Archive for Wall Street

NASDAQ Shut Down Caused By Computer Error, Jimmies Remain Rustled

Don’t cry my child, the jimmies will soon be back in order

Yesterday the global financial market had a horrifying scare when the NASDAQ was inaccessible and offline for three hours Thursday.  The shutdown didn’t happen because people were worried about a terrorist attack, nor was it shut down because of some sort of national emergency.  A “minor” computer error put the entire system on lockdown, and now people across the industry are worried about the security of one of the most crucial financial systems on the planet.

A three hour shut down may not seem like that big of a deal to you, but you need to keep in mind that the NASDAQ is the second biggest American market operator and is the trading home for 3,200 companies across 37 nations.  The mistake was so serious that President Barack Obama was notified of the shutdown shortly after it occurred, and now SEC chairman Mary Joe White wants to meet with exchange leaders in Washington to discuss vulnerabilities in the system.  Their alarm may seem suspicious, but they have a good reason to scramble the finance troops.  If a minor computer error was able to shut down the NASDAQ for a few hours, imagine what skilled hackers could do.

The IT specialists at the stock exchange are probably in for some trouble, but most people have their pitchforks and torches aimed at the NASDAQ’s chief executive Robert Greifeld.  Some people still haven’t forgiven Greifeld over last year’s Facebook IPO disaster, and this news has only added more fuel to the “Greifeld sucks” fire.  People are upset that Greifeld wasn’t reachable when people first noticed the trouble on the trading floor.  To be fair, Greifeld wasn’t available since he was at a wake in New Jersey, but for some death isn’t an excuse for not doing your job.  Greifeld attempted to do damage control on CNBC and Bloomberg TV this morning, but people still feel like they didn’t get a reasonable explanation for the catastrophic shut down.

It’s very likely that there will be more news about IT security issues in the stock market, and even more likely that Greifeld will do something to embarrass himself even more.  All you can do now is sit back, relax, and watch the financial sector have a good old fashioned freak out.

Share

Will iPhone 5′s ‘Lightning’ Connector Bet Pay Off?

Is the iPhone 5′s new Lightning Connector a bigger problem than analysts seem to think?

From the day iPods debuted, you couldn’t miss the white wires. While all previous cables and headphones were black, Apple added a brilliant piece of branding to the world of mobile media: they changed cable colors. Today, you can always spot an Apple user. From the headphones in their ears to the charger cables dangling from wall outlets and USB sockets across the world, Apple white-washed them all. Today, the iPhone—Apple’s biggest selling product and smartphone originator—can be plugged in just about anywhere. Friends, colleagues, the guy sitting next to you in the library and even your local bartender can be counted on to help you out with a charge. But this ubiquitous charger utopia is about to come to an end.

With the unveiling of the iPhone 5 on Wednesday, Apple announced a whole slate of new changes including a larger screen, a faster processer and an 8 MP camera. But the blogosphere and tech journalists everywhere only saw one thing: the addition of the ‘Lightning’ connector. This miniaturized version of the omnipresent 30-pin connector offers a reversible design and a smaller, lighter cable that offers a faster charge and quicker transfers. It also requires all iPhone 5 buyers purchase a $29 adapter if they want to use the traditional 30-pin connection, still present on devices like docking stations, USB cables and other pervasive items.

Apple only compounded the ire of customers by releasing an order page in the U.K. proclaiming that the adapter came free with every purchase. This offer was later rescinded.

It is easy to see how this makes sense for Apple. The Lightning connector is smaller and requires fewer raw materials to make. If all those ubiquitous cables, cords and devices have to be replaced, one can hear the ka-ching noise a mile away. But with $40 headphones and $30 USB cables already a retail reality in the nation’s Apple stores, consumers are weary of these cash grabs. One wonders how much more customers can be expected to take.

But a look at Wall Street projections show no indication that analysts see this problem coming. Despite the fact that the launch of the iPhone 4S was the company’s first unsuccessful product launch, losing 10 percent on its stock price, analysts predict massive increases in the company’s current $664 per-share price. Analysts covering Apple with big names like Deutsche Bank, Barclay’s and Goldman Sachs all raised their stock price projections from the initial 10-15 percent estimate to over 25 percent after the iPhone’s newest features were unveiled.

Bloggers, tech journalists and business owners are not so sure. According to the Wall Street Journal, a Dallas hotel owner stated he bought 600 clock radios, all with the old connector. If iPhone has its way, every new phone user will be trying to balance their iPhone on top of a cradle dock and praying for the best. This scene is not consistant with iPhone’s interest in design and seamless plug-and-play integration. One thing is for sure: forcing customers to buy entirely new peripherals is a bet we can’t believe is going to pay off in Apple’s favor.

Share

IBM to Purchase Kenexa for $1.3 Billion

IBM surprised both stock holders and market analysts by announcing their plans to buy Kenexa Corp, one of the leading social networking information analysts, for 1.3 billion dollars.  IBM plans to pay $46 a share for the company, almost a 42% premium over the stock’s Friday closing price.  The deal is expected to be completed by the end of fourth quarter, but the wait time has done nothing to kill the buzz surround the deal.  Many were surprised that IMB was willing to pay over a billion dollars for a relatively unknown company, but if you look at the work Kenexa has done in the past and truly think about the import role social media plays for businesses the deal makes perfect sense.

