What do you do after you make a ZILLION dollars?
In the dot-com boom I made a little bit of money and then proceeded to make every mistake possible with that money. It was like reading a Stephen King horror story written in blood across your bank statement. Several years later, I included the story in the intro to one of my books and gave the book to a potential investor. He read the intro and said, “I can’t invest in you. You’re a functional idiot.” And yet, I’ve seen the pattern repeated so many times with so many people can I at least enjoy the company of other idiots?
So to help out others who will pocket some of the $600bb in quantitative easing, I have a few simple tips for greatly improving the chances of success if you have sudden fortune thrust upon you, either through your hard work or simply by chance.
1.) The One-Year Rule. Don’t change your lifestyle at all for at least one year.
No new house or apartment. Don’t buy a fancy car. Don’t buy expensive artwork. This is not to say these things are bad. It’s just that you need to let the new wealth marinate your soul a little bit.
Get comfortable with it before you try on new clothes that might not fit yet. Once you buy some massively expensive toys or homes, it changes your whole perspective and might make you much more foolish than you were when you were first climbing the ladder of success.
Remember: One year.
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2.) The No-Friends Rule. Don’t lend money to old friends. Don’t be so quick to make new friends. Once you make money, everyone will approach you about new investments you can make. Or people will want to borrow money from you.
Don’t do either.
It’s very hard, of course, to deny a friend who says, “listen, I just need to borrow $100,000 for 90 days.” Or “I have a great new start-up that looks like Twitter but better. I’m just raising $500,000 and I left $300,000 for you to come into the round.”
But here’s what you can say, “I’d love to do it. It sounds great. Right now everything is tied up with my financial adviser and you can talk to him. I have to go by what he says because of all the legal stuff I don’t understand.” And then get some guy to pretend to be your financial adviser who can get you off the hook by denying your friend.
I know, it’s dishonest and devious. But it’s necessary in you want to keep your friends. Particularly in Year One (see previous rule).
3.) Don’t Invest. What’s the rush? You just made your money. Put it in a savings account for one year at least. Or under your mattress. No stocks. No paintings. No private investments. Try not to start a business again so quickly.
A friend of mine recently won $3 million in a poker tournament after being broke for many years (all his life). Right away he wanted to buy a hotel.
Don’t do it.
This was right before the entire housing crisis and recession that followed. Thank God he took my advice. If you feel absolutely compelled to do some investing then follow the next rule.
[Follow me on twitter]
4.) The 2% Rule. If you really feel that Google is going to $5,000 per share and you have to buy some stock at $500, don’t put more than 2% of your money into it. Then, if it all goes to hell, you’ve only lost 2% of your money (or more likely, 1%, since Google will probably never go down more than 50%).
This is hard for entrepreneurs who come into sudden wealth because they are used to making their money by having most of their net worth tied up in one investment (their business).
But this is probably the most important rule on the list.
5.) The Good Health Rule. Believe it or not, your health is now at risk if you just came into sudden wealth.
A friend of mine had a very stressful business in the online gambling space. He was worried the Feds were going to outlaw him and arrest him. He was broke and the business was always in a state of running out of money.
High, high, stress.
I thought he was going to have a stroke or a heart attack but he always stayed in great health. Then he sold his business and made about $50 million. Three months later he was on a ski slope in Aspen, enjoying the fruits of his labor, when he suddenly had a major heart attack and only survived because of immediate medical care. He was essentially dead for five minutes on the operating table.
Your body, in a high adrenalin situation, will postpone punishing you until the situation is over. But don’t think when the stress is over that your body will forget. It doesn’t.
You must focus on health after achieving sudden wealth.
6.) Try Not To Burn Out. Your business was brutal. I know. I’ve been there. Clients and customers are sometimes hard to deal with. And now you might have employers who just bought your company that you have to report to.
But don’t burn out just yet. You need to be responsible and show the people around you that they all made the right decision in trusting you, in buying your business, in buying your goods and services, in working for you, etc. You have few chances in life to demonstrate that you’re made of the right stuff and this is one of them.
And what to do if you lose it all? Don’t worry.
There’s no such thing as luck. In the chess-playing world there’s a saying: “Only the good players are lucky.” That applies to business as well. People can say you were lucky. But the truth is you’ll be able to do it again and again, no matter how deeply you fall.
Trust in this and follow these rules and sudden wealth will become permanent wealth
Friday, April 8, 2011
33 Unusual Tips to Being a Better Writer
33 Unusual Tips to Being a Better Writer
Back in college, Sanket and I would hang out in bars and try to talk to women but I was horrible at it. Nobody would talk to me for more than thirty seconds and every woman would laugh at all his jokes for what seemed like hours. Even decades later I think they are still laughing at his jokes. One time he turned to me, “the girls are getting bored when you talk. Your stories go on too long. From now on, you need to leave out every other sentence when you tell a story.” We were both undergrads in Computer Science. I haven’t seen him since but that’s the most important writing (and communicating) advice I ever got.
33 other tips to be a better writer.
- Write whatever you want. Then take out the first paragraph and last paragraph. Here’s the funny thing about this rule. It’s sort of like knowing the future. You still can’t change it. In other words, even if you know this rule and write the article, the article will still be better if you take out the first paragraph and the last paragraph.
- Take a huge bowel movement every day. And you won’t see that on any other list on how to be a better writer. If your body doesn’t flow then your brain won’t flow. Eat more fruit if you have to.
- Bleed in the first line. We’re all human. A computer can win Jeopardy but still not write a novel. You want people to relate to you, then you have to be human. Penelope Trunk started a post a few weeks ago: “I smashed a lamp over my head. There was blood everywhere. And glass. And I took a picture.” That’s real bleeding. My wife recently put up a post where the first line was so painful she had to take it down. Too many people were crying.
- Don’t ask for permission. In other words, never say “in my opinion” (or worse “IMHO”). We know it’s your opinion. You’re writing it.
- Write a lot. I spent the entire 90s writing bad fiction. 5 bad novels. Dozens of bad stories. But I learned to handle massive rejection. And how to put two words together. In my head, I won the pulitzer prize. But in my hand, over 100 rejection letters.
- Read a lot. You can’t write without first reading. A lot. When I was writing five bad novels in a row I would read all day long whenever I wasn’t writing (I had a job as a programmer, which I would do for about five minutes a day because my programs all worked and I just had to “maintain” them). I read everything I could get my hands on.
- Read before you write. Before I write every day I spend 30-60 minutes reading high quality short stories poetry, or essays. Books by Denis Johnson, Miranda July, David Foster Wallace, Ariel Leve, William Vollmann, Raymond Carver, etc. All of the writers are in the top 1/1000 of 1% of writers. It has to be at that level or else it won’t lift up your writing at all.
- Coffee. I go through three cups at least before I even begin to write. No coffee, no creativity.
- Break the laws of physics. There’s no time in text. Nothing has to go in order. Don’t make it nonsense. But don’t be beholden to the laws of physics. Advice I Want to Tell My Daughters is an example.
- Be Honest. Tell people the stuff they all think but nobody ever says. Some people will be angry you let out the secret. But most people will be grateful. Else you aren’t delivering value. Be the little boy in the Emperor Wears No Clothes. If you can’t do this, don’t write.
- Don’t Hurt Anyone. This goes against the above rule. But I never like to hurt people. And I don’t respect people who get pageviews by breaking this rule. Don’t be a bad guy. Was Buddha a Bad Father? addresses this.
- Don’t be afraid of what people think. For each single person you worry about, deduct 1% in quality from your writing. Everyone has deductions. I have to deduct about 10% right off the top. Maybe there’s 10 people I’m worried about. Some of them are evil people. Some of them are people I just don’t want to offend. So my writing is only about 90% of what it could be. But I think most people write at about 20% of what it could be. Believe it or not, clients, customers, friends, family, will love you more if you are honest with them. So we all have our boundaries. But try this: for the next ten things you write, tell people something that nobody knows about you.
- Be opinionated. Most people I know have strong opinions about at least one or two things. Write about those. Nobody cares about all the things you don’t have strong opinions on. Barry Ritholz told me the other day he doesn’t start writing until he’s angry about something. That’s one approach. Barry and I have had some great writing fights because sometimes we’ve been angry at each other.
- Have a shocking title. I blew it the other day. I wanted to title this piece: “How I torture women” but I settled for “I’m guilty of torture”. I wimped out. But I have some other fun ones. Like “is it bad I wanted my first kid to be aborted” (which the famous Howard Lindzon cautioned me against). Don’t forget that you are competing against a trillion other pieces of content out there. So you need a title to draw people in. Else you lose.
- Steal. I don’t quite mean it literally. But if you know a topic gets pageviews (and you aren’t hurting anyone) than steal it, no matter who’s written about it or how many times you’ve written about it before. “How I Screwed Yasser Arafat out of $2mm” was able to nicely piggyback off of how amazingly popular Yasser Arafat is.
- Make people cry. If you’ve ever been in love, you know how to cry. Bring readers to that moment when they were a child, and all of life was in front of them, except for that one bittersweet moment when everything began to change. If only that one moment could’ve lasted forever. Please let me go back in time right now to that moment. But now it’s gone.
- Relate to people. The past decade has totally sucked. For everyone. The country has been in post-traumatic stress syndrome since 9/11 and 2008 only made it worse. I’ve gone broke a few times during the decade, had a divorce, lost friendships, and have only survived (barely) by being persistent and knowing I had two kids to take care of, and loneliness to fight. Nobody’s perfect. We’re all trying. Show people how you are trying and struggling. Nobody expects you to be a superhero.
- Time heals all wounds. Everyone has experiences they don’t want to write about. But with enough time, its ok. My New Year’s Resolution of 1995 is pretty embarrassing. But whatever. Its 16 years ago.. The longer back you go, the less you have to worry about what people think.
- Risk. Notice that almost all of these rules are about where the boundaries are. Most people play it too safe. When you are really risking something and the reader senses that (and they WILL sense it), then you know you are in good territory. If you aren’t risking something, then I’m moving on. I know I’m on the right track if after I post something someone tweets, “OMFG”.
- Be funny. You can be all of the above and be funny at the same time. When I went to India I was brutalized by my first few yoga classes (actually every yoga class). And I was intimidated by everyone around me. They were like yoga superheroes and I felt like a fraud around them. So I cried, and hopefully people laughed. It was also a case where I didn’t have to dig into my past but I had an experience that was happening to me right then. How do you be funny? First rule of funny: ugly people are funny. I’m naturally ugly so its easy. Make yourself as ugly as possible. Nobody wants to read that you are beautiful and doing great in life.
- The last line needs to go BOOM! . Your article is meaningless unless the last line KILLS. Read the book of short stories “Jesus’ Son” by Denis Johnson. It’s the only way to learn how to do a last line. The last line should take you all the way back to the first line and then “BOOM!”
- Use a lot of periods. Forget commas and semicolons. A period makes people pause. Your sentences should be strong enough that you want people to pause and think about it. This will also make your sentences shorter. Short sentences are good.
- Write every day. This is a must. Writing is spiritual practice. You are diving inside of yourself and cleaning out the toxins. If you don’t do it every day, you lose the ability. If you do it every day, then slowly you find out where all the toxins are. And the cleaning can begin.
- Write with the same voice you talk in. You’ve spent your whole life learning how to communicate with that voice. Why change it when you communicate with text?
- Deliver value with every sentence. Even on a tweet or Facebook status update. Deliver poetry and value with ever word. Else, be quiet. (And, of course, follow me on twitter for more examples)
- Take what everyone thinks and explore the opposite. Don’t disagree just to disagree. But explore. Turn the world upside down. Guess what? There are people living in China. Plenty of times you’ll find value where nobody else did.
- Have lots of ideas. I discuss this in “How to be the Luckiest Man Alive” in the Daily Practice section. Your idea muscle atrophies within days if you don’t exercise it. Then what do you do? You need to exercise it every day until it hurts. Else no ideas.
- Sleep eight hours a day. Go to sleep before 9pm at least 4 days a week. And stretch while taking deep breaths before you write. We supposedly use only 5% of our brain. You need to use 6% at least to write better than everyone else. So make sure your brain is getting as much healthy oxygen as possible. Too many people waste valuable writing or resting time by chattering until all hours of the night.
- Don’t write if you’re upset at someone. Then the person you are upset at becomes your audience. You want to love and flirt with your audience so they can love you back.
- Use “said” instead of any other word. Don’t use “he suggested” or “he bellowed”. Just “he said.” We’ll figure it out if he suggested something.
- Paint. Or draw. Keep exercising other creative muscles.
- Let it sleep. Whatever you are working on, sleep on it. Then wake up, stretch, coffee, read, and look again. Rewrite. Take out every other sentence.
- Then take out every other sentence again. Or something like that.
Sanket didn’t want to go to grad school after we graduated. He had another plan. Lets go to Thailand, he said. And become monks in a Buddhist monastery for a year. We can date Thai women whenever we aren’t begging for food, he said. It will be great and we’ll get life experience.
It sounded good to me.
But then he got accepted to the University of Wisconsin and got a PhD. Now he lives in India and works for Oracle. And as for me, I don’t know what the hell happened to me.
Back in college, Sanket and I would hang out in bars and try to talk to women but I was horrible at it. Nobody would talk to me for more than thirty seconds and every woman would laugh at all his jokes for what seemed like hours. Even decades later I think they are still laughing at his jokes. One time he turned to me, “the girls are getting bored when you talk. Your stories go on too long. From now on, you need to leave out every other sentence when you tell a story.” We were both undergrads in Computer Science. I haven’t seen him since but that’s the most important writing (and communicating) advice I ever got.
33 other tips to be a better writer.
- Write whatever you want. Then take out the first paragraph and last paragraph. Here’s the funny thing about this rule. It’s sort of like knowing the future. You still can’t change it. In other words, even if you know this rule and write the article, the article will still be better if you take out the first paragraph and the last paragraph.
- Take a huge bowel movement every day. And you won’t see that on any other list on how to be a better writer. If your body doesn’t flow then your brain won’t flow. Eat more fruit if you have to.
- Bleed in the first line. We’re all human. A computer can win Jeopardy but still not write a novel. You want people to relate to you, then you have to be human. Penelope Trunk started a post a few weeks ago: “I smashed a lamp over my head. There was blood everywhere. And glass. And I took a picture.” That’s real bleeding. My wife recently put up a post where the first line was so painful she had to take it down. Too many people were crying.
- Don’t ask for permission. In other words, never say “in my opinion” (or worse “IMHO”). We know it’s your opinion. You’re writing it.
- Write a lot. I spent the entire 90s writing bad fiction. 5 bad novels. Dozens of bad stories. But I learned to handle massive rejection. And how to put two words together. In my head, I won the pulitzer prize. But in my hand, over 100 rejection letters.
- Read a lot. You can’t write without first reading. A lot. When I was writing five bad novels in a row I would read all day long whenever I wasn’t writing (I had a job as a programmer, which I would do for about five minutes a day because my programs all worked and I just had to “maintain” them). I read everything I could get my hands on.
- Read before you write. Before I write every day I spend 30-60 minutes reading high quality short stories poetry, or essays. Books by Denis Johnson, Miranda July, David Foster Wallace, Ariel Leve, William Vollmann, Raymond Carver, etc. All of the writers are in the top 1/1000 of 1% of writers. It has to be at that level or else it won’t lift up your writing at all.
- Coffee. I go through three cups at least before I even begin to write. No coffee, no creativity.
- Break the laws of physics. There’s no time in text. Nothing has to go in order. Don’t make it nonsense. But don’t be beholden to the laws of physics. Advice I Want to Tell My Daughters is an example.
- Be Honest. Tell people the stuff they all think but nobody ever says. Some people will be angry you let out the secret. But most people will be grateful. Else you aren’t delivering value. Be the little boy in the Emperor Wears No Clothes. If you can’t do this, don’t write.
- Don’t Hurt Anyone. This goes against the above rule. But I never like to hurt people. And I don’t respect people who get pageviews by breaking this rule. Don’t be a bad guy. Was Buddha a Bad Father? addresses this.
- Don’t be afraid of what people think. For each single person you worry about, deduct 1% in quality from your writing. Everyone has deductions. I have to deduct about 10% right off the top. Maybe there’s 10 people I’m worried about. Some of them are evil people. Some of them are people I just don’t want to offend. So my writing is only about 90% of what it could be. But I think most people write at about 20% of what it could be. Believe it or not, clients, customers, friends, family, will love you more if you are honest with them. So we all have our boundaries. But try this: for the next ten things you write, tell people something that nobody knows about you.
- Be opinionated. Most people I know have strong opinions about at least one or two things. Write about those. Nobody cares about all the things you don’t have strong opinions on. Barry Ritholz told me the other day he doesn’t start writing until he’s angry about something. That’s one approach. Barry and I have had some great writing fights because sometimes we’ve been angry at each other.
- Have a shocking title. I blew it the other day. I wanted to title this piece: “How I torture women” but I settled for “I’m guilty of torture”. I wimped out. But I have some other fun ones. Like “is it bad I wanted my first kid to be aborted” (which the famous Howard Lindzon cautioned me against). Don’t forget that you are competing against a trillion other pieces of content out there. So you need a title to draw people in. Else you lose.
- Steal. I don’t quite mean it literally. But if you know a topic gets pageviews (and you aren’t hurting anyone) than steal it, no matter who’s written about it or how many times you’ve written about it before. “How I Screwed Yasser Arafat out of $2mm” was able to nicely piggyback off of how amazingly popular Yasser Arafat is.
- Make people cry. If you’ve ever been in love, you know how to cry. Bring readers to that moment when they were a child, and all of life was in front of them, except for that one bittersweet moment when everything began to change. If only that one moment could’ve lasted forever. Please let me go back in time right now to that moment. But now it’s gone.
- Relate to people. The past decade has totally sucked. For everyone. The country has been in post-traumatic stress syndrome since 9/11 and 2008 only made it worse. I’ve gone broke a few times during the decade, had a divorce, lost friendships, and have only survived (barely) by being persistent and knowing I had two kids to take care of, and loneliness to fight. Nobody’s perfect. We’re all trying. Show people how you are trying and struggling. Nobody expects you to be a superhero.
- Time heals all wounds. Everyone has experiences they don’t want to write about. But with enough time, its ok. My New Year’s Resolution of 1995 is pretty embarrassing. But whatever. Its 16 years ago.. The longer back you go, the less you have to worry about what people think.
