The stock market has certainly produced its share of heroes and villains
over the years. And while villains have been many, the heroes have been
few.
One of the good guys (for me, at least) has always been
Jesse L. Livermore. He's considered by many of today's top Wall Street
traders to be the greatest trader who ever lived.
Leaving home at
age 14 with no more than five bucks in his pocket, Livermore went on to
earn millions on Wall Street back in the days when they still literally
read the tape.
Long or short, it didn't matter to Jesse.
Instead,
he was happy to take whatever the markets gave him because he knew what
every good trader knows: Markets never go straight up or straight down.
In
one of Livermore's more famous moves, he made a massive fortune betting
against the markets in 1929, earning $100 million in short-selling
profits during the crash. In today's dollars, that would be a cool $12.6
billion.
That's part of the reason why an earlier biography of
his life, entitled Reminiscences of a Stock Operator, has been a
must-read for experienced traders and beginners alike.
A gambler and speculator to the core, his insights into human nature and the markets have been widely quoted ever since.
Here are just a few of his market beating lessons:
On the school of hard knocks:
The
game taught me the game. And it didn't spare me rod while teaching. It
took me five years to learn to play the game intelligently enough to
make big money when I was right.
On losing trades:
Losing
money is the least of my troubles. A loss never troubles me after I
take it. I forget it overnight. But being wrong - not taking the loss -
that is what does the damage to the pocket book and to the soul.
On trading the trends:
Disregarding
the big swing and trying to jump in and out was fatal to me. Nobody can
catch all the fluctuations. In a bull market the game is to buy and
hold until you believe the bull market is near its end.
On sticking to his plan:
What
beat me was not having brains enough to stick to my own game - that is,
to play the market only when I was satisfied that precedents favoured
my play. There is the plain fool, who does the wrong thing at all times
everywhere, but there is also the Wall Street fool, who thinks he must
trade all the time. No man can have adequate reasons for buying or
selling stocks daily - or sufficient knowledge to make his play an
intelligent play.
On speculation:
If somebody had
told me my method would not work, I nevertheless would have tried it out
to make sure for myself, for when I am wrong only one thing convinces
me of it, and that is, to lose money. And I am only right when I make
money. That is speculating.
On respecting the tape:
A
speculator must concern himself with making money out of the market and
not with insisting that the tape must agree with him. Never argue with
it or ask for reasons or explanations.
On human nature and trading:
The
speculator's deadly enemies are: Ignorance, greed, fear and hope. All
the statute books in the world and all the rule books on all the
Exchanges of the earth cannot eliminate these from the human animal.
On riding the trend to the big money:
Men
who can both be right and sit tight are uncommon. I found it one of the
hardest things to learn. But it is only after a stock operator has
firmly grasped this that he can make big money. It is literally true
that millions come easier to a trader after he knows how to trade than
hundreds did in the days of his ignorance.
On the nature of Wall Street:
Wall
Street never changes, the pockets change, the suckers change, the
stocks change, but Wall Street never changes, because human nature never
changes.
So, what ever happened to Jesse L. Livermore?
He didn't die a poor man - not by any stretch of the imagination.
But he did take his own life, believing he was "a failure," which proves once again that money can't buy happiness.
http://moneymorning.com/2013/01/04/nine-lessons-from-the-greatest-trader-who-ever-lived/#
Stock Statistics
Saturday, March 29, 2014
If trading psychology is a issue for you
If you talk to many very successful traders they know the importance of trading psychology. But they are not consumed by it. In last 10 years I have interacted closely with many successful traders, few market wizards , and some hedge fund people, none of them had ever hired a trading psychologist. And most of those people are at top of their game. The key to their success is their belief system.
But if you talk to struggling traders they often think trading
psychology is important and some claim it is the most important thing.
If psychology is an issue for you and you think it is affecting your
trading , what concrete steps can you take to resolve it.
There is lot of talk of trading psychology , but what exactly are the 3 or 5 things you can do to improve your psychology.
If you want to increase your muscles you go and lift weight
If you want to improve your stamina, you go and run daily
If you want to reduce weight you eat less and exercise more
What exactly do you need to do to improve your psychology.
There is lot of talk of trading psychology , but what exactly are the 3 or 5 things you can do to improve your psychology.
If you want to increase your muscles you go and lift weight
If you want to improve your stamina, you go and run daily
If you want to reduce weight you eat less and exercise more
What exactly do you need to do to improve your psychology.
First starting point if you want to improve your psychology is by examining your beliefs
You can only trade what you believe in.
Your beliefs drive your behaviour.
If you believe only way to trade is using mechanical methods ( that is a
belief) and as a result all your behaviour will flow from it.
If you believe one should only trade triple ETF and not waste time on
individual stocks (that is a belief) and as a result all your behaviour
will flow from it.
If you believe that only way to trade is with big risk (that is a belief) and as a result all your behaviour will flow from it.
Every trade has deeply held beliefs. The bundle of deeply held beliefs
drive what kind of set-up they will trade, what kind of time frame they
will trade and also all elements of trade like entry, exit , risk, and
number of positions held.
Beliefs are not necessarily based on science or logic. In trading there
are many beliefs based on to others pseudo-science . Personally I would
never trade based on Elliott Waves , because it is not in line with my
belief system. I believe it is not scientific and hocus focus. But there
are traders who build their entire trading around it.
Your beliefs drive your trading actions. If you want better results in
your trading you start by examining your beliefs about market, how they
operate and about your trading and beliefs behind those trading
decisions. A critical study of them might show you where you need to fix
things.
It is difficult to change beliefs. Contrary to what self help books and
many motivational authors and speakers will tell you it is not easy to
change beliefs. Beliefs persist for lifetime in some people. So much of
human behaviour is driven by beliefs. Religion survives because people
are driven by beliefs.
When you are kid you have many simple beliefs, like monster exist or
eating sweets will lead to cavities, or my parents are going to be
forever, but as you grow and get exposed to science your beliefs change.
New knowledge and new discovery leads to change of beliefs. Same thing
with markets and and trading. More you educate yourself and expose
yourself to different beliefs you will re examine some of your deeply
held beliefs and start changing them. Your surroundings and people you
interact with also helps to change or reinforce your beliefs. If you
want to change beliefs change your surroundings, friends, family and
incentive structure.
For traders same thing applies. If you hang around with traders who all
the time whine and "believe" market is manipulated, you will also imbibe
same beliefs, you will get rewarded in that setting for those beliefs.
If you change that and say start interacting with a highly motivated
trader with 10 year plus track record and no negative years , your
beliefs will change. In that setting you will not be rewarded for your
beliefs about manipulation.
First starting point if you want to improve your psychology is by examining your beliefs
Align your beliefs with market structure by educating yourself about how
markets work. Align your belief with what has shown to have worked in
the market based on history and statistics. Align your belief with a
style of investing growth, value, contrarian investing. Align your
belief with time frame (day trade , swing, position). Align your belief
with right kind of market paradigm
(http://sharemarket-srilanka.blogspot.com/)
Friday, March 28, 2014
The 10 Secrets of Successful Investing
For Sir John Marks Templeton, the road not taken really did make all the difference in the world.
A true contrarian, the legendary investor became a billionaire by "avoiding the herd".
He bought low, sold high, and was always working against the grains of extreme bullish and bearish sentiment.
In fact, it is when the streets were the bloodiest that Templeton became the most eager to invest.
It was at these moments of what Templeton called "points of maximum pessimism" that he began to wade in snapping up rock bottom bargains along the way..
A true contrarian, the legendary investor became a billionaire by "avoiding the herd".
He bought low, sold high, and was always working against the grains of extreme bullish and bearish sentiment.
In fact, it is when the streets were the bloodiest that Templeton became the most eager to invest.
It was at these moments of what Templeton called "points of maximum pessimism" that he began to wade in snapping up rock bottom bargains along the way..
Going Long on Pessimism
To his credit, that included one of Templeton's most daring plays.As the U.S. was still mired in The Great Depression and the war drums in Europe began to beat, Templeton borrowed enough money to invest in U.S. markets during the dark days of 1939.
With a war chest of $10,000, Templeton bought 100 shares in every single company that was trading for less than a dollar a share on the New York Stock Exchange. When he was done, Templeton had bet on 104 companies, including 34 that were already in bankruptcy.
A short four years later, only four of them turned out to be worthless, while Templeton's initial investment grew 400% to $40,000.
That was the start of long and successful career. Not long after, he became a billionaire by pioneering the use of globally diversified mutual funds.
Established in 1954, his Templeton Growth Fund was the granddaddy of them all. It grew at an astonishing rate of nearly 16% a year until Templeton's retirement in 1992, handily beating the Standard & Poor's gains of 11.1%.
With dividends reinvested, each $10,000 invested in the Templeton Growth Fund at its inception would have grown to $2 million by 1992, before it was sold to the Franklin Group.
A fundamentalist by nature, Templeton's overall investment thesis was simple: it was to "search for companies around the world that offered low prices and an excellent long-term outlook."
That usually included areas of the world other investors had completely overlooked--most notably post-war Japan. Templeton was not only one of the first investors to place bets there, he was also one of the first investors to sell out as the Japanese bubble peaked in the mid-1980's.
Likewise, his timing couldn't have been better in the late 1990's.
At the height of the Internet bubble Templeton predicted 90% of the new Internet companies would be bankrupt within five years.
Confident in his prediction, Templeton went short dozens of technology companies, making himself over $80 million in a matter of weeks. He later called it "the easiest money I ever made."
After a long and profitable career, Money magazine dubbed him "arguably the greatest global stock picker of the century" in 1999.
Of course, along the way he also left behind a wealth of investment advice for stock pickers at every level.
Templeton's 10 Maxims
He called them Templeton's 10 Principles for Successful Investing. They included the following:- 1. Invest for real returns: "The true objective for any long-term investor is maximum total real return after taxes."
2. Keep an open mind: "Never adopt permanently any type of asset or any selection method. Try to stay flexible, open minded and skeptical. Long term top results are achieved only by changing from popular to unpopular the types of securities you favour and your methods of selection."
3. Never follow the crowd: "If you buy the same securities as other people, you will have the same results as other people. It is impossible to produce superior performance unless you do something different from the majority. Buying when others are despondently selling and selling when others are greedily buying requires the greatest fortitude and pays the greatest reward."
4. Everything changes: "Bear markets have always been temporary. And so have bull markets."
5. Avoid the popular: "When any method for selecting stocks becomes popular, you will need to switch to unpopular methods."
6. Learn from your mistakes: "'This time is different' are among the most costly four words in market history."
7. Buy during times of pessimism: "Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell."
8. Search worldwide: "To avoid having all your eggs in the wrong basket at the wrong time, you should diversify. When you search worldwide, you find more better bargains than when you monitor only one nation. You also benefit from more safety thanks to diversification."
9. Hunt for value and bargains: "Too many investors focus on outlook and trend. Therefore, more profit is made by focusing on value. In the stock market the only way to get a bargain is to buy what most investors are selling."
10. No-one knows everything: "An investor who has all of the answers doesn't even understand the questions."
Templeton passed away in July 2008 at the age of 95.
http://moneymorning.com/2013/04/26/the-10-secrets-of-successful-investing/
The dual role of a CEO
To be an effective CEO one must be a manager and leader, says Ranjith Fernando
By Cheranka Mendis
To become an effective CEO, an individual must subjugate himself to the functions of the Board of Directors, be familiar with the function of the company model and play the dual role as a manager and leader – bringing in both a stabilising effect as well as a destabilising effect to the company.
