Tag Archives: trading

Top 5 Corporate Mistakes – No 5

The Edsel

Voted by TIME magazine in the list of 50 Worst Cars of All Time, and more than 50 years after it was unveiled, Ford’s Edsel is still synonymous with a major corporate flop. Marketers hyped the car as a design wonder, but when the oval shaped front grill was unveiled, people thought the car looked like it was sucking on a lemon! It was fuel thirsty and too expensive, particularly at the outset of the late ’50s recession. Furthermore, reliability problems led some critics to joke that EDSEL stood for “Every Day Something Else Leaks.”

The economy sagged around the same time, so sales projections of 200,000 or more a year actually ended up being 100,000 over three years. The car lost Ford $250 million, the equivalent of almost $2 billion today. Nevertheless, Ford still posted a profit and paid dividends in the three years the car was produced, and many technologies invented for the Edsel paid off in later models. Interestingly, it was Ford President Robert McNamara who convinced the board to bail out of the Edsel project. All thing’s considered though, the Edsel was actually more of an embarrassment than a corporate disaster.

Top 5 Corporate Mistakes – No 4

Apple Maps

No company is better known than Apple for both brilliance and bloopers. It launched the personal computer and smart phone industries, but it also released 1993′s Newton (a personal digital assistant that didn’t work as promised).

The most recent of the Apple hiccups is the Apple Maps iPhone app, which wrongly relocated milestones such as the Washington Monument, and lacked public transit directions, generally failing to get users to their destinations. What made it such a huge disaster was that the iPhone allowed its users to share screen shots of this with the entire world.

Apple’s Maps has apparently improved since its first version directed unsuspecting Australian motorists into the middle of a national-park wilderness, but it would be naive to imagine that the NSA does not have access to this app’s data. If you don’t want to be tracked, maybe it is better you stick to good ol’ fashioned maps - you know, the ones printed on paper.

Top 5 Corporate Mistakes - No 3

The AOL/Time Warner Merger

One of the biggest mergers of all time was when AOL acquired Time Warner in 2000. The deal seemed to signal the fact that internet had finally taken over old media for good. People predicted wonderful things to come, with Time Warner’s movies, music and print media being delivered to AOL’s customers through the internet.

Today, the largest merger in U.S. business history is not famous for its size but rather for being the worst merger in history. The companies’ combined value shrunk from $300 billion when the merger was announced to about $40 billion when the two companies finally called it quits in 2009.

The idea behind the merger was actually sound, proven by the fact that we are now seeing movies, TV and music disseminated online by Apple, Google, and Amazon. But the AOL / Time Warner deal just did not work because cultures clashed, leadership faltered, and they failed to figure out the practicalities of delivering media online. At the end of the day, the bursting of the dot-com bubble reduced AOL to a fraction of its previous value.

Top 5 Corporate Mistakes - No 2

Bank of America’s $5 Debit Card Fee

In 2011, Bank of America decided to charge customers a $5 monthly fee for making debit cards transactions. The fee was an attempt to make up lost revenue after federal regulations limited the amount banks could charge merchants for each swipe. This was a monumentally bad idea since debit cards make the bank money, so discouraging your customers from doing something that generates revenue makes no sense.

Customers were not pleased. There was an uproar by customers, who petitioned the bank, and threatened to close their accounts and take their business elsewhere. The outcry prompted other major banks, including JP Morgan and Wells Fargo, to cancel tests of similar debit card fees. Bank of America eventually nixed the fee after no rival banks followed suit. The bank’s leadership said it changed its mind after listening to customers.

Top 5 Corporate Mistakes - No 1

New Coke

There is a saying, “If it ain’t broke, don’t fix it.” The Coca-Cola executives of the 1980s should have listened to this, but at the time, Coke had been losing market share against Pepsi for over a decade, so the company invented a new formula, which was actually preferred over old Coke in taste tests with more than 200,000 people.

But when the company announced the change, customers grew furious. Calls to Coke’s customer service hotline climbed sharply to 1,500 a day from an average of 400 - and most of the calls were angry. Even Fidel Castro complained! Coke’s own website acknowledges that New Coke debut is “a day that will live in marketing infamy.”