- Risk. Notice that almost all of these rules are about where the boundaries are. Most people play it too safe. When you are really risking something and the reader senses that (and they WILL sense it), then you know you are in good territory. If you aren’t risking something, then I’m moving on. I know I’m on the right track if after I post something someone tweets, “OMFG”.
- Be funny. You can be all of the above and be funny at the same time. When I went to India I was brutalized by my first few yoga classes (actually every yoga class). And I was intimidated by everyone around me. They were like yoga superheroes and I felt like a fraud around them. So I cried, and hopefully people laughed. It was also a case where I didn’t have to dig into my past but I had an experience that was happening to me right then. How do you be funny? First rule of funny: ugly people are funny. I’m naturally ugly so its easy. Make yourself as ugly as possible. Nobody wants to read that you are beautiful and doing great in life.
- The last line needs to go BOOM! . Your article is meaningless unless the last line KILLS. Read the book of short stories “Jesus’ Son” by Denis Johnson. It’s the only way to learn how to do a last line. The last line should take you all the way back to the first line and then “BOOM!”
- Use a lot of periods. Forget commas and semicolons. A period makes people pause. Your sentences should be strong enough that you want people to pause and think about it. This will also make your sentences shorter. Short sentences are good.
- Write every day. This is a must. Writing is spiritual practice. You are diving inside of yourself and cleaning out the toxins. If you don’t do it every day, you lose the ability. If you do it every day, then slowly you find out where all the toxins are. And the cleaning can begin.
- Write with the same voice you talk in. You’ve spent your whole life learning how to communicate with that voice. Why change it when you communicate with text?
- Deliver value with every sentence. Even on a tweet or Facebook status update. Deliver poetry and value with ever word. Else, be quiet. (And, of course, follow me on twitter for more examples)
- Take what everyone thinks and explore the opposite. Don’t disagree just to disagree. But explore. Turn the world upside down. Guess what? There are people living in China. Plenty of times you’ll find value where nobody else did.
- Have lots of ideas. I discuss this in “How to be the Luckiest Man Alive” in the Daily Practice section. Your idea muscle atrophies within days if you don’t exercise it. Then what do you do? You need to exercise it every day until it hurts. Else no ideas.
- Sleep eight hours a day. Go to sleep before 9pm at least 4 days a week. And stretch while taking deep breaths before you write. We supposedly use only 5% of our brain. You need to use 6% at least to write better than everyone else. So make sure your brain is getting as much healthy oxygen as possible. Too many people waste valuable writing or resting time by chattering until all hours of the night.
- Don’t write if you’re upset at someone. Then the person you are upset at becomes your audience. You want to love and flirt with your audience so they can love you back.
- Use “said” instead of any other word. Don’t use “he suggested” or “he bellowed”. Just “he said.” We’ll figure it out if he suggested something.
- Paint. Or draw. Keep exercising other creative muscles.
- Let it sleep. Whatever you are working on, sleep on it. Then wake up, stretch, coffee, read, and look again. Rewrite. Take out every other sentence.
- Then take out every other sentence again. Or something like that.
Sanket didn’t want to go to grad school after we graduated. He had another plan. Lets go to Thailand, he said. And become monks in a Buddhist monastery for a year. We can date Thai women whenever we aren’t begging for food, he said. It will be great and we’ll get life experience.
It sounded good to me.
But then he got accepted to the University of Wisconsin and got a PhD. Now he lives in India and works for Oracle. And as for me, I don’t know what the hell happened to me.
10 Things I Learned While Trading for Victor Niederhoffer
10 Things I Learned While Trading for Victor Niederhoffer
I traded for Victor Niederhoffer for about a year starting in 2003. I was up slightly more than 100% for him, primarily trading futures using a quantitative approach. During that period I had one down month: June 2003.
Victor was a top trader for George Soros before starting his own fund in the ’90s and then writing the classic investment text “Education of a Speculator.” He then suffered one of several blowups in his career when his fund crashed to zero while on the wrong side of a couple of bets during the Asian currency crisis in 1997 (most notably, he was short S&P puts when the market crashed that year).
Despite that, Victor has consistently traded his own portfolio quite successfully and is one of the best traders I’ve seen in action. He still posts his daily comments on trading and the markets at his site dailyspeculations.com.
Here are 10 things I learned during my time trading for Victor:
1.) Test, test, test. Test everything you can. If someone says to me, “There’s inflation coming so you better short stocks,” I know right away the person doesn’t test and will lose money. Data is available for almost anything you can imagine. (In my talks, I always discuss the “blizzard system” based on data of what the stock market does depending on how many inches of snow have fallen in Central Park that day). Victor and his crew would spend all day testing ideas: What historically happens to the market on a Fed day? What happens on options expiration day if the two prior days were negative? Do stocks that start with the letter “x” outperform? Nothing was beyond testing.
2.) Optimism. There’s plenty of reasons every day to assume the world is going to end. The media is constantly speculating about imminent financial collapse, hyperinflation, peak oil, pandemics, terrorism, etc. One of Victor’s favorite books, which I highly recommend, is “Triumph of the Optimists,” which shows the success of the U.S. markets over the past century over other markets and asset classes. Yes, the markets take a hit. But invariably buying dips (and being careful not to get wiped out) will be a long-term strategy for success.
3.) Fearlessness. I had a big March 2003 trading for Victor. The market was threatening to go to new lows at the advent of the Iraqi war. I went long and strong and had a great month. Then, for the rest of the year, for fear of destroying a great track record, I would go up a few percentage points at the beginning of each month and then coast for the rest of the month, probably leaving another 100% or so on the table as I passed on trading many high probability situations. I always suspected Victor was very disappointed in me for that. When you have a high probability situation, trade it and trade it big.
4.) Everything Is Connected. Whether you are studying baseball, checkers, trees, wars – all contain patterns similar to the patterns we see every day in trading. Sometimes the best way to get perspective on your trading is to study something seemingly unrelated and to then consider the analogies.
5.) Ayn Rand. There’s a lot of retrospectives right now about Rand, one of Victor’s favorite authors. I don’t care much for the so-called Objectivism or Rand’s views on capitalism, but what struck me about her books was the emphasis on competence. Her novels are about competence and the personal gratification one gets by being good at what you do, whether it’s building railroads, designing a building, trading or cleaning a house.
6.) Warren Buffett. Victor is not a fan of Warren Buffett. This forced me to look at Buffett in a whole new way. Is Buffett a value investor? What other tricks of the trade has Buffett used over the years? I ended up reading every biography of Buffett, going through four decades of SEC filings, and pouring over not only his Berkshire letters but his prior letters from his hedge fund days (1957-1969). The result was my book, “Trade Like Warren Buffett.”
7.) The First Day of the Month. It’s probably the most important trading day of the month, as inflows come in from 401(k) plans, 1RAs, etc. and mutual fund have to go out there and put this new money into stocks. Over the past 16 years, buying the close on SPY (the S&P 500 ETF) on the last day of the month and selling one day later would result in a successful trade 63% of the time with an average return of 0.37% (as opposed to 0.03% and a 50%-50% success rate if you buy any random day during this period). Various conditions take place that improve this result significantly. For instance, one time I was visiting Victor’s office on the first day of a month and one of his traders showed me a system and said, “If you show this to anyone we will have to kill you.” Basically, the system was: If the last half of the last day of the month was negative and the first half of the first day of the month was negative, buy at 11 a.m. and hold for the rest of the day. “This is an ATM machine” the trader told me. I leave it to the reader to test this system.
8.) Always Protect the Downside. This is learned by negative example. As Nassim Taleb has pointed out ad nauseum, Black Swans occur. (See the Malcolm Gladwell article on Taleb to see Taleb’s thoughts on Victor.) No matter how much you test, there will be a “this time is different” moment that will force your bank account into oblivion. I trade a strategy based on selling puts and calls at levels where my software thinks its statistically unlikely the market hits those levels before the next options expirations day. But I also use some of the premium I earned from selling those puts and calls to buy slightly further out puts and calls as insurance the market doesn’t run away from me. No matter how confident the software is, always protect.
9.) Keep Life Interesting. Victor surrounds himself by games and the people who enjoy them. When I knew him, he took regular checkers lessons, played tennis every day, and has some of the oddest collections I’ve ever seen. He stands out on a crowded city street and seems to spend part of each day seeking out new and interesting experiences. He often asked me what I’d been reading and if it was trading related he was disappointed. Trading is ultimately a window into the psyche of the world at that moment. Uncovering the nuances of that psyche is ultimately more important than doing the latest test on what happens after a Fed announcement (but, on that point, tests have shown that whatever the market is doing before a 2:15p.m. Fed announcement on Fed days, chances are it will reverse after 2:15).
10.) Be Open to New Ideas. In 2002, I was still reeling from the dot-com collapse. I had sold a company near the height of the insanity in 1998 and also started a VC fund that opened up doors in March, 2000, the absolute peak of the market. I was trying to figure out new things to do. I came up with a list of about 30 people I looked up to and came up with 10 ideas for each person about how they could improve their business. To Victor, I sent a series of trading ideas that I had both backtested and had traded successfully. To Jim Cramer, I sent a list of 10 ideas for articles he should write. Of the 30 people, they were the only two who responded and ultimately I ended up managing a little bit of money for Victor and writing for Jim Cramer’s site, thestreet.com. I’m grateful for the opportunities that both people created for me.
I traded for Victor Niederhoffer for about a year starting in 2003. I was up slightly more than 100% for him, primarily trading futures using a quantitative approach. During that period I had one down month: June 2003.
Victor was a top trader for George Soros before starting his own fund in the ’90s and then writing the classic investment text “Education of a Speculator.” He then suffered one of several blowups in his career when his fund crashed to zero while on the wrong side of a couple of bets during the Asian currency crisis in 1997 (most notably, he was short S&P puts when the market crashed that year).
Despite that, Victor has consistently traded his own portfolio quite successfully and is one of the best traders I’ve seen in action. He still posts his daily comments on trading and the markets at his site dailyspeculations.com.
Here are 10 things I learned during my time trading for Victor:
1.) Test, test, test. Test everything you can. If someone says to me, “There’s inflation coming so you better short stocks,” I know right away the person doesn’t test and will lose money. Data is available for almost anything you can imagine. (In my talks, I always discuss the “blizzard system” based on data of what the stock market does depending on how many inches of snow have fallen in Central Park that day). Victor and his crew would spend all day testing ideas: What historically happens to the market on a Fed day? What happens on options expiration day if the two prior days were negative? Do stocks that start with the letter “x” outperform? Nothing was beyond testing.
2.) Optimism. There’s plenty of reasons every day to assume the world is going to end. The media is constantly speculating about imminent financial collapse, hyperinflation, peak oil, pandemics, terrorism, etc. One of Victor’s favorite books, which I highly recommend, is “Triumph of the Optimists,” which shows the success of the U.S. markets over the past century over other markets and asset classes. Yes, the markets take a hit. But invariably buying dips (and being careful not to get wiped out) will be a long-term strategy for success.
3.) Fearlessness. I had a big March 2003 trading for Victor. The market was threatening to go to new lows at the advent of the Iraqi war. I went long and strong and had a great month. Then, for the rest of the year, for fear of destroying a great track record, I would go up a few percentage points at the beginning of each month and then coast for the rest of the month, probably leaving another 100% or so on the table as I passed on trading many high probability situations. I always suspected Victor was very disappointed in me for that. When you have a high probability situation, trade it and trade it big.
4.) Everything Is Connected. Whether you are studying baseball, checkers, trees, wars – all contain patterns similar to the patterns we see every day in trading. Sometimes the best way to get perspective on your trading is to study something seemingly unrelated and to then consider the analogies.
5.) Ayn Rand. There’s a lot of retrospectives right now about Rand, one of Victor’s favorite authors. I don’t care much for the so-called Objectivism or Rand’s views on capitalism, but what struck me about her books was the emphasis on competence. Her novels are about competence and the personal gratification one gets by being good at what you do, whether it’s building railroads, designing a building, trading or cleaning a house.
6.) Warren Buffett. Victor is not a fan of Warren Buffett. This forced me to look at Buffett in a whole new way. Is Buffett a value investor? What other tricks of the trade has Buffett used over the years? I ended up reading every biography of Buffett, going through four decades of SEC filings, and pouring over not only his Berkshire letters but his prior letters from his hedge fund days (1957-1969). The result was my book, “Trade Like Warren Buffett.”
7.) The First Day of the Month. It’s probably the most important trading day of the month, as inflows come in from 401(k) plans, 1RAs, etc. and mutual fund have to go out there and put this new money into stocks. Over the past 16 years, buying the close on SPY (the S&P 500 ETF) on the last day of the month and selling one day later would result in a successful trade 63% of the time with an average return of 0.37% (as opposed to 0.03% and a 50%-50% success rate if you buy any random day during this period). Various conditions take place that improve this result significantly. For instance, one time I was visiting Victor’s office on the first day of a month and one of his traders showed me a system and said, “If you show this to anyone we will have to kill you.” Basically, the system was: If the last half of the last day of the month was negative and the first half of the first day of the month was negative, buy at 11 a.m. and hold for the rest of the day. “This is an ATM machine” the trader told me. I leave it to the reader to test this system.
8.) Always Protect the Downside. This is learned by negative example. As Nassim Taleb has pointed out ad nauseum, Black Swans occur. (See the Malcolm Gladwell article on Taleb to see Taleb’s thoughts on Victor.) No matter how much you test, there will be a “this time is different” moment that will force your bank account into oblivion. I trade a strategy based on selling puts and calls at levels where my software thinks its statistically unlikely the market hits those levels before the next options expirations day. But I also use some of the premium I earned from selling those puts and calls to buy slightly further out puts and calls as insurance the market doesn’t run away from me. No matter how confident the software is, always protect.
9.) Keep Life Interesting. Victor surrounds himself by games and the people who enjoy them. When I knew him, he took regular checkers lessons, played tennis every day, and has some of the oddest collections I’ve ever seen. He stands out on a crowded city street and seems to spend part of each day seeking out new and interesting experiences. He often asked me what I’d been reading and if it was trading related he was disappointed. Trading is ultimately a window into the psyche of the world at that moment. Uncovering the nuances of that psyche is ultimately more important than doing the latest test on what happens after a Fed announcement (but, on that point, tests have shown that whatever the market is doing before a 2:15p.m. Fed announcement on Fed days, chances are it will reverse after 2:15).
10.) Be Open to New Ideas. In 2002, I was still reeling from the dot-com collapse. I had sold a company near the height of the insanity in 1998 and also started a VC fund that opened up doors in March, 2000, the absolute peak of the market. I was trying to figure out new things to do. I came up with a list of about 30 people I looked up to and came up with 10 ideas for each person about how they could improve their business. To Victor, I sent a series of trading ideas that I had both backtested and had traded successfully. To Jim Cramer, I sent a list of 10 ideas for articles he should write. Of the 30 people, they were the only two who responded and ultimately I ended up managing a little bit of money for Victor and writing for Jim Cramer’s site, thestreet.com. I’m grateful for the opportunities that both people created for me.
Thursday, April 7, 2011
How to be THE LUCKIEST GUY ON THE PLANET in 4 Easy Steps
How to be THE LUCKIEST GUY ON THE PLANET in 4 Easy Steps
I told my dad, “I’m a lucky guy.” He said, “But are you lucky in love?” I was six years old. Love was the most disgusting thing in the world to me. What the hell was he talking about? Love was living in another neighborhood at that time. Or another planet. It would be years before Love stuck its ugly little nose into my house and said, “hello, anyone here?
Luck was all about rolling the dice. Or finding a quarter on the ground. Or seeing a double rainbow after a quick storm.
But now I’m different. I’m constantly checking in and out of the Hospital of No Luck. I’m older. I need luck to be constantly transfused into me or I run out of it. Without luck, I’m dead. For me, good luck equals happiness. On a scale of happiness from 0 to 10, I think I’m about a seven or eight. But that’s a big improvement. When I was lying on the floor here, I was probably about a zero. Or at different points in this story, I was maybe at negative. So I’m trending upwards. I get lucky when I stick to three simple goals:
My ONLY Three Goals in Life
A) I want to be happy.
B) I want to eradicate unhappiness in my life.
C) I want every day to be as smooth as possible. No hassles.
That’s it. I’m not asking for much. I need simple goals else I can’t achieve them.
There’s been at least ten times in my life that everything seemed so low I felt like I would never achieve the above three things and the world would be better off without me. Other times I felt like I was stuck at a crossroads and would never figure out which road to take. Each time I bounced back.
When I look back at these times now I realize there was a common thread. Each time there were four things, and only four things, that were always in place in order for me to bounce back. Now I try to incorporate these four things into a daily practice so I never dip low again.
THE DAILY PRACTICE
A) Physical – being in shape. Doing some form of exercise. In 2003 I woke up at 5am every day and from 5-6am I played “Round the World” on a basketball court overlooking the Hudson River. Every day (except when it rained). Trains would pass and people at 5:30am would wave to me out the window. Now, I try to do yoga every day. But its hard. All you need to do, minimally, is exercise enough to break a sweat for 10 minutes. So about 20-30 minutes worth of exercise a day. This is not to get “ripped” or “shredded”. But just to be healthy. You can’t be happy if you aren’t healthy. Also, spending this time helps your mind better deal with its daily anxieties. If you can breathe easy when your body is in pain then its easier to breathe during difficult situations. Here’s other things that are a part of this but a little bit harder:
1. Wake up by 4-5am every day.
2. Go to sleep by 8:30-9. (Good to sleep 8 hours a night!)
3. No eating after 5:30pm. Can’t be happy if indigested at night.
B) Emotional– If someone is a drag on me, I cut them out. If someone lifts me up, I bring them closer. Nobody is sacred here. When the plane is going down, put the oxygen mask on your face first. Family, friends, people I love – I always try to be there for them and help. But I don’t get close to anyone bringing me down. This rule can’t be broken. Energy leaks out of you if someone is draining you. And I never owe anyone an explanation. Explaining is draining.
Another important rule: always be honest. Its fun. Nobody is honest anymore and people are afraid of it. Try being honest for a day (without being hurtful). Its amazing where the boundaries are of how honest one can be. Its much bigger than I thought. A corollary of this is: I never do anything I don’t want to do. Like I NEVER go to weddings.