IBM has been promoting its business-analytics software for years now.  IBM’s program is designed to help companies sort through large amounts of data in order to study trends and make big decisions.  The company has spent a pretty penny improving their analytics software, over the past five years the company has spent $16 billion on analytics acquisitions alone.  The move makes sense business wise, the demand for hardware and hardware related services has fallen considerable over the past decade.  Now the money seems to be in data analysis, and companies are eager for new and improved ways to properly analyze their data.

Kenexa originally started in the recruitment services field, but since its beginnings in 1987 the company has switched their focus into social networking services in order to improve their data analytics services.  Their business shift has worked dramatically; the company helps big name corporations like Starbucks and General Electric sort through data and find new employees each year.  It looks like the buyout will have some very positive outcomes for IBM, even though stocks initially fell when the deal was announced.

 

Share

Diversification: Construction

In difficult economic times people think about investing in companies that provide human necessities.    Concrete, steel, and cement are used in almost every modern building and structure.  Even if there’s another recession, there will always be a demand for strong building materials.  There are an array of companies you could invest in, but we’re just focusing on two for this post.

Fluor Corporation

The Fluor Corporation specializes in engineering, procurement, project management, and construction.  They already have a few profitable projects in the works.  Fluor is in charge of the modernization of the BP refinery In Whiting, IN.  They’re also a part of California’s biggest construction project, the Eastern span replacement of San Francisco’s Oakland Bay Bridge.

Ambuja Cements Limited

Sometimes when you look for construction companies to invest in, it’s best to look overseas.  Countries in Africa, Asia, and South America are experiencing a construction boom.  They need more hospitals, homes, and buildings built quickly in order to keep up with their growing population.  Ambuja is one of the largest cement manufacturers in India, and they have a considerable presence in both foreign and domestic markets.  It’s estimated that the company is worth $1.38 billion in American dollars. Ambuja sees a lot of money come in during the rainy season due to the demand for repairs, but even after this past usually dry rainy season the company is still going on strong.  June’s quarter earnings show that Ambuja’s profit rose to 34.9% (after taxes), and the company just reported that they saw a 2% production increase for the month of July.

Share

What Is Going On With Best Buy?

Investors, businessmen, and average electronics consumers have watched in horror and confusion as Best Buy has taken a sharp decline in over the past few years.  Don’t be confused by the terrible recent news, despite all of its troubles Best Buy is still the largest specialty consumer-electronics store in the world.  The company’s size hasn’t been much help in the past few years.  The company has lost a considerable amount of business to tech companies that sell their own merchandise like Apple and online merchants like Amazon.com.  As a result Best But has lost billions of dollars, laid off hundreds of employees, and closed many of their retail stores.

All of those factors helped contribute to the general shock from people on August 6th when Richard Schulze, Best Buy’s founder former chairman, made a bold offer to Best Buy and make it a private company.  Here are the basics of the deal:

-Schulze offered to acquire all of the common stock of the company for $24 – 26 per share in cash (shockingly 36 – 47% premium to Friday’s closing price)

-Schulze stepped down as CEO in 2002, but in 2011 was named along with three other Best Buy board members in a shareholder suit because of alleged illegal insider trading.

-Even though Schulze is no longer the chairman of the company, he still is the company’s single largest shareholder (he owns 20% of the company).

-Schulze is offering $8 billion for the company, although some industry insiders believe that deal should more realistically be around $10 billion because of all the debt the company has acquired over the years.

The timing, ambitious offer, and general history of Schulze has helped catapult this story to every business blog’s front page.  Schulze could be rightly blamed for the company’s demise in the first place.  During his chairman days he failed to make vital changes to company’s retail focus that could have saved them, and since the end of his chairman days he’s been accused of some serious crimes.  Even though Schulze has had his considerable share of troubles over the years, he also was the man who helped make the company into a retail giant.  Regardless of the outcome it will be a story to watch closely, the end decision could change the way business restructure

Share

Facebook Earnings Call Exposes Doubt In Social Media Stocks

After a disastrous IPO that saw social media giant Facebook’s stock price tumble from its opening of $38 per share to just below $24, the company’s first earnings call after going public was the most anticipated financial story of the week. Would CEO Mark Zuckerberg and his team of internet innovators have answers and new revenue-generating initiatives to show investors? While the call showed positive results like a 32 percent growth in revenue in the second quarter, there was a marked lack of earnings forecasts and strategies outlined to quell investor concerns. The company ended trading Friday down 12 percent.

The Facebook earnings call was just the latest in a series of disappointing returns for publicly traded social media companies. Social gaming company Zynga—responsible for a number of popular games including Words With Friends—posted another 3 percent in losses Friday after a posted loss in revenue sent the stock plunging 37 percent Thursday. Daily deals sites Groupon and Living Social are down 71 percent and 9 percent respectively from their opening offer prices.

