Apple Card Credit Card Signup

I signed up to receive an Apple Card, today. The entire process, from applying, through approval, to receiving the new card in my Apple Wallet took less than ten minutes.

Once I received it in my wallet it was active to use with Apple Pay. I also requested to have the physical titanium card sent to me which should take about a week.

Customer support via text message

I was wondering if the Apple Card had a virtual account number similar to my Citi Mastercard. There was a button to call or text for help which was great. Nothing better than getting customer support via text message – no wait or hold time.

Unfortunately, the Apple Card can only generate one number at a time which can be easily changed by pressing a button. So, at this time, it seems that I can only have a single credit card number active with Apple Card.

Another disappointment was that Apple Card interest rate depends on credit worthiness, somewhere between 12.99% - 23.99%. My FICO score is over 810, so I would have hoped for something lower than 17.99%. But it's been more than a decade or two since I've carried a balance from, month to month, on my credit card. So, this shouldn't be an issue for me.

A nice thing about the Apple Card was that I could tap one button any all of my Apple bills (iCloud, iTunes, etc) were switched to my Apple Card which returns 3% cash, daily. Let's see how it works.

Minor Bitcoin Epiphany

Summary

While in my hot tub, this afternoon, I had a minor Bitcoin epiphany: Since Bitcoin is based on supply and demand, the supply, once it's reached its pinnacle, will continue to decrease in perpetuity meaning its value will continue to increase, somewhat similar to gold but greatly accelerated. We may have reached, or are very close to, the zenith of Bitcoin in circulation because it's probably vanishing faster than it's being created.

Background

I am not a fan of Bitcoin; not so much because of the technology, but because of how it's presented. The Bitcoin movement started as a fad with engineers, not economist or entrepreneurs. If you ask a technically-minded Bitcoin aficionado to described the benefits of Bitcoin, they won't tell you. Instead, they'll spout a list of features such as:

• Laissez-faire: It's a currency that's not controlled by any country or central bank. Keep in mind that organized crime is also laissez-faire and Bitcoin has found a nice home there.
• Anonymity: Transactions can be carried out without revealing the transacting parties. The same is true for cash and cash transactions typically have zero fees.

The truth of the matter is that Bitcoin comes with most of the same downsides as cash or gold. We don't keep cash under our mattresses because it's too dangerous. Bitcoin's personal security solution is the wallet, kept with a third party, which stores a Bitcoin transaction's credentials. So, now the Bitcoin community has effectively created banks without FDIC insurance. In other words, Bitcoin banks that are easily robbed without recourse or recovery.

Some people refer to Bitcoin as a currency and other's consider it an investment. The IRS considers Bitcoin to be property (like gold) which has helped it flourish since it's unconstitutional for any person, company, or state to print or coin money.

As an investment... and this is my key heartache with Bitcoin aficionados... there's no deep fundamental insight into Bitcoin. Rather, all speculation in the Bitcoin market is predominantly based on technical analysis (trading trends). This seems more like gambling at a blackjack table than crossing the British pound with Japanese yen, etc. Yes, people make money investing in Bitcoin, but so do lottery winners.

Conclusion

We've reached a point were it seems that Bitcoin is disappearing faster than it's being created and this trend will likely continue. The anonymous creator of Bitcoin, Nakamoto, has disappeared leaving an estimated one million Bitcoins in virtual limbo. Nakamoto Bitcoin accounts represent billions of dollars that haven't been touched since their creation. That is the equivalent of burning cash, never to be recovered.

So, if you own a Bitcoin, hold on to it as the supply dwindles.

Raw Thoughts on Bitcoin

Blockchain could be a game changer for non-repudiation, but it might take many years to be adopted/go mainstream, much like Boolean algebra (AND, OR, XOR, NAND, etc). Boolean (truth) logic was useless when it was introduced in the mid-1800s and now it’s the backbone of electrical engineering and computer science.