Speaking at the memorial oration on the 12th year remembrance of late K. Sivagananathan, highly respected banker and financer of our time, Ranjith Fernando who has acted as Director/CEO of NDB, Secretary to Ministries of Industries and Constitutional Affairs listed key pointers that would make a company CEO an effective one.
The oration was organised by the trust in association with the Association of Professional Bankers Sri Lanka and was followed by a Memorial Trust Award Ceremony took place at the BOC Head Office in Colombo1.
The model of a company
Explaining his subject from the much celebrated case in 1986 when the House of Lords decided in Salmon Vs Salmon to create the fiction of a legal entity/personality in a company – a personality who is distinct from the owners of the company, and from the shareholders of the company with power to own property, to be sued and to sue – a hallmark decision at the time, Fernando noted that the very model and workings of a company has changed over time, with ramifications when needed, to a tripartite arrangement between three parties – shareholders, board and management.
The working of this model also brought with it umpteenth issues and but has grown to such an extent that there is now a body with legal statute and case law which has built up, and defines the framework within which a company works.
In time to come issues such as the role of a regulator and an independent director will be resolved, he assured confidently.
“A CEO must subjugate himself to the oversight function of the board. The greatest disaster is having a weak board so that the CEO can run the company as he wants. A CEO must have a strong board that demands he performs certain functions. The CEO is runs the company on a day-to-day basis, and therefore it is his duty to defend the turf he is given
Today we find that many CEOs find it convenient to let the chairman make certain decisions and even preside over staff or departmental meetings. That kind of CEO is not an effective CEO as you are breaking down the very model
An individual who is a CEO is both a manager and a leader. Both roles are very different from each other, one is not inferior to the other but are complimentary to each other. Most companies are, I submit, over-managed but under-led. Not everyone can be good at both. In fact, companies today try to bring about manager-leaders and leader-managers who perform both functions
Managing is a stabilising influence; leadership is a destabilising influence as you bring about change. Because the world outside is changing and unless your company can change in relation to what is happening in the world, the end will be in sight. You need to anticipate change
– Ranjith Fernando”
The tripartite relationship
Today, there are two fundamental principles that defines this relationship – separation of power between the three bodies with each body having a role to play and the checks and balance you have against one another, i.e. that the plenitude of a power of a company is not derived on a single body. If these principles are violated one cannot be an effective CEO, he said.
Further elucidating the former he noted that each body has a role to play. Shareholders meet and discharge certain functions such as election of the board, declaration of the dividend, etc. and appoint a Board of Directors who tries to understand the laws that govern the particular industry of which they are on the board (of a company) and ensure that the company functions within the said parameters.
The board can also demand a business plan from the CEO whom the board appoints. They not only appoint the CEO but demand a business plan setting out clear, time-bound goals to be achieved by the company; and ensure that CEO delivers these targets. They have an oversight function over the CEO and the management. They also have a duty for shareholders to whom they report.
Yet another duty of a board is to ensure integrity of financial statements produced by the company to the shareholders periodically and understands the risks in business and ensure the management has put in certain controls to take care of those risks and are effective.
Understanding the model
The role of a CEO must therefore be taken in the context of working that model, he said.
“This relationship between three parties had been defined over time by courts, statutes, and by codes of conduct which are rules made and changed in a more flexible manner than an act of parliament,” Fernando explained. “Today we have a body of knowledge that defines these roles in a much more definite manner than at the time when the celebrated case was decided by the House of Lords.”
Within that model, how can a CEO by effective? As the chief of the management what is his role, he questioned. “The CEO needs to understand the model and without that understanding he cannot play an effective role as a CEO.”
“A CEO must subjugate himself to the oversight function of the board.” The greatest disaster is having a weak board so that the CEO can run the company as he wants; he noted adding that a CEO must have a strong board that demands he performs certain functions.
The CEO is runs the company on a day-to-day basis, and therefore it is his duty to defend the turf he is given. “Today we find that many CEOs find it convenient to let the chairman make certain decisions and even preside over staff or departmental meetings. That kind of CEO is not an effective CEO as you are breaking down the very model,” Fernando assured.
Playing the dual roles
An individual who is a CEO is both a manager and a leader.
“Both roles are very different from each other, one is not inferior to the other but are complimentary to each other,” he stressed.
Leadership has nothing to do with charisma nor is it better than managers. “Most companies are, I submit, over-managed but under-led. Not everyone can be good at both. In fact, companies today try to bring about manager-leaders and leader-managers who perform both functions.”
Management is about coping with complexities. It brings about order and consistency. Regulate and deciding on a systematic way of allocating resources, checking performances, getting feedback, correcting the loop and achieving certain results.
Leadership on the other hand is synonymous with change. It is very different from managing. “Managing is a stabilising influence; leadership is a destabilising influence as you bring about change. Because the world outside is changing and unless your company can change in relation to what is happening in the world, the end will be in sight. You need to anticipate change.”
Each deals with what needs to be done, no doubt, but under different circumstances and different roles.
Managers plan and budget, setting targets and goals, detailing implementation steps, allocating resources, monitoring implementation, controlling and problem solving.
In contrast, leaders set direction, a long term vision for the company. “They articulate that vision to the people whom he leads, exciting and aligning them to the vision, obtaining commitment from them, motivating and inspiring and appealing to values and emotions.”
Fernando said: “It is not a completely rational thing whereas managing is a deductive process.” Planning is a managerial position, design to produce orderly results. Setting direction on the other hand is more inductive – doesn’t produce plans, but a vision and strategy.
Planning works best not as a substitute for direction setting but as a compliment to it. Planning process is a useful reality check on the direction setting. “The latter provides a focus, framework within which planning can be carried out.”
He added: Managers organise to create human systems, structures; but aligning is more a communication challenge which necessitates talking to more people than in organising clients, governments, etc. “Direction setting identifies appropriate path for movement whereas effective movement gets people moving down that path. Managerial process must be as close as possible to fail-safe and risk-free, whereas leadership is fraud with change and risk taken.”
“My submission is aligning people is not the same as getting them organised as a structure,” Fernando said.
www.ft.lk
By Cheranka Mendis
To become an effective CEO, an individual must subjugate himself to the functions of the Board of Directors, be familiar with the function of the company model and play the dual role as a manager and leader – bringing in both a stabilising effect as well as a destabilising effect to the company.
Speaking at the memorial oration on the 12th year remembrance of late K. Sivagananathan, highly respected banker and financer of our time, Ranjith Fernando who has acted as Director/CEO of NDB, Secretary to Ministries of Industries and Constitutional Affairs listed key pointers that would make a company CEO an effective one.
The oration was organised by the trust in association with the Association of Professional Bankers Sri Lanka and was followed by a Memorial Trust Award Ceremony took place at the BOC Head Office in Colombo1.
The model of a company
Explaining his subject from the much celebrated case in 1986 when the House of Lords decided in Salmon Vs Salmon to create the fiction of a legal entity/personality in a company – a personality who is distinct from the owners of the company, and from the shareholders of the company with power to own property, to be sued and to sue – a hallmark decision at the time, Fernando noted that the very model and workings of a company has changed over time, with ramifications when needed, to a tripartite arrangement between three parties – shareholders, board and management.
The working of this model also brought with it umpteenth issues and but has grown to such an extent that there is now a body with legal statute and case law which has built up, and defines the framework within which a company works.
In time to come issues such as the role of a regulator and an independent director will be resolved, he assured confidently.
“A CEO must subjugate himself to the oversight function of the board. The greatest disaster is having a weak board so that the CEO can run the company as he wants. A CEO must have a strong board that demands he performs certain functions. The CEO is runs the company on a day-to-day basis, and therefore it is his duty to defend the turf he is given
Today we find that many CEOs find it convenient to let the chairman make certain decisions and even preside over staff or departmental meetings. That kind of CEO is not an effective CEO as you are breaking down the very model
An individual who is a CEO is both a manager and a leader. Both roles are very different from each other, one is not inferior to the other but are complimentary to each other. Most companies are, I submit, over-managed but under-led. Not everyone can be good at both. In fact, companies today try to bring about manager-leaders and leader-managers who perform both functions
Managing is a stabilising influence; leadership is a destabilising influence as you bring about change. Because the world outside is changing and unless your company can change in relation to what is happening in the world, the end will be in sight. You need to anticipate change
– Ranjith Fernando”
The tripartite relationship
Today, there are two fundamental principles that defines this relationship – separation of power between the three bodies with each body having a role to play and the checks and balance you have against one another, i.e. that the plenitude of a power of a company is not derived on a single body. If these principles are violated one cannot be an effective CEO, he said.
Further elucidating the former he noted that each body has a role to play. Shareholders meet and discharge certain functions such as election of the board, declaration of the dividend, etc. and appoint a Board of Directors who tries to understand the laws that govern the particular industry of which they are on the board (of a company) and ensure that the company functions within the said parameters.
The board can also demand a business plan from the CEO whom the board appoints. They not only appoint the CEO but demand a business plan setting out clear, time-bound goals to be achieved by the company; and ensure that CEO delivers these targets. They have an oversight function over the CEO and the management. They also have a duty for shareholders to whom they report.
Yet another duty of a board is to ensure integrity of financial statements produced by the company to the shareholders periodically and understands the risks in business and ensure the management has put in certain controls to take care of those risks and are effective.
Understanding the model
The role of a CEO must therefore be taken in the context of working that model, he said.
“This relationship between three parties had been defined over time by courts, statutes, and by codes of conduct which are rules made and changed in a more flexible manner than an act of parliament,” Fernando explained. “Today we have a body of knowledge that defines these roles in a much more definite manner than at the time when the celebrated case was decided by the House of Lords.”
Within that model, how can a CEO by effective? As the chief of the management what is his role, he questioned. “The CEO needs to understand the model and without that understanding he cannot play an effective role as a CEO.”
“A CEO must subjugate himself to the oversight function of the board.” The greatest disaster is having a weak board so that the CEO can run the company as he wants; he noted adding that a CEO must have a strong board that demands he performs certain functions.
The CEO is runs the company on a day-to-day basis, and therefore it is his duty to defend the turf he is given. “Today we find that many CEOs find it convenient to let the chairman make certain decisions and even preside over staff or departmental meetings. That kind of CEO is not an effective CEO as you are breaking down the very model,” Fernando assured.
Playing the dual roles
An individual who is a CEO is both a manager and a leader.
“Both roles are very different from each other, one is not inferior to the other but are complimentary to each other,” he stressed.
Leadership has nothing to do with charisma nor is it better than managers. “Most companies are, I submit, over-managed but under-led. Not everyone can be good at both. In fact, companies today try to bring about manager-leaders and leader-managers who perform both functions.”
Management is about coping with complexities. It brings about order and consistency. Regulate and deciding on a systematic way of allocating resources, checking performances, getting feedback, correcting the loop and achieving certain results.
Leadership on the other hand is synonymous with change. It is very different from managing. “Managing is a stabilising influence; leadership is a destabilising influence as you bring about change. Because the world outside is changing and unless your company can change in relation to what is happening in the world, the end will be in sight. You need to anticipate change.”
Each deals with what needs to be done, no doubt, but under different circumstances and different roles.
Managers plan and budget, setting targets and goals, detailing implementation steps, allocating resources, monitoring implementation, controlling and problem solving.
In contrast, leaders set direction, a long term vision for the company. “They articulate that vision to the people whom he leads, exciting and aligning them to the vision, obtaining commitment from them, motivating and inspiring and appealing to values and emotions.”
Fernando said: “It is not a completely rational thing whereas managing is a deductive process.” Planning is a managerial position, design to produce orderly results. Setting direction on the other hand is more inductive – doesn’t produce plans, but a vision and strategy.