C) Mental – Every day I write down ideas. I write down so many ideas that it hurts my head to come up with one more. Then I try to write down five more. The other day I tried to write 100 alternatives kids can do other than go to college. I wrote down eight, which I wrote about here. I couldn’t come up with anymore. Then the next day I came up with another 40. It definitely stretched my head. No ideas today? Memorize all the legal 2 letter words for Scrabble. Translate the Tao Te Ching into Spanish. Need ideas for lists of ideas? Come up with 30 separate chapters for an “autobiography”. Try to think of 10 businesses you can start from home (and be realistic how you can execute them)? Give me 10 ideas of directions this blog can go in. Think of 20 ways Obama can improve the country. List every productive thing you did yesterday (this improves memory also and gives you ideas for today).
The “idea muscle” atrophies within days if you don’t use it. Just like walking. If you don’t use your legs for a week, they atrophy. You need to exercise the idea muscle. It takes about 3-6 months to build up once it atrophies. Trust me on this.
(use waiter pads to write down ideas)
D) Spiritual. I feel that most people don’t like the word “spiritual”. They think it means “god”. Or “religion”. But it doesn’t. I don’t know what it means actually. But I feel like I have a spiritual practice when I do one of the following:
1. Pray (doesn’t matter if I’m praying to a god or to dead people or to the sun or to a chair in front of me – it just means being thankful. And not taking all the credit, for just a few seconds of the day).
2. Meditate – Meditation for more than a few minutes is hard. It’s boring. Here I give tips for 60 second meditations. You can also meditate for 15 seconds by really visualizing what it would be like meditate for 60 minutes. Here’s a simple meditation: sit in a chair, keep the back straight, watch yourself breathe. If you get distracted, no problem. Just pull yourself back to your breath. Try it for 5 minutes. Then six.
3. Being grateful – I try to think of everyone in my life I’m grateful for. Then I try to think of more people. Then more. Its hard.
4. Forgiving – I picture everyone who has done me wrong. I visualize gratefulness for them (but not pity).
5. Studying. If I read a spiritual text (doesn’t matter what it is: Bible, Tao Te Ching, anything Zen related, even inspirational self-help stuff, doesn’t matter) I tend to feel good. This is not as powerful as praying or meditating (it doesn’t train your mind to cut out the BS) but it still makes me feel good.
My own experience: I can never achieve the three “simple” goals on a steady basis without doing the above practice on a daily basis. And EVERY TIME I’ve hit bottom (or close to a bottom, or I’ve been at some sort of crossroads.) and started dong the above 4 items (1991, 1995, 1997, 2002, 2006, 2008) magic would happen:
The Results
A) Within about one month, I’d notice coincidences start to happen. I’d start to feel lucky. People would smile at me more.
B) Within three months the ideas would really start flowing, to the point where I felt overwhelming urges to execute the ideas.
C) Within six months, good ideas would start flowing, I’d begin executing them, and everyone around me would help me put everything together.
D) Within a year my life was always completely different. 100% upside down from the year before. More money, more luck, more health, etc. And then I’d get lazy and stop doing the practice. And everything falls apart again. But now I’m trying to do it every day.
Its hard to do all of this every day. Nobody is perfect. I don’t know if I’ll do all of these things today. But I know when I do it, it works
I told my dad, “I’m a lucky guy.” He said, “But are you lucky in love?” I was six years old. Love was the most disgusting thing in the world to me. What the hell was he talking about? Love was living in another neighborhood at that time. Or another planet. It would be years before Love stuck its ugly little nose into my house and said, “hello, anyone here?
Luck was all about rolling the dice. Or finding a quarter on the ground. Or seeing a double rainbow after a quick storm.
But now I’m different. I’m constantly checking in and out of the Hospital of No Luck. I’m older. I need luck to be constantly transfused into me or I run out of it. Without luck, I’m dead. For me, good luck equals happiness. On a scale of happiness from 0 to 10, I think I’m about a seven or eight. But that’s a big improvement. When I was lying on the floor here, I was probably about a zero. Or at different points in this story, I was maybe at negative. So I’m trending upwards. I get lucky when I stick to three simple goals:
My ONLY Three Goals in Life
A) I want to be happy.
B) I want to eradicate unhappiness in my life.
C) I want every day to be as smooth as possible. No hassles.
That’s it. I’m not asking for much. I need simple goals else I can’t achieve them.
There’s been at least ten times in my life that everything seemed so low I felt like I would never achieve the above three things and the world would be better off without me. Other times I felt like I was stuck at a crossroads and would never figure out which road to take. Each time I bounced back.
When I look back at these times now I realize there was a common thread. Each time there were four things, and only four things, that were always in place in order for me to bounce back. Now I try to incorporate these four things into a daily practice so I never dip low again.
THE DAILY PRACTICE
A) Physical – being in shape. Doing some form of exercise. In 2003 I woke up at 5am every day and from 5-6am I played “Round the World” on a basketball court overlooking the Hudson River. Every day (except when it rained). Trains would pass and people at 5:30am would wave to me out the window. Now, I try to do yoga every day. But its hard. All you need to do, minimally, is exercise enough to break a sweat for 10 minutes. So about 20-30 minutes worth of exercise a day. This is not to get “ripped” or “shredded”. But just to be healthy. You can’t be happy if you aren’t healthy. Also, spending this time helps your mind better deal with its daily anxieties. If you can breathe easy when your body is in pain then its easier to breathe during difficult situations. Here’s other things that are a part of this but a little bit harder:
1. Wake up by 4-5am every day.
2. Go to sleep by 8:30-9. (Good to sleep 8 hours a night!)
3. No eating after 5:30pm. Can’t be happy if indigested at night.
B) Emotional– If someone is a drag on me, I cut them out. If someone lifts me up, I bring them closer. Nobody is sacred here. When the plane is going down, put the oxygen mask on your face first. Family, friends, people I love – I always try to be there for them and help. But I don’t get close to anyone bringing me down. This rule can’t be broken. Energy leaks out of you if someone is draining you. And I never owe anyone an explanation. Explaining is draining.
Another important rule: always be honest. Its fun. Nobody is honest anymore and people are afraid of it. Try being honest for a day (without being hurtful). Its amazing where the boundaries are of how honest one can be. Its much bigger than I thought. A corollary of this is: I never do anything I don’t want to do. Like I NEVER go to weddings.
C) Mental – Every day I write down ideas. I write down so many ideas that it hurts my head to come up with one more. Then I try to write down five more. The other day I tried to write 100 alternatives kids can do other than go to college. I wrote down eight, which I wrote about here. I couldn’t come up with anymore. Then the next day I came up with another 40. It definitely stretched my head. No ideas today? Memorize all the legal 2 letter words for Scrabble. Translate the Tao Te Ching into Spanish. Need ideas for lists of ideas? Come up with 30 separate chapters for an “autobiography”. Try to think of 10 businesses you can start from home (and be realistic how you can execute them)? Give me 10 ideas of directions this blog can go in. Think of 20 ways Obama can improve the country. List every productive thing you did yesterday (this improves memory also and gives you ideas for today).
The “idea muscle” atrophies within days if you don’t use it. Just like walking. If you don’t use your legs for a week, they atrophy. You need to exercise the idea muscle. It takes about 3-6 months to build up once it atrophies. Trust me on this.
(use waiter pads to write down ideas)
D) Spiritual. I feel that most people don’t like the word “spiritual”. They think it means “god”. Or “religion”. But it doesn’t. I don’t know what it means actually. But I feel like I have a spiritual practice when I do one of the following:
1. Pray (doesn’t matter if I’m praying to a god or to dead people or to the sun or to a chair in front of me – it just means being thankful. And not taking all the credit, for just a few seconds of the day).
2. Meditate – Meditation for more than a few minutes is hard. It’s boring. Here I give tips for 60 second meditations. You can also meditate for 15 seconds by really visualizing what it would be like meditate for 60 minutes. Here’s a simple meditation: sit in a chair, keep the back straight, watch yourself breathe. If you get distracted, no problem. Just pull yourself back to your breath. Try it for 5 minutes. Then six.
3. Being grateful – I try to think of everyone in my life I’m grateful for. Then I try to think of more people. Then more. Its hard.
4. Forgiving – I picture everyone who has done me wrong. I visualize gratefulness for them (but not pity).
5. Studying. If I read a spiritual text (doesn’t matter what it is: Bible, Tao Te Ching, anything Zen related, even inspirational self-help stuff, doesn’t matter) I tend to feel good. This is not as powerful as praying or meditating (it doesn’t train your mind to cut out the BS) but it still makes me feel good.
My own experience: I can never achieve the three “simple” goals on a steady basis without doing the above practice on a daily basis. And EVERY TIME I’ve hit bottom (or close to a bottom, or I’ve been at some sort of crossroads.) and started dong the above 4 items (1991, 1995, 1997, 2002, 2006, 2008) magic would happen:
The Results
A) Within about one month, I’d notice coincidences start to happen. I’d start to feel lucky. People would smile at me more.
B) Within three months the ideas would really start flowing, to the point where I felt overwhelming urges to execute the ideas.
C) Within six months, good ideas would start flowing, I’d begin executing them, and everyone around me would help me put everything together.
D) Within a year my life was always completely different. 100% upside down from the year before. More money, more luck, more health, etc. And then I’d get lazy and stop doing the practice. And everything falls apart again. But now I’m trying to do it every day.
Its hard to do all of this every day. Nobody is perfect. I don’t know if I’ll do all of these things today. But I know when I do it, it works
Why Apple Will Be The First Company to Reach a Trillion Dollar Market Cap
Why Apple Will Be The First Company to Reach a Trillion Dollar Market Cap
Various members of the NetNet crew are in and out this vacation and snow-filled week, so we've asked a few friends to fill in. The following is from hedge fund manager and financial columnist James Altucher ...
Apple [AAPL Loading... () ] is the dream company we always wished for when we were children. The messiah of companies that we never thought would come to Earth in our lifetimes.
Getty Images
Steve Jobs
When I was a kid the only thing I wanted in life was an Apple II+. When I finally got one, (my dad took one from his work and gave it to me for about six months) I did everything a young boy does with his computer.
I programmed (in BASIC) the computer to type my name over and over again. I then went to the local computer store and shoplifted Ultima III. My friends and I then copied each others games so we had a whole set of games to play with. I then skipped school incessantly in order to play games all day, my friends and I calling each other throughout the day (we all skipped school every day) in order to share the latest secrets we found while hacking our way through Castle Wolfenstein.
Fifteen years later Apple was on the verge of bankruptcy. The company I worked for (HBO) and Philip Morris, the cigarette company, were the only two companies in the city that I knew of that used primarily Macintoshes (except for the legal department, which used all PCs and every document was redlined, outlined, greenlit, in WordPerfect 7.1.1).
Gil Amelio, the CEO of the company for about 3 seconds came to visit HBO. We were all so impressed with him. The CEO of Apple! How much cooler could you get? At the time they were about this close from bankruptcy or being, at the very least, hopelessly inconsequential.
Five years before that was the Apple Newton. The head of Carnegie Mellon’s Art school said to me, “this will change the world.” And five years before that, I wrote my first term paper on this amazing little device, the Mac 512k. I also saw Steve Jobs when he visited Cornell’s Computer Science Department to get them to buy some NEXT machines. They were beautiful. Maybe still the most beautiful desktop machines I’ve ever seen.
Black cubes, super powerful. They were magic to program and experiment with. I wrote a chess program on them. Everyone surrounded Steve Jobs just to see what he looked like. I was jealous. He was young, rich, and had so much charisma you couldn’t even see past the light that shined out of him.
Getty Images
Now, I’m writing this on my last Windows-based laptop ever. I know what's going to happen. Already in my house there’s one Macbook Air. There are two IPod Touches, one iPhone, two iPads, and four or five iPods. I’ve got 10 authorized computers already for iTunes across two accounts. I download apps at least once per day, much more if you add in songs, TV shows and movies from the iTunes store. Within two weeks, before I leave on a trip for India, I will buy a Macbook Air 13” to travel with, and I know I will never go back to the HP laptops I’ve been using for almost the past 10 years.
Now lets look at the basic numbers.
This year iPad sales will probably end up being somewhere between 10 million and 12 million (they were 7.5 million at the end of last quarter.) Apple has about 40 percent gross margin on iPad sales
iPad has about 30 percent gross margin on app sales and 10 percent margin on song sales. They are selling up to 30 million apps a day.
Assume iPad is going to sell 50 million iPads next year (I’ve seen estimates ranging from 43 million to 65 million). That’s at least four times as many iPads. Lets say they only grow two times per year for the two years after that (new models, more availability worldwide, etc). That’s 200 million iPads in 2013, or 15 to 20 times what they did in 2010. Two-hundred million iPads with a 30 percent margin (currently margins on iPads are about 36 percent, but I assume they will go down) is about $30 billion in gross profits.
Assume 100 million app sales a day. Each app, on average, is about 30 cents They get 30 percent margins on an app, or about 9 cents per app. That’s $9 million in gross profits per day or about $3.5 billion per year in gross profits on app sales in 2013. Already we are at $35 billion in gross profits and that’s without counting iPhone sales, iPod sales, song sales (also about 10 cent margin per song), video sales, and of course, Mac sales.
You can’t even really make a calculation on everything else. The last few quarters: profits, Mac sales, iPod Touch sales, iPhone sales, all reached all time highs. Mac (which analysts originally thought might be cannibalized by the iPad) sales achieved double-digit growth in every worldwide market.
Next year the iPhone will be available on Verizon so will blow past all estimates
One can go on and on with the metrics of how Apple blows it away but lets just say that in 2013, iPad and app sales represent about 40 percent of Apple’s gross profits. Total gross profits could be about $80 billion (today is $25 billion). Cash flow could be about 75 percent of that (like it is today), or about $60 billion. Slap a 20 times multiple on that and you have a market cap of $1.2 trillion. That’s a shareprice of about $1200 by 2013.
We can try and model everything: Mac sales, iPod Touch sales, song sales, margins, etc. But even back of the envelope using current growth of the iPad and the app store, we can easily make a rationale for a trillion dollar market cap. The fact that iPad sales, rather than cannibalizing the Mac, has actually increased Mac sales further increases the argument. The day my dad had to take away my Apple II+, I cried. I have a 30 year relationship with Apple. I love it. I don’t think I have a real relationship with any other company on the planet. That’s why its going to be a trillion dollar market cap.
Various members of the NetNet crew are in and out this vacation and snow-filled week, so we've asked a few friends to fill in. The following is from hedge fund manager and financial columnist James Altucher ...
Apple [AAPL Loading... () ] is the dream company we always wished for when we were children. The messiah of companies that we never thought would come to Earth in our lifetimes.
Getty Images
Steve Jobs
When I was a kid the only thing I wanted in life was an Apple II+. When I finally got one, (my dad took one from his work and gave it to me for about six months) I did everything a young boy does with his computer.
I programmed (in BASIC) the computer to type my name over and over again. I then went to the local computer store and shoplifted Ultima III. My friends and I then copied each others games so we had a whole set of games to play with. I then skipped school incessantly in order to play games all day, my friends and I calling each other throughout the day (we all skipped school every day) in order to share the latest secrets we found while hacking our way through Castle Wolfenstein.
Fifteen years later Apple was on the verge of bankruptcy. The company I worked for (HBO) and Philip Morris, the cigarette company, were the only two companies in the city that I knew of that used primarily Macintoshes (except for the legal department, which used all PCs and every document was redlined, outlined, greenlit, in WordPerfect 7.1.1).
Gil Amelio, the CEO of the company for about 3 seconds came to visit HBO. We were all so impressed with him. The CEO of Apple! How much cooler could you get? At the time they were about this close from bankruptcy or being, at the very least, hopelessly inconsequential.
Five years before that was the Apple Newton. The head of Carnegie Mellon’s Art school said to me, “this will change the world.” And five years before that, I wrote my first term paper on this amazing little device, the Mac 512k. I also saw Steve Jobs when he visited Cornell’s Computer Science Department to get them to buy some NEXT machines. They were beautiful. Maybe still the most beautiful desktop machines I’ve ever seen.
Black cubes, super powerful. They were magic to program and experiment with. I wrote a chess program on them. Everyone surrounded Steve Jobs just to see what he looked like. I was jealous. He was young, rich, and had so much charisma you couldn’t even see past the light that shined out of him.
Getty Images
Now, I’m writing this on my last Windows-based laptop ever. I know what's going to happen. Already in my house there’s one Macbook Air. There are two IPod Touches, one iPhone, two iPads, and four or five iPods. I’ve got 10 authorized computers already for iTunes across two accounts. I download apps at least once per day, much more if you add in songs, TV shows and movies from the iTunes store. Within two weeks, before I leave on a trip for India, I will buy a Macbook Air 13” to travel with, and I know I will never go back to the HP laptops I’ve been using for almost the past 10 years.
Now lets look at the basic numbers.
This year iPad sales will probably end up being somewhere between 10 million and 12 million (they were 7.5 million at the end of last quarter.) Apple has about 40 percent gross margin on iPad sales
iPad has about 30 percent gross margin on app sales and 10 percent margin on song sales. They are selling up to 30 million apps a day.
Assume iPad is going to sell 50 million iPads next year (I’ve seen estimates ranging from 43 million to 65 million). That’s at least four times as many iPads. Lets say they only grow two times per year for the two years after that (new models, more availability worldwide, etc). That’s 200 million iPads in 2013, or 15 to 20 times what they did in 2010. Two-hundred million iPads with a 30 percent margin (currently margins on iPads are about 36 percent, but I assume they will go down) is about $30 billion in gross profits.
Assume 100 million app sales a day. Each app, on average, is about 30 cents They get 30 percent margins on an app, or about 9 cents per app. That’s $9 million in gross profits per day or about $3.5 billion per year in gross profits on app sales in 2013. Already we are at $35 billion in gross profits and that’s without counting iPhone sales, iPod sales, song sales (also about 10 cent margin per song), video sales, and of course, Mac sales.
You can’t even really make a calculation on everything else. The last few quarters: profits, Mac sales, iPod Touch sales, iPhone sales, all reached all time highs. Mac (which analysts originally thought might be cannibalized by the iPad) sales achieved double-digit growth in every worldwide market.
Next year the iPhone will be available on Verizon so will blow past all estimates
One can go on and on with the metrics of how Apple blows it away but lets just say that in 2013, iPad and app sales represent about 40 percent of Apple’s gross profits. Total gross profits could be about $80 billion (today is $25 billion). Cash flow could be about 75 percent of that (like it is today), or about $60 billion. Slap a 20 times multiple on that and you have a market cap of $1.2 trillion. That’s a shareprice of about $1200 by 2013.
