Behind the Money

A New Reserve Currency Emerges: Apple Products

A new program by GameStop to accept old iPods, iPhones and iPads in return for store credit could catch on big time, according to an industry analyst, essentially turning old Apple products into a currency.

Apple Store
Flickr: ping ping

“These high ASP (Average Selling Price) products can be resold at high margins and provide a new currency for gamers to buy other GameStop products,” said Tony Wible, an analyst with Janney Capital Markets, in a note to clients Wednesday. “Almost every year there is a refresh of these products, which sell at a premium to competing brands.”

The move by the world’s largest video game retailer speaks to the high demand, quick refresh cycle and durability of Apple products. The press release this month from GameStop even contained a term often used to describe historical currencies like gold: “source of funds.”

“By trading in iOS devices, GameStop customers have yet another source of funds to put toward the purchase of new and pre-owned games, DLC, digital PC games and more,” said GameStop president Tony Bartel, in the press release announcing the program earlier this month.

Investors could use a "source of funds" these days as countries race to devalue their currencies in order to inflate their way out of the second financial crisis in three years. The Federal Reserve is buying longer-term Treasuries to keep rates down. There’s speculation the ECB may cut rates to soften the blow from a possible Greek default.

Volatility at the end of the quarter also hurt the oldest currency, gold, as hedge funds sold the metal to cover for other losses.

Apple is expected to unveil a new iPhone at the beginning of October. More than 29 million iPads are in the market, as well as 65 million iPod Touches, and 130 million iPhones, according to Janney figures.

“Assuming 10 percent of iPads, 10 percent of iPod touches, and 10 percent of the iPhones sold over the past year will upgrade to newer technology over the course of a year implies there is a global opportunity to acquire and sell three million iPads, seven million iPods, and eight million iPhones,” said Janney’s Wible.

So if GameStop’s program takes off, others are likely to join in as well.

“Maybe Greece can try it,” joked Guy Adami of Drakon Capital.                                   

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