Blockchain works like this: You and I sign a contract for a sales transaction (i.e. when you sign the credit card receipt at the point of sale). It's printed on paper and we don't want the other party to lose or change the contract. So, we cut up the contract into pieces, like a jigsaw puzzle (think of this as encrypting the contract). The puzzle pieces are placed into a lockbox for which only you and I have the key. Our lockbox (let's call our lockbox OURS) is then welded to another lockbox (called THEIRS) and info from each lockbox is written on the other. Written on the outside of the lockbox is: "I'm OURS and I'm attached to THEIRS." In essence, lockbox OURS has public info about lockbox THEIRS and vice versa, so all the lockboxes know who they’re suppose to be attached to. Another customer comes along with their lockbox (called SOMEONEELSES) and it's welded to our lockbox, forming a chain of three lockboxes with OURS in the middle. This chain of lockboxes is always shared publicly. The public can see all of the lockboxes and how they're attached to one another, but they can't see what's in side of each one.

If this chain is tampered with, then not only would someone see a missing link in the chain, but even if the two lockboxes on either side of the missing link were reattached, the info on the newly attached lockboxes wouldn't be correct for their new neighbor. 

(Think of blockchain as quantum encoding, if one piece is changed, even by mere observation, then it all breaks down.)

Bitcoin might be touted as a currency, but the IRS has ruled it as property much like gold, which is a good call. Gold has real value (in addition to practical uses in electronics), but it’s not a currency.

The key problem with Bitcoin is its volatility. Investors hate volatility – hustlers love it, and the latter use it to hook in get-rich-quick believing consumers over FOMO (fear of missing out).

A few years ago, someone sent me 0.0001 Bitcoin. At that time, it was worth 7¢, today it would be worth $1.38. A fantastic appreciation, but a totally unpredictable gamble. I don’t think I’ve seen a single Bitcoin transaction used “in the wild” (i.e. purchasing an item, in person or online). Of course, there’s nothing wrong with owning some Bitcoin, I would just consider it a long shot, not an investment.

Fascinating Fact

Since mid January 2009, the inventor of Bitcoin (Satoshi Nakamoto) hasn't spent a penny of his original Bitcoin. The public Bitcoin transaction log shows that Nakamoto's account contains roughly one million Bitcoins. As of 17 December 2017, this is worth over $19 billion making him (or them, if it's multiple people) the 44th richest person on earth.

USMC Order of Battle: How it's Budgeted

Second Battalion, First Marines Supply Section

I joined the Marines when I was a naive teenager. I didn't know an officer from an enlisted person and I had no idea of how the military operated. Of course, I began learning all that on Parris Island. But, it wasn't until nearly ten years later, when I was a supply and fiscal officer for an infantry battalion (1/9 and 2/1) where I learned how military budgets worked. One supply chief I worked with used to tell me, "Sir, just take last year's budget and add 10%." While that was a great estimate, I still had to submit detailed calculations to support our budget requests.

Order of Battle

In our infantry battalion, we had close to 1,000 people, nearly all Marines except for about 70 U.S. Navy personnel for medical and religious support. Unlike the other services of the U.S. Armed Forces, every Marine is a combatant, so the Navy would support us with non-combat specialties. (There is one case that comes to mind of when a Marine would be considered a non-combatant and that's if they are captured and classified as prisoner of war.)

The Marine Corps likes to organize maneuver elements into groups of three:
Three Marines form a fireteam (plus a fireteam leader).
Three fireteams form a squad.
Three squads form a platoon.
Three platoons form a company.
Three companies form a battalion.
Three battalions form a regiment.
Three regiments form a division.

In practice, each unit requires leadership and support. A squad has a squad leader. A platoon has platoon commander, a platoon sergeant, and a guide (the guide marches at the front of the platoon carrying the guidon). The larger the unit, the more leadership and support is required.

Our infantry battalion had the typical five companies. Three were line companies used as maneuver elements, meaning that they'd engage in combat as a single unit on the front lines. The other two companies were support units. One was the weapons company, which is a maneuver support unit that provides organic fire support to the three line companies. The weapons company wouldn't see action as an entire company. Rather, they'd be split up into smaller elements (detachments) and attached to the line companies (as reinforcements) with their crew-served weapons (weapons requiring more than one person to operate such as a heavy machine gun or mortar).

Supply Support

H&S Company organizational chart (c. 2017)

As a supply officer, I was a part of the other support unit, Headquarters and Service Company (H&S). This company is where the commanding officer and his staff, which I was a part of, were organized. Supply officers are sometimes referred to as secondary staff officers since they usually report to the logistics officer who was considered primary staff. (For details on staff work see #3 Leading vs Staff Work.)