We can try and model everything: Mac sales, iPod Touch sales, song sales, margins, etc. But even back of the envelope using current growth of the iPad and the app store, we can easily make a rationale for a trillion dollar market cap. The fact that iPad sales, rather than cannibalizing the Mac, has actually increased Mac sales further increases the argument. The day my dad had to take away my Apple II+, I cried. I have a 30 year relationship with Apple. I love it. I don’t think I have a real relationship with any other company on the planet. That’s why its going to be a trillion dollar market cap.
10 Unusual Things I Didn’t Know About Steve Jobs
10 Unusual Things I Didn’t Know About Steve Jobs
I was standing right next to Steve Jobs in 1989 and it was the closest thing I ever felt to being gay. The guy was incredibly wealthy, good looking enough to get any girl, a nerd super-rockstar who had just convinced my school to buy a bunch of NeXT machines (which, btw, were in fact the best machines to program on at the time) and I just wanted to be him. I wanted to be him ever since I had the Apple II+ as a kid. Ever since I shoplifted Ultima II, Castle Wolfenstein, and half a dozen other games that my friends and I would then rip from each other and pretend to be sick so we could stay home and play all day.
I don’t care about Apple stock. (Well, I do think it will be the first trillion dollar company). Or about his business successes. That’s boring. The only thing that matters to me is how Steve Jobs became the greatest artist that ever lived. You only get to be an artist like that by turning everything in your life upside down, by making horrible, ugly, mistakes, by doing things so differently that people will never be able to figure you out. By failing, cheating, lying, having everyone hate you, and coming out the other side with a little bit more wisdom than the rest.
So, 10 Unusual things I didn’t know about Steve Jobs.
1) Nature versus Nurture. His sister is Mona Simpson but he didn’t know it until he was an adult. Mona Simpson was one of my favorite novelists from the late 80s. Her first novel, Anywhere but Here , was about her relationship with her parents. Which, ironically, was Steve Jobs parents. But since Steve Jobs was adopted (see below) they didn’t know they were brother-sister until the 90s when he tracked her down. It’s proof (to an extent) of the nature versus nurture argument. Two kids, without knowing they were brother and sister, both having a unique sensibility of life on this planet to become among the best artists in the world in completely different endeavors. And, to me it was great that I was a fan of both without realizing (even before they realized) that they were related.
2) His father’s name is Abdulfattah Jandali. If you had to ask me what Steve Job’s father’s name was I never in one zillion years would’ve guessed that and that Steve Jobs biologically was half Syrian Muslim. For some reason I thought he was Jewish. Maybe its because I wanted to be him so I projected my own background onto him. His parents were two graduate students who I guess weren’t sure if they were ready for a kid so put him up for adoption and then a few years later had another kid (see above). So I didn’t know he was adopted. The one requirement his biological parents had was that he be adopted by two college educated people. But the couple that adopted him lied at first and turned out not to be college educated (the mom was not a high school graduate) so the deal almost fell through until they promised to send Steve to college. A promise they couldn’t keep (see below). So despite many layers of lies and promises broken, it all worked out in the end. People can save a lot of hassle by not having such high expectations and overly ambitious worries in the first place.
3) He made the game “Breakout”. If there was one thing I loved almost as much as the games on the Apple II+ it was playing Breakout on my first-generation Atari (I can’t remember, was that the Atari 2600?) And then breakout on every version of my Blackberry since 2000. If he had never done anything else in life and I had met him and he said, “I’m the guy who made Breakout”, I would’ve said, “you are the greatest genius of the past 100 years.” Funny how things turn out. He went on from Atari to form Apple. Nolan Bushnell, founder of Atari, went to form the greatest restaurant chain in the history of mankind: Chuck E. Cheese.
4) He denied paternity on his first child, claiming he was sterile. The other had to initially raise the kid using welfare checks. I have no judgment on this at all. Raising kids is hard. And when you have a kid you feel like this enormous energy and creativity you have for the world is going to get misdirected into a … little baby (Jobs’ parents must’ve felt that way as well. Like father, like son). Heck, I originally wanted my first kid to be aborted. But people change, mature, grow up. Eventually Jobs became a good father. And that’s what counts in the end. Much worse if it was the reverse. I didn’t know this either: that the Lisa computer (the “Apple III”) was named after this first child.
5) He’s a pescetarian. In other words, he eats fish but no other meat. And he eats anything else a vegetarian eats (including eggs and dairy). Turns out if you compare pescetarians with regular meat-eaters they have a 34% less chance of dying of heart disease. And if you compare vegetarians with meat eaters, they only have a 20% less chance of dying of heart disease. I think from now on I’m going to be a pescetarian, just because Steve Jobs is one. Except when I’m in Argentina. In Argentina you have to eat steak. Ted Danson and Mary Tyler Moore consider themselves pescetarians. Somehow, even the world “pescetarian” seems like it was invented in California.
6) He doesn’t give any money to charity. And when he became Apple’s CEO he stopped all of their philanthropic programs. He said, “wait until we are profitable”. Now they are profitable, and sitting on $40bb cash, and still not corporate philanthropy. I actually think Jobs is probably the most charitable guy on the planet. Rather than focus on which mosquitoes to kill in Africa (Bill Gates is already focusing on that), Jobs has put his energy into massively improving quality of life with all of his inventions. People think that entrepreneurs have to some day “give back”. This is not true. They already gave at the office. Look at the entire ipod/Mac/iphone/Disney ecosystem and ask how many lives have benefited directly (because they’ve been hired) or indirectly (because they use the products to improve their quality of life). As far as I know, Jobs has never even commented about his thoughts on charity. Good for him. As one CEO of a (currently) Fortune 10 company once told me when I had my hand out for a charitable website, “Screw charity!”
7) He lied to Steve Wozniak. When they made Breakout for Atari, Wozniak and Jobs were going to split the pay 50-50. Atari gave Jobs $5000 to do the job. He told Wozniak he got $700 so Wozniak took home $350. Again, no judgment. Young people do things. Show me someone who says he’s been honest from the day he was born and I’ll show you a liar. Its by making mistakes, having fights, finding out where your real boundaries in life are, that allow you to truly know where the boundaries are.
8) He’s a Zen Buddhist. He even thought about joining a monastery and becoming a monk. His guru, a Zen monk, married him and his wife. When I was going through some of my hardest times my only relief was sitting with a Zen group. Trying to quiet the mind to deal with the onrush of non-stop pain that was trying to invade there. The interesting thing about Jobs being a a Zen Buddhist is that most people would think that serious Buddhism and being one of the wealthiest people in the world come into conflict with each other. Isn’t Buddhism about non-attachment? Didn’t Buddha himself leave his riches and family behind?
But the answer is “no”. Its normal to pursue passions and outcomes, but just not to become overly attached to those outcomes. Being happy regardless of the outcome. A great story is the Zen master and his student walking by a river. A prostitute was there and needed to be carried over the river. The Zen master picked her up and carried her across the river and then put her down. Then the master and student kept walking. A few hours later the student was so agitated he finally had to ask, “Master, how could you touch and help that prostitute! That’s against what we believe in!” And the Master said, “I left her by the river. Why are you still carrying her?”
9) He didn’t go to college. I actually didn’t know this initially. Bill Gates and Mark Zuckerberg are the famous college dropouts that I knew about. But apparently Steve Jobs went to Reed College for one semester and then dropped out. I guess you don’t need college to program computers, make computers, build businesses, make movies, manage people, etc. (Of course, you can see all my other posts on why kids should not go to college)
10) Psychedelics. Steve Jobs used LSD at least once when he was younger. In fact, he said about the experience, it was “one of the two or three most important things I have done in my life.” Apple’s slogan for many years was “Think Different”. Maybe using a drug which tore him from the normal frame of reference taught him how to look at problems from such a unique perspective. I don’t think LSD is for everyone, but when you combine it with the innate genius the man had, plus the many ups and downs that he experienced, plus the Zen Buddhism and all of the other things above, its quite possible it all adds up to the many inventions he’s been able to produce.
Steve Jobs’ story is filled with nuance and ambiguity. People study Steve Jobs by looking at his straightforward business successes. Yes, he started Apple in a garage. Yes, he started Pixar and almost went broke with it. Yes, he started and sold Next and he was fired as CEO of Apple, and blah blah blah. But none of that will ever explain the man behind the genius. None of that will explain all the products he invented that we use today. None of that will tell us about the ipad, Toy Story, the Mac Air, the Apple II+, etc. A man’s successes can be truly understood only if we can count his tears. And unfortunately in the case of Steve Jobs, that is one task that’s impossible.
I was standing right next to Steve Jobs in 1989 and it was the closest thing I ever felt to being gay. The guy was incredibly wealthy, good looking enough to get any girl, a nerd super-rockstar who had just convinced my school to buy a bunch of NeXT machines (which, btw, were in fact the best machines to program on at the time) and I just wanted to be him. I wanted to be him ever since I had the Apple II+ as a kid. Ever since I shoplifted Ultima II, Castle Wolfenstein, and half a dozen other games that my friends and I would then rip from each other and pretend to be sick so we could stay home and play all day.
I don’t care about Apple stock. (Well, I do think it will be the first trillion dollar company). Or about his business successes. That’s boring. The only thing that matters to me is how Steve Jobs became the greatest artist that ever lived. You only get to be an artist like that by turning everything in your life upside down, by making horrible, ugly, mistakes, by doing things so differently that people will never be able to figure you out. By failing, cheating, lying, having everyone hate you, and coming out the other side with a little bit more wisdom than the rest.
So, 10 Unusual things I didn’t know about Steve Jobs.
1) Nature versus Nurture. His sister is Mona Simpson but he didn’t know it until he was an adult. Mona Simpson was one of my favorite novelists from the late 80s. Her first novel, Anywhere but Here , was about her relationship with her parents. Which, ironically, was Steve Jobs parents. But since Steve Jobs was adopted (see below) they didn’t know they were brother-sister until the 90s when he tracked her down. It’s proof (to an extent) of the nature versus nurture argument. Two kids, without knowing they were brother and sister, both having a unique sensibility of life on this planet to become among the best artists in the world in completely different endeavors. And, to me it was great that I was a fan of both without realizing (even before they realized) that they were related.
2) His father’s name is Abdulfattah Jandali. If you had to ask me what Steve Job’s father’s name was I never in one zillion years would’ve guessed that and that Steve Jobs biologically was half Syrian Muslim. For some reason I thought he was Jewish. Maybe its because I wanted to be him so I projected my own background onto him. His parents were two graduate students who I guess weren’t sure if they were ready for a kid so put him up for adoption and then a few years later had another kid (see above). So I didn’t know he was adopted. The one requirement his biological parents had was that he be adopted by two college educated people. But the couple that adopted him lied at first and turned out not to be college educated (the mom was not a high school graduate) so the deal almost fell through until they promised to send Steve to college. A promise they couldn’t keep (see below). So despite many layers of lies and promises broken, it all worked out in the end. People can save a lot of hassle by not having such high expectations and overly ambitious worries in the first place.
3) He made the game “Breakout”. If there was one thing I loved almost as much as the games on the Apple II+ it was playing Breakout on my first-generation Atari (I can’t remember, was that the Atari 2600?) And then breakout on every version of my Blackberry since 2000. If he had never done anything else in life and I had met him and he said, “I’m the guy who made Breakout”, I would’ve said, “you are the greatest genius of the past 100 years.” Funny how things turn out. He went on from Atari to form Apple. Nolan Bushnell, founder of Atari, went to form the greatest restaurant chain in the history of mankind: Chuck E. Cheese.
4) He denied paternity on his first child, claiming he was sterile. The other had to initially raise the kid using welfare checks. I have no judgment on this at all. Raising kids is hard. And when you have a kid you feel like this enormous energy and creativity you have for the world is going to get misdirected into a … little baby (Jobs’ parents must’ve felt that way as well. Like father, like son). Heck, I originally wanted my first kid to be aborted. But people change, mature, grow up. Eventually Jobs became a good father. And that’s what counts in the end. Much worse if it was the reverse. I didn’t know this either: that the Lisa computer (the “Apple III”) was named after this first child.
5) He’s a pescetarian. In other words, he eats fish but no other meat. And he eats anything else a vegetarian eats (including eggs and dairy). Turns out if you compare pescetarians with regular meat-eaters they have a 34% less chance of dying of heart disease. And if you compare vegetarians with meat eaters, they only have a 20% less chance of dying of heart disease. I think from now on I’m going to be a pescetarian, just because Steve Jobs is one. Except when I’m in Argentina. In Argentina you have to eat steak. Ted Danson and Mary Tyler Moore consider themselves pescetarians. Somehow, even the world “pescetarian” seems like it was invented in California.
6) He doesn’t give any money to charity. And when he became Apple’s CEO he stopped all of their philanthropic programs. He said, “wait until we are profitable”. Now they are profitable, and sitting on $40bb cash, and still not corporate philanthropy. I actually think Jobs is probably the most charitable guy on the planet. Rather than focus on which mosquitoes to kill in Africa (Bill Gates is already focusing on that), Jobs has put his energy into massively improving quality of life with all of his inventions. People think that entrepreneurs have to some day “give back”. This is not true. They already gave at the office. Look at the entire ipod/Mac/iphone/Disney ecosystem and ask how many lives have benefited directly (because they’ve been hired) or indirectly (because they use the products to improve their quality of life). As far as I know, Jobs has never even commented about his thoughts on charity. Good for him. As one CEO of a (currently) Fortune 10 company once told me when I had my hand out for a charitable website, “Screw charity!”
7) He lied to Steve Wozniak. When they made Breakout for Atari, Wozniak and Jobs were going to split the pay 50-50. Atari gave Jobs $5000 to do the job. He told Wozniak he got $700 so Wozniak took home $350. Again, no judgment. Young people do things. Show me someone who says he’s been honest from the day he was born and I’ll show you a liar. Its by making mistakes, having fights, finding out where your real boundaries in life are, that allow you to truly know where the boundaries are.
8) He’s a Zen Buddhist. He even thought about joining a monastery and becoming a monk. His guru, a Zen monk, married him and his wife. When I was going through some of my hardest times my only relief was sitting with a Zen group. Trying to quiet the mind to deal with the onrush of non-stop pain that was trying to invade there. The interesting thing about Jobs being a a Zen Buddhist is that most people would think that serious Buddhism and being one of the wealthiest people in the world come into conflict with each other. Isn’t Buddhism about non-attachment? Didn’t Buddha himself leave his riches and family behind?
But the answer is “no”. Its normal to pursue passions and outcomes, but just not to become overly attached to those outcomes. Being happy regardless of the outcome. A great story is the Zen master and his student walking by a river. A prostitute was there and needed to be carried over the river. The Zen master picked her up and carried her across the river and then put her down. Then the master and student kept walking. A few hours later the student was so agitated he finally had to ask, “Master, how could you touch and help that prostitute! That’s against what we believe in!” And the Master said, “I left her by the river. Why are you still carrying her?”
9) He didn’t go to college. I actually didn’t know this initially. Bill Gates and Mark Zuckerberg are the famous college dropouts that I knew about. But apparently Steve Jobs went to Reed College for one semester and then dropped out. I guess you don’t need college to program computers, make computers, build businesses, make movies, manage people, etc. (Of course, you can see all my other posts on why kids should not go to college)
10) Psychedelics. Steve Jobs used LSD at least once when he was younger. In fact, he said about the experience, it was “one of the two or three most important things I have done in my life.” Apple’s slogan for many years was “Think Different”. Maybe using a drug which tore him from the normal frame of reference taught him how to look at problems from such a unique perspective. I don’t think LSD is for everyone, but when you combine it with the innate genius the man had, plus the many ups and downs that he experienced, plus the Zen Buddhism and all of the other things above, its quite possible it all adds up to the many inventions he’s been able to produce.
Steve Jobs’ story is filled with nuance and ambiguity. People study Steve Jobs by looking at his straightforward business successes. Yes, he started Apple in a garage. Yes, he started Pixar and almost went broke with it. Yes, he started and sold Next and he was fired as CEO of Apple, and blah blah blah. But none of that will ever explain the man behind the genius. None of that will explain all the products he invented that we use today. None of that will tell us about the ipad, Toy Story, the Mac Air, the Apple II+, etc. A man’s successes can be truly understood only if we can count his tears. And unfortunately in the case of Steve Jobs, that is one task that’s impossible.
How I Screwed Yasser Arafat out of $2mm (and lost $100mm in the process)
How I Screwed Yasser Arafat out of $2mm (and lost $100mm in the process)
I needed to make one hundred million dollars pretty fast. You know how it is. There are bills to pay. There are things you want to do in life. I wanted, for instance, to work as a cashier in a bookstore. But with a twist. I would own the bookstore. I wanted to do a 90 second ad in the SuperBowl which would just be me walking around for 90 seconds saying and doing nothing. People would argue afterwards, “he could’ve used that money for charity. How selfish!” But I wouldn’t care. It was my money and I could do what I want with it. I would be teaching this grand lesson to all the people watching the Superbowl. I had no other specific desires about what I would do with one hundred million dollars. Just those two. But I knew more things would come.
At the time (1999) I had recently made money selling a company in the web services business. Among other things, my company made the website for the movie, “The Matrix”. I knew I was Neo but I wouldn’t be able to take the red pill until I had my first hundred million. That was the pill that would let me be a real person. The pill that would allow me to be fully alive.
So I came up with an idea. It was a catchphrase and I would use it many times over the next six months. “First there was the wireLINE internet. Then there was the wireLESS internet. Which would be ten times bigger.”
Those three sentences (or maybe its one if you use commas) were my path to $100 million. Here’s what you do then once you have your catchphrase. I had a business partner who wasn’t shy. So he called up 20 companies in the wireless software business and said, “We want to buy your company.” We had no money to buy anybody but if you ever let that slow you down you might as well run around naked in a football stadium with 60,000 people watching you.
One company responded. A company called “MobileLogic” out of Denver. They flew in and we took them out to breakfast at the Royalton Hotel on 44th Street. Its a fancy breakfast place. The sort of place Rupert Murdoch orders the pancakes, chews it up, spits it out without swallowing, and then orders granola to be healthy.