Coke brought back “Coke Classic” in less than three months, but the venture wasn’t a complete loss. From this experience, it was apparent that customer loyalty for this brand is so fierce that some people speculate that Coca-Cola engineered the whole debacle as a publicity stunt. When Coke brought back the classic formula, customers stockpiled packages of the original drink, and, Peter Jennings interrupted General Hospital to announce this news!

Twitter mood can predict the stock market. TWEET!

Stock market prediction has attracted a lot of attention from scholars as well as businessmen over the years. But can the stock market really be predicted? Many expert traders claim to know how to predict whether it will rise or fall at any particular time, but there are few - if any - who can actually do it successfully.

Why? Because conventional economic theory, otherwise known as Efficient Market Theory, states that the movement of prices in a market follow a random pattern, making it impossible to predict with an accuracy greater than 50 per cent. This hypothesis, however, no longer holds much value, since numerous studies have shown that stock market prices are not entirely random, and may actually be linked to mass psychology and other related factors. If this is true, then there may essentially be a way to assess the mass consciousness for predictive signs.

Behavioural economics tells us that emotions can profoundly affect individual behaviour and decision-making. But does this apply to societies at large; can societies experience mood states that affect their collective decision making? Moreover, is the public mood correlated or even predictive of economic indicators? Researchers believe so, and have stated that they have found such a predictor buried in the seemingly endless chatter that springs from Twitterverse.

The recent excitement around the subject of Twitter trading stems from a paper by academics Johan Bollen and Huina Mao of Indiana University, and Xiao-Jun Zeng of the University of Manchester. The question they asked is whether any human states correlate with stock market prices, since it is not unfeasible that the rise and fall of stock market prices may be influenced by the public mood. Bollen and his team took 9.7 million tweets posted by 2.7 million tweeters between March and December 2008 and looked for correlations between the GPOMS indices and whether Dow Jones Industrial Average rose or fell each day. Their illuminating conclusion is that there truly is a correlation: calmness. The calmness index appears to be a good predictor of whether the Dow Jones Industrial Average goes up or down between 2 and 6 days later. According to the report: “We find an accuracy of 87.6 percent in predicting the daily up and down changes in the closing values of the Dow Jones industrial average.” Their report clearly found that gauging the investing public’s mood can be a startlingly predictive mechanism for the stock market. In order words, Twitter mood can predict the stock market.

How can it be explained? “One idea is that the stream of thought is representative of the mental state of humankind at any instant. Various groups have devised algorithms to analyse this data stream hoping to use it to take the temperature of various human states,” reports MIT Technology Review. Given the amount of irrelevant nonsense on Twitter, it’s natural to be highly sceptical of the strategy. But if you think through the logic, analysing Twitter data isn’t such a strange idea. A basic premise of behavioural economics is that the markets aren’t perfectly rational machines, but are expressions of human emotions like greed and fear. If you agree with that premise, and are looking for an immediate way to measure and keep track of those human sentiments, then Twitter is one of the greatest tools ever invented.

A decade ago, anyone who suggested using social media to predict market movement would have been looked upon as if they had landed from outer space. Richard Peterson, managing director of Santa Monica-based MarketPsych, experienced just such a reaction eight years ago when he stated that social media could be mined for data about what people are thinking and feeling, and that this could translate into powerful investment ideas. “People would say to me, ‘You’re crazy,’” says Peterson, who has a post doctorate in neuro-economics from Stanford University.

But with usage of social media like Twitter exploding in recent years, analysts now have a real-time reflection of popular sentiment. As a result, Peterson’s MarketPsych serves up data to hedge funds and research firms like Titan Trading Analytics. “The importance of social media aggregation, and how that might influence the price of a stock, cannot be ignored,” said the latter company’s CEO John Coulter. “We’ve chosen to use it as one of many indicators, providing traders with alerts on events and by flagging socially expressed emotions which haven’t been picked up upon by traditional news outlets.”

Nobody is laughing at Peterson today. Although he is glad that investment managers are now finally taking him seriously, on the downside there is more competition as more and more people are trying to unlock the secret of this trading strategy from the billions of tweets out there. The trick is how to sift through that data effectively and make some sense of the hundreds of millions of tweets generated every day. Peterson, for example, filters the data using 1,500 different factors and keywords to track global moods. His take on the markets: if the public is overly bullish, it’s time to be cautious. If it is extremely gloomy, on the other hand, it might be time to snap up a bargain.