As a supply officer, I typically had one to two dozen Marines reporting up to me. On the battlefield, moving supplies around requires coordination via a trained logistics expert. Whereas, on a ship in the Navy the reverse is typically the case; a naval supply officer oversees logistics operations since it's not as challenging to move supplies from one part of a ship to another.

In addition to the commanding officer's staff and the supply section that I previously mentioned, an H&S company is also comprised of communications, motor transport, maintenance, armory, and cook sections that are administrative or technical. H&S does have one tactical unit, the scout sniper platoon, used for organic reconnaissance and engaging select targets.

The beauty of the Marine Corps is that every Marine's a rifleman. So, it's fairly common for cooks or communications Marines to go on patrol or be used to provide security around a base.

So, how is all of this budgeted and paid for?

Paying for War

As a second lieutenant, I learned, on the job, how budgets work but my knowledge was limited to the scope of my experiences.

There are two basic forms of military budgeting that I was involved with. Baseline budgeting, for training during peacetime, and contingency budgeting for wartime.

Contingency Budgeting

4th LAR Supply Section

Contingency budgeting is simple. Simply buy what you need, regardless of cost. It's like throwing out the checkbook register. Since it's war, money is not a big concern, especially at the battalion level. I experienced this when I served with 4th Light Armored Reconnaissance Battalion (4th LAR) after their return from the "March to Baghdad" in support of Operation Iraqi Freedom. We simply ordered all the repair parts we needed to refit our battalion. I don't recall how much that totaled, but the division headquarters was keen to let us know that we ran up the highest bill of any other unit in 4th Marine Division. But, that was expected since we were the only "heavy" (mechanized) battalion that was entirely mobilized from the Marine Corp Reserves.

Baseline Budgeting

Baseline budgeting is a bit more tedious than contingency budgeting since we had to figure out how much our training was going to cost, ahead of time. Luckily, we had the Redbook. The Redbook is a manual of cost factors used to "cost out" training events. There is a lot of paperwork involved when repairing anything in the military, and for a good reason. Maintenance Marines typically don't realize it when they're filling out the repair forms, but the paperwork they submit captures specific details of the maintenance costs for every item repaired, from an M-16 to a tank. All of these costs are captures and averaged across the First Marine Division. The Redbook would give me, as the supply and fiscal officer, a reference to know that, on average, for every day an M-16 is used, we should plan to spend 2¢ on maintenance (not counting the ammunition) or for each day an M-1 Abrams tank is used it would cost $185.

With the Redbook, I would simply layout our peacetime training plan and figure out which units and equipment would participate in each event. Unfortunately, I had create the spreadsheets from scratch and keypunch the data, myself; this would typically take about ten days to complete. Luckily, I didn't have to budget for payroll and food since that was a fixed cost managed by the Marine Corps, at the highest level (there's no overtime in the military). Ammunition was budgeted for in terms of numbers of rounds, but not dollars, so that, too, wasn't a concern of mine.

Although baseline budgeting was tedious, it was a rewarding document to send up the chain of command. If we were short funds, we had hard data to make our case for additional money. Since Marines change billets every two to four years, most everyone is new to their current job position, including the commanding officer. Presenting this level of detail to my commanding officers made them keenly aware, if they were asked to participate in an unscheduled exercise or task force, that their first question should always be, "Who's paying for this?" Even in the Marines, it was pay-to-play. Semper Fi.

My Luck With Banking

Last month, I withdrew $200 from a San Diego ATM. Unlike New York, where ATMs dispense $20, $50, and $100 bills, San Diego's ATMs have always spit out $20 bills, in my experience. But, last month I got a pleasant surprise when, instead of receiving ten $20 bills, I received nine $20 bills and one $100 bill. Suspected jackpot! 

My first thought was that I had either received $280 in cash or, perhaps, I received $180, plus a counterfeit $100 bill. I immediately spent the "Benjamin" without any problem. On Friday, I looked at my bank statement and saw that I was debited $200, as expected. I spoke to a local corner market owner who refills his store's ATM and he told me that there would be no record of the extra $100 bill since the ATMs can't distinguish between bills – everything's a $20 bill to the ATM. Reaffirmed jackpot!

I figured that I would be free-and-clear of the extra $80, but it wouldn't surprise me if, at some point in the future, that money might be debited from my bank account without notice. So, I sent a message to my bank, describing what happened and this was their response:

Dear Mr. Moreno,

Thank you for your message.  I appreciate your honesty!