Planning works best not as a substitute for direction setting but as a compliment to it. Planning process is a useful reality check on the direction setting. “The latter provides a focus, framework within which planning can be carried out.”
He added: Managers organise to create human systems, structures; but aligning is more a communication challenge which necessitates talking to more people than in organising clients, governments, etc. “Direction setting identifies appropriate path for movement whereas effective movement gets people moving down that path. Managerial process must be as close as possible to fail-safe and risk-free, whereas leadership is fraud with change and risk taken.”
“My submission is aligning people is not the same as getting them organised as a structure,” Fernando said.
www.ft.lk
Monday, March 24, 2014
Top 10 greatest trades of all time
http://www.ibtimes.com/top-10-greatest-trades-all-time-253039
The period of the Great Moderation, to use Federal Reserve Chairman Bernanke's words, ended in 2007 and ushered in a new era of heightened volatility.
This seismic change mostly destroyed careers on Wall Street, but it also made the careers of people like hedge fund giant John Paulson, who made billions betting against the subprime mortgage crisis.
As a result, there is a renewed interest in the style of trading that's best described as making huge, concentrated bets by analyzing fundamental economic/business conditions. Most (but not all) of these trades can be labeled as 'global macro.'
Paulson's successful trade also prompted talks about it being the greatest of all time.
IBTimes agrees with this assessment and has compiled a list below of the greatest trades of all time, filling in spots two through ten.
The list also includes explanations of the rankings, which were determined by the importance of the underlying events, how much money the trades likely made, and the difficulty and exclusivity of the analyses.
1. John Paulson's bet against subprime mortgages
John Paulson is the famous hedge manager who correctly predicted the subprime mortgage crisis and profited enormously from it.
His trade made his hedge fund $15 billion in 2007 alone. It propelled him from relative obscurity to stardom and his hedge fund to become the third largest in the world.
Paulson does indeed deserve the title of having made the greatest trade ever.
First, he bet big on the largest economic event of the last 70 years and earned billions doing it.
Second, only a handful (less than 10, probably) of players on Wall Street profited enormously from this momentous event. Indeed, compared to other trades on the list, Paulson's prediction is one of the most exclusive.
Paulson isn't even a global macro trader (his background is in merger arbitrage) so it is highly puzzling but impressive that he came up with such an impeccable and spot-on analysis.
He should also be credited for being bold enough to believe in his analysis and ignore his oblivious Wall Street colleagues.
2. Jesse Livermore's call on the Crash of 1929
Jesse Livermore is a legendary speculator from early in the 20th century.
He is famous for correctly predicting both the 1907 and 1929 stock market crashes. The 1929 stock market crash and the subsequent Great Depression was the most significant U.S. economic event in the 20th century.
For his 1907 call, Livermore made $3 million, which is equivalent to almost $70 million today. After his 1929 trade, he was worth $100 million, which is equivalent to over $1.2 billion today.
Like Paulson, Livermore scores points for the high impact of the events he predicted and the amount of money he made.
Furthermore, he made his fortune without the benefit of having a hedge fund (i.e. massive amounts of money from investors) and using fancy derivative instruments.
One last point in Livermore's favor is that he became successful with less educational resources and mentors than modern speculators.
In fact, Livermore is considered a pioneer in the art of speculation and top traders still swear by the Reminiscences of a Stock Operator, a book based on his trading philosophy and career.
3. John Templeton's foray into Japan
Sir John Templeton, born in 1912, is a pioneer of the mutual fund industry and a legendary investor.
In the 1960s, when Japan was beginning its three-decade long economic miracle, Templeton was one of the country's first outside investors. At one point, he boldly put more than 60 percent of his fund in Japanese assets.
Before his brilliant call on Japan, Templeton also correctly assessed the economic impact of World War II, which was the second most important economic event of the 20th century.
In 1939, he put $100 each in 104 U.S. stocks that were trading below $1. In just 4 years, this portfolio quadrupled.
In addition to the fact that he predicted important events, Templeton gets points for being a true pioneer.
Back in the 1960s, people weren't really familiar with the concept of investing in Asia and Japan's export-driven model wasn't yet proven. It took someone of Templeton's ingenuity, courage, and foresight to lead the way.
4. George Soros' breaking of BOE
George Soros put the hedge fund industry on the map in 1992 after he broke the Bank of England (BOE) by shorting 10 billion worth of pound sterling and forcing the U.K. to withdraw from the European Exchange Rate Mechanism (ERM).
Soros made $1 billion in the process, which was an unimaginable sum back then.
Why isn't Soros, probably the most (in)famous trader in the world, and shorting the sterling pound, his most famous trade, ranked higher?
Not to belittle Soros' accomplishments, but the analysis behind it wasn't as difficult as some of the other trades on this list.
Indeed, there were copycats that made the same trade as Soros. Also, far more people recognized the unsustainability of the ERM than those that saw the dangers of the subprime mortgage market.
Moreover, it was Soros' partner Stanley Druckenmiller who came up with the trade idea in the first place. Soros' contribution was agreeing with it and taking a large position.
Still, Soros deserves credit for having the boldness to make the trade. He also gets 'coolness' points for being the catalyst that ushered in a new currency regime for a major country. This level of impact from a single trade is matchless to this day.
5. Paul Tudor Jones' shorting of Black Monday
Paul Tudor Jones correctly predicted and profited handsomely from the Black Monday of 1987, the largest single-day U.S. stock market decline (by percentage) ever.
Jones reportedly tripled his money, making as much as $100 million on that trade as the Dow Jones Industrial Average plunged 22 percent.
In the weeks leading up to Black Monday, many traders were on edge about the market. Some also recognized the danger of portfolio insurance, which was partly responsible for the magnitude of the fall.
Consequently, many had short positions going into Black Monday or advised their clients to get out of the stock market shortly before it happened, so Jones wasn't unique in predicting the crash.
Nevertheless, Jones deserves to be #5 because Black Monday was such a momentous market event and he was the person who made the most money from it.
6. Andrew Hall's $100 oil prediction
Back in 2003, when oil was trading at $30 barrel and the economy had just recovered from the dot-com crash, Andrew Hall wagered that prices would top $100 per barrel within five years.
When oil prices blew past $100 five years later in 2008, Hall's employer Citigroup made a bundle and Hall took home $100 million as a part of his compensation for this and other successful trades.
According to Time Magazine, Hall structured the contracts so that if oil prices didn't hit $100 within 5 years, they would expire worthless.
Therefore, it took a tremendous amount of conviction and probably some brilliant analysis on Hall's part to make that trade.
Traders know it's hard enough to predict the direction of an asset and find a good entry point. What Hall did was actually pinpoint a timeframe and price level of the move.
Hall is known for doing these brilliant (but risky) types of trades. In 2009, for example, he thought spot oil was cheap. However, oil futures were expensive, so he couldn’t buy them. Instead, he actually bought 1 million barrels of real oil and physically stored it.
So while Hall's calls weren't about monumental events in history, he makes up for it by his brilliance and creativity.
7. David Tepper's 2009 bet on financials
In early 2009, David Tepper bought severely depressed shares of big banks like Bank of America (NYSE: BAC) and Citigroup (NYSE: C). By the end of 2009, Bank of America quadrupled in value and Citigroup tripled in value from their bottoms earlier in the year.
That was good enough to earn Tepper's hedge fund $7 billion. His personal cut was $4 billion.
Tepper's background is in investing in distressed assets and that's exactly what he did in his biggest score to date.
In early 2009, everyone knew Bank of America and Citigroup shares were cheap, but they were too afraid to buy because, among other concerns, they were afraid that these banks would be nationalized.
Tepper bet they wouldn't be. While this trade seems like a wild gamble, Tepper's excellent track record in distressed investing proves otherwise.
A more likely explanation is that Tepper kept his cool while everyone else lost theirs with worries about a coming depression, a collapse of the global financial system, and other 'the-world-is-ending' scenarios.
What's not so impressive about Tepper's trade is the caliber and exclusivity of the analysis because everyone knew about the factors at stake, i.e. whether big banks would be nationalized.
But Tepper deserves credit because he did what one else dared to do and made a lot of money doing it.
8. Jim Chanos' prescient shorts
Jim Chanos is the best short-seller in the world.
He correctly predicted, and profited enormously, from the demise of Enron. Other examples of his successful shorts include Baldwin-United, Tyco International (NYSE: TYC), Worldcom and recently homebuilders like KB Home (NYSE: KBH)
Chanos started to look into Enron as early as 2000. When he found red flags, he dug deeper, discovered more discrepancies, alerted the media, added to his short position, and eventually got rich when the Enron scandal was revealed in October 2001 and the company went bankrupt.
The Enron scandal was highly impactful because it was the biggest bankruptcy to date, led to the dissolution of accounting firm Arthur Andersen, and brought about new regulations like the Sarbanes-Oxley Act.
In a way, Chanos' short of Enron is like a miniature version of Paulson's short of the subprime mortgage market; both reached strongly held convictions by painstaking and thorough research and very few people were aware of the landmines these traders discovered.
Chanos is now setting his sights on China because he believes its economy is just a giant bubble.
There are limited ways he can short the Chinese economy, so Chanos won't make as much money as Paulson if he turns out to be right. However, if he is indeed right, he would cement his status as one of the most brilliant analysts of all time (and this list would be revised to reflect that).
9. Jim Rogers' early call on commodities
Jim Rogers spotted the secular bull market for commodities way back in the 1990s. In 1996, he created the Rogers International Commodity Index. Subsequently, he worked on ways to make that index investable.
Since 1998, the index has returned 290 percent through the end of 2010. This compares to the 10 percent return of the S&P 500 Index during the same period.
Rogers expects commodities to continue to rally ferociously for the long term as paper assets become more worthless and demand (for certain commodities) picks up worldwide. If he is indeed correct, the importance of his call will be elevated and this list would be revised to place him higher.
Back in the 1990s, on the heels of a long bear market for commodities, it was difficult to make a bullish case for them. In fact, few people did.
It is therefore highly impressive that Rogers pretty much called the bottom of a market that went on to rally tremendously for the next decade and more.
10. Louis Bacon's geopolitical play
Louis Bacon made a killing in 1990 by anticipating that Saddam Hussein would invade Kuwait. Bacon went long on oil, short on stocks, and helped his new hedge fund return 86 percent that year. In the following year, he also correctly bet that the U.S. would quickly defeat Iraq and the oil market would recover.
Aside from the eye-popping returns, this feat is included on the list because Bacon ventured outside the field of finance and correctly anticipated a geopolitical event.
Granted, his analysis likely centered on the financial difficulties of the Iraqi government, so it wasn't entirely outside his area of expertise.
But Bacon's feat was impressive because he likely anticipated the invasion better than the people who are supposed to be good at this stuff, like the U.S. President, director of the CIA, and top government officials of other countries. These government people also had better information and access than Bacon did.
http://forum.srilankaequity.com
The period of the Great Moderation, to use Federal Reserve Chairman Bernanke's words, ended in 2007 and ushered in a new era of heightened volatility.
This seismic change mostly destroyed careers on Wall Street, but it also made the careers of people like hedge fund giant John Paulson, who made billions betting against the subprime mortgage crisis.
As a result, there is a renewed interest in the style of trading that's best described as making huge, concentrated bets by analyzing fundamental economic/business conditions. Most (but not all) of these trades can be labeled as 'global macro.'
Paulson's successful trade also prompted talks about it being the greatest of all time.
IBTimes agrees with this assessment and has compiled a list below of the greatest trades of all time, filling in spots two through ten.
The list also includes explanations of the rankings, which were determined by the importance of the underlying events, how much money the trades likely made, and the difficulty and exclusivity of the analyses.