We’re all sitting around a table. “Its fortunate that you called,” the CEO of MobileLogic said to us. “Since Ericsson just offered us seventeen million and we’re thinking of taking it.” “Why would you take that,” I said. “We’ll offer you twenty million, half cash, half stock. That stock alone will be worth one hundred million or more once we go public. We have five other companies we’ll buy after you. You’ll be President of a major company thats going public, pronto. Ericsson is the old generation. Be apart of something new and exciting.”
I love the pancakes at the Royalton. They whip the eggs into the batter. Its fluffy and delicious. And the bacon is thick and the bacon juices spill into your mouth as you bite into it. Life was good. Jerry Levin might very well have been at the table next to us buying AOL right in front of our eyes. Thats how good life was then.
They took our offer. We quickly wrote up a binding LOI which they signed. We negotiated their salaries, their options, their earnout, everything. Now we needed to pay them twenty million dollars. We knew we could pay half the twenty in stock. So that was easy. That was a piece of paper. Now we had to come up with the other ten.
No problem. Because suddenly I had a real asset. I had a binding LOI for a company with $5-10mm in revenues (despite my propensity to remember every detail of my childhood, I can’t remember how much in revenues this company I was buying in 1999 had). There were companies going public then with zero dollars in revenues that were now worth over a hundred trillion dollars.
So, with some partners who were excellent middlemen I started going to potential investors. Mark Patterson, who was then vice chairman of CSFB and is now the head of multi-billion dollar hedge fund Maitlin-Patterson set up a conference call with a few small investors. One call he set up was with Henry Kravis, Leo Hindery, Jim McMann (CEO of 1800-Flowers) and Dennis something or other who just sold a huge Irish telecom company and was worth a random billion or so. I gave a fifteen minute talk. I described my background and the company I had sold. Then I used my catchphrase (see above) and scoped out the opportunity (“10x the size of the wireline internet”) and that was the call. Henry Kravis asked a question. I can’t remember what it was now because all I kept thinking was “you were the barbarian at the gate and now I’m the barbarian.”
Right after the call, Mark Patterson’s phone started ringing. Mark told me, “Henry wants to wire five million right now.” But we only took one from him. Too many other people wanted to invest. Everyone on that 15 minute conference call put in one million each.
At another meeting to raise money, I had to describe what we did. I wasn’t even totally sure what MobileLogic did. We protected data that was in corporate databases but was being sent out to the salesforces through wireless devices that we set up. It was pretty solid. I said, “the data goes to the satellite and then comes down to our devices.”
“I thought the data didn’t go through satellites. Doesn’t data go through cellular towers?” someone named Mamoon asked.
Uh-oh. That seemed to make more sense than satellites. “Sometimes,” I answered.
And they put five million in. Frank Quattrone put money in. Sam Waksal, Allen & Co. CMGI. The list goes on. We were the hot investment for three seconds. One guy who had initially rejected us but then saw the list of investors called me at two in the morning and said, “please let me put in a million.”
So we closed on thirty million dollars and bought our first company. Then we bought a second company. A consulting company called Katahdin. They had nothing to do with wireless but they had profits. We’d bury them in the IPO story but make use of their profits. Then we bought a third company. I can’t even remember their name but they were a spinoff from MIT. Right away we were getting calls. Aether Systems wanted to buy us but we said no. They only wanted to pay fifty million for the company. A banker at CS First Boston told us he could get us seventy five million no problem. But we didn’t even listen to him. In the elevator we laughed at him. What an old fool! We were going for an IPO.
Every bank came in with a powerpoint and a team of young people to pitch us. Goldman, CSFB, Merrill, Lehman, etc. CSFB was the front runner because Frank Quattrone was an investor but Merrill made a strong pitch. The pitch was funny. The top Merrill banker was there. He said to the associate on the deal, “John, walk them through the numbers.” And John said, “uhh, my name is Roy”. Two other things I remember from the pitch. The first was, “Henry Blodget will be the analyst on this deal. He loves wireless.” Which made no sense to me since he was an Internet consumer analyst.
The other thing I remember was the back page of the presentation. The beautiful back page. The only page that mattered. It had what my networth would be if we IPOed and the market valued us similar to Aether Systems. I would be worth something like nine hundred million dollars.
I knew exactly what bookstore I wanted to buy. It would be Shakespeare & Company on Broadway. None of the other employees would know that I would be the owner. And I would work just stacking books and being the guy at the cash register. My secret would give me infinite power.
I didn’t know how to be CEO of this company. And because I didn’t really know any of the employees of the companies we were buying I was feeling very shy. I would call my secretary before I arrived at work and ask her if anyone was in the hallway and could she please unlock my office door. Then I would hurry into the office and lock the door behind me.
Eventually they replaced me as CEO. Even later, when we had to raise up to another 70 million, they asked me to step off as a director on the board. At one point I arranged for a reverse merger to occur. We’d be public at at least at a hundred million dollar valuation. But the guy behind the reverse merger turned out to have a checkered past and had spent some time in jail in 1969 for either embezzlement or something to do with transporting fake diamonds. But thats another story.
None of this portrays me in a good light at all. Except for maybe the fact that I was a good salesman during the greatest bubble in world history. But it was decade ago and I don’t mind what people think.
But I did learn several things that became incredibly important to me later. :
A) if you have to raise thirty million to start your business, its probably not a good business (at least for me). All of my good businesses (businesses that I started that I eventually sold and made money on) started off profitable from day one and never raised a dime of money.
B) Most M&A transactions don’t work. When you buy a company, its very hard to keep the owners of the old company incentivized. 90% of acquisitions don’t work. Build your business. Don’t buy it.
C) A lesson I learn repeatedly: traveling for business almost never generates more revenues. New York (and America) are big enough places to generate revenues. You should never travel. In the course of doing this business I traveled repeatedly to the west coast, Denver, England (to try and buy a company), Sweden (where Ericsson was based), Germany (Ericsson wanted me to show up at a conference for one day), Georgia, Florida, Boston, etc etc. Not a single meeting generated any revenues for the business but wasted hundreds of hours of my life.
D) Hiring smart people doesn’t work if you aren’t smart. Everything ultimately comes form the top down.
E) Spending a lot of money on branding and marketing materials is a waste of money for a startup. If you don’t know who you are, no amount of money will create materials explaining who you are.
F) If you are going to raise thirty million for a business, then raise a hundred million if you can. Don’t turn down Henry Kravis’s five million. It doesn’t matter how badly you get diluted. If you have to raise money, take in every dime you can.
G) MOST IMPORTANT: If you raise thirty million, spend none of it. Warren Buffett once said, “if you know a business will be around 20 years from now then its probably a good investment.” With thirty million we could’ve stayed in business for 20 years or more and eventually figured ourself out. Instead, I spent forty million in the first month or so. I learned a lot, and over a hundred million was lost.
Eventually Vaultus (the name of the company. I think i forgot to mention it until now) was sold to Antenna Software. I made no money, as I rightfully shouldn’t.
Four years later, I was on a train to Boston with my business partner. It was 5 in the morning and we were going up to visit a hedge fund we were invested in. He was reading Bloomberg magazine. “Holy shit,” he said, waking me up. He showed me an article in the magazine. It was about Yasser Arafat, who had just died. Turns out he had a front corporation that was making various investments for him from the money he had somehow made off of the PLO. His largest (or second largest ) investment was two million dollars he had put into a “New York company, Vaultus, Inc.”. I can tell you for a fact his estate lost that two million. So, as they say in Brooklyn, it was good for the Jews.
I needed to make one hundred million dollars pretty fast. You know how it is. There are bills to pay. There are things you want to do in life. I wanted, for instance, to work as a cashier in a bookstore. But with a twist. I would own the bookstore. I wanted to do a 90 second ad in the SuperBowl which would just be me walking around for 90 seconds saying and doing nothing. People would argue afterwards, “he could’ve used that money for charity. How selfish!” But I wouldn’t care. It was my money and I could do what I want with it. I would be teaching this grand lesson to all the people watching the Superbowl. I had no other specific desires about what I would do with one hundred million dollars. Just those two. But I knew more things would come.
At the time (1999) I had recently made money selling a company in the web services business. Among other things, my company made the website for the movie, “The Matrix”. I knew I was Neo but I wouldn’t be able to take the red pill until I had my first hundred million. That was the pill that would let me be a real person. The pill that would allow me to be fully alive.
So I came up with an idea. It was a catchphrase and I would use it many times over the next six months. “First there was the wireLINE internet. Then there was the wireLESS internet. Which would be ten times bigger.”
Those three sentences (or maybe its one if you use commas) were my path to $100 million. Here’s what you do then once you have your catchphrase. I had a business partner who wasn’t shy. So he called up 20 companies in the wireless software business and said, “We want to buy your company.” We had no money to buy anybody but if you ever let that slow you down you might as well run around naked in a football stadium with 60,000 people watching you.
One company responded. A company called “MobileLogic” out of Denver. They flew in and we took them out to breakfast at the Royalton Hotel on 44th Street. Its a fancy breakfast place. The sort of place Rupert Murdoch orders the pancakes, chews it up, spits it out without swallowing, and then orders granola to be healthy.
We’re all sitting around a table. “Its fortunate that you called,” the CEO of MobileLogic said to us. “Since Ericsson just offered us seventeen million and we’re thinking of taking it.” “Why would you take that,” I said. “We’ll offer you twenty million, half cash, half stock. That stock alone will be worth one hundred million or more once we go public. We have five other companies we’ll buy after you. You’ll be President of a major company thats going public, pronto. Ericsson is the old generation. Be apart of something new and exciting.”
I love the pancakes at the Royalton. They whip the eggs into the batter. Its fluffy and delicious. And the bacon is thick and the bacon juices spill into your mouth as you bite into it. Life was good. Jerry Levin might very well have been at the table next to us buying AOL right in front of our eyes. Thats how good life was then.
They took our offer. We quickly wrote up a binding LOI which they signed. We negotiated their salaries, their options, their earnout, everything. Now we needed to pay them twenty million dollars. We knew we could pay half the twenty in stock. So that was easy. That was a piece of paper. Now we had to come up with the other ten.
No problem. Because suddenly I had a real asset. I had a binding LOI for a company with $5-10mm in revenues (despite my propensity to remember every detail of my childhood, I can’t remember how much in revenues this company I was buying in 1999 had). There were companies going public then with zero dollars in revenues that were now worth over a hundred trillion dollars.
So, with some partners who were excellent middlemen I started going to potential investors. Mark Patterson, who was then vice chairman of CSFB and is now the head of multi-billion dollar hedge fund Maitlin-Patterson set up a conference call with a few small investors. One call he set up was with Henry Kravis, Leo Hindery, Jim McMann (CEO of 1800-Flowers) and Dennis something or other who just sold a huge Irish telecom company and was worth a random billion or so. I gave a fifteen minute talk. I described my background and the company I had sold. Then I used my catchphrase (see above) and scoped out the opportunity (“10x the size of the wireline internet”) and that was the call. Henry Kravis asked a question. I can’t remember what it was now because all I kept thinking was “you were the barbarian at the gate and now I’m the barbarian.”
Right after the call, Mark Patterson’s phone started ringing. Mark told me, “Henry wants to wire five million right now.” But we only took one from him. Too many other people wanted to invest. Everyone on that 15 minute conference call put in one million each.
At another meeting to raise money, I had to describe what we did. I wasn’t even totally sure what MobileLogic did. We protected data that was in corporate databases but was being sent out to the salesforces through wireless devices that we set up. It was pretty solid. I said, “the data goes to the satellite and then comes down to our devices.”
“I thought the data didn’t go through satellites. Doesn’t data go through cellular towers?” someone named Mamoon asked.
Uh-oh. That seemed to make more sense than satellites. “Sometimes,” I answered.
And they put five million in. Frank Quattrone put money in. Sam Waksal, Allen & Co. CMGI. The list goes on. We were the hot investment for three seconds. One guy who had initially rejected us but then saw the list of investors called me at two in the morning and said, “please let me put in a million.”
So we closed on thirty million dollars and bought our first company. Then we bought a second company. A consulting company called Katahdin. They had nothing to do with wireless but they had profits. We’d bury them in the IPO story but make use of their profits. Then we bought a third company. I can’t even remember their name but they were a spinoff from MIT. Right away we were getting calls. Aether Systems wanted to buy us but we said no. They only wanted to pay fifty million for the company. A banker at CS First Boston told us he could get us seventy five million no problem. But we didn’t even listen to him. In the elevator we laughed at him. What an old fool! We were going for an IPO.
Every bank came in with a powerpoint and a team of young people to pitch us. Goldman, CSFB, Merrill, Lehman, etc. CSFB was the front runner because Frank Quattrone was an investor but Merrill made a strong pitch. The pitch was funny. The top Merrill banker was there. He said to the associate on the deal, “John, walk them through the numbers.” And John said, “uhh, my name is Roy”. Two other things I remember from the pitch. The first was, “Henry Blodget will be the analyst on this deal. He loves wireless.” Which made no sense to me since he was an Internet consumer analyst.
The other thing I remember was the back page of the presentation. The beautiful back page. The only page that mattered. It had what my networth would be if we IPOed and the market valued us similar to Aether Systems. I would be worth something like nine hundred million dollars.
I knew exactly what bookstore I wanted to buy. It would be Shakespeare & Company on Broadway. None of the other employees would know that I would be the owner. And I would work just stacking books and being the guy at the cash register. My secret would give me infinite power.
I didn’t know how to be CEO of this company. And because I didn’t really know any of the employees of the companies we were buying I was feeling very shy. I would call my secretary before I arrived at work and ask her if anyone was in the hallway and could she please unlock my office door. Then I would hurry into the office and lock the door behind me.
Eventually they replaced me as CEO. Even later, when we had to raise up to another 70 million, they asked me to step off as a director on the board. At one point I arranged for a reverse merger to occur. We’d be public at at least at a hundred million dollar valuation. But the guy behind the reverse merger turned out to have a checkered past and had spent some time in jail in 1969 for either embezzlement or something to do with transporting fake diamonds. But thats another story.
None of this portrays me in a good light at all. Except for maybe the fact that I was a good salesman during the greatest bubble in world history. But it was decade ago and I don’t mind what people think.
But I did learn several things that became incredibly important to me later. :
A) if you have to raise thirty million to start your business, its probably not a good business (at least for me). All of my good businesses (businesses that I started that I eventually sold and made money on) started off profitable from day one and never raised a dime of money.
B) Most M&A transactions don’t work. When you buy a company, its very hard to keep the owners of the old company incentivized. 90% of acquisitions don’t work. Build your business. Don’t buy it.
C) A lesson I learn repeatedly: traveling for business almost never generates more revenues. New York (and America) are big enough places to generate revenues. You should never travel. In the course of doing this business I traveled repeatedly to the west coast, Denver, England (to try and buy a company), Sweden (where Ericsson was based), Germany (Ericsson wanted me to show up at a conference for one day), Georgia, Florida, Boston, etc etc. Not a single meeting generated any revenues for the business but wasted hundreds of hours of my life.
D) Hiring smart people doesn’t work if you aren’t smart. Everything ultimately comes form the top down.
E) Spending a lot of money on branding and marketing materials is a waste of money for a startup. If you don’t know who you are, no amount of money will create materials explaining who you are.
F) If you are going to raise thirty million for a business, then raise a hundred million if you can. Don’t turn down Henry Kravis’s five million. It doesn’t matter how badly you get diluted. If you have to raise money, take in every dime you can.
G) MOST IMPORTANT: If you raise thirty million, spend none of it. Warren Buffett once said, “if you know a business will be around 20 years from now then its probably a good investment.” With thirty million we could’ve stayed in business for 20 years or more and eventually figured ourself out. Instead, I spent forty million in the first month or so. I learned a lot, and over a hundred million was lost.
Eventually Vaultus (the name of the company. I think i forgot to mention it until now) was sold to Antenna Software. I made no money, as I rightfully shouldn’t.
Four years later, I was on a train to Boston with my business partner. It was 5 in the morning and we were going up to visit a hedge fund we were invested in. He was reading Bloomberg magazine. “Holy shit,” he said, waking me up. He showed me an article in the magazine. It was about Yasser Arafat, who had just died. Turns out he had a front corporation that was making various investments for him from the money he had somehow made off of the PLO. His largest (or second largest ) investment was two million dollars he had put into a “New York company, Vaultus, Inc.”. I can tell you for a fact his estate lost that two million. So, as they say in Brooklyn, it was good for the Jews.
Ten Reasons You Need to Quit Your Job
Ten Reasons You Need to Quit Your Job
This is a cross-post from James Altucher‘s blog Altucher Confidential. His previous appearances on the Freakonomics blog can be found here.
Private Equity Firm
I fell straight down and broke both my legs right in the middle of the street. Or strained them. Or something. Because I couldn’t walk for a week afterwards. I was walking on Wall Street with two partners in the private equity firm I had just become a partner at earlier that week. This was fairly recently. Like in the past two years. I hadn’t stumbled over anything. Just fell to the ground in front of everyone.
“You okay?” everyone asked. I pretended not to limp. Later that night I couldn’t walk. A few days later I showed back up at the firm for a meeting I had set up. I wanted to do business with a Brazilian private equity firm. Brazil has two harvests, I learned in the meeting. Sounded like a place I wanted to do business. But I got bored. “Excuse me,” I said, and walked out of the meeting. Out of the office. Sixty-seven floors down. Subway to Grand Central. Train up to the Hudson Valley.
I never went back to the office. “Where are you?” The head partner wrote me. Some phone calls appeared on my cell. “Come back,” said the next email. “There’s still a place for you here,” said the next email two weeks later. I never responded to anything. They might still have my name on the door.
I have some bad habits.
HBO
I couldn’t get out of bed in the morning. It was summer. I lived in Hell’s Kitchen. For awhile, HBO was the best job ever. I used to skip to work every day. But I couldn’t get out of bed. And I had a business on the side that was growing. But I was afraid to jump into the abyss and just do my business full-time. HBO was HBO. I was afraid nobody would return my calls if I left HBO. And I was right. Start-up world was the abyss. The work at HBO was monotonous, draining; I hated the politics. I had to go in though. There were meetings. Who was going to make the website for Sex and the City?
But I couldn’t get out of bed in the morning.
TheStreet.com
I was afraid to go into the office. There were too many people I didn’t want to run into. I would do videos outside every morning in front of the New York Stock Exchange. But I refused to go up into the office for meetings. People still stop me on the street. “I used to love those videos. Where are you now?” They ask. Even though I write for a million other places. I learned a lot working with Jim Cramer.