If you feel inspired, take a moment, however, before you start examining your own Twitter feed for brilliant investment ideas. Unless you are armed with highly complex mathematical models and teams of analysts who can dive into social-media data and asses the global mood from billions of tweets, you are going to find it tricky, as an individual investor, to make any sense of the collective tweets of 100 million active Twitter users.

Nevertheless, social-media sentiment analysis is immediate and ongoing, and the Twitter-analysis trend seems to be just gearing up. “It won’t make you a millionaire overnight, but it does work,” says Richard Gardner, president and CEO of Scottsdale, Arizona-based Modulus Financial Engineering, which collects historic Twitter data for hedge funds and research firms to crunch. “The markets are moved by emotion, and I think this is going to be the future of trading. You can actually see global moods moving up and down in real time.”

Fictitious License Claims Rock the Trading World

It is no secret that financial investments can carry certain risks with them. As any seasoned, or even novice, trader knows, the exciting world of breaking news and economic events brings not only opportunities for profit, but also the risk of failure. At Banc De Binary, we take your safety very seriously and we constantly seek ways to minimise your risk exposure when entering online trades. We are proud to have been the first Binary Options company to have been fully regulated and licensed under CySEC, an innovation that has brought great benefits to the entire sector of Binary Options trading.

Unfortunately, however, not all companies involved in Binary Options and Forex trading provide the same transparency or legal protection as we do, and a recent news story should serve as an example to all traders regarding the importance of researching online brokers extensively to ensure that one is trading with a fully licensed and registered entity.

On 8th January, the Commission de Surveillance du Secteur Financier (CSSF), the regulating authority of Luxembourg’s financial market, published an advisory informing the public that claims made by Forex trading company Bulls Capital Markets regarding their license with them were fictitious. Forex Magnates reports in an article that the company’s website stated that “Bulls Capital Markets is registered and licensed in the country of Luxembourg. The registration number is F2589754 and the category F2 license number is 179065.” The CSSF however, has outright rejected the claim saying that “Bulls Capital Markets has not been granted the required authorisation to offer banking and financial services in or from Luxembourg and is therefore not supervised by the CSSF.”

The details of the registration and licensing numbers that Bulls Capital Markets was offering on their website certainly made their claims seem creditable, and even we were surprised to learn that they were not true. The point here, however, is not to make a scapegoat of the company in question, but rather to offer a cautionary tale: no statement on any broker’s website should ever suffice as guarantee of legality. Always make sure to do your own research and look well into a company’s status before opening your wallet and handing your hard-earned money to it.

Since the release of the public notice by CSSF last Wednesday, Bulls Market Capitals has apparently made some changes to its “Regulation and License” page, which now states that “Bulls Capital Markets registered by the Capital Market Investment at New Zealand under the registration The Financial Service Providers Register (FSPR).” The company, which now offers its registration number in New Zealand, has kept its claim that it was begun in the USA in 2009, and says that “with the changes in the laws and regulations in the USA a few years back, Money and Capital Markets transformed itself as Bulls Capital Markets and moved out of USA into Luxumbourg in order to better serve its growing client base.” No mention of New Zealand is made in this segment of the page, nor is the relationship between their activities in the three geographic areas (namely the U.S.A., Luxembourg, and New Zealand) explained any further, which seems greatly puzzling.

Stories like this one, naturally, create a certain amount of concern within the industry as traders check to make sure their investments are in safe hands, but they also bring some positive results for licensed brokers. As far as we are concerned, the vetting of licenses and brokers can only confirm our reputation as the industry leader and assure our traders that their investment lies in safe hands.

The 10 Greatest Trades On Wall Street – #9 John Paulson

One step before the end in our 10 Greatest Trades on Wall Street list and we have come to the most recent financial crisis that still has a lose grip on the financial world today. This time, however, we are not talking about fancy new technology, but about about the housing market. While everyone was still in financial la-la land, thinking that easy money would go on forever one man foresaw the cliff and took a risk that paid off in BILLIONS!