1. John Paulson's bet against subprime mortgages
John Paulson is the famous hedge manager who correctly predicted the subprime mortgage crisis and profited enormously from it.
His trade made his hedge fund $15 billion in 2007 alone. It propelled him from relative obscurity to stardom and his hedge fund to become the third largest in the world.
Paulson does indeed deserve the title of having made the greatest trade ever.
First, he bet big on the largest economic event of the last 70 years and earned billions doing it.
Second, only a handful (less than 10, probably) of players on Wall Street profited enormously from this momentous event. Indeed, compared to other trades on the list, Paulson's prediction is one of the most exclusive.
Paulson isn't even a global macro trader (his background is in merger arbitrage) so it is highly puzzling but impressive that he came up with such an impeccable and spot-on analysis.
He should also be credited for being bold enough to believe in his analysis and ignore his oblivious Wall Street colleagues.
2. Jesse Livermore's call on the Crash of 1929
Jesse Livermore is a legendary speculator from early in the 20th century.
He is famous for correctly predicting both the 1907 and 1929 stock market crashes. The 1929 stock market crash and the subsequent Great Depression was the most significant U.S. economic event in the 20th century.
For his 1907 call, Livermore made $3 million, which is equivalent to almost $70 million today. After his 1929 trade, he was worth $100 million, which is equivalent to over $1.2 billion today.
Like Paulson, Livermore scores points for the high impact of the events he predicted and the amount of money he made.
Furthermore, he made his fortune without the benefit of having a hedge fund (i.e. massive amounts of money from investors) and using fancy derivative instruments.
One last point in Livermore's favor is that he became successful with less educational resources and mentors than modern speculators.
In fact, Livermore is considered a pioneer in the art of speculation and top traders still swear by the Reminiscences of a Stock Operator, a book based on his trading philosophy and career.
3. John Templeton's foray into Japan
Sir John Templeton, born in 1912, is a pioneer of the mutual fund industry and a legendary investor.
In the 1960s, when Japan was beginning its three-decade long economic miracle, Templeton was one of the country's first outside investors. At one point, he boldly put more than 60 percent of his fund in Japanese assets.
Before his brilliant call on Japan, Templeton also correctly assessed the economic impact of World War II, which was the second most important economic event of the 20th century.
In 1939, he put $100 each in 104 U.S. stocks that were trading below $1. In just 4 years, this portfolio quadrupled.
In addition to the fact that he predicted important events, Templeton gets points for being a true pioneer.
Back in the 1960s, people weren't really familiar with the concept of investing in Asia and Japan's export-driven model wasn't yet proven. It took someone of Templeton's ingenuity, courage, and foresight to lead the way.
4. George Soros' breaking of BOE
George Soros put the hedge fund industry on the map in 1992 after he broke the Bank of England (BOE) by shorting 10 billion worth of pound sterling and forcing the U.K. to withdraw from the European Exchange Rate Mechanism (ERM).
Soros made $1 billion in the process, which was an unimaginable sum back then.
Why isn't Soros, probably the most (in)famous trader in the world, and shorting the sterling pound, his most famous trade, ranked higher?
Not to belittle Soros' accomplishments, but the analysis behind it wasn't as difficult as some of the other trades on this list.
Indeed, there were copycats that made the same trade as Soros. Also, far more people recognized the unsustainability of the ERM than those that saw the dangers of the subprime mortgage market.
Moreover, it was Soros' partner Stanley Druckenmiller who came up with the trade idea in the first place. Soros' contribution was agreeing with it and taking a large position.
Still, Soros deserves credit for having the boldness to make the trade. He also gets 'coolness' points for being the catalyst that ushered in a new currency regime for a major country. This level of impact from a single trade is matchless to this day.
5. Paul Tudor Jones' shorting of Black Monday
Paul Tudor Jones correctly predicted and profited handsomely from the Black Monday of 1987, the largest single-day U.S. stock market decline (by percentage) ever.
Jones reportedly tripled his money, making as much as $100 million on that trade as the Dow Jones Industrial Average plunged 22 percent.
In the weeks leading up to Black Monday, many traders were on edge about the market. Some also recognized the danger of portfolio insurance, which was partly responsible for the magnitude of the fall.
Consequently, many had short positions going into Black Monday or advised their clients to get out of the stock market shortly before it happened, so Jones wasn't unique in predicting the crash.
Nevertheless, Jones deserves to be #5 because Black Monday was such a momentous market event and he was the person who made the most money from it.
6. Andrew Hall's $100 oil prediction
Back in 2003, when oil was trading at $30 barrel and the economy had just recovered from the dot-com crash, Andrew Hall wagered that prices would top $100 per barrel within five years.
When oil prices blew past $100 five years later in 2008, Hall's employer Citigroup made a bundle and Hall took home $100 million as a part of his compensation for this and other successful trades.
According to Time Magazine, Hall structured the contracts so that if oil prices didn't hit $100 within 5 years, they would expire worthless.
Therefore, it took a tremendous amount of conviction and probably some brilliant analysis on Hall's part to make that trade.
Traders know it's hard enough to predict the direction of an asset and find a good entry point. What Hall did was actually pinpoint a timeframe and price level of the move.
Hall is known for doing these brilliant (but risky) types of trades. In 2009, for example, he thought spot oil was cheap. However, oil futures were expensive, so he couldn’t buy them. Instead, he actually bought 1 million barrels of real oil and physically stored it.
So while Hall's calls weren't about monumental events in history, he makes up for it by his brilliance and creativity.
7. David Tepper's 2009 bet on financials
In early 2009, David Tepper bought severely depressed shares of big banks like Bank of America (NYSE: BAC) and Citigroup (NYSE: C). By the end of 2009, Bank of America quadrupled in value and Citigroup tripled in value from their bottoms earlier in the year.
That was good enough to earn Tepper's hedge fund $7 billion. His personal cut was $4 billion.
Tepper's background is in investing in distressed assets and that's exactly what he did in his biggest score to date.
In early 2009, everyone knew Bank of America and Citigroup shares were cheap, but they were too afraid to buy because, among other concerns, they were afraid that these banks would be nationalized.
Tepper bet they wouldn't be. While this trade seems like a wild gamble, Tepper's excellent track record in distressed investing proves otherwise.
A more likely explanation is that Tepper kept his cool while everyone else lost theirs with worries about a coming depression, a collapse of the global financial system, and other 'the-world-is-ending' scenarios.
What's not so impressive about Tepper's trade is the caliber and exclusivity of the analysis because everyone knew about the factors at stake, i.e. whether big banks would be nationalized.
But Tepper deserves credit because he did what one else dared to do and made a lot of money doing it.
8. Jim Chanos' prescient shorts
Jim Chanos is the best short-seller in the world.
He correctly predicted, and profited enormously, from the demise of Enron. Other examples of his successful shorts include Baldwin-United, Tyco International (NYSE: TYC), Worldcom and recently homebuilders like KB Home (NYSE: KBH)
Chanos started to look into Enron as early as 2000. When he found red flags, he dug deeper, discovered more discrepancies, alerted the media, added to his short position, and eventually got rich when the Enron scandal was revealed in October 2001 and the company went bankrupt.
The Enron scandal was highly impactful because it was the biggest bankruptcy to date, led to the dissolution of accounting firm Arthur Andersen, and brought about new regulations like the Sarbanes-Oxley Act.
In a way, Chanos' short of Enron is like a miniature version of Paulson's short of the subprime mortgage market; both reached strongly held convictions by painstaking and thorough research and very few people were aware of the landmines these traders discovered.
Chanos is now setting his sights on China because he believes its economy is just a giant bubble.
There are limited ways he can short the Chinese economy, so Chanos won't make as much money as Paulson if he turns out to be right. However, if he is indeed right, he would cement his status as one of the most brilliant analysts of all time (and this list would be revised to reflect that).
9. Jim Rogers' early call on commodities
Jim Rogers spotted the secular bull market for commodities way back in the 1990s. In 1996, he created the Rogers International Commodity Index. Subsequently, he worked on ways to make that index investable.
Since 1998, the index has returned 290 percent through the end of 2010. This compares to the 10 percent return of the S&P 500 Index during the same period.
Rogers expects commodities to continue to rally ferociously for the long term as paper assets become more worthless and demand (for certain commodities) picks up worldwide. If he is indeed correct, the importance of his call will be elevated and this list would be revised to place him higher.
Back in the 1990s, on the heels of a long bear market for commodities, it was difficult to make a bullish case for them. In fact, few people did.
It is therefore highly impressive that Rogers pretty much called the bottom of a market that went on to rally tremendously for the next decade and more.
10. Louis Bacon's geopolitical play
Louis Bacon made a killing in 1990 by anticipating that Saddam Hussein would invade Kuwait. Bacon went long on oil, short on stocks, and helped his new hedge fund return 86 percent that year. In the following year, he also correctly bet that the U.S. would quickly defeat Iraq and the oil market would recover.
Aside from the eye-popping returns, this feat is included on the list because Bacon ventured outside the field of finance and correctly anticipated a geopolitical event.
Granted, his analysis likely centered on the financial difficulties of the Iraqi government, so it wasn't entirely outside his area of expertise.
But Bacon's feat was impressive because he likely anticipated the invasion better than the people who are supposed to be good at this stuff, like the U.S. President, director of the CIA, and top government officials of other countries. These government people also had better information and access than Bacon did.
http://forum.srilankaequity.com
Is entrepreneurship the final goal of a career end?
Not everyone chooses a career – some, if they are honest enough, will
confess that they got into a career by chance. And once the course of
time runs and the biological clock runs, most would choose to stay
within the comfort zones of known routines, predictable outcomes and
familiar territory, instead of venturing out into newer, better
opportunities.
Yet, there are others who are driven by a passion to exceed their own expectations. Those who know that the experience and the expertise they have achieved in the corporate world is only the stepping stone to what they eventually want to become – a successful entrepreneur who always sees an unfulfilled need that could be met.
Pros and cons
There are those who have reached the zenith of their career – and are looking for a successful exit strategy. Entrepreneurship is naturally an option to consider, but only if you have got the talent to manage the tight rope walk self-employment often is. For women in particular, becoming self-employed is a very attractive option mid-career but the pros need to be weighed against the cons. To start with, a supportive spouse or family goes a long way in making entrepreneurship a possible and a workable choice. There are other aspects to consider too.
Leaving the comfort zone of a corporate job can be difficult. Entrepreneurship is not always the dream start everyone makes it out to be but yes, there are very many rewards. Utilizing your talents and your expertise in unharnessed ways can be rewarding in itself, leave aside the monetary rewards.
There are many out there stuck in corporate ruts, wishing they could start something on their own if only the funds were there, if only the time was right, if only the monthly bills could be managed until the whole self-employment thing works out.
I left the corporate world almost 20 years ago to become an entrepreneur. I haven’t looked back and yes, it has been challenging but it has been a tremendous road to travel. The initial shock of not having the comfy office, the structure of the work environment you have been used to, soon wears out as you dig your heels in become busy with developing your business. The flexibility of entrepreneurship is extremely attractive and rewarding too. You can choose the time you work and that means working your schedule around the children and home chores.
Reaching the top
It is a fact that not everyone gets to reach the top. Not everyone wants to, either. The cost of it can sometimes be overwhelming in personal terms. For most women, branching out into doing something on their own can be sometimes a complete turn from what they have been trained to do. There are women who having worked as accountants, have become experts at running a bakery business. There are others who have turned a passion that has become a hobby into a thriving career.
