The iPhone Economy

Fred Alger & Co. has given us a riff on John Edwards’ “Two Americas” theme. 

The New York-based investment firm argues that traditional economic indicators are no longer terribly useful, as the economy has bifurcated into two economies: The iPhone Economy (good) and the Sub-prime Economy (bad). It acknowledges that even this is a bit simplistic, but is at least a start.

Here’s an explanation, from Alger’s 2008 Outlook:

“The sub-prime economy is comprised of as many as two
million homes in foreclosure in the coming year, with prices already having dropped by as much as 5% and a growing housing inventory of unsold homes exceeding nine months. It is an economy of tightening credit, tougher lending standards (even for higher-quality customers seeking “jumbo” loans in excess of $400,000), plunging housing starts, and a dwindling number of
construction-related jobs.

The iPhone economy is epitomized by the sale of more than 1.5 million iPhones since its introduction in early 2007, with a retail price between $600 when the phone that one GDP statistic, we predict that some parts of our economy will do quite well even as others do poorly, and that the iPhone economy is likely to be strong even as the sub-prime economy, along with swaths of the financial sector, contracts.”

If you want Alger’s entire 2008 outlook, you can download it here: Alger.pdf