9. John Paulson played the real-estate bubble just before the financial crisis burst it

The housing bubble caught almost everyone by surprise and when it burst in 2007 it left investors everywhere scampering to make up loses. Almost everyone, that is. John Paulson had not only predicted the advance of the housing bubble but also got its timing right, which is a pretty remarkable feat in prediction accuracy. While the financial giants were still pouring money into subprime mortgages thinking, apparently, that real estate would forever stay on tis upwards trajectory, Paulson, who was relatively unknown then, heavily bet against them in a deal that made his hedge fund $15 billion and earned the him a reported $3-4 billion in fees. Not a bad day to be trading under his firm at all!

The 10 Greatest Trades On Wall Street – #7 John Templeton

AS the years move forward and Wall Street adapts its trading to the new era, we see trading practices and opportunities shifting and changing with the times. It should come as no surprise then, that one of the first great Wall Street trades of the twenty-first centuries involves not a traditional asset like currencies and commodities, but rather the then newly-fledged business of the internet. Technological progress entered the new century running and the internet became the most popular medium of communication so quickly, it could not sustain its own growth and morphed into the well-know dot-com bubble

7. John Templeton against the Dot-Com bubble

When John Templeton bought $100 worth of stocks of every company trading under $1 on the New York and American stock exchanges in 1939, his move was considered rather unorthodox. When the investment returned quadruple profits he became the king of diversification in Wall Street. Just a few years before he passed away, Templeton put his strategy to use one last time, earning himself millions of dollars in weeks. Spotting the precariousness of the then-booming dot-com industry, Templeton shorted a widely varied basket of internet stocks just before the post-IPO six-month lock-up expiry. When the expiry times hit the newly created tech CEOs and founders were looking to cash out on their investment, but Templeton had already beat them and the burst of the bubble in a bet that earned him $80 million in just weeks.

Investigate before Investing: What Are The Signs That A Company Is Not Doing Well?

When it comes to investing in companies, many investors get caught out because they mostly rely on share prices, which in themselves can be very misleading, rather than paying particular attention to what is going on with the company itself. For any trader it is a good idea to do your homework and investigate before you invest. Is the company doing well, is it good idea to buy shares now, or, if you are already a shareholder, is it advisable to sell? How do you know if a corporation or organisation is heading for failure?

There are usually warning signs if a company is sliding into a downward spiral - clues which can be observed and taken into account - the most obvious of which has to be falling revenues. If this happens as a one off it may not be significant, especially if it is linked to a turn of events in the economy. But if you start noticing a pattern of falling revenues over a period of time, with each quarterly review significantly worse than the last, this is evidence that things are not right. This goes hand in hand with growing losses, which occur when the company’s revenues are surpassed by expenditure. Again, if there is a consistent pattern of increasing losses, either through falling revenues or rising expenses, then this is a bad sign that it may be only be a matter of time before that company goes bust.

Another clue to look out for is if a company has to continually borrow money to sustain even its very basic operations; rising debt is a serious problem, which gets worse if a company has to approach the capital market in order to obtain funds to take care of its debt. If the company’s debt profile continues to increase with no sign of stopping, this is worrying. A company’s liquidity is important, because a decrease signifies that the company is running out of cash. Short-term loans can occasionally cover short terms of trouble, however, lenders will only give to companies they feel are credit worthy, therefore if a company is refused overdrafts or loan facilities, this is usually a red alert that all is not well with the company’s finances.

A sure sign that all is not well within the organisation is if there are arguments in the boardroom, particularly if a member of the financial team, such as the CFO, has resigned or been forced out. Investors should pay particular attention to whether there is something unlawful going on that is being objected to, or if there are internal rivalries and ceased communication - all of which are sure-fire negative signs. When information stops flowing, people avoid conversing; when decisions are made in secret, this is a clear tell-tale that things are in trouble. People mistrust official statements – that is when gossip begins to replace the facts… which is never a good thing.

It follows that lack of communication leads to increased isolation: people retreat into their own corners or cliques, often suspicious of others and unwilling to engage with them. Focus turns inwards, people stop looking at the bigger picture and external goals become lost. Criticism and blame increase, external forces are blamed, personal responsibility is avoided. Respect decreases, along with initiative, and subsequently aspirations diminish. People stop improving and instead simple settle for minimising risk. It is no wonder that negativity spreads. All of these are parts of a negative chain reaction, which drags a company into further decline and distress.

Whether a company is being affected detrimentally from internal or external sources, it is essential to pick up on the warning signs in order to avoid investing in a company which is heading for imminent and irreparable disaster.

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