The beauty of entrepreneurship is that you can always reinvent the wheel. All it takes is to get the blend of elements right. There are so many unutilized opportunities and unmet needs that companies and consumers would pay to make use of. Innovation is one great platform all entrepreneurs can use. Today’s technology with multiple layers of communications opportunities, social media and the Internet has added a totally new dimension to entrepreneurship.
You can work from wherever you are and the world is indeed your oyster. You can sit in your home in front of your laptop and talk to customers half a world away as if they were in the next room. With such power at our fingertips, in an ideal world, there would be hundreds of entrepreneurs born every week.
Start it small
Of course, entrepreneurship at the end of the career rainbow is not always the best choice if your aim is too high. Working for yourself often brings you down a peg or two and enables you to connect with the world in ways you may not have thought possible before, from inside the cocooned atmosphere of the corporate world. You have to do things on your own – get around, meet and greet, talk to people and communicate with them on different platforms. Entrepreneurship is often an experience in itself, empowering you to do things you haven’t done before and go where you haven’t gone before. It is an enriching and a daunting, yet a wonderful experience at the same time.
Financially too, starting on your own can be challenging if not frightening at the beginning. If you hire people, you need to be able to pay them and pay a rent if you hire an office. The wisest choice for those aspiring to make the transition from the corporate executive to the entrepreneur is to start small. To ensure that whatever it is, it is manageable in the foreseeable future without having to break a bank. A glittering launch would be nice but may not be very practical as you start out. In
entrepreneurship, rewards don’t always come at once but down the road.
For all of you out there dreaming of starting on your own – keep dreaming. You can and you will – when you know what it is that you want to do and more importantly, when you know what makes you happy to be doing.
www.dailymirror.lk
Yet, there are others who are driven by a passion to exceed their own expectations. Those who know that the experience and the expertise they have achieved in the corporate world is only the stepping stone to what they eventually want to become – a successful entrepreneur who always sees an unfulfilled need that could be met.
Pros and cons
There are those who have reached the zenith of their career – and are looking for a successful exit strategy. Entrepreneurship is naturally an option to consider, but only if you have got the talent to manage the tight rope walk self-employment often is. For women in particular, becoming self-employed is a very attractive option mid-career but the pros need to be weighed against the cons. To start with, a supportive spouse or family goes a long way in making entrepreneurship a possible and a workable choice. There are other aspects to consider too.
Leaving the comfort zone of a corporate job can be difficult. Entrepreneurship is not always the dream start everyone makes it out to be but yes, there are very many rewards. Utilizing your talents and your expertise in unharnessed ways can be rewarding in itself, leave aside the monetary rewards.
There are many out there stuck in corporate ruts, wishing they could start something on their own if only the funds were there, if only the time was right, if only the monthly bills could be managed until the whole self-employment thing works out.
I left the corporate world almost 20 years ago to become an entrepreneur. I haven’t looked back and yes, it has been challenging but it has been a tremendous road to travel. The initial shock of not having the comfy office, the structure of the work environment you have been used to, soon wears out as you dig your heels in become busy with developing your business. The flexibility of entrepreneurship is extremely attractive and rewarding too. You can choose the time you work and that means working your schedule around the children and home chores.
Reaching the top
It is a fact that not everyone gets to reach the top. Not everyone wants to, either. The cost of it can sometimes be overwhelming in personal terms. For most women, branching out into doing something on their own can be sometimes a complete turn from what they have been trained to do. There are women who having worked as accountants, have become experts at running a bakery business. There are others who have turned a passion that has become a hobby into a thriving career.
The beauty of entrepreneurship is that you can always reinvent the wheel. All it takes is to get the blend of elements right. There are so many unutilized opportunities and unmet needs that companies and consumers would pay to make use of. Innovation is one great platform all entrepreneurs can use. Today’s technology with multiple layers of communications opportunities, social media and the Internet has added a totally new dimension to entrepreneurship.
You can work from wherever you are and the world is indeed your oyster. You can sit in your home in front of your laptop and talk to customers half a world away as if they were in the next room. With such power at our fingertips, in an ideal world, there would be hundreds of entrepreneurs born every week.
Start it small
Of course, entrepreneurship at the end of the career rainbow is not always the best choice if your aim is too high. Working for yourself often brings you down a peg or two and enables you to connect with the world in ways you may not have thought possible before, from inside the cocooned atmosphere of the corporate world. You have to do things on your own – get around, meet and greet, talk to people and communicate with them on different platforms. Entrepreneurship is often an experience in itself, empowering you to do things you haven’t done before and go where you haven’t gone before. It is an enriching and a daunting, yet a wonderful experience at the same time.
Financially too, starting on your own can be challenging if not frightening at the beginning. If you hire people, you need to be able to pay them and pay a rent if you hire an office. The wisest choice for those aspiring to make the transition from the corporate executive to the entrepreneur is to start small. To ensure that whatever it is, it is manageable in the foreseeable future without having to break a bank. A glittering launch would be nice but may not be very practical as you start out. In
entrepreneurship, rewards don’t always come at once but down the road.
For all of you out there dreaming of starting on your own – keep dreaming. You can and you will – when you know what it is that you want to do and more importantly, when you know what makes you happy to be doing.
www.dailymirror.lk
Sunday, March 23, 2014
Three "Crazy" Rules of Investing You'll Never Hear From Your Broker
In life, things
rarely work out the way you'd expect. The "nice guy" hardly ever gets
the girl. The smartest kid in the class never becomes rich and famous.
Meanwhile, the problematic student with lousy grades in high school ends
up in the U.S. Senate -- or beyond.
The investment world also has its share of "crazy" rules. I call them "crazy" because they highlight the way the investing world works in ways you would never expect.
Yet understanding these "crazy" rules, and how you can apply them, can spell the difference between making (and keeping) your investment profits -- or, at worst, spending an unpleasant stint in the poor house.
With that backdrop, here are my three "crazy" rules...
1. Don't Confuse Luck with Smarts
Old time traders put this view another way: "Never confuse brains with a bull market." The role of "luck" in investment success is more complicated than you think.
You probably believe that if you turn a $10,000 investment in a single stock into $1 million, it would be the best thing that could ever happen to you. But you'd be wrong.
After enjoying such remarkable success, you'd suddenly think that you'd "cracked the code" of the markets. The next time around, you'd have the confidence to bet your life savings on another "can't lose" investment.
And maybe you'd win this time, as well. So you do it again.
After all, you calculate that if you repeat your success only one more time, you'd have $100 million in the bank. But this time, you tell yourself that once this investment hits, you'd take all of your chips off of the table.
Sure enough, your luck runs out and your latest "can't lose" investment flops. And since you "bet the farm," you not only lost your shirt but you're also deeply in debt.
You wake up one morning to realize that you are worse off than when you started.
That's the problem with sudden wealth -- whether it comes from a big bet on a stock tip, buying a winning lottery ticket or becoming a highly paid pro-athlete.
Almost everyone who wins the lottery ends up poorer five years later than beforehand. You see formerly wealthy pro athletes declaring bankruptcy almost every week.
The lesson? Understand that if you have ever won a big investment bet, you were at least as lucky as you were smart.
Over the long term, there are no shortcuts. Making money on a consistent basis is a grind that is one part "insight" and nine parts "discipline".
2. Your Analysis Is Irrelevant to Your Investment Success
The philosopher Friedrich Nietzsche once observed that, "Any explanation is better than none."
I disagree. Sometimes, in the investment world, no explanation is really necessary -- or relevant.
Today, you suffer from information overload. You can access more information about the financial markets than ever before. Yet, I bet your investment returns have not improved.
Not only do we seem incapable of divining the future, we can't even seem to agree on what happened. Was the credit crunch a result of Greenspan's monetary policy? Bernanke's incompetence? Clinton's "affirmative action" mortgages for low-income borrowers? Or was it just a classic mania? We crave explanations because it gives us an illusion of control.
But it gets even worse. Even the "doom and gloomers " who got their analysis "right" in predicting the credit crunch weren't able to turn their insights into money for their clients. Analysts who promised to "crash-proof" their clients' portfolios ended up losing more money for their clients than if they had stuck with simple index funds.
That's because they weren't that right after all. Gold didn't hit $3,000 an ounce. The U.S. dollar didn't implode. Treasuries didn't collapse. And the U.S. stock market recovered.
The lesson? Successful investors are successful in the long term because they admit their mistakes.
As the world's greatest speculator George Soros said, "My system doesn't work by making valid predictions. It works by allowing me to recognize when I am wrong."
3. Your "Intelligence" is Your Biggest Handicap
Warren Buffett famously observed that it takes no more than average intelligence to become a successful investor.
I'd add something to that perspective. I'd say high intelligence is actually a handicap to successful investing.
Here's why. When you are smart, you are used to being 100% correct. You just can't accept the possibility of being wrong. So you stick to your guns, even when the market is telling you otherwise.
That's why overeducated Wall Street analysts make such lousy money managers and why hedge fund managers who flaunt their intelligence inevitably flounder.
Think about it this way. If high intelligence was the key to successful investing, top business school professors and economists would be the wealthiest guys on the planet. Instead, the Forbes 400 is populated by dropouts from places like Harvard (Bill Gates) and Stanford (the Google guys).
That's also why poker players make the best traders and investors. They play each hand as if it is dealt to them. If they get a bad hand, they fold. They play the investment game the same way.
Perhaps that's also why a former Dean of Harvard College, Henry Rosovsky, observed the following about Harvard students, "Our A students become professors. Our B students go to law school. Our C students rule the world."
Now you also understand why my Harvard law school classmate Barack Obama doesn't release his college and law school transcripts.
How You Can Apply These Three Crazy Rules
So, how can you use these "crazy" rules to improve your investment returns?
First, never bet too big on one idea. You may get lucky once. Maybe even twice. But your luck will eventually run out. And if you bet the farm, you are out of the investment game for good.
Second, don't delude yourself into thinking that you have special insight into the market. Bring that attitude to your investments, and you will have your head handed to you.
And it's not a question of "if" but "when".
Third, learn to think of your investments like a hand in a poker game. Up the ante when you are lucky enough to get a good hand. But also be prepared to fold -- and to fold often.
By following these rules, I have saved me from my own follies more than once.
They will do the same for you.
By Nicholas A. Vardy
Editor, The Global Guru
http://www.nicholasvardy.com
(http://sharemarket-srilanka.blogspot.co.uk/)
The investment world also has its share of "crazy" rules. I call them "crazy" because they highlight the way the investing world works in ways you would never expect.
Yet understanding these "crazy" rules, and how you can apply them, can spell the difference between making (and keeping) your investment profits -- or, at worst, spending an unpleasant stint in the poor house.
With that backdrop, here are my three "crazy" rules...
1. Don't Confuse Luck with Smarts
Old time traders put this view another way: "Never confuse brains with a bull market." The role of "luck" in investment success is more complicated than you think.
You probably believe that if you turn a $10,000 investment in a single stock into $1 million, it would be the best thing that could ever happen to you. But you'd be wrong.
After enjoying such remarkable success, you'd suddenly think that you'd "cracked the code" of the markets. The next time around, you'd have the confidence to bet your life savings on another "can't lose" investment.
And maybe you'd win this time, as well. So you do it again.
After all, you calculate that if you repeat your success only one more time, you'd have $100 million in the bank. But this time, you tell yourself that once this investment hits, you'd take all of your chips off of the table.
Sure enough, your luck runs out and your latest "can't lose" investment flops. And since you "bet the farm," you not only lost your shirt but you're also deeply in debt.
You wake up one morning to realize that you are worse off than when you started.
That's the problem with sudden wealth -- whether it comes from a big bet on a stock tip, buying a winning lottery ticket or becoming a highly paid pro-athlete.