As it turns out, [we] can file a dispute when you are not paid enough, but we do not have a resolution process when you are overpaid [...] it sounds as though you may have had a lucky draw!  

Confirmed jackpot!

Bad Luck With Banking

In the mid-1980s, I withdrew some money from a Marine Corps West Federal Credit Union on Camp Pendleton. I heard some paper crunching inside the machine as the money was dispensed, jamming up the cash dispenser. When I walked into the bank to report the issue, the banker looked at me with suspicion and skepticism as I told her what happened.

"We'll look into it," she said, dismissively.

About a week later, I followed up with her and she made me whole. She seemed a little defensive when I asked what happened and how they confirmed it. She simply said the extra money was discovered jammed in the ATM cash dispenser feeder. A minor hassle for me before the age of e-mail, but it all worked out. 

One day, I'll write about how, in the mid-1990s, my landlord deposited my rent checks, but he wasn't credited for them. My bank, which was a different institution than his, was adamant that he was "almost positively" lying. He wasn't, but it took a couple months to reconcile. 

PS – Did you know that you can make actual size, hard copy reproductions of US bills in black and white? You can also make color reproductions of money as long as the one-sided reproduction is more than 25% smaller or 50% larger than genuine bills.

Ingenious Money Laundering

      Skyler: Are you telling me you make $7,125,000 a year?

      Walter: Seven and a half even, before expenses.

Last night, I rewatched the Problem Dog episode of Breaking Bad where Skyler and Walter White discover the challenges of laundering $274,000, every two weeks, through their newly purchased carwash.

About ten years ago, I put together an anti-money laundering (AML) compliance guide for a text message payments startup that I was raising funding for. As I read through AML case studies, published by the Treasury Department's Office of Comptroller of the Currency, one stuck out in my mind. A cartel would smuggle cocaine from Columbia into the United States. The trick was getting the money back to Columbia. The cartel's solution was brilliant. They bought gold, with the proceeds from the cocaine, and cast the gold into simple hardware tools like hammers and wrenches. Then, the money launderers finished the gold with silver colored paint to look like normal tools and shipped the wares back to Columbia. After all, who's going to question the export of everyday hardware tools?

Update: After reviewing my previous blog post, from earlier today, it dawned on me that Amazon Fulfillment Services might be a great way to launder money. Seriously... who's paying almost $20,000 for bar soap?

Corporate Taxes, Private Taxes

I asked a question on Twitter which lead to a fruitful discussion:
What's the difference between corporations doing business overseas to reduce taxes and New Yorkers who drive to NJ to avoid paying taxes on clothing?

The conclusion we reached was that it's about the corporations not doing business where they say they're doing business. It's the equivalent to an American citizen claiming income tax-free Las Vegas as their state of residency while living (domiciled full time) in California.

Of course, it's hard to blame a company or person for paying as little taxes as legally possible, but...

Apple Pay Rejection Leads to Bigger Question

I read this article, Walmart, Best Buy Reject Apple Pay, earlier today, and it got me thinking.

I understand that scanning a QR code is a simpler payment process than NFC technology. It might not be as fast as  Pay, but it should be quicker and more secure than the current credit card technology. I also get the point that Walmart and Best Buy want to use their own joint venture technology, MCX. Their technology is like a stored-value card. But this article lead me to a more fundamental question. Why do companies like Target and Home Depot keep retail customers' credit card numbers?

POS

A customer swipes their credit card at the point of sale. The transation could be run as an authorization in the case of a restaurant or gas station. More likely, it'll be a sales transaction to capture the funds. To complete the transaction the merchant processor sends back an authorization number. That should be the end of the transaction. The merchant doesn't need to store the customer's credit card number. When my local cafe swipes my credit card with Square, they aren't privy to my credit card details. Reconciliation can be done via the authorization number. Returns and even recurring charges can also be accomplished using the authorization number.

So, I'm wondering what the advantage is for the big box retailers to keep retail customers' credit card numbers on file. I'm sure there's a good answer explaining why it's worth the risk.

Update: CNNMoney cybersecurity reporter, Jose Paglier, replied to some of my questions. He said retailers use my credit card number to figure out where I live. That's fine, but once they figure out who I am, they shouldn't need my credit card number anymore. At the very least, retailers could store my credit card number as a one way hash. They could still figure out which locations I shop at without my credit card number being compromised.