But there were too many people I didn’t want to run into.
One day, Dave Morrow (R.I.P.) called me and said, “You have to come into the office. We have to talk.”
I said, “Let’s meet outside where you usually do your cigarette breaks.” I couldn’t come into the office.
“No,” he said. “You have to come in.”
I had a deal with TheStreet.com after I sold Stockpickr to them. But two years in they wanted to change the deal. I went into the office and was met by Dave and the woman from HR. They offered me half salary and I had to show up at the office 40 hours a week.
I’m a skilled negotiator. So I counter-offered. “I will write for you every day for FREE,” I said, “and I will get zero salary. But I can’t come into the office.” At the time I lived on 15 Broad Street. If you know the geography of Wall Street, you would know that I lived approximately 40 feet from Thestreet.com’s offices at 14 Wall Street.
They said, “No.”
Fund of funds
Photo: iStockphoto
I ran a fund of hedge funds. We were invested in 12 different hedge funds. This was 2006. Several of those funds have since settled with the SEC. But by then we were no longer invested in them.
A major bank wanted to buy our fund of funds. They made a great offer: 10 percent of our assets. Typically a company like ours goes for 2 percent of assets. It was millions. We flew out to California to meet them. They flew out to NYC to meet us. We got the official legal document that was the deal. They wanted me to sign a six-year employment agreement. My business partner said we can’t do this deal. My lawyer said, “This is indentured servitude.”
We didn’t respond to the offer. They called me several times. “We are willing to negotiate,” the CEO of the bank said, “if there’s a problem.” But they had no idea what the problem was. Because I never responded to them. I responded to their Facebook friend requests. We’re all “friends” now, although we’ve never spoken again. And we shut the fund of funds down.
Trading
I was trading for several hedge funds. But about once a month I would get so stressed I wouldn’t be able to sleep and I would feel all the blood going through my body. I’d be up at three in the morning checking futures. I’d never sleep. Once a month my partner and I were convinced we were going to stop trading and make an infomercial for “diet pills.”
We figured out how to manufacture them cheap, how to video the infomercial, how to air it late at night. We were going to do it. But we kept trading. And once a month… repeat. We returned the money. Nobody wanted the money back. We were doing great for them. But we returned it all and never spoke to anyone again.
Programming
I had a job at Carnegie Mellon’s Center for Machine Translation. Software I wrote helped take Caterpillar tractor manuals and translate them from English to German and ten other languages. One day I left early. I wanted to hang out with a girl. The next day the boss came into my office and, with the door open and in front of people, proceeded to yell at me. But not just yell at me. He was yelling questions. You know those sorts of questions. A yell plus a question you can’t answer like, “Did you really think that was a good thing to do?” Of course I can’t answer that.
So I quit. And took the job HBO was offering me. But never told him I had a counter-offer. So he would suffer. For months after I left nobody could figure out my programming code. Because I had the ugliest code known to man. It was indecipherable.
Xceed
Xceed bought my first company, Reset. They were going to keep all the brands separate but then they combined them and moved us all into one big building. I had an office. I was a “senior vice president” along with about 40 other people. But Xceed had acquired too many companies. Everyone was gossiping all day long about everyone else. I stopped going into the office. I started looking for other things to do. I finally told them I was quitting and they threatened to sue me. “The one area where slavery is legal in America is when one company buys another company,” the Chairman of the company told me. So sue me. He has since produced the latest Superman movie.
10 Signs you need to leave your corporate job
A) You can’t wake up. You need 10 extra minutes to get up. Then another 10.
B) You get physically hurt while on the job for no real reason (subconscious at work).
C) You don’t feel like returning emails or phone calls. When the number of un-returned emails or calls hits 20, you need to leave.
D) You are unsure about your compensation (with the private equity firm above my compensation was very unclear).
E) You are afraid to run into people in the office for no real reason.
F) You are not creating any additional value for yourself. View yourself as a business. Is the value of “your business” going up. When I was at the fund of funds, the fact that I could only sell my fund of funds if I signed a six year employment agreement, showed me that I had not been creating any additional value in my business.
G) You are thinking about selling diet pills. Tim Ferris aside, nobody in their right mind should sell diet pills.
H) Someone yells at you. You’re not a kid. Yelling is abusive. Nobody should ever yell at you. Ever. But that’s a hard habit to break if you are used to people yelling at you.
I) You think about office politics more than you think about how to do your job well. Never gossip at work. Ever.
J) You date someone at work. One of you needs to leave. Pronto. Or else, work, relationships, life, gets ruined. Don’t shit where you eat.
I think 90 percent of people should quit their jobs right now or do something utterly drastic to shake things up. “What would I do?” People ask. “I have responsibilities, mouths to feed, mortgage to pay. You don’t get it.” Yes I do. You throw yourself into the abyss. You get scared. You stay up late at night thinking and thinking and thinking. You feel like the death of emptiness is worse than the slow death of your job. But you’ll figure it out. One by one all of your old colleagues will disappear from your life. They will die.
You’ll still be alive.
*As a side story, once I was at the second wedding I ever went to. It was a lesbian wedding, so we had to go out to sea in a boat. I saw this pretty woman on the boat. She started talking to me and I still didn’t recognize her. Finally, she realized I didn’t recognize her and said, “James! It’s me, X!” And I remembered the last time I’d seen her. It was six months earlier. I used to work with her every day. Then she had been fired. She had been ugly then. I mean, hideous. Now she was beautiful and unrecognizable. Six months is a long time when you are free from prison
This is a cross-post from James Altucher‘s blog Altucher Confidential. His previous appearances on the Freakonomics blog can be found here.
Private Equity Firm
I fell straight down and broke both my legs right in the middle of the street. Or strained them. Or something. Because I couldn’t walk for a week afterwards. I was walking on Wall Street with two partners in the private equity firm I had just become a partner at earlier that week. This was fairly recently. Like in the past two years. I hadn’t stumbled over anything. Just fell to the ground in front of everyone.
“You okay?” everyone asked. I pretended not to limp. Later that night I couldn’t walk. A few days later I showed back up at the firm for a meeting I had set up. I wanted to do business with a Brazilian private equity firm. Brazil has two harvests, I learned in the meeting. Sounded like a place I wanted to do business. But I got bored. “Excuse me,” I said, and walked out of the meeting. Out of the office. Sixty-seven floors down. Subway to Grand Central. Train up to the Hudson Valley.
I never went back to the office. “Where are you?” The head partner wrote me. Some phone calls appeared on my cell. “Come back,” said the next email. “There’s still a place for you here,” said the next email two weeks later. I never responded to anything. They might still have my name on the door.
I have some bad habits.
HBO
I couldn’t get out of bed in the morning. It was summer. I lived in Hell’s Kitchen. For awhile, HBO was the best job ever. I used to skip to work every day. But I couldn’t get out of bed. And I had a business on the side that was growing. But I was afraid to jump into the abyss and just do my business full-time. HBO was HBO. I was afraid nobody would return my calls if I left HBO. And I was right. Start-up world was the abyss. The work at HBO was monotonous, draining; I hated the politics. I had to go in though. There were meetings. Who was going to make the website for Sex and the City?
But I couldn’t get out of bed in the morning.
TheStreet.com
I was afraid to go into the office. There were too many people I didn’t want to run into. I would do videos outside every morning in front of the New York Stock Exchange. But I refused to go up into the office for meetings. People still stop me on the street. “I used to love those videos. Where are you now?” They ask. Even though I write for a million other places. I learned a lot working with Jim Cramer.
But there were too many people I didn’t want to run into.
One day, Dave Morrow (R.I.P.) called me and said, “You have to come into the office. We have to talk.”
I said, “Let’s meet outside where you usually do your cigarette breaks.” I couldn’t come into the office.
“No,” he said. “You have to come in.”
I had a deal with TheStreet.com after I sold Stockpickr to them. But two years in they wanted to change the deal. I went into the office and was met by Dave and the woman from HR. They offered me half salary and I had to show up at the office 40 hours a week.
I’m a skilled negotiator. So I counter-offered. “I will write for you every day for FREE,” I said, “and I will get zero salary. But I can’t come into the office.” At the time I lived on 15 Broad Street. If you know the geography of Wall Street, you would know that I lived approximately 40 feet from Thestreet.com’s offices at 14 Wall Street.
They said, “No.”
Fund of funds
Photo: iStockphoto
I ran a fund of hedge funds. We were invested in 12 different hedge funds. This was 2006. Several of those funds have since settled with the SEC. But by then we were no longer invested in them.
A major bank wanted to buy our fund of funds. They made a great offer: 10 percent of our assets. Typically a company like ours goes for 2 percent of assets. It was millions. We flew out to California to meet them. They flew out to NYC to meet us. We got the official legal document that was the deal. They wanted me to sign a six-year employment agreement. My business partner said we can’t do this deal. My lawyer said, “This is indentured servitude.”
We didn’t respond to the offer. They called me several times. “We are willing to negotiate,” the CEO of the bank said, “if there’s a problem.” But they had no idea what the problem was. Because I never responded to them. I responded to their Facebook friend requests. We’re all “friends” now, although we’ve never spoken again. And we shut the fund of funds down.
Trading
I was trading for several hedge funds. But about once a month I would get so stressed I wouldn’t be able to sleep and I would feel all the blood going through my body. I’d be up at three in the morning checking futures. I’d never sleep. Once a month my partner and I were convinced we were going to stop trading and make an infomercial for “diet pills.”
We figured out how to manufacture them cheap, how to video the infomercial, how to air it late at night. We were going to do it. But we kept trading. And once a month… repeat. We returned the money. Nobody wanted the money back. We were doing great for them. But we returned it all and never spoke to anyone again.
Programming
I had a job at Carnegie Mellon’s Center for Machine Translation. Software I wrote helped take Caterpillar tractor manuals and translate them from English to German and ten other languages. One day I left early. I wanted to hang out with a girl. The next day the boss came into my office and, with the door open and in front of people, proceeded to yell at me. But not just yell at me. He was yelling questions. You know those sorts of questions. A yell plus a question you can’t answer like, “Did you really think that was a good thing to do?” Of course I can’t answer that.
So I quit. And took the job HBO was offering me. But never told him I had a counter-offer. So he would suffer. For months after I left nobody could figure out my programming code. Because I had the ugliest code known to man. It was indecipherable.
Xceed
Xceed bought my first company, Reset. They were going to keep all the brands separate but then they combined them and moved us all into one big building. I had an office. I was a “senior vice president” along with about 40 other people. But Xceed had acquired too many companies. Everyone was gossiping all day long about everyone else. I stopped going into the office. I started looking for other things to do. I finally told them I was quitting and they threatened to sue me. “The one area where slavery is legal in America is when one company buys another company,” the Chairman of the company told me. So sue me. He has since produced the latest Superman movie.
10 Signs you need to leave your corporate job
A) You can’t wake up. You need 10 extra minutes to get up. Then another 10.
B) You get physically hurt while on the job for no real reason (subconscious at work).
C) You don’t feel like returning emails or phone calls. When the number of un-returned emails or calls hits 20, you need to leave.
D) You are unsure about your compensation (with the private equity firm above my compensation was very unclear).
E) You are afraid to run into people in the office for no real reason.
F) You are not creating any additional value for yourself. View yourself as a business. Is the value of “your business” going up. When I was at the fund of funds, the fact that I could only sell my fund of funds if I signed a six year employment agreement, showed me that I had not been creating any additional value in my business.
G) You are thinking about selling diet pills. Tim Ferris aside, nobody in their right mind should sell diet pills.
H) Someone yells at you. You’re not a kid. Yelling is abusive. Nobody should ever yell at you. Ever. But that’s a hard habit to break if you are used to people yelling at you.
I) You think about office politics more than you think about how to do your job well. Never gossip at work. Ever.
J) You date someone at work. One of you needs to leave. Pronto. Or else, work, relationships, life, gets ruined. Don’t shit where you eat.
I think 90 percent of people should quit their jobs right now or do something utterly drastic to shake things up. “What would I do?” People ask. “I have responsibilities, mouths to feed, mortgage to pay. You don’t get it.” Yes I do. You throw yourself into the abyss. You get scared. You stay up late at night thinking and thinking and thinking. You feel like the death of emptiness is worse than the slow death of your job. But you’ll figure it out. One by one all of your old colleagues will disappear from your life. They will die.
You’ll still be alive.
*As a side story, once I was at the second wedding I ever went to. It was a lesbian wedding, so we had to go out to sea in a boat. I saw this pretty woman on the boat. She started talking to me and I still didn’t recognize her. Finally, she realized I didn’t recognize her and said, “James! It’s me, X!” And I remembered the last time I’d seen her. It was six months earlier. I used to work with her every day. Then she had been fired. She had been ugly then. I mean, hideous. Now she was beautiful and unrecognizable. Six months is a long time when you are free from prison
Tuesday, March 22, 2011
japan aftermath...
India and China record gains, Japan stocks tumble 6% amid quake aftermath
The Asian markets witnessed a mixed outing today though the overall sentiments were hurt after the devastating 8.9 8.9-magnitude earthquake in Japan on Friday. The earthquake and the ensuing tsunamis have lead to a loss of around 10000 lives and the natural calamity is being held as the worst disaster for the second largest economy in Asia since World War II. Today, media reports stated that a hydrogen explosion rocked Japan's stricken Dai-ichi nuclear plant in Fukushima - second such blast in three days. The US stocks had a good outing on Friday, with bargain hunting leading the index linked counters higher after the stocks hit one-month closing on Thursday. The Dow added 59.48 points or 0.5 percent to close at 12,044.09.
Meanwhile, the political unrest in Libya is persisting. The unrelenting stance of the Qadhafi government and a lack of consensus among the global powers over whether any intervention is advisable have led to a deadlock and there are fears that the more the conflict rages, there is a better chance of Qadhafi prevailing as his brute force would jettison the protestors.
This ensured that the week starts on a somber note for the Asian markets. Japanese stocks were pummeled as expected, dropping more than 6% in early moves and holding onto the initial setback throughout the day. The Japanese yen, on the other hand, rose and kept it very difficult for the exporters to witness any sort of bargain buying. Japan's Nikkei 225 plunged 617.18 points or 6.02% to 9,637.25. On the economic front, a monthly survey conducted by Cabinet Office in Japan revealed that consumer sentiment weakened in February. Overall consumer sentiment fell to 40.7 in February from 41.1 in the previous month. At the same time, households' confidence came in at 40.6, down from 41.1 in January. Within the households' sentiment index, overall livelihood fell to 41.5 from 42.7 in January and income growth eased to 40.6 from 41
In Australia, the markets were off to a weak start on the first trading session of the week. The resources stayed lower and mid session gains were cut back on persistent selling pressure. The benchmark S&P/ASX200 Index dropped 18.40 points, or 0.40%, to close at 4,626.40 points by the close.
In China, the broad markets edged higher despite gloomy sentiments in world markets as coal and steel counters went up, pushing the benchmark Shanghai Composite index above 2900 points level. The barometer added 5.11 points or 0.17% to close at 2938.91 points.
In Mumbai, frenzied buying propelled the key benchmark indices to fresh day's high in late trade as a decline in crude oil prices offset the latest data showing higher headline inflation in February 2011. Reports that the Union Cabinet is likely consider a Constitution Amendment Bill tomorrow, 15 March 2011, to pave the way for implementation of Goods and Services Tax (GST), also boosted sentiments. The GST is a major indirect tax reform. European markets and US index futures were off day's lows and most Asian markets settled higher after a subdued start even as Japanese stocks tumbled as investors continued to assess the financial impact of Friday's (11 March 2011) devastating earthquake that hit Japan. As per provisional closing, the BSE 30-share Sensex was up 281.60 points or 1.55% to 18,455.69.
In other markets, Straits Times index in Singapore dropped 0.26%, Seoul Composite index in South Korea edged up 0.80% while Taiwan Weighted index in Taiwan shed 0.56%. In commodities, crude oil futures fell under $100 per barrel for the WTI variety in New York and currently quote at $99.36, down $1.80 per ounce on the day. Gold is quoting with little change, holding around $1425 per ounce mark as buying support emerged after prices tested lows under $1420 per ounce. Dollar gained slightly today after cutting its gains on Friday after the European leaders announced their collective support to the debt laden PIIGS nations.
The Asian markets witnessed a mixed outing today though the overall sentiments were hurt after the devastating 8.9 8.9-magnitude earthquake in Japan on Friday. The earthquake and the ensuing tsunamis have lead to a loss of around 10000 lives and the natural calamity is being held as the worst disaster for the second largest economy in Asia since World War II. Today, media reports stated that a hydrogen explosion rocked Japan's stricken Dai-ichi nuclear plant in Fukushima - second such blast in three days. The US stocks had a good outing on Friday, with bargain hunting leading the index linked counters higher after the stocks hit one-month closing on Thursday. The Dow added 59.48 points or 0.5 percent to close at 12,044.09.
Meanwhile, the political unrest in Libya is persisting. The unrelenting stance of the Qadhafi government and a lack of consensus among the global powers over whether any intervention is advisable have led to a deadlock and there are fears that the more the conflict rages, there is a better chance of Qadhafi prevailing as his brute force would jettison the protestors.
This ensured that the week starts on a somber note for the Asian markets. Japanese stocks were pummeled as expected, dropping more than 6% in early moves and holding onto the initial setback throughout the day. The Japanese yen, on the other hand, rose and kept it very difficult for the exporters to witness any sort of bargain buying. Japan's Nikkei 225 plunged 617.18 points or 6.02% to 9,637.25. On the economic front, a monthly survey conducted by Cabinet Office in Japan revealed that consumer sentiment weakened in February. Overall consumer sentiment fell to 40.7 in February from 41.1 in the previous month. At the same time, households' confidence came in at 40.6, down from 41.1 in January. Within the households' sentiment index, overall livelihood fell to 41.5 from 42.7 in January and income growth eased to 40.6 from 41
In Australia, the markets were off to a weak start on the first trading session of the week. The resources stayed lower and mid session gains were cut back on persistent selling pressure. The benchmark S&P/ASX200 Index dropped 18.40 points, or 0.40%, to close at 4,626.40 points by the close.
In China, the broad markets edged higher despite gloomy sentiments in world markets as coal and steel counters went up, pushing the benchmark Shanghai Composite index above 2900 points level. The barometer added 5.11 points or 0.17% to close at 2938.91 points.