Almost everyone who wins the lottery ends up poorer five years later than beforehand. You see formerly wealthy pro athletes declaring bankruptcy almost every week.
The lesson? Understand that if you have ever won a big investment bet, you were at least as lucky as you were smart.
Over the long term, there are no shortcuts. Making money on a consistent basis is a grind that is one part "insight" and nine parts "discipline".
2. Your Analysis Is Irrelevant to Your Investment Success
The philosopher Friedrich Nietzsche once observed that, "Any explanation is better than none."
I disagree. Sometimes, in the investment world, no explanation is really necessary -- or relevant.
Today, you suffer from information overload. You can access more information about the financial markets than ever before. Yet, I bet your investment returns have not improved.
Not only do we seem incapable of divining the future, we can't even seem to agree on what happened. Was the credit crunch a result of Greenspan's monetary policy? Bernanke's incompetence? Clinton's "affirmative action" mortgages for low-income borrowers? Or was it just a classic mania? We crave explanations because it gives us an illusion of control.
But it gets even worse. Even the "doom and gloomers " who got their analysis "right" in predicting the credit crunch weren't able to turn their insights into money for their clients. Analysts who promised to "crash-proof" their clients' portfolios ended up losing more money for their clients than if they had stuck with simple index funds.
That's because they weren't that right after all. Gold didn't hit $3,000 an ounce. The U.S. dollar didn't implode. Treasuries didn't collapse. And the U.S. stock market recovered.
The lesson? Successful investors are successful in the long term because they admit their mistakes.
As the world's greatest speculator George Soros said, "My system doesn't work by making valid predictions. It works by allowing me to recognize when I am wrong."
3. Your "Intelligence" is Your Biggest Handicap
Warren Buffett famously observed that it takes no more than average intelligence to become a successful investor.
I'd add something to that perspective. I'd say high intelligence is actually a handicap to successful investing.
Here's why. When you are smart, you are used to being 100% correct. You just can't accept the possibility of being wrong. So you stick to your guns, even when the market is telling you otherwise.
That's why overeducated Wall Street analysts make such lousy money managers and why hedge fund managers who flaunt their intelligence inevitably flounder.
Think about it this way. If high intelligence was the key to successful investing, top business school professors and economists would be the wealthiest guys on the planet. Instead, the Forbes 400 is populated by dropouts from places like Harvard (Bill Gates) and Stanford (the Google guys).
That's also why poker players make the best traders and investors. They play each hand as if it is dealt to them. If they get a bad hand, they fold. They play the investment game the same way.
Perhaps that's also why a former Dean of Harvard College, Henry Rosovsky, observed the following about Harvard students, "Our A students become professors. Our B students go to law school. Our C students rule the world."
Now you also understand why my Harvard law school classmate Barack Obama doesn't release his college and law school transcripts.
How You Can Apply These Three Crazy Rules
So, how can you use these "crazy" rules to improve your investment returns?
First, never bet too big on one idea. You may get lucky once. Maybe even twice. But your luck will eventually run out. And if you bet the farm, you are out of the investment game for good.
Second, don't delude yourself into thinking that you have special insight into the market. Bring that attitude to your investments, and you will have your head handed to you.
And it's not a question of "if" but "when".
Third, learn to think of your investments like a hand in a poker game. Up the ante when you are lucky enough to get a good hand. But also be prepared to fold -- and to fold often.
By following these rules, I have saved me from my own follies more than once.
They will do the same for you.
By Nicholas A. Vardy
Editor, The Global Guru
http://www.nicholasvardy.com
(http://sharemarket-srilanka.blogspot.co.uk/)
Saturday, March 22, 2014
Customer satisfaction or delight
How crucial it is to ‘delight a customer’. Raising customer satisfaction
is such an obvious point. Management tends to forget the importance of
delighting a customer. Customer satisfaction is talked about in creative
copy writing. What is neglected is the need to constantly and seriously
think whether customers are really being delighted and to continually
put efforts into raising customer satisfaction.
When price wars are ignited by companies, management by its very nature assumes that it is for the good of their company and customers. Sometimes it happens that when a company strives to bring its prices down than those of its competitors, usually the quality of service deteriorates and the customer satisfaction goes down. The end result will be a cheap and nasty business. This happens, when the company forgets to make the effort to think seriously about delighting customers.
Essence of business
The true essence of business lies in the ability to satisfy opposing interests. Obviously the seller wants to sell their products at a price as high as possible. The buyer wants to buy products at a price as low as possible. There is always a conflict of interests. They are as far apart as the two opposing banks of a river. Delighting the customer creates a bridge between the two sides.
If customers are delighted with service, customers will pay a price to commensurate with their satisfaction. Delighting and satisfying are what make the customer’s and the service provider’s benefits go in the same direction. A delighted and satisfied customer will always be loyal to the brand as well as the service provider.
No company wants the service culture to decline while other organisations are improving. If your company is only focused on making profits and launching new products, lack of attention to building or sustaining the service culture can be costly. If this decline in not arrested, customers will leave and your best employees will join competitors in frustration. This slide can be stopped by becoming a better place to work as a service provider and a better place to be served as a customer. Study the architecture and implementation of roadmaps for building service culture. All over the world, companies are following these guidelines to become distinguished by uplifting service. Best customer services are provided in Japan and the US.
Building a service culture takes time, energy and commitment but this will pay off. Companies with strong service cultures are consistently more profitable and productive. They keep more loyal customers and retain more passionate employees.
Customers react to your poor service disappointment with others, especially with fiends, relations, colleagues and competitors. Very few will complain to the management. These complaints damage your reputation, resulting in loss of sales and profitability.
Customer expectations keep rising as competition increases and the service keeps improving. Trainers will give scripts to use and tell staff what standards to achieve. All this customer service training doesn’t make a lasting difference. Solving this requires a different approach. First, stop telling staff what to say and do. Instead, educate staff to understand service situations and design more effective service actions. Service can be defined as taking action to create value for someone else. The anchor of this definition is not the action taken, or the value created. Service and customer expectations go hand in hand. What do the service providers and customers want to accomplish or achieve? What do they want to avoid? What are their top priorities? What are their real concerns?
Build leadership alignments
Schools teach math, science, language, etc. but never the fundamental principles for creating value through service to others. All of us will spend our lives giving service and obtaining service. Management schools need to provide actionable service education to students and equip them with tools and skills that are needed to provide better service, earn more compliments and quickly resolve expectations.
If the management does not agree on the priority of improving service, the intended focus on service gets fractured and lost in a deluge of comments on pricing, competition, recent problems and defective products. Staff will be confused about how service really matters and they cannot be blamed. This lack of leadership alignment weakens an organisation as your top team argues over projects and budgets, the primacy of service improvement fades away and the likelihood of differentiating on service or building a superior service culture is neglected.
Companies have to build strong alignment among the members of the leadership team and alignment at the top is essential to build momentum within the entire company. Best options would be to study global best practices and successful case studies. With these insights leadership alignments can be built and all have to agree on a common service vision and secure commitment for implementation.
Poor internal service harms external service to customers. If staff is stuck in rigid boxes with poor communication and little cooperation across departments or the reporting structure produces more uncertainty and confusion than urgently needed collaboration or internal departments are more concerned about looking good than they are about looking after the customer expectations.
When things go wrong, staff are faster at pointing fingers than they are at pointing out what can be done. Unwilling attitude towards internal service consumes time, costs money and damages employee morale and worse, it prevents staff from giving external customers the quality of service they deserve. Some organisations suffer with this condition but some thrive by making excellent internal service to colleagues a focus of their culture and benchmark their service to customers. To build a culture of excellent service between functions, divisions and departments, the management must provide teams with consistent support.
Improve activities that influence your staff service culture every day. Have a service vision, common service language and communication method, benchmark service, staff service measures, service improvement process, rewards and recognitions, orientation and service role modelling, train service staff on service
recovery/guarantees and to listen to voice of customers.
Deadly service sin
Budget is management responsibility. Service staff will have blue sky ideas, great ideas but despite this high volume of new ideas, there is painfully little new action at the end, all the happy talk about excellent service seems to be just talk. A pile of ideas can be transformed into a mountain of results with a process that moves ideas into action.
How could this be done? Select a team of change leaders who get certified to conduct service improvement workshops. Then deploy this powerful resource to teach service principles to all internal and external service providers. Next, apply the tools and frameworks. Learn to review service problems and generate new ideas. Choose ideas that offer quick wins and others that hold the possibility for big and positive changes. Now put these ideas into action. As results are achieved, trumpet the service solutions and praise the people involved. Repeat this cycle until everyone appreciates how service issues lead to new ideas, new ideas lead to new actions and new action produces results.
As time goes on customer complaints may increase and internal problems may keep building up and they wear your people down. Enthusiasm dims like a slowly dying ember. Fortunately, you can fan a glowing ember back to life. Reignite the interest and motivation of your team with contests, workshops, keynote presentations, customer visits, panel discussions, cross-functional teams and more. Be proactive. Make sure everyone is engaged weekly, monthly and quarterly in creative programmes that keep the flame for service burning brightly.
Sustaining focus and enthusiasm for service is an essential leadership skill. Not sustaining focus and enthusiasm is a deadly service sin. Second rate service culture can be found in many business, government and community organisations. When you see these signs at work, take action to turn the tide. You can lift your culture out of the darkness and into the ‘light of delight’.
www.dailymirror.lk
When price wars are ignited by companies, management by its very nature assumes that it is for the good of their company and customers. Sometimes it happens that when a company strives to bring its prices down than those of its competitors, usually the quality of service deteriorates and the customer satisfaction goes down. The end result will be a cheap and nasty business. This happens, when the company forgets to make the effort to think seriously about delighting customers.
Essence of business
The true essence of business lies in the ability to satisfy opposing interests. Obviously the seller wants to sell their products at a price as high as possible. The buyer wants to buy products at a price as low as possible. There is always a conflict of interests. They are as far apart as the two opposing banks of a river. Delighting the customer creates a bridge between the two sides.
If customers are delighted with service, customers will pay a price to commensurate with their satisfaction. Delighting and satisfying are what make the customer’s and the service provider’s benefits go in the same direction. A delighted and satisfied customer will always be loyal to the brand as well as the service provider.
No company wants the service culture to decline while other organisations are improving. If your company is only focused on making profits and launching new products, lack of attention to building or sustaining the service culture can be costly. If this decline in not arrested, customers will leave and your best employees will join competitors in frustration. This slide can be stopped by becoming a better place to work as a service provider and a better place to be served as a customer. Study the architecture and implementation of roadmaps for building service culture. All over the world, companies are following these guidelines to become distinguished by uplifting service. Best customer services are provided in Japan and the US.
Building a service culture takes time, energy and commitment but this will pay off. Companies with strong service cultures are consistently more profitable and productive. They keep more loyal customers and retain more passionate employees.
Customers react to your poor service disappointment with others, especially with fiends, relations, colleagues and competitors. Very few will complain to the management. These complaints damage your reputation, resulting in loss of sales and profitability.
Customer expectations keep rising as competition increases and the service keeps improving. Trainers will give scripts to use and tell staff what standards to achieve. All this customer service training doesn’t make a lasting difference. Solving this requires a different approach. First, stop telling staff what to say and do. Instead, educate staff to understand service situations and design more effective service actions. Service can be defined as taking action to create value for someone else. The anchor of this definition is not the action taken, or the value created. Service and customer expectations go hand in hand. What do the service providers and customers want to accomplish or achieve? What do they want to avoid? What are their top priorities? What are their real concerns?