What is it about social media companies that have driven these stocks out of favor on Wall Street? Financial analysts have posited many theories. For one, Facebook’s advertising model has not delivered nearly the level of results that other companies like Google have been able to generate, despite having billions of daily users around the world. The company has hinted at various initiatives, including increasing its mobile offerings and courting ecommerce listings for businesses with the addition of a “Want” button. Currently, the “Like” button is the site’s most popular feature.

According to the Wall Street Journal, traders and consumers have expressed concern over the way social media companies are structured. Many of the newly public Internet companies, including Facebook, Zynga, and GrouponInc. have several classes of stock, giving founders more power than other shareholders. This has ensured that founders can remain in control of offerings but may be deterring larger investments.

But the key problem that many in the industry seem to be cluing in on is that Facebook, like many technology companies, appears to have been overvalued. In the three years between Facebook’s initial May 2009 valuation and its May 2012 IPO, the company valuation increased from $10 billion to $100 billion.

There is one bright spot in the world of social media stocks: LinkedIn. The company has increased over 130 percent from its original stock valuation, making it the most successful social media company on the market today. Despite shake-ups like a hacking scandal that impacted over six million passwords and complaints that its mobile app was improperly downloading user information, the stock price has barely moved from its high returns. The stock is up over 50 percent on the year. 

Share

Uses for the Ultimate Safe Investment

Gold (and precious metals in general) is the ultimate “safe” investment.  Gold has been valuable throughout human history, and as scientists continue to find more uses for the precious metal its value will only continue to grow.  Many people think that gold is only good for jewelry and currency, but the truth is that this precious metal has an array of uses that make it a much sought after commodity.

Technological Uses

Did you know that your laptop, smartphone, and the majority of modern electronics contain some gold in them?  Gold is known for its durability, conductivity, and resistance to corrosion.  Extremely pure gold (99.999 percent pure rounded up) connects computer circuits to semiconductors through extremely thin wiring.  Telephones, powerchairs, televisions, and VCRs all need gold to operate.  Before you get excited and smash open your smart phone, keep in mind that electronics need a very small amount of gold to properly function.

Medical Uses

Gold may not be as tough as iron, but it’s still one of the toughest metals around.  It’s malleable yet still tough and durable, and also resistant to corrosion and non-toxic.  All of those qualities make gold perfect for medical research and medical procedures.  Dentists use a mixture of metals (platinum, palladium, silver) along with gold in an array of dental procedures, not just for making gold crowns and teeth.

The medical benefits of gold don’t stop with dentistry; surgeons have been able to use gold instruments to clear clogged coronary arties. Ion lasers with interior surfaces coated with gold have been one of the most promising developments in medical science.  Gold vapor lasers have been successfully in the treatment of cancer.  Gold vapor lasers have been able to destroy cancerous cells without harming neighboring healthy cells.

Scientific Research

The gold bullion you buy from Goldline today could be on the space crafts of tomorrow.  Computers in space shuttles, satellites, and other space faring vessels have much of their circuitry protected from solar radiation by gold.

Share

Three Risky “Safe Investments”

Before we get into the main focus of this post this statement must be made: there is no such thing as a “sure” investment.  Some industries tend to do better than others because of their necessity or popularity, but there is no such thing as a “safe investment”, “sure thing”, or an “always profitable investment”.

Even though the true financial crisis began and ended in 2008, both amateur and professional investors are worried about the stability of their investments.  Millions of people saw their retirement funds and 401ks disappear after 2008 and nobody wants to experience that sense of panic and loss again.  Economic experts have always expressed the importance of investing in necessities regardless of the current market situation, but the definition of what qualifies as a human necessity has changed over the years.  It was already said that there’s no such thing as a 100% safe and steady stock, but there are certain industries that always seem to survive the worst financial panics.

Tech Industry

Economists have been arguing over whether or not tech tools (laptops, computers, smart phones) are true necessities for years. It could be argued that computers and smartphones are now a necessity in the lives of many people in developed nations, the modern workplace revolves around these advanced forms of communications technologies.  If you want a solid tech investment don’t go for popular OS manufacturers like Apple and Microsoft, invest in tech hardware manufacturers like Intel and Samsung. The iPhone and other popular tech products will eventually lose their popular appeal, but the hardware these devices are made from will always be needed.

Food Industry

Investing in the food industry is a tricky kind of “safe investment”.  People will always need to eat, but people won’t walkways have to eat a certain brand.  Some people invest in companies like Coca-Cola and Pepsi since they have a considerable market share both at home and abroad.  Investing in these food conglomerates can also give investors the added bonus of investing in an array of products by just investing in one company.  PepsiCo owns Pepsi, but it also owns Frito-Lay and Tropicana, two large and popular food and beverage manufacturers.

Pharmaceuticals Industry

The pharmaceuticals industry has seen some substantial growth in the past few decades, and as medical science continues to advance the industry will only grow stronger.   Drug manufacturers are always experimenting with new medications and searching for new ways to use their older medicines, so investors won’t have to worry about there being a lack of innovations and growth.  It’s important for pharmaceuticals investors to stay on top of industry news, one clinical trial or FDA study could discover a problem with a new wonder drug and send your stocks plummeting.

Share