Target?

Apple display at Target

Stock market averages rose today, but the world's most valuable company was down 0.82%. Apple Stock Hit With Second Downgrade In A Week: [bold added]

Atlantic Equities analyst James Cordwell noted signs that iPhone demand is starting to soften as well as "limited visibility into the potential for future iPhone cycles"...On Friday, respected Apple analyst Ming-Chi Kuo of KGI Securities predicted that the iPhone X will reach "end of life" in the summer.

Analysts have been wrong about Apple before but probably not here. Last Sunday the iPhone X was displayed prominently at the San Carlos Best Buy, which had plenty of supply.

That night I chanced upon a similar display at Target. Target? Not exactly where the elites shop, but maybe Apple is willing to sacrifice prestige because a) Apple has become desperate to sell excess inventory, or b) it wants to get as many iPhone X's into as many hands as possible for reasons still unclear. In either case, the price of the X could drop in a few months, much sooner than expected.

Beyond His Ability

These aren't the modems you are looking for (atomic toasters)

A friend moved into her six-year-old house and asked for help in setting up the WiFi. The homeowners' association provided "free Internet", and a call to the provider confirmed that the line was active. But my friend had to buy her own WiFi router to plug into the provider's modem. The task didn't sound difficult.

After running to Best Buy to pick up a router, I searched for the modem. I opened every drawer, cabinet, and closet, but a gizmo with flashing lights was nowhere to be found. Finally, I emailed the seller of the house and asked if he had taken the modem.

No, he replied the next day, the modem was built into the house. It was behind an upstairs metal panel labelled "Communications". The Ethernet port was downstairs next to the fireplace. I plugged in the router and within a few minutes the router was transmitting a signal throughout the house.

In addition to prewired Internet, the house in this middle-class suburb has built-in sprinkler, security, cable TV, telephone, and HVAC (heating, ventilation, and air-conditioning) systems. Many of the systems require annual checkups by a professional; it's too risky for the average homeowner to maintain them herself.

Backyard mechanics and home handymen are a dying breed. The technology that empowers John Q. Public is beyond his ability to understand...and to fix.

Going with My Gut

When making my own personal financial decisions---like the doctor who won’t look after his own health—I find it hard to gain the motivation to apply the same thoroughness that I do on tasks for my clients and employers.

Lately I’ve been buying extended warranties and service contracts on new appliances. These decisions have been based more on gut feel than disciplined quantitative analysis. The purchases have turned out to be right, despite popular advice that one should avoid these agreements.

The Best Buy repairman came by earlier today to finish the work on the refrigerator. Last month he fixed our front-loading washer, also under contract. (Regarding the latter, the latch had broken, and the washing machine wouldn’t operate with the door even slightly ajar. However, I installed an elastic strap to over-ride the safety feature until the repairman fixed it on his second visit. Fortunately, the laundry police weren't called.)

When deciding whether to buy service contracts, doing a decent analysis requires us to ascertain the elements going into the decision, including:

length of the standard warranty;

probability that the equipment will need repair one or more times after the warranty expires;

length of time the equipment will be held;

cost of the repair(s);

cost and length of the extended service contract;

replacement cost of the equipment in the period it is likely to break down (note that the current purchase price is irrelevant, although it may give a clue as to what the future replacement cost may be).

We’ve had to perform analyses like this at work. If the project was a big one, we would also need to analyze the cost of other alternatives, such as leasing-in the equipment or using a less-efficient configuration (for example, two smaller machines in place of a large one) in lieu of repair. Then, after gathering the data to fix the range of probabilities and costs for each scenario, we would run multiple iterations, sometimes cranking out hundreds of Monte Carlo simulations. After all the work was done, senior management would often decide on the opposite of the model recommendation (not that there’s anything wrong with that).

Perhaps I don’t do quantitative analysis more frequently in personal situations because I subconsciously (now consciously) know that all that work does not necessarily improve the result. Especially when considering other uses of my time, I can make a decision in a minute, pop a cold one and watch a ballgame.

It's possible that I am getting smarter as I get older.

Cost of Convenience

Those of us who remember only being able to get cash from our bank between the hours of 9 and 3 on weekdays (6 p.m. on Fridays), having to mail a check a week before a payment was due, or being forced to deal with a stockbroker despite already knowing the stock we wanted to buy appreciate greatly the convenience of modern personal finance.

The downside is that it's also easier for thieves to ruin our lives. They don't need a gun or a knife, just access to some personal information. One elderly lady whom we know has had a number of purchases made in her name and her checking accounts emptied. Armed with just her name, address, social security number, and birth date, crooks were able to make off with thousands of dollars. Not every bank will restore her money, she's worried about more break-ins of the non-physical kind, and her health suffers.

My personal to-do list now includes periodic online viewing of our financial accounts. There are services that will monitor activity for a fee, but I don't wholly trust them. Besides, personal responsibility dictates that I need to be up to speed on my own financial status, distressing though these details may sometimes be.

I do subscribe to a barebones credit reporting service that e-mails notices of new accounts being opened in my name. It also notes if anyone has inquired about my credit. (I'll safeguard my assets myself, but these agencies are needed to make sure my liabilities are not increasing without my knowledge.)

When we agreed to a 36-month no-interest payment plan on our new flatscreen TV, the credit reporting service worked as advertised. The only flagged activity last month was our new account at Best Buy. We'll see if we've bought enough protection.

Happy Birthday, Mr. Schwab

The weekend Wall Street Journal interviews (link requires registration) Charles Schwab. We’ve had brokerage accounts at Charles Schwab & Co. since the late 1970’s, and, although my portfolio’s performance has been wanting, I am fully aware where the blame lies. (Question: what is the definition of an MBA? Answer: someone who has the answer to all questions save one---“if you’re so smart, why aren’t you rich?”).

Charles Schwab turns 70 this weekend, and his energy and optimism would appear remarkable for a man half his age. Also remarkable is this passage from the interview:

I went yesterday to Best Buy to get a CD player, I looked at the price, and I looked at this thing, and I said, how could it be any good at 29 bucks? I mean, there must be a catch here. I've got to try this thing. Twenty-nine dollars for this incredible CD [player], with earphones and all the things I love to listen to.

Wish I could have been there: one of the Bay Area’s billionaires, prowling the aisles at Best Buy, fingering a $29 CD player. C’mon, Chuck! It’s your birthday---treat yourself to an iPod! © 2007 Stephen Yuen

Happiness is Warranted

While we’re on the subject of Best Buy (above post), it’s been four and a half years since we bought our refrigerator, washing machine, and dishwasher at the San Carlos outlet. In late spring of 2003 appliances were on sale and one-year financing was interest-free, but we resignedly gave the economic benefit right back by buying a five-year warranty for $300.

I haven’t had a good record with extended warranties---when I’ve purchased them the items either never break or break after the warranty expires anyway. (Of course declining the warranty contract is a nearly infallible predictor of product failure, regardless of the manufacturer’s reputation.)

The broken black mechanism sits on top of the washer.

But every dog has its day. The handle broke on our front-loading washer, a Whirlpool Duet, which has performed excellently otherwise. I was able to locate the Best Buy contract--a victory in itself--and give the number to customer service. The repairman fixed the washer within a week and even tuned the softener dispenser, which had a minor timing problem.

The warm afterglow of making the right decision has lasted several days. It doesn’t take much to make me happy; that’s one of the few attributes I have in common with Charles Schwab. © 2007 Stephen Yuen