Build leadership alignments
Schools teach math, science, language, etc. but never the fundamental principles for creating value through service to others. All of us will spend our lives giving service and obtaining service. Management schools need to provide actionable service education to students and equip them with tools and skills that are needed to provide better service, earn more compliments and quickly resolve expectations.
If the management does not agree on the priority of improving service, the intended focus on service gets fractured and lost in a deluge of comments on pricing, competition, recent problems and defective products. Staff will be confused about how service really matters and they cannot be blamed. This lack of leadership alignment weakens an organisation as your top team argues over projects and budgets, the primacy of service improvement fades away and the likelihood of differentiating on service or building a superior service culture is neglected.
Companies have to build strong alignment among the members of the leadership team and alignment at the top is essential to build momentum within the entire company. Best options would be to study global best practices and successful case studies. With these insights leadership alignments can be built and all have to agree on a common service vision and secure commitment for implementation.
Poor internal service harms external service to customers. If staff is stuck in rigid boxes with poor communication and little cooperation across departments or the reporting structure produces more uncertainty and confusion than urgently needed collaboration or internal departments are more concerned about looking good than they are about looking after the customer expectations.
When things go wrong, staff are faster at pointing fingers than they are at pointing out what can be done. Unwilling attitude towards internal service consumes time, costs money and damages employee morale and worse, it prevents staff from giving external customers the quality of service they deserve. Some organisations suffer with this condition but some thrive by making excellent internal service to colleagues a focus of their culture and benchmark their service to customers. To build a culture of excellent service between functions, divisions and departments, the management must provide teams with consistent support.
Improve activities that influence your staff service culture every day. Have a service vision, common service language and communication method, benchmark service, staff service measures, service improvement process, rewards and recognitions, orientation and service role modelling, train service staff on service
recovery/guarantees and to listen to voice of customers.
Deadly service sin
Budget is management responsibility. Service staff will have blue sky ideas, great ideas but despite this high volume of new ideas, there is painfully little new action at the end, all the happy talk about excellent service seems to be just talk. A pile of ideas can be transformed into a mountain of results with a process that moves ideas into action.
How could this be done? Select a team of change leaders who get certified to conduct service improvement workshops. Then deploy this powerful resource to teach service principles to all internal and external service providers. Next, apply the tools and frameworks. Learn to review service problems and generate new ideas. Choose ideas that offer quick wins and others that hold the possibility for big and positive changes. Now put these ideas into action. As results are achieved, trumpet the service solutions and praise the people involved. Repeat this cycle until everyone appreciates how service issues lead to new ideas, new ideas lead to new actions and new action produces results.
As time goes on customer complaints may increase and internal problems may keep building up and they wear your people down. Enthusiasm dims like a slowly dying ember. Fortunately, you can fan a glowing ember back to life. Reignite the interest and motivation of your team with contests, workshops, keynote presentations, customer visits, panel discussions, cross-functional teams and more. Be proactive. Make sure everyone is engaged weekly, monthly and quarterly in creative programmes that keep the flame for service burning brightly.
Sustaining focus and enthusiasm for service is an essential leadership skill. Not sustaining focus and enthusiasm is a deadly service sin. Second rate service culture can be found in many business, government and community organisations. When you see these signs at work, take action to turn the tide. You can lift your culture out of the darkness and into the ‘light of delight’.
www.dailymirror.lk
Doug Casey’s 9 Secrets for Successful Speculation
As you read the list below, think about how you can learn more about each secret and adapt it to your own most effective use.
Secret #1: Contrarianism takes courage.
Everyone knows the
essential investment formula: “Buy low, sell high,” but it is so much
easier said than done, it might as well be a secret formula.
The way to really
make it work is to invest in an asset or commodity that people want and
need but that for reasons of market cyclicality or other temporary
factors, no one else is buying. When the vast majority thinks something
necessary is a bad investment, you want to be a buyer—that’s what it
means to be a contrarian.
Obviously, if this
were easy, everyone would do it, and there would be no such thing as a
contrarian opportunity. But it is very hard for most people to think
independently enough to risk hard-won cash in ways others think is
mistaken or too dangerous. Hence, fortune favors the bold.
Secret #2: Success takes discipline.
It’s not just a
matter of courage, of course; you can bravely follow a path right off a
cliff if you’re not careful. So you have to have a game plan for risk
mitigation. You have to expect market volatility and turn it to your
advantage. And you’ll need an exit strategy.
The ways a
successful speculator needs discipline are endless, but the most
critical of all is to employ smart buying and selling tactics, so you
don’t get goaded into paying too much or spooked into selling for too
little.
Secret #3: Analysis over emotion.
This may seem like
an obvious corollary to the above, but it’s a point well worth stressing
on its own. To be a successful speculator does not require being an
emotionless robot, but it does require abiding by reason at times when
either fear or euphoria tempt us to veer from our game plans.
When a substantial
investment in a speculative pick tanks—for no company-specific
reason—the sense of gut-wrenching fear is very real. Panic often causes
investors to sell at the very time they should be backing up the truck
for more.
Similarly, when a
stock is on a tear and friends are congratulating you on what a genius
you are, the temptation to remain fully exposed—or even take on more
risk in a play that is no longer undervalued—can be irresistible. But to
ignore the numbers because of how you feel is extremely risky and leads
to realizing unnecessary losses and letting terrific gains slip through
your fingers.
Secret #4: Trust your gut.
Trusting a gut
feeling sounds contradictory to the above, but it’s really not. The
point is not to put feelings over logic, but to listen to what your
feelings tell you—particularly about company people you meet and their
words in press releases.
“People” is the first of Doug Casey’s famous Eight Ps of Resource Stock Evaluation,
and if a CEO comes across like a used-car salesman, that is telling you
something. If a press release omits critical numbers or seems to be
gilding the lily, that, too, tells you something.
The more experience
you accumulate in whatever sector you focus on, the more acute your
intuitive “radar” becomes: listen to it. There’s nothing more
frustrating than to take a chance on a story that looked good on paper
but that your gut was warning you about, and then the investment
disappoints. Kicking yourself is bad for your knees.
Secret #5: Assume Bulshytt.
As a speculator,
investor, or really anyone who buys anything, you have to assume that
everyone in business has an angle. Their interests may coincide with
your own, but you can’t assume that.
It’s vital to keep
in mind whom you are speaking with and what their interest might be.
This applies to even the most honest people in mining, which is such a
difficult business, no mine would ever get built if company CEOs put out
a press release every time they ran into a problem.
A mine, from
exploration to production to reclamation, is a non stop flow of problems
that need solving. But your brokers want to make commissions, your
conference organizers want excitement, your bullion dealers want volume,
etc. And, yes, your newsletter writers want to eat as well; ask
yourself who pays them and whether their interests are aligned with
yours or the companies they cover.
(Bulshytt is not a typo, but a reference to Neal Stephenson's brilliant novel, Anathem, which defines the term, briefly, as words, phrases, or even entire books or speeches that are misleading or empty of meaning.)
Secret #6: The trend is your friend.
No one can predict
the future, but anyone who applies him- or herself diligently enough can
identify trends in the world that will have predictable consequences
and outcomes.
If you identify a
trend that is real—or that at least has an overwhelming amount of
evidence in its favor—it can serve as both compass and chart, keeping
you on course regardless of market chaos, irrational investors, and the
ever-present flood of bulshytt.
Knowing that you
are betting on a trend that makes great sense and is backed by hard data
also helps maintain your courage. Remember; prices may fluctuate, but
price and value are not the same thing. If you are right about the
trend, it will be your friend. Also, remember that it’s easier to be
right about the direction of a trend than its timing.
Secret #7: Only speculate with money you can afford to lose.
This is a logical
corollary to the above. If you bet the farm or gamble away your
children’s college tuition on risky speculations—and only relatively
risky investments have the potential to generate the extraordinary
returns that justify speculating in the first place—it will be almost
impossible to maintain your cool and discipline when you need it.
As Doug likes to
say; it’s better to risk 10% of your capital shooting for 100% gains
than to risk 100% of your capital shooting for 10% gains.
Secret #8: Stack the odds in your favour.
Given the risks
inherent in speculating for extraordinary gains, you have to stack the
odds in your favor. If you can’t, don’t play.
There are several
ways to do this, including betting on People with proven track records,
buying when market corrections put companies on sale way below any
objective valuation, and participating in private placements. The most
critical may be to either conduct the due diligence most investors are
too busy to be bothered with, or find someone you can trust to do it for
you.
Secret #9: You can’t kiss all the girls.
This is one of Doug’s favourite sayings, and though seemingly obvious, it’s one of the main pitfalls for unwary speculators.
When you encounter a
fantastic story or a stock going vertical and it feels like it’s
getting away from you, it can be very, very difficult to do all the
things I mention above. I can tell you from firsthand experience, it’s
agonizing to identify a good bet, arrive too late, and see the ship sail
off to great fortune—without you.
But if you let that
push you into paying too much for your speculative picks, you can wipe
out your own gains, even if you’re betting on the right trends.
You can’t kiss all
the girls, and it only leads to trouble if you try. Fortunately, the
universe of possible speculations is so vast, it simply doesn't matter
if someone else beats you to any particular one; there will always be
another to ask for the next dance. Bide your time, and make your move
only when all of the above is on your side.
Extracted article from http://www.caseyresearch.com/articles/doug-caseys-9-secrets-for-successful-speculation-1
Extracted article from http://www.caseyresearch.com/articles/doug-caseys-9-secrets-for-successful-speculation-1
(http://sharemarket-srilanka.blogspot.co.uk/)
Thursday, March 20, 2014
Evolution or Revolution? Managing brand transition
As your business and the market changes, so should your brand. But should the design strategy be subtle or significant, evolutionary or revolutionary?
By Michel Nugawela
It’s
not uncommon to find major homegrown brands in Sri Lanka either
undernourished or underexploited but after a period of neglect, they
need to be reexamined and refreshed from the ground up.
When brands need to change – and evolving styles, trends, technologies,
business models and new product offers eventually push all brands to
change –design plays a key role if and when it is linked to a strategy that
consolidates or increases share in existing markets, or advances the
brand into new segments and categories. But when, how and to what extent
are we talking about?
In any transition from as-is to should-be, there are two degrees of
change for marketers to consider. In the first approach – what we refer
to as an evolutionary strategy – brands keep pace with shifts in the
market, but do so within a context that consumers clearly recognize.
However, when a revolutionary strategy is required, every aspect of the
brand is up for scrutiny and possible positional change.
When done right, giving new vitality to a brand – be it evolutionary or
revolutionary – can successfully differentiate it, modernize it, signal a
new direction to the market, or shift consumer perception in a positive
way.
Evolutionary strategy
Evolutionary design, as the word implies, is made up of smaller
incremental changes that do not fundamentally alter the character of a
brand. These changes can range from functional to cosmetic, subtle to
significant, but the overall message is one of continuity. In insets 1
and 2, I have shown two before-and-after examples of evolutionary
design: while the degree of change varies (Mabroc’s shift is subtle
while Aitken Spence’s is significant) there was no repositioning of
either brand, based on a shift in business direction or a new product or
service offering.
Over the years, Aitken Spence had seen its identity splinter, as
disparate logos and names were used by different business sectors and
individual companies – a frequent outgrowth of organically evolving
businesses. The new Aitken Spence logo and master brand strategy is
highly efficient: it maximizes awareness by focusing on a single brand
image, enabling growth today and building elasticity that can drive
expansion tomorrow.
Businesses that compete in different geographical markets also make
widespread use of evolutionary design – the newly refreshed Mabroc logo
bears a striking resemblance to its predecessor by retaining the shapes,
symbols and colours that have driven consumer familiarity and
recognition in the CIS and East European markets. Take that away and
customers and consumers (who were also not conversant in English) would
have had a hard time recognizing the brand and sales could have been
impacted – perhaps drastically.