Apple: Think Fundamental

Many investors have been hurt by Apple stock's fall from grace as it nears its 52 week lows. There have been calls on Apple to buy back stock, split, or issue a dividend to help prop it up. But, Apple's fundamental thinking transcends form over substance and not to a fault.

It's one thing to speak these ideals yet it's another thing to stick to your guns when your stock price is tanking while investors are suing and screaming. But, whose long term interests do the shareholders have in mind? Every shareholder could chose to not be a shareholder tomorrow but Apple cannot choose to not be Apple tomorrow.

I'm an investor in Apple. But, paying dividends and buying back stock are things that Warren Buffet does since he's a finance guy. Increasing share price is not what Apple's about at a fundamental level.

"Give us your money! Pay us a dividend," demanded the investors not too long ago. So, here we are less than a year later and now these same investors are calling for more money. Let's not forget that, in a publicly traded company, none of the money invested in the stock market actually goes to the corporation. For Apple, that ended with their IPO in 1980.

Apple usually forgoes form over substance. As one of the biggest corporations in the world, they have no written mission statement. Save your corporate mission statements for non-profits where they really matter. Apple has no "department of innovation." All of these fundamentals are in their DNA. Propping up stock price is not.

Virtually every dollar of Apple's $137B in cash and investments is reflected in a dollar's value in the company's stock price. Robbing Peter to pay Paul is shortsighted. You don't make money by buying stock, it's the selling where the money is made. Apple buying back its own stock is merely a gesture symbolizing that the company feels the stock is undervalued. Yes, it decreases the supply of the stock but Apple will never have an opportunity to sell back those shares when the stock price increases.

Apple really is a different type of company. When I first started working there I initially thought that it was about design. And I don't just mean industrial design - I saw beautiful design in everything: software, user interfaces, internal hardware that no one would ever see, etc. I also realized that design wasn't just how it looked, but how it worked. However, it took me a little while to figure out Apple's DNA because I initially worked in a services division that sold into the enterprise. That was two strikes against me since Apple is a hardware company which markets to the consumer. There aren't many Apple software or services that don't directly support their hardware.

If you think Apple needs to pay its shareholders more money by increasing its dividend or by buying back more stock then ask yourself, "What Apple's motivation for not doing that?" As much as I'd like to see Apple increase its dividend or buy by its stock in order to increase its share price in the short term, I know that's not what the company is about.

Apple is about one thing: best possible user experience. And that user is the customer, not the employee or the investor. Apple's metric for this isn't click throughs, page views, or market share; rather, it's unit sales – with a nice margin which is the best of business models. If you build it right then they will come and stay.

Future Prediction
At the end of the day, Apple's investors simply feel helpless as they watch the stock price drop. What these investors really want, even more than a cash payout, is to see Apple enter and dominate a new market. I predict, if Apple gets their way, that the next market will be TV and broadcasting where viewers could unbundle their cable TV packages and, say, subscribe to individual channels via an Apple TV or iOS app. After all, this is exactly that Apple did with the iTunes store.

Wouldn't it be nice (not to mention disruptive) to pick and choose which TV channels you pay for? Imagine subscribing to your local news channel, CNBC, and Spike while forgoing the weekend morning's plethora of informercials and QVC? Seriously, why am I paying my cable company to show me get-rich-quick schemes and instant weight-loss programs?

Bank of America User Experience

Each time I visit Bank of America I get to interact with their ATMs. Earlier this year, I noticed a great UI improvement to save a couple steps when withdrawing money. Unfortunately, B of A needs to improves some of their other UIs.

1. The drive through ATM is unusable without having to at least open your car door and, sometimes, get completely out of the car.


I've seen adjustable ATMs at other banks which let the driver set the height of the ATM so that it works for both SUVs and sedans.

2. Another pet peeve of mine is when I use the ATM in the lobby after the bank is closed. For some reason, I can't read the directions on this sign in my haste to unlock the lobby door with my ATM card. I think simply three words, "Magnetic Strip Down", along with this diagram, would go a long way to improving my understanding.

The High Cost of Being Poor

This is funny.

11 Mar 08: "Should I be worried about Bear Stearns?"

The Real Price Of Gold

Here's an interesting graph showing the price of gold since 1450, adjusted for inflation.

In 1980, gold reached a 2007 inflation adjusted price of $2,150/Troy oz.

Click to enlarge.

[digg this]