicorns and rainbows was merely implied.
Really, Clegg should have just gone all in with the class-warfare angle: “See that guy down the street with the newest and most souped-up iPhone model that you can’t afford? He’s your enemy, and so is Apple. We’re your friend. We’re altruistic and compassionate and only looking out for your best interests with our free s**t. Pay no nevermind to the 10 properties our CEO owns in Palo Alto and San Fran and Tahoe and Hawaii."
If that’s the best Clegg’s got, he might as well pack it in right now.
C’mon. It’s the middle of 2019. Nearly everyone knows that, as the saying goes, “if you’re not paying for the product, you’re not the customer — you’re the product.”
To be sure, it’s been a phenomenally lucrative business model for Facebook. Google too. They’re among the biggest publicly traded firms in the world… and at this time only six years ago, neither firm had even cracked the top 10.
It was a great ride while it lasted. But the “free” model is headed for the proverbial dustbin of history, according to our newest contributor.
All this week we’ve been introducing you to the tech visionary George Gilder. And we don’t think “visionary” is overstating his credentials. Not when in his 1990 book Life After Television he already saw the advent of the smartphone…
“The computer of the future,” he wrote, “will be as portable as your watch and as personal as your wallet. It will recognize speech and navigate streets, collect your mail and your news.”
The story goes that the late Steve Jobs handed out copies of Gilder’s book to his underlings at Apple. There were other smartphones before the iPhone came along — the Blackberry, the Treo — but it was Apple’s creation in 2007 that’s synonymous with the “smartphone” today.
Mr. Gilder is out with his newest paradigm-smashing prediction — as radical as his 1990 anticipation of the smartphone. (OK, he called it a “teleputer.” Still a pretty good call!)
The Google era — indeed the entire model of so-called free products and services — “is coming to an end,” he declares.
“Indeed, we already know that its advertising business is not sustainable.
“Did you know that 30% of your payments for smartphone services go to download ads that you don't want to see? And only 0.06% of these smartphone ads are clicked on? According to surveys, 50% of these clicks are made in error. That means only 0.03% of ads are actually desired.
“This is a catastrophe. And it’s not a viable business. Google is coming to the end of the line in smartphone advertising.”
No, it won’t be the end of Google itself. Or Facebook. But it will be the end of you being “the product” — along with the end of the privacy disaster both companies have wrought.
As Mr. Gilder said here yesterday, “All our private data resides in a bunch of corporate data centers scattered about the landscape and all it takes is for some careless IT administrator to forget to update to the latest version of a piece of software and, oops, suddenly hackers now have access to the whole treasure chest — and there’s nothing you or I can do about it.”
But inventive people both inside and outside of Silicon Valley are doing something about it.
We’ll tell you more about their extraordinary plans tomorrow. In the meantime, George is planning to reveal how you could collect life-changing gains alongside these pioneers of a new, more secure and more private internet. It’s a special event scheduled this coming Tuesday, July 2, at 1:00 p.m. EDT — only five days from now.
Seriously, this is the sort of thing you might expect to see at a TED talk, months before the talk is released to YouTube. Did you know attendance at a TED conference can set you back as much as $7,500? But you can see this event FREE. Again, it’s next Tuesday. Access here. Well, at least while slots are still available. And they’re filling up quickly.
The markets are treading water, waiting for shoes to drop at the G20 summit in Japan.
The Wall Street Journal reports this morning that Chinese President Xi Jinping will present President Trump with “a set of terms for settling the trade fight, including lifting the ban on U.S. sales to Huawei.”
Hmmm… With that, the Dow is nearly flat on the day, the S&P 500 up slightly, the Nasdaq up more.
Treasury yields are backing down, the 10-year just over 2.02%. Gold is down slightly but still holding the line on $1,400. Crude is down a few cents but still above $59. Bitcoin is back below $12,000 for the moment.