An evolutionary design response is also important to consider when
consumers don’t make weighty decisions on low-involvement routine buys
(soft drinks, biscuits, and tea, for example) and settle into habitual
purchases. When consumers select a brand because it is familiar – what
we more commonly refer to as a “comfort zone” – they are reassured that
the product will deliver the same taste, flavour and experience that
they have come to habitually rely upon. Here, radical repositionings (or
revolutionary design responses with the brand suddenly appearing in a
new and unrecognizable form) disrupt their habitual buying behaviour and
reactivate the consumers’ purchase decision mechanism – a dangerous
situation that can lead to reassessment and exploration of alternative
competitor offers. In inset 3, I have demonstrated another example of an
evolutionary design response – in this case, Elephant House’s carefully
managed transition to its new contoured bottle – which successfully
addressed consumer familiarity while concurrently evolving the brand to a
more contemporary position. At focus group discussions, the migration
achieved a 100 percent approval rating with consumers perceiving and
personifying the old-to-new shift in evolutionary language that in
itself is highly revealing – from “grandfather to grandson” and “mother
to daughter”.
Revolutionary strategy
Revolutionary design requires more time and cost investment, and is
usually the approach when companies are trying to reach new audiences or
signal a change in their brand or business strategy. Revolutionary
design overthrows the old order and introduces new ways of perceiving
and engaging with brands – either through extensions aimed at radically
new segments that advance the brand into new high-growth categories and
markets, or through mergers, acquisitions, spin-offs or reorganizations.
In such cases, it becomes necessary to shift and build new customer and
consumer perceptions about brands – through new products, services,
capabilities, and long-term growth prospects.
When Hayleys wanted to signal its new position to the market following
the acquisition of Mabroc Teas and a reorganization to its portfolio
(which included Kelani Valley Plantations and Talawakelle Tea Estates),
global market research revealed the rapid growth of fruit & herbal
and health & wellness teas in value sales, pointing the way to a
master brand logo that broadened market perceptions of the Mabroc brand
and its offering through the combined capabilities of its sister
companies.
A second example, shown in inset 4, is the decision by Carson
Cumberbatch’s oil palm business – Goodhope PLC – to diversify beyond its
traditional focus on plantations to encompass the total product
lifecycle from growing to refining, merchandising, and distributing palm
oil. This once again required a revolutionary design approach through a
positioning strategy that defined the value proposition of the business
as it integrated vertically, as well as a new logo and global brand
architecture strategy to communicate the link between the parent company
and its new acquired businesses moving forward.
As I mentioned earlier, revolutionary design also becomes necessary as a
company matures and needs to penetrate and appeal to new (and usually
younger) consumer segments. Here, Elephant House’s corporate rebranding
strategically repositioned the brand to support its investments in, and
adaptations to, a product mix that was better geared to meet more
current demands – especially in the higher-margin impulse segment
targeted at younger consumers. Managing any brand revitalization means
staying true to existing consumers (after all, intentionally alienating
your core market isn’t exactly a shrewd business strategy) while also
marketing to the more youthful demographic that fuels the future growth
of the brand. Shown in inset 5, Elephant House’s master brand strategy
strongly brought back the Elephant House name into the identity while
relegating the old (but much revered) elephant icon to the role of the
Ceylon Cold Stores parent endorser.
Finally, a revolutionary approach is also most typically associated with
a catastrophic event or customer crisis for a brand – such as Golden
Key – at which point even changing the name may be on the cards. Brands
that fall into this category are unwise to stay the course with their
tarnished names and identities: they will always run at sub-optimal
performance with more customers staying away (out of sheer fear) than
patronizing their services.
Which way to go, what degree of change?
When a brand is properly revitalized – through consumer and market
research, as well as a strategy and positioning that builds a compelling
point of difference which in turn justifies a price premium – an
updated and strategically relevant logo or identity becomes a rallying
point to customers and consumers. With an evolutionary approach, it can
signal a fresher way of perceiving an existing brand or entirely new
offering as the business evolves organically to own new ground, or,
through a revolutionary approach, herald radical shifts based on
newly-acquired capabilities and market dynamics.
(The writer is one of Sri
Lanka’s leading brand consultants and can be contacted at:
www.michelnugawela.com /lk.linkedin.com/in/ michelnugawela)
www.dailymirror.lk
Sri Lanka shares close flat
Sri Lanka's shares close slightly higher amid thin price increases in the index heavy stocks, brokers said.
The Colombo benchmark All Share Price Index closed 2.51 points higher at 5,914.56 up 0.04 percent. The S&P SL20 closed 6.69 points higher at 3,231.91, up 0.21 percent.
Turnover was 263.33 million rupees, down from 640.97 million rupees a day earlier with 93 stocks close positive against 97 negative.
Commercial Bank closed 1.20 rupees higher at 117.70 rupees with market transactions of 50.60 million rupees contributing to 19 percent of the daily turnover.
Foreign investors bought 105.47 million rupees worth shares while selling 53.33 million rupees of shares.
Union Bank closed 90 cents higher at 18.30 rupees and Blue Diamonds closed 30 cents higher at 3.50 rupees, attracting most number of trades during the day.
Indo Malay closed 150.00 rupees higher at 1,650.00 rupees and C T Holdings closed 5.40 rupees higher at 140.00 rupees.
Hatton National Bank closed 1.70 rupees lower at 156.20 rupees.
Bukit Darah closed 8.90 rupees higher at 560.00 rupees and Lion Brewery closed 9.00 rupees lower at 385.00 rupees.
Ceylon Cold Stores closed 5.70 rupees lower at 141.00 rupees and Nestle Lanka closed 2.90 rupees higher at 1,953.10 rupees.
Ceylon Tobacco Company closed 10 cents lower at 1,099.90 rupees and John Keells Holdings closed 10 cents higher at 218.10 rupees.
JKH’s W0022 warrants closed 1.10 rupees lower at 62.70 rupees and its W0023 warrants closed flat at 67.10 rupees.
www.lbo.lk
The Colombo benchmark All Share Price Index closed 2.51 points higher at 5,914.56 up 0.04 percent. The S&P SL20 closed 6.69 points higher at 3,231.91, up 0.21 percent.
Turnover was 263.33 million rupees, down from 640.97 million rupees a day earlier with 93 stocks close positive against 97 negative.
Commercial Bank closed 1.20 rupees higher at 117.70 rupees with market transactions of 50.60 million rupees contributing to 19 percent of the daily turnover.
Foreign investors bought 105.47 million rupees worth shares while selling 53.33 million rupees of shares.
Union Bank closed 90 cents higher at 18.30 rupees and Blue Diamonds closed 30 cents higher at 3.50 rupees, attracting most number of trades during the day.
Indo Malay closed 150.00 rupees higher at 1,650.00 rupees and C T Holdings closed 5.40 rupees higher at 140.00 rupees.
Hatton National Bank closed 1.70 rupees lower at 156.20 rupees.
Bukit Darah closed 8.90 rupees higher at 560.00 rupees and Lion Brewery closed 9.00 rupees lower at 385.00 rupees.
Ceylon Cold Stores closed 5.70 rupees lower at 141.00 rupees and Nestle Lanka closed 2.90 rupees higher at 1,953.10 rupees.
Ceylon Tobacco Company closed 10 cents lower at 1,099.90 rupees and John Keells Holdings closed 10 cents higher at 218.10 rupees.
JKH’s W0022 warrants closed 1.10 rupees lower at 62.70 rupees and its W0023 warrants closed flat at 67.10 rupees.
www.lbo.lk
Tuesday, March 18, 2014
Will Warren Buffett's investment advice work for you?
In his most recent Berkshire Hathaway shareholder letter, the ever-folksy Warren Buffett sounds more like a personal finance guru than a financial mastermind, focusing on buy-and-hold investing and advocating indexing strategies.
Buffett's net worth is about $60 billion, according to Forbes magazine, so he is obviously doing something right. But how sound is his advice for the rest of us? (here)
I spoke to some financial advisers and pundits, some of whom are the kind of folks Buffett thinks you should ignore, to get their take.
What immediately caught my eye is Buffett's instruction that his wife back up the truck and invest in the Standard & Poor's 500 stock-index upon his death.
That's not a huge surprise, though. Buffett is a longtime fan of Jack Bogle, founder of the Vanguard Group, who champions passive, low-cost investing. But this is the first time Buffett is "putting his money where his mouth is in his own estate," Bogle said in a email exchange with Reuters.
Specifically, Buffett wants the trustee of his estate to put 10 percent of his wife's cash inheritance in short-term government bonds and 90 percent in a low-cost S&P index fund - and he tips his hat specifically to Bogle's Vanguard in doing so. Says Buffett: "I believe the trust's long-term results from this policy will be superior to those attained by most investors - whether pension funds, institutions or individuals."
Face value, that's a solid recommendation, although it might seem a bit odd, considering that Berkshire Hathaway has underperformed the S&P 500 in the past five years, and is trailing it slightly in 2014. But that's not surprising because Buffett tends to lag a bit in bull markets, says Robert Hagstrom, author of The Warren Buffett Way.
"I had this image of the American flag waving in the background as I read the letter," said Hagstrom. "He's so bullish about the U.S., not necessarily about stocks, but about the country in general."
When it comes to equities, Buffett's recommendation to buy the S&P 500 is solid, experts say. "The S&P 500 is probably the best index out there - it's clearly a core holding," says Lou Kokernak, a financial adviser at Haven Financial Advisers in Austin, Texas.
However, other advisers say Buffett is endorsing an asset allocation strategy that's not optimal for most investors. That's because the S&P 500 is focused on U.S. companies, even if quite a few have a multinational tilt. "We refer to that as a home bias, and it's very dangerous," says Randy Kurtz, chief investment officer at RK Investment Advisors in Kinnelon, New Jersey.
That is exactly why Paul Jacobs of Palisades Hudson Financial Group in Atlanta suggests putting as much as 40 percent of Buffett's suggested equity stake in foreign stocks.
Another criticism? Most investors cannot tolerate the risk of a 90/10 portfolio. "They would be scared out at the bottom when their $1,000,000 would have turned into $500,000 in 2009," says Matthew Chope, a financial adviser at Raymond James in Southfield, Michigan. "It's as easy as that. We are paid to manage risk, not just return."
INVESTING VS. SPECULATION
Which brings us to another big Buffett takeaway: invest, rather than speculate. In his 24-page letter, Buffett uses the examples of an office building in New York City and a farm he has visited only twice as investments he has held for the long haul, through the ups and downs of the market.
A farm and office building might strike some people as odd investments. Yet they are "classic Buffett" because they get to the heart of what is plaguing investors, who spend more time worrying about the price of an asset rather than its intrinsic value, Hagstrom says. "Investment is focusing on the asset and what that asset will earn, while speculation focuses on the price and predicting what the changes in price will be," says Hagstrom.
Writes Buffett: "With my two small investments, I thought only of what the properties would produce and cared not at all about their daily valuations. Games are won by players who focus on the playing field - not by those whose eyes are glued to the scoreboard."
That is the key takeaway from Buffett's latest tome to shareholders, says Josh Brown, chief executive officer of Ritholtz Wealth Management in New York Cityand a frequent pundit. "He invests like an owner and keeps himself aware of his own weaknesses," Brown says. "He buys companies that he prefers to own no matter what happens with the macroeconomic picture."
Can investors tune out the incremental ups and downs of the market? That is a tall order.
But I do love this little nugget from Buffett: "If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays." I just might try that one.
http://www.reuters.com
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