Economic outlook for 2007, and still clueless on Apple

16 Jan Economic outlook for 2007, and still clueless on Apple

When the Executive Club of Chicago presented its annual outlook for the year in a renovated Grand Ballroom of the Conrad Hilton, the guest speakers were Robert J. “Dr. Bob” Froehlich of Deutsche Asset Management, Allan Murray of the Wall Street Journal, and Diane Swonk of Mesirow Financial.
Chicago Sun-Times columnist Terry Savage moderated the panel and some of their insights are worth putting a spotlight on.
Comparing last year to this year
Savage focused on several key indicators. The DOW went up and so did the Fed Fund Rate.

Last year, most people thought the DOW would not break 11,000, but there is more optimism that the DOW is headed up this year.
Investments should be global
I have been saying that we must understand the global economy, and Dr. Bob said we should be investing in it.
He had some interesting insights and predictions. He thought that the DOW would break 14,000 this year, and he said that we all should be investing more in global markets.
He pointed out that even though the DOW went up fairly well in 2006, he compared that to China’s stock market growth of over 50 percent in the same year. He also predicted the Federal Reserve Board would not raise interest rates this year.
His breakdown of asset classes, the places where you should put your money, was as follows:
• 60 percent in stocks.
• 10 percent in bonds.
• 15 percent in commodities.
• 15 percent in real estate.
• 0 percent in cash.
That sounded fairly reasonable, until he said, “90 percent of that should be outside the United States” in various emerging markets. Most people would find that pretty radical. He also pointed out these facts:
• 98 percent of the world’s land mass is located outside the United States.
• 93 percent of the jobs are located outside the United States.
• 72 percent of the global economy is located outside the United States.
Basically, there are a lot of opportunities outside the United States. I shared his views with some people that lost their jobs at Motorola several years ago. If you look at this from another perspective, you would say that he is not bullish on investing in America.
If everyone follows Froehlich’s investment strategy, attendees asked, how do we fuel our own future growth? I did not have the answer, but I understood what they were asking. I still felt his investment strategy had a lot of merit.
White-collar recession
All of these economists sort of gloss over what is happening in the United States when it comes to people that have been caught in industries shifting to outsourcing. And I am talking about highly skilled white-collar jobs evaporating, not minimum-skilled factory or service jobs.
When you talk with some of them who have dropped from jobs paying $80,000 to $120,000 a year plus benefits to jobs that are maybe around $30,000, their personal view of the economy is that it never turned up since the crash of the NASDAQ in 2000. That statistic of the growing number of underemployed doesn’t seem to make it onto any official economic radar.
This is hard to believe if you have been in some insulated industry or government agency that has not seen jobs being outsourced or replaced by H-1B workers (non-citizens working here on a visa) and you have been getting your four to five percent raise every year.
A month or two ago, my column focused on the rise of foreclosures across the country, but no one really addressed this. They mentioned the housing market but said there was no recession and you could not check the housing market like you could the stock market. One said that there is no housing market barometer. That’s true, but there are foreclosures, and they are up dramatically.
Media still clueless on Apple
At the Executive Club luncheon, one incredible issue around the table was the misinterpretation of Apple’s iPhone announcement. At our table, which was a good cross-section of PR firms, a manufacturing firm, a real estate firm, a trade consulate, and a consulting firm, we had just talked about how some in the media did not understand what Apple actually brought to the market, and how it should not be looked at as a “commodity cell phone.”
Just after we said that, Murray (Wall Street Journal) comments, “Sell Apple short because who’s going to pay $600 for a cell phone?” Wow! I could not believe it.
Unfortunately, Murray – based on his assessment – is one of many heralded media people who really doesn’t understand disruptive technology, yet he is commenting on it. He doesn’t see the change in the core focus of the handheld communications device shifting from voice to video.
Both he and Herb Greenberg on CNBC exemplify many in the media who just don’t understand the impact of change in technology and its corresponding impact on society. Instead, they focus on price and comparing the wrong feature, which totally obscures the real magnitude of what is happening. But maybe it is not all their fault.
What was Apple thinking?
Let’s not just blame some highly regarded media people. Creating the biggest blunder in announcing the product was Apple, itself. For all of its supposed marketing expertise, the problem was that they kept an “old image” name (phone) for a breakthrough communications device.
This has hurt them with some media people who can’t distinguish a waistband from broadband. And by having someone prominent from the Wall Street Journal comparing it to a cheap commodity cell phone at a meeting of over 1,100 executives, Apple might as well fire whoever put together the marketing strategy. Some in the prominent media are distorting the product’s capabilities by only ranting about price, which is turning some people off, if not putting them in a cynical mode.
Maybe Apple should have named it a “video communicator,” or the next generation mobile video handheld access transponder (VHAT), or something that does not conjure up the old image of a cell phone, which most people equate to as cheap, free, or a commodity. And then to name it a CISCO-trademarked name, what were they thinking?
CARLINI-ISM: We need people in media that understand technology and that can distinguish new capabilities.
Copyright 2007 – James Carlini
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