Apple Stock Is Undervalued

The Financial Accounting Standards Board is about the change the way that some companies recognize revenue for the sale of hybrid products (story here). A hybrid product is one that is typically bundled with a service offering, and the old rules tied revenue recognition to the service instead of the product. A perfect example of this is the Apple iPhone, which is sold by AT&T as part of a two-year contract.

Under the current rules, Apple has to spread out the iPhone product revenue over eight quarters, the length of the AT&T subscriber contract. But the new rules, which are expected to affect Apple's financial statements in December, will permit immediate and total recognition of the product revenue at the time the subscriber contract is signed.

Had these new rules been in effect, Apple's recently disclosed third-quarter revenue would have increased by $1.4 billion and the commensurate net profit by over $700 million. The crowd in Cupertino will be sipping some well-deserved Cristal; it's not every day that you can grow revenues by almost 21% and earnings by 57%, all without hiring a single salesperson, placing a single ad, or increasing production by a single unit. Now that's paper money!

Nobel Season is Heating Up!

Stockholm is a-buzz with the latest dirt on the big brains who will be walking the red carpet in hopes of taking home a "dynamite" prize along with some cold cash from Scandinavia - 10 million kronor, to be exact. Or $1,438,712.53 if you haven't gotten hip to globalization yet. The odds makers in Las Vegas are going positively batty because of some real wild cards in the running this year, but that's what makes this the silly season north of "did my nose just fall off?"

Yes, I already have my fantasy Nobel team picked, and as you can imagine, Peter Higgs is tapped as my Don Quixote of Physics, jousting at bosons that could end my roller-coaster life of binge eating and purge dieting just by making my mass disappear. Yeah, Peter! You go guy!


Dr. Higgs has postulated the existence of the Higgs boson, conveniently named after him, a particle that not only explains how the Universe came into being, but also extends an olive branch between string theory and Standard Model particle physicists, long locked in a vicious struggle for dominance of high energy physics. Hey, maybe Higgs will win the Peace Prize too! (Here's Peter in his Edinburgh office, explaining how it's impossible to stay upright after drinking too much single malt).

The problem with Petey winning the Karolinska saucer is the fact that no one has found his boson yet. The Large Hadron Collider was supposed to do just that, but with liquid helium spills and vacuum leaks, it sounds more like my apartment after the Oscars. There is some evidence of the Higgs B, but it's not conclusive and the Nobel committee has a notorious reputation for having something called "a verified, proven result." Well, if they can't see fit to hang the dish around Dr. Pete's neck, then I swear I won't touch a little meatball for a year and I'll protest in front of the nearest IKEA, at least until I see a table that would just make the breakfast nook.

Stay tuned, Nobel nerds. This Prize fight has all the marks of a heavyweight bout, beginning October 5th with Medicine and finishing October 12th with Economics. And if you're still on speaking terms with your bookie, lay a couple of bucks on Higgs - he may be a long shot, but so was Milton Friedman.

Energy is the Answer

Dean Kamen, inventor of the Segway personal transporter as well as other, more important creations, has been trying to tackle one of the world's most pressing problems - a shortage of fresh, potable water. After 10 years of work, he has created the Slingshot, a vacuum compression distillation engine that uses only 2% of the usual electrical energy. The prototype costs $100,000 and Kamen hopes to get the price down to less than $2,000, which in his opinion would spark rural usage worldwide.

The process of vacuum compression distillation is not new; however, a decade of work was required to get the power consumption down to 500 watts, and that brings me to my point - the most pressing issue facing the planet isn't about clean water, arable land, pollution, or global warming; the most pressing issue is energy. With enough clean, renewable energy, every other problem becomes moot.

The energy consumption of the planet Earth is now increasing at a remarkable rate, largely due to the rapidly increasing standards of living in developing countries. For example, in 1985 the average person in China consumed 44 pounds of meat per year; by 2000 that figure had topped 110 pounds. High quality protein, such as meat, requires massive amounts of energy to produce, and with China showing such a dramatic change, you can only imagine the global impact to our energy picture.

A fews years ago, I had the good fortune to speak with Dr. Richard Smalley, winner of the 1996 Nobel prize in chemistry for his work on a new type of carbon, and it was he who convinced me that the solution for practically all human problems lay in energy. The entire economic notion of scarcity, which is responsible for both good and evil in the world (from entrepreneurship & innovation to wars, crime, and poverty), has its roots in a lack of energy.

The total worldwide demand for energy reached 14.5 terawatts per day in 2004, which is the equivalent of 220 million barrels of oil, and in fact, oil provides the largest share of our energy needs. But we all know that oil is finite, the very definition of scarcity. Not only is it becoming more difficult to find, extract, and provide, the process of making new oil is far too slow to compensate for our thirst (plankton + seabed + perfect rock formation + 150 million years). Coal has been proposed as a viable alternative, but there is no such thing as "clean coal," and even if carbon dioxide emissions could be stored in large underground reservoirs, coal mining still poses a serious health threat (graphs courtesy of Dr. Richard Smalley).

By 2050, we will consume 60 terawatts per day, or the equivalent of 900 million barrels of oil - oil that won't exist by mid-century. Nuclear power does play an important role, both today and into the future, but the problem of storing spent fuel rods is persistent and nagging. What happens when Yucca Mountain is filled to the brim? Fission and fusion are stopgaps, for the simple reason that they are not sustainable over the long-term. When it comes to energy, the picture isn't pretty, but are we truly condemned to a dystopian landscape? Not necessarily - the answer is hovering above us.

Amaterasu, Apollo, Freyr, Helios, Huitzilopochtli, Inti, Liza, Lugh, Ra, Sol Invictus, Surya, Tonatiuh, Utu - whatever you call it, the sun beams down to Earth 165,000 terawatts of energy each day. That is more than enough energy to provide health, wealth, and happiness for every person on the planet, and we don't even have to efficiently extract power from sunlight. All we have to do is efficiently transport the electricity from massive solar farms, which would be located in the ever-expanding desert regions of the world. Here's some food for thought - the future of our species is hinged upon developing a better copper wire.