The Commerce Department issued its final guess on first-quarter GDP this morning — an annualized 3.1%, as expected. But consumer spending — which makes up about 70% of the figure — was revised down, and that wasn’t expected. The second-quarter number won’t be nearly as robust.
Now for the real reason the Federal Reserve is signaling interest rate cuts later this summer.
By tomorrow, the Financial Times anticipates at least 10 companies whose debt is rated “junk” — i.e., risky and not investment grade — will nonetheless manage to float new debt and find buyers this week alone. That includes a $500 million issue by Post Holdings, the ailing maker of Grape-Nuts.
As of this morning, futures traders are pricing in a 100% probability the Fed will cut the fed funds rate at the end of July. “That has helped drag down borrowing costs for companies,” says the FT, “with the average yield for junk-rated bonds falling below 6% for the first time since April 2018. The hope is that a cut in interest rates will extend the current economic expansion and prop up risky corporate debt.”
For six months now we’ve been wringing our hands about the corporate debt market — with a third of all corporate debt rated junk and another third rated just one notch above junk. Rising interest rates would make servicing that debt more costly. And we know this situation has been on the Fed’s radar.
For all the Fed’s chatter of late about “acting as appropriate to sustain the economic expansion,” we suspect the real reason for impending rate cuts is to stave off disaster in corporate debt. More to come…
On the subject of gold ETFs, a reader writes: “One very important element of the VanEck Merk Gold Trust (OUNZ) that you didn't mention is that it is the only gold ETF that allows shareholders to swap shares for physical gold in ounce quantities.
“I own it for that reason. Sprott Physical Gold Trust (PHYS) allows the swap but only in 400-ounce quantities.”
“Not sure when it started, but it feels as if the market has become more sensitive to the Fed's jibby-jabba,” writes our next correspondent.
“I wonder if there won't be a normal end to this cycle, but more like a zombie-dragging market instead. Thoughts?
“I enjoy The 5!”
The 5: It’s been a slow-motion process across more than three decades now.
After the 1987 stock market crash, the Fed effectively added a third element to its so-called “dual mandate.” In addition to “maximum employment” and “stable prices,” the Fed aims for stability in financial markets.
Of course, the Fed failed miserably in this regard, with policies that contributed mightily to the Panic of 2008, and the Fed responded with a host of unprecedented and experimental measures — including a seven-year state of monetary emergency with a fed funds rate near zero from 2008–2015.
Along the way, the Fed stepped up its phony efforts at “transparency” with ruses like the chairman holding a press conference four times a year. (Now eight!)
Little wonder that nowadays every cough during every speech delivered by every Fed pooh-bah is analyzed for clues to the Fed’s intentions.
It’s just as ridiculous as the attempts to divine meaning from every presidential tweet. And not nearly as entertaining…
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. One more item from the mailbag, on the subject of Facebook’s foray into cryptocurrency: “I'm all in with crypto. Fan of bitcoin. However. FARCEBOOK has already gotten too big for its britches, like Google.
“I would not support its coin at all. Maybe they will call it progressive coin.”
We understand the name will be libra. And if it’s like everything else Facebook does, it will be designed primarily for the benefit of Facebook — with the users an afterthought except for how they can be managed, massaged and monetized.
That’s why we’re so excited about our newest contributor George Gilder’s vision for a future internet where FB and GOOG don’t call all the shots. An internet where power is put back in the hands of the people. And this isn’t some utopian, pie-in-the-sky thing — it’s the inevitable direction that new technology will take us. (Again, more about that tomorrow.)
We take Gilder’s prophecies seriously, given that he’s the guy who showed a microchip to Ronald Reagan back in the day and told him it would change the world.
In five days, he’s revealing another prophecy — one for the ages, and enormously lucrative for the tiny, publicly traded players making this new internet happen.
Join George for his exclusive event next Tuesday at 1:00 p.m. EDT. Access is free, but space is limited — sign up at this link.