In Mumbai, frenzied buying propelled the key benchmark indices to fresh day's high in late trade as a decline in crude oil prices offset the latest data showing higher headline inflation in February 2011. Reports that the Union Cabinet is likely consider a Constitution Amendment Bill tomorrow, 15 March 2011, to pave the way for implementation of Goods and Services Tax (GST), also boosted sentiments. The GST is a major indirect tax reform. European markets and US index futures were off day's lows and most Asian markets settled higher after a subdued start even as Japanese stocks tumbled as investors continued to assess the financial impact of Friday's (11 March 2011) devastating earthquake that hit Japan. As per provisional closing, the BSE 30-share Sensex was up 281.60 points or 1.55% to 18,455.69.
In other markets, Straits Times index in Singapore dropped 0.26%, Seoul Composite index in South Korea edged up 0.80% while Taiwan Weighted index in Taiwan shed 0.56%. In commodities, crude oil futures fell under $100 per barrel for the WTI variety in New York and currently quote at $99.36, down $1.80 per ounce on the day. Gold is quoting with little change, holding around $1425 per ounce mark as buying support emerged after prices tested lows under $1420 per ounce. Dollar gained slightly today after cutting its gains on Friday after the European leaders announced their collective support to the debt laden PIIGS nations.
Courage!
In the world of securities, courage becomes the supreme virtue after adequate knowledge and a tested judgment are at hand – Benjamin Graham.
After another tumultuous week, we are headed for a positive start despite oil prices climbing in the wake of the air strikes on Libya. Most Asian markets have for now shrugged off the new developments in MENA, Japan’s continuous struggle to contain nuclear contamination and China’s latest RRR hike. Japan’s markets are shut today for a holiday.
US markets closed higher on Friday for a second straight day but finished in the red for the week. European stocks managed slender gains but were down for the week.
While the opening will be in the green, the gains may peter out later in the day amid concerns about surging oil prices and the MENA unrest.
Volatility will stay elevated. The fact that the key indices are still trading below their 200-DMA is a big worry. Even if they do manage to surpass the key technical levels, there is no immediate certainty about the near term direction of the market.
Among the major domestic concerns has been lack of meaningful progress on reforms amid a series of controversies. FII inflows too are yet to turn around.
The Indian markets made a lower high and a lower low on weekly candlestick chart last week. With the Nifty violating key support level of 5400, we could see accentuated selling in the near term which can take the index toward of 5300.
FIIs were net sellers of Rs 5.23bn in the cash segment on Friday, according to the provisional NSE data. The domestic institutional investors (DIIs) were net buyers at Rs 2.96bn on the same day. FIIs were net sellers at Rs 13.06bn in the F&O segment.
The foreign funds were net sellers at Rs 4.05bn in the cash segment on Thursday, as per final SEBI data. Mutual Funds were net buyers at Rs 650mn in the cash segment on the same day.
Asian Markets on Monday:
Asian markets advanced, notwithstanding a fresh spike in crude oil prices in the wake of the weekend aerial assault by the US and allied forces in Libya. Regional energy stocks rose. Sentiment was also supported by healthy US data.
Japanese markets are closed for a public holiday.
The MSCI Asia Pacific, excluding Japan Index was little changed at 452.90. About twice as many stocks rose as fell on the gauge, which has lost 5.5% this year.
The Hang Seng in Hong Kong was up 1% at 22,530 while the Shanghai Composite index in China was down ~0.1% at 2,903. The Kospi in Seoul climbed ~1% at 2,000 while the Straits Times in Singapore gained 0.8% at 2,959.
The Taiex in Taiwan was up 0.75% at 8,458 while the S&P/ASX 200 index in Australia rose ~0.1% at 4,632. New Zealand's NZX 50 index was up 0.25% at 3,347.
The broader MSCI Asia Pacific Index last week recorded its biggest weekly drop since the height of the European debt crisis last May.
The yen declined for a second day against all its major counterparts on speculation that the Group of Seven (G7) nations will continue to support Japan buy jointly selling the currency.
G7 members sold the Japanese currency on March 18 after it reached a postwar high.
The euro strengthened versus the yen on the prospect that European Central Bank (ECB) President Jean-Claude Trichet will today reiterate his willingness to increase interest rates next month.
The euro rose versus 11 of its 16 major counterparts.
The dollar managed to avert heavy losses amid continuing turmoil in the Middle-East and North Africa.
The US and allied forces launched an air offensive against Libya, adding to the concerns that the regional unrest will spread in other parts of the world's key oil-producing region.
A no-fly zone is now in place over Libya, Admiral Mike Mullen, chairman of the US Joint Chiefs of Staff said. The coalition ordered Libyan leader Muammar Gaddafi to withdraw his forces from major cities .
US Markets on Friday:
US stock indices rose for a second day in a row on Friday but closed off session highs and finished down for the week as investors weighed risks from the persistent strife in the MENA region and Japan's ongoing nuclear problems.
The gains were supported by a spate of dividend announcements from major banks and a decision by global central banks to intervene in the currency markets to help Japan recover from its worst earthquake.
The Dow Jones Industrial Average closed up 83.93 points, or 0.7%, at 11,858.52, losing some steam in afternoon trading after gaining more than 150 points.
The Standard & Poor’s 500 Index gained 5.49 points, or 0.4%, to 1,279.21, with financials the best-performing sector among its 10 industry groups.
The Nasdaq Composite Index rose 7.62 points, or 0.3%, at 2,643.67.
For the week, the Dow average lost 1.5%, the S&P 500 slid 1.9% and the Nasdaq Composite lost 2.7%.
While the Dow and S&P 500 remain modestly higher for the year, this week's declines have now put the Nasdaq down 0.4% year-to-date.
On the New York Stock Exchange, advancers topped decliners by more than 2-to-1, where 1.9 billion shares traded hands.
Treasurys edged lower, sending yields on the 10-year note up 1 basis point to 3.28%. For the week, however, Treasurys rallied on demand for safe-haven assets, with yields falling from 3.4% a week ago.
After rising to an intraday high of $103.66 a barrel, crude-oil futures for April delivery finished at $101.07, down 35 cents, on the New York Mercantile Exchange.
The dollar gained 2.3% against the yen to ¥80.756, its biggest one-day gain since mid-September. At one point it surged 3.7%. The dollar had tumbled against the yen since a devastating earthquake.
The Japanese yen had been driven sharply higher in recent days by global uncertainty and the prospect of more cash flowing into Japan.
Gold futures for April delivery rose $11.90, or 0.8%, to trade at $1,416.10 an ounce.
Sentiment was bolstered after the world’s seven biggest industrialized nations agreed to a plan to bring the Japanese yen down from historic highs.
Libya’s foreign minister announced a cease-fire and said that the government would halt military operations in the North African nation.
Reports later indicated heavy fighting in at least one Libyan city even as western powers moved closer to taking military action in the oil-producing country.
The United Nations Security Council earlier passed a resolution, agreeing late on Thursday to allow “all necessary measures” to protect civilians in the wake of a month-long rebellion against Moammar Gadhafi’s regime.
Bank stocks rose after the Federal Reserve announced that some large lenders had the go-ahead to raise dividends, with several immediately unveiling plans to raise shareholder payouts.
Among the firms to announce dividend hikes were JPMorgan Chase, Wells Fargo and US Bancorp, which each saw their shares climb.
Cisco Systems shares rose 0.8% after the company announced a new 6 cents-a-share dividend.
Nike shares tumbled 9% after the company reported disappointing earnings and said it would raise prices on many of its products because of higher commodity prices.
Celera shares soared 34% after Quest Diagnostics announced it would buy Celera for $344 million, or $8 a share.
Shares of tax-software maker Intuit rose 3% after the company said that the number of users of its TurboTax software jumped 7% compared to a year ago.
European Markets on Friday:
European stock benchmarks ended with modest gains on Friday, but were down for the week, as investors digested conflicting reports about the situation in Libya and continued to be anxious over the Japanese nuclear crisis.
European investors also mulled news that the Group of Seven (G7) intervened jointly in the currency markets to halt the rising Japanese yen. The Stoxx Europe 600 index gained 0.2% to end at 267.63.
Earlier, the regional index had risen as high as 269.78 on news that Libya’s government has declared an immediate cease-fire.
But, media reports later suggested that fierce fighting continued between opposition and pro-government forces despite the announcement of a cease-fire.
For the week, the Stoxx 600 index fell 2.8%.
In Germany, the DAX 30 index closed up 0.1% at 6,664.40, substantially paring its intraday gains. The FTSE 100 index ended up 0.4% to 5,718.13. In France, the CAC 40 index rose 0.6% to 3,810.22
After another tumultuous week, we are headed for a positive start despite oil prices climbing in the wake of the air strikes on Libya. Most Asian markets have for now shrugged off the new developments in MENA, Japan’s continuous struggle to contain nuclear contamination and China’s latest RRR hike. Japan’s markets are shut today for a holiday.
US markets closed higher on Friday for a second straight day but finished in the red for the week. European stocks managed slender gains but were down for the week.
While the opening will be in the green, the gains may peter out later in the day amid concerns about surging oil prices and the MENA unrest.
Volatility will stay elevated. The fact that the key indices are still trading below their 200-DMA is a big worry. Even if they do manage to surpass the key technical levels, there is no immediate certainty about the near term direction of the market.
Among the major domestic concerns has been lack of meaningful progress on reforms amid a series of controversies. FII inflows too are yet to turn around.
The Indian markets made a lower high and a lower low on weekly candlestick chart last week. With the Nifty violating key support level of 5400, we could see accentuated selling in the near term which can take the index toward of 5300.
FIIs were net sellers of Rs 5.23bn in the cash segment on Friday, according to the provisional NSE data. The domestic institutional investors (DIIs) were net buyers at Rs 2.96bn on the same day. FIIs were net sellers at Rs 13.06bn in the F&O segment.
The foreign funds were net sellers at Rs 4.05bn in the cash segment on Thursday, as per final SEBI data. Mutual Funds were net buyers at Rs 650mn in the cash segment on the same day.
Asian Markets on Monday:
Asian markets advanced, notwithstanding a fresh spike in crude oil prices in the wake of the weekend aerial assault by the US and allied forces in Libya. Regional energy stocks rose. Sentiment was also supported by healthy US data.
Japanese markets are closed for a public holiday.
The MSCI Asia Pacific, excluding Japan Index was little changed at 452.90. About twice as many stocks rose as fell on the gauge, which has lost 5.5% this year.
The Hang Seng in Hong Kong was up 1% at 22,530 while the Shanghai Composite index in China was down ~0.1% at 2,903. The Kospi in Seoul climbed ~1% at 2,000 while the Straits Times in Singapore gained 0.8% at 2,959.
The Taiex in Taiwan was up 0.75% at 8,458 while the S&P/ASX 200 index in Australia rose ~0.1% at 4,632. New Zealand's NZX 50 index was up 0.25% at 3,347.
The broader MSCI Asia Pacific Index last week recorded its biggest weekly drop since the height of the European debt crisis last May.
The yen declined for a second day against all its major counterparts on speculation that the Group of Seven (G7) nations will continue to support Japan buy jointly selling the currency.
G7 members sold the Japanese currency on March 18 after it reached a postwar high.
The euro strengthened versus the yen on the prospect that European Central Bank (ECB) President Jean-Claude Trichet will today reiterate his willingness to increase interest rates next month.
The euro rose versus 11 of its 16 major counterparts.
The dollar managed to avert heavy losses amid continuing turmoil in the Middle-East and North Africa.
The US and allied forces launched an air offensive against Libya, adding to the concerns that the regional unrest will spread in other parts of the world's key oil-producing region.
A no-fly zone is now in place over Libya, Admiral Mike Mullen, chairman of the US Joint Chiefs of Staff said. The coalition ordered Libyan leader Muammar Gaddafi to withdraw his forces from major cities .
US Markets on Friday:
US stock indices rose for a second day in a row on Friday but closed off session highs and finished down for the week as investors weighed risks from the persistent strife in the MENA region and Japan's ongoing nuclear problems.
The gains were supported by a spate of dividend announcements from major banks and a decision by global central banks to intervene in the currency markets to help Japan recover from its worst earthquake.
The Dow Jones Industrial Average closed up 83.93 points, or 0.7%, at 11,858.52, losing some steam in afternoon trading after gaining more than 150 points.
The Standard & Poor’s 500 Index gained 5.49 points, or 0.4%, to 1,279.21, with financials the best-performing sector among its 10 industry groups.
The Nasdaq Composite Index rose 7.62 points, or 0.3%, at 2,643.67.
For the week, the Dow average lost 1.5%, the S&P 500 slid 1.9% and the Nasdaq Composite lost 2.7%.
While the Dow and S&P 500 remain modestly higher for the year, this week's declines have now put the Nasdaq down 0.4% year-to-date.
On the New York Stock Exchange, advancers topped decliners by more than 2-to-1, where 1.9 billion shares traded hands.
Treasurys edged lower, sending yields on the 10-year note up 1 basis point to 3.28%. For the week, however, Treasurys rallied on demand for safe-haven assets, with yields falling from 3.4% a week ago.
After rising to an intraday high of $103.66 a barrel, crude-oil futures for April delivery finished at $101.07, down 35 cents, on the New York Mercantile Exchange.
The dollar gained 2.3% against the yen to ¥80.756, its biggest one-day gain since mid-September. At one point it surged 3.7%. The dollar had tumbled against the yen since a devastating earthquake.
The Japanese yen had been driven sharply higher in recent days by global uncertainty and the prospect of more cash flowing into Japan.
Gold futures for April delivery rose $11.90, or 0.8%, to trade at $1,416.10 an ounce.
Sentiment was bolstered after the world’s seven biggest industrialized nations agreed to a plan to bring the Japanese yen down from historic highs.
Libya’s foreign minister announced a cease-fire and said that the government would halt military operations in the North African nation.
Reports later indicated heavy fighting in at least one Libyan city even as western powers moved closer to taking military action in the oil-producing country.
The United Nations Security Council earlier passed a resolution, agreeing late on Thursday to allow “all necessary measures” to protect civilians in the wake of a month-long rebellion against Moammar Gadhafi’s regime.
Bank stocks rose after the Federal Reserve announced that some large lenders had the go-ahead to raise dividends, with several immediately unveiling plans to raise shareholder payouts.
Among the firms to announce dividend hikes were JPMorgan Chase, Wells Fargo and US Bancorp, which each saw their shares climb.
Cisco Systems shares rose 0.8% after the company announced a new 6 cents-a-share dividend.
Nike shares tumbled 9% after the company reported disappointing earnings and said it would raise prices on many of its products because of higher commodity prices.
Celera shares soared 34% after Quest Diagnostics announced it would buy Celera for $344 million, or $8 a share.
Shares of tax-software maker Intuit rose 3% after the company said that the number of users of its TurboTax software jumped 7% compared to a year ago.
European Markets on Friday:
European stock benchmarks ended with modest gains on Friday, but were down for the week, as investors digested conflicting reports about the situation in Libya and continued to be anxious over the Japanese nuclear crisis.
European investors also mulled news that the Group of Seven (G7) intervened jointly in the currency markets to halt the rising Japanese yen. The Stoxx Europe 600 index gained 0.2% to end at 267.63.
Earlier, the regional index had risen as high as 269.78 on news that Libya’s government has declared an immediate cease-fire.
But, media reports later suggested that fierce fighting continued between opposition and pro-government forces despite the announcement of a cease-fire.
For the week, the Stoxx 600 index fell 2.8%.
In Germany, the DAX 30 index closed up 0.1% at 6,664.40, substantially paring its intraday gains. The FTSE 100 index ended up 0.4% to 5,718.13. In France, the CAC 40 index rose 0.6% to 3,810.22
Friday, June 19, 2009
inter-arresting!
Rally of 1931 to haunt the markets this year, SEC hasnt really stopped anything, Fed must find a way to hide toxic assets, bear market not reversible, Currencies deprecate against gold, funding new health insurance initiatives not easy in times of debts, Monetary policy to become inflationary The next major move in the stock market will be down. We are seeing the last vestiges of a rally similar to what we saw in 1931. The rally we expected at 6600 up to 8500 will end as soon as all the financial institutions that need to sell what stock is necessary to bolster their balance sheets. Our guess is the rally has been aided in a big way by short covering and the participation of the US government. Those who believe the SEC has stopped naked short selling are sadly mistaken. Markets weaken during the summer as volume dries up during the vacation season. In addition, second quarter earnings will be very disappointing, especially in the financial segment. Unemployment continues to worsen and capacity utilization is at its lowest level in years. Banks continue to cut credit lines and not lend nearly as much as they did before. Citigroup’s earnings should turn down again. They won’t have another $2.7 billion gain or another $400 million mark-to-market fictitious gain. Absent those gains they would have lost $2.8 billion.
The credit crisis certainly isn’t over after 23 months. The credit markets are still very tight and the residential and commercial real estate markets are still in a state of collapse. In the midst of this ongoing fiasco the Fed is monetizing $2.2 trillion in treasuries, Agencies and CDOs, collateralized debt obligation, otherwise known as toxic junk. Our fiscal deficit for this year ended 9/30/09 will be between $2 and $2.5 trillion, followed by more than $2 trillion in 2010.
Times are tough, everywhere and export nations are determined to keep their products cheaply devaluing their currencies.
When all is said and done the Fed will have to remove hundreds of billions in toxic assets from lender balance sheets, get consumers to spend and allow banks to lend again. Ben Bernanke at the Fed would really like to see a lower dollar, to get consumers to spend. But if that happens interest rates will move higher hurting real estate sales. As Ben dreams, unemployment increases adding more downward pressure on home prices, causing lower prices and reducing equity. Congress is pushing to have returned TARP money back to the Treasury and the PPIP program looks like a nonevent, because it could cause insolvencies. Public funds would be used to protect bondholders of mismanaged companies. Ben and Tiny Tim want to reopen securitization markets that caused the problem in the first place. They have to be insane. They want to bring back leverage that caused this monstrous problem we have.
The TALF, Term Asset-backed Securities Loan Facility, makes non-recourse loans, willing to buy AAA bonds backed by consumer and small-business loans, in a market that is frozen. Then for private investors there is a guarantee because the loan recipients cannot pay the loans back. This would cost taxpayers hundreds of billions more dollars.
The public is de-leveraging, which means less consumption, less profits and more savings. The bear market is far from reversible. The rally is over. Dow 6600 will be retested. The basis and support for growth no longer exists. Credit markets are still semi-frozen and the financial system is no better off now than it was 23 months ago.
The big foreign lenders have brought a new global dynamic into the game. Rising yields are a signal that the unusual dollar rally that should never have been, is over. The safety of the dollar is no longer sacrosanct. In fact, it is being in some quarters perceived that the dollar is no longer safe and it has to vie with gold as the safe haven go to asset. Fiscal deficits are projected this year to be $2 to $2.5 trillion and well over $1 trillion annually for years to come.
Commodity prices have surged over the past several months as the dollar has weakened, which reflects anticipated future inflation as well as rotation. We have seen this reflected in precious metal prices as well. The leeway the Fed experienced some months ago via deleveraging has past making it much more difficult to employ quantitative easing, monetization. The job of pegging long-term as well as short-term interest rates will be difficult and very injurious to the value of the dollar, as more and more money and credit are made up out of thin air. Trillions of dollars of MBS, ABS and CDO being purchased by the Fed incurring long-term losses can’t be tolerated indefinitely.
Sadly as the Fed and the Treasury go so does most of the nations of the world. In that case most all currencies depreciate against gold. Yes, the Fed can drive rates down, but for how long? Especially as the economy fails to perform and taxes rise as do borrowing costs. Import costs are already rising as well. Foreign lenders, with each passing day, become more skeptical of monetization, the damage it will do to the dollar and the Fed’s ultimate ability to retire dollars from the financial system. Dollar selling will feed on itself under those circumstances pushing the dollar lower versus other currencies and gold. It is now only a question of when will the system break? We do not know that, but we do know it will break and the only safe haven to preserve wealth is in gold and silver.
Higher interest rates have to have caused great consternation in the banking community concerning their IRS and CDS swaps. This is an unregulated market so no one except the players know what is going on inside. For a number of years these contracts have caused interest rates to be abnormally low. If these swaps were to blow up interest rates could and probably would move substantially higher.
The big loser in all of this will be the dollar as more and more dollar owners become fearful and sell dollars. If you look at a USDX chart you will see what we mean. A total breakdown as the dollar struggles to begin momentum and break out over 81 again. It is not going to happen. The question is how long will it take to get to 71.18? We can list all the reasons for pressure on the dollar, but you already know them.
The Fed is monetizing about $2.3 trillion in Treasuries, Agencies and CDOs. We said week’s ago that these monetizations would be followed by an additional $2 trillion if not by the end of this year, by March 2010. The Fed has no other choice. This is going to go on indefinitely until the dollar reaches 40 on the USDX and at that point no one will want to buy dollar denominated securities or to even borrow dollars. That is when we’ll have our next Bretton Woods type conference where all currencies will devalue and default and gold and silver will reach great heights. We saw all this coming when we warned you earlier in the year that you had until June to refinance debt. We hope you did so. We are now entering a new stage in real estate. Price pressure is going to press a further downward bias that will last a minimum of 3-1/2 years. How long we will be on the bottom no one knows.
This is why you do not want to own US Treasuries or US corporate or municipal bonds. A better currency is the Canadian dollar if you must have money in Treasuries. All your funds should really be in gold and silver related assets.
Interest rates have now become a dummy’s game driven by derivatives. They are going to explode. It is only a question of when. All the major banks, holding 75% of US deposits are insolvent, and they will collapse when the derivative bomb explodes. In addition there are lots of other losses on the way as well. The ability of the Fed and the Treasury in the misuse of “The Working Group on Financial Markets” will come to an end. Much of what they have been up too will be exposed by an audit of the Fed, which we believe is on the way. As a result legislation will follow that and will bring an end to the criminally misused executive order number 1263, which Bill Keene and Sue Herrera tell us on CNBC doesn’t exist. It will be discovered that the swaps market has little or no collateral and as a result Goldman Sachs, Citigroup, JP Morgan Chase and Bank of America will meet their demise. The biggest positions reside with JP Morgan, thus they should be first to bite the dust. The losses are going to be in the trillions. The loss of capitalization when the bomb explodes will engulf the entire world financial system.
The Ron Paul strategy in HR 1207, now with 225 co-sponsors, the Federal Reserve Transparency Act of 2009, and the companion Bill in the Senate S604, The Federal Reserve Sunshine Act, sponsored by Bernard Sanders (I-VT) will uncover what the Fed and its owners – the major banks – have been up too; particularly in rigging markets.
It looks like HR 1207 will be passed in the House. Now train your guns on the Senate. Hit every Senator with: Dear Senator, Please co-sponsor S604, the Federal Reserve Sunshine Act of 2009, and make it become law. Sincerely, etc. Short and sweet and to the point. No comments or opinions.
The Fed is in a box and cannot get out. We have to make sure they do not get out by investigation, exposure and destruction. The Fed is the core, the nexus of the Illuminati. Few in the media or in business will tell the truth because they are either in on it or they are terrified to talk about it for fear of being destroyed. This is the kind of world we live in. you can still do your part by contacting the Senators. We want them buried in emails. This is our chance to finally win without bloodshed.
President Obama has begun selling his healthcare program. He presents it as a reduced cost, guaranteed choice, quality plan for all. The reality is government programs will result in higher costs, no choices and inferior care. The legislative vehicle for this health care deception is planned to be in the budget reconciliation bill, which requires only 51 Senate votes for passage instead of the 60 needed to authorize new programs.
The Kennedy Plan promises that all Americans will have health care, employers will have to contribute to the costs. A government program will subsidize premiums for people up to 500% of the poverty level, that is $110,000 for a family of 4, and private insurers will have to pay out a specified percentage of their premium revenues in benefits. There is no provision for funding the program, so it looks like perpetual deficit spending to cover the costs.
Healthy people will be forced to pay more for their insurance in order to subsidize those not as healthy, those who have ruined their bodies and minds and the old.
Fines will be imposed if you do not provide health care for employees. That means the employers will not insure employees and pay the cheaper fine, or just go out of business.
That means 100 million people happy with their programs will have to take an inferior government plan. Then, of course, is the bureaucracy, which dictate treatment and who will live and who will die.
Part of the proposal includes a proposal to tax these health benefits with current employer-based health insurance.
We are promised cost savings by putting all Americans’ health records on a uniform computer system, which will be eventually mandatory for all countries. These totalitarian controls will be forced on all doctors and terminate all medical privacy.
Healthcare will be rationed letting bureaucrats decide who gets treated and how and who will be allowed to die. Seventy percent of medical lifetime costs occur in the last year of life. We already experienced this with a doctor and I asked him which side of his head he’d like his brains blown out of.
Part of the legislation would provide healthcare for illegal aliens, which 80% of American voters are opposed too.
It would be far more constructive to begin to fix the problems in Medicare and Social Security then try to create an expensive new system.
On the other side of the spectrum are those who want a single-payer-approach like those used in Europe. Congress has said they won’t even consider it, this in spite of the fact that any other plan will leave the big insurance companies in charge and keep hurting patients. Someone should tell these poor ignorant souls that both parties are promoting corporatist fascism.
The real deep-seated problem is that the health insurance companies and related industries are major campaign contributors to members of Congress on both sides of the aisle. Senator Grassley is a good example. Since 2005, he has collected $1.3 million in donations from industries related to the health insurance debate.
In a different perspective on healthcare the US will spend 15.4% of GDP both state and private. With that it gets 2.6 doctors per 1,000 people; 3.3 hospital beds and its people live to 78.2 years.
The question is how do we cut down medical costs? There has been some pressure to do so, but costs go relentlessly higher. Senators and congressmen receive hundreds of millions of dollars from the industry to continue their gravy train. Then there are the investors, bureaucrats and preexisting conditions.
Mr. Obama doesn’t have the answers and neither does the industry.
How can anyone not expect interest rates to rise? Mandated programs such as Medicaid, Medicare, Social Security and the FDIC and the Pension Benefit Guarantee Corp., and a host of others have us over $100 trillion the short-term.
We have been in a crisis financially and economically for 23 months. We were in recession from February 2007 to February 2009, and we have been in depression since this past February. The budget deficit for the fiscal year ended 9/30/09 should be about 15% of GDP the largest deficit since WW II or five times last year’s deficit. The Treasury and the Fed have created money and credit of some $14.8 trillion and next year we project over $20 trillion - this as our government acquires large stakes in banks, brokerage houses, insurance companies, health-care, mortgage companies and auto and truck manufacturers.
As a result of this dreadful profligacy last month in May we began the beginnings of inflation resumption that will soon become hyperinflation. Interest rates will continue to rise as will gold, silver and commodities and bonds, stocks and the dollar will decline against other currencies and gold and silver. Business will be forced to pass on price increases or go out of business. Currency in circulation, which nominally is 10%, is now 50% of the monetary base and bank reserves have risen by 20-fold. Banks have this huge position as a reserve against their liabilities. This allows banks to float or extend the day they’ll have to write off their losses.
Banks are able to expend their loan making abilities, but they have not done so as yet. As this loan constriction continues the expansion of money and credit is running at about 18% annualized. This will in time result in higher interest, which are underway and higher inflation, which we’ve begun as well. By way of example, M1 is near 15% the highest level in 50 years.
We are looking at a monetary policy far more inflationary than in the late 1970s, we know we were there. That wasn’t a pretty picture and neither will this be. We saw inflation at 13.5% and the prime rate at 21.5%. We saw gold rise from $35.00 to $850.00. This time it could go much higher.
The credit crisis certainly isn’t over after 23 months. The credit markets are still very tight and the residential and commercial real estate markets are still in a state of collapse. In the midst of this ongoing fiasco the Fed is monetizing $2.2 trillion in treasuries, Agencies and CDOs, collateralized debt obligation, otherwise known as toxic junk. Our fiscal deficit for this year ended 9/30/09 will be between $2 and $2.5 trillion, followed by more than $2 trillion in 2010.
Times are tough, everywhere and export nations are determined to keep their products cheaply devaluing their currencies.
When all is said and done the Fed will have to remove hundreds of billions in toxic assets from lender balance sheets, get consumers to spend and allow banks to lend again. Ben Bernanke at the Fed would really like to see a lower dollar, to get consumers to spend. But if that happens interest rates will move higher hurting real estate sales. As Ben dreams, unemployment increases adding more downward pressure on home prices, causing lower prices and reducing equity. Congress is pushing to have returned TARP money back to the Treasury and the PPIP program looks like a nonevent, because it could cause insolvencies. Public funds would be used to protect bondholders of mismanaged companies. Ben and Tiny Tim want to reopen securitization markets that caused the problem in the first place. They have to be insane. They want to bring back leverage that caused this monstrous problem we have.
The TALF, Term Asset-backed Securities Loan Facility, makes non-recourse loans, willing to buy AAA bonds backed by consumer and small-business loans, in a market that is frozen. Then for private investors there is a guarantee because the loan recipients cannot pay the loans back. This would cost taxpayers hundreds of billions more dollars.
The public is de-leveraging, which means less consumption, less profits and more savings. The bear market is far from reversible. The rally is over. Dow 6600 will be retested. The basis and support for growth no longer exists. Credit markets are still semi-frozen and the financial system is no better off now than it was 23 months ago.
The big foreign lenders have brought a new global dynamic into the game. Rising yields are a signal that the unusual dollar rally that should never have been, is over. The safety of the dollar is no longer sacrosanct. In fact, it is being in some quarters perceived that the dollar is no longer safe and it has to vie with gold as the safe haven go to asset. Fiscal deficits are projected this year to be $2 to $2.5 trillion and well over $1 trillion annually for years to come.
Commodity prices have surged over the past several months as the dollar has weakened, which reflects anticipated future inflation as well as rotation. We have seen this reflected in precious metal prices as well. The leeway the Fed experienced some months ago via deleveraging has past making it much more difficult to employ quantitative easing, monetization. The job of pegging long-term as well as short-term interest rates will be difficult and very injurious to the value of the dollar, as more and more money and credit are made up out of thin air. Trillions of dollars of MBS, ABS and CDO being purchased by the Fed incurring long-term losses can’t be tolerated indefinitely.
Sadly as the Fed and the Treasury go so does most of the nations of the world. In that case most all currencies depreciate against gold. Yes, the Fed can drive rates down, but for how long? Especially as the economy fails to perform and taxes rise as do borrowing costs. Import costs are already rising as well. Foreign lenders, with each passing day, become more skeptical of monetization, the damage it will do to the dollar and the Fed’s ultimate ability to retire dollars from the financial system. Dollar selling will feed on itself under those circumstances pushing the dollar lower versus other currencies and gold. It is now only a question of when will the system break? We do not know that, but we do know it will break and the only safe haven to preserve wealth is in gold and silver.
Higher interest rates have to have caused great consternation in the banking community concerning their IRS and CDS swaps. This is an unregulated market so no one except the players know what is going on inside. For a number of years these contracts have caused interest rates to be abnormally low. If these swaps were to blow up interest rates could and probably would move substantially higher.
The big loser in all of this will be the dollar as more and more dollar owners become fearful and sell dollars. If you look at a USDX chart you will see what we mean. A total breakdown as the dollar struggles to begin momentum and break out over 81 again. It is not going to happen. The question is how long will it take to get to 71.18? We can list all the reasons for pressure on the dollar, but you already know them.
The Fed is monetizing about $2.3 trillion in Treasuries, Agencies and CDOs. We said week’s ago that these monetizations would be followed by an additional $2 trillion if not by the end of this year, by March 2010. The Fed has no other choice. This is going to go on indefinitely until the dollar reaches 40 on the USDX and at that point no one will want to buy dollar denominated securities or to even borrow dollars. That is when we’ll have our next Bretton Woods type conference where all currencies will devalue and default and gold and silver will reach great heights. We saw all this coming when we warned you earlier in the year that you had until June to refinance debt. We hope you did so. We are now entering a new stage in real estate. Price pressure is going to press a further downward bias that will last a minimum of 3-1/2 years. How long we will be on the bottom no one knows.
This is why you do not want to own US Treasuries or US corporate or municipal bonds. A better currency is the Canadian dollar if you must have money in Treasuries. All your funds should really be in gold and silver related assets.
Interest rates have now become a dummy’s game driven by derivatives. They are going to explode. It is only a question of when. All the major banks, holding 75% of US deposits are insolvent, and they will collapse when the derivative bomb explodes. In addition there are lots of other losses on the way as well. The ability of the Fed and the Treasury in the misuse of “The Working Group on Financial Markets” will come to an end. Much of what they have been up too will be exposed by an audit of the Fed, which we believe is on the way. As a result legislation will follow that and will bring an end to the criminally misused executive order number 1263, which Bill Keene and Sue Herrera tell us on CNBC doesn’t exist. It will be discovered that the swaps market has little or no collateral and as a result Goldman Sachs, Citigroup, JP Morgan Chase and Bank of America will meet their demise. The biggest positions reside with JP Morgan, thus they should be first to bite the dust. The losses are going to be in the trillions. The loss of capitalization when the bomb explodes will engulf the entire world financial system.
The Ron Paul strategy in HR 1207, now with 225 co-sponsors, the Federal Reserve Transparency Act of 2009, and the companion Bill in the Senate S604, The Federal Reserve Sunshine Act, sponsored by Bernard Sanders (I-VT) will uncover what the Fed and its owners – the major banks – have been up too; particularly in rigging markets.
It looks like HR 1207 will be passed in the House. Now train your guns on the Senate. Hit every Senator with: Dear Senator, Please co-sponsor S604, the Federal Reserve Sunshine Act of 2009, and make it become law. Sincerely, etc. Short and sweet and to the point. No comments or opinions.
The Fed is in a box and cannot get out. We have to make sure they do not get out by investigation, exposure and destruction. The Fed is the core, the nexus of the Illuminati. Few in the media or in business will tell the truth because they are either in on it or they are terrified to talk about it for fear of being destroyed. This is the kind of world we live in. you can still do your part by contacting the Senators. We want them buried in emails. This is our chance to finally win without bloodshed.
President Obama has begun selling his healthcare program. He presents it as a reduced cost, guaranteed choice, quality plan for all. The reality is government programs will result in higher costs, no choices and inferior care. The legislative vehicle for this health care deception is planned to be in the budget reconciliation bill, which requires only 51 Senate votes for passage instead of the 60 needed to authorize new programs.
The Kennedy Plan promises that all Americans will have health care, employers will have to contribute to the costs. A government program will subsidize premiums for people up to 500% of the poverty level, that is $110,000 for a family of 4, and private insurers will have to pay out a specified percentage of their premium revenues in benefits. There is no provision for funding the program, so it looks like perpetual deficit spending to cover the costs.
Healthy people will be forced to pay more for their insurance in order to subsidize those not as healthy, those who have ruined their bodies and minds and the old.
Fines will be imposed if you do not provide health care for employees. That means the employers will not insure employees and pay the cheaper fine, or just go out of business.
That means 100 million people happy with their programs will have to take an inferior government plan. Then, of course, is the bureaucracy, which dictate treatment and who will live and who will die.
Part of the proposal includes a proposal to tax these health benefits with current employer-based health insurance.
We are promised cost savings by putting all Americans’ health records on a uniform computer system, which will be eventually mandatory for all countries. These totalitarian controls will be forced on all doctors and terminate all medical privacy.
Healthcare will be rationed letting bureaucrats decide who gets treated and how and who will be allowed to die. Seventy percent of medical lifetime costs occur in the last year of life. We already experienced this with a doctor and I asked him which side of his head he’d like his brains blown out of.
Part of the legislation would provide healthcare for illegal aliens, which 80% of American voters are opposed too.
It would be far more constructive to begin to fix the problems in Medicare and Social Security then try to create an expensive new system.
On the other side of the spectrum are those who want a single-payer-approach like those used in Europe. Congress has said they won’t even consider it, this in spite of the fact that any other plan will leave the big insurance companies in charge and keep hurting patients. Someone should tell these poor ignorant souls that both parties are promoting corporatist fascism.
The real deep-seated problem is that the health insurance companies and related industries are major campaign contributors to members of Congress on both sides of the aisle. Senator Grassley is a good example. Since 2005, he has collected $1.3 million in donations from industries related to the health insurance debate.
In a different perspective on healthcare the US will spend 15.4% of GDP both state and private. With that it gets 2.6 doctors per 1,000 people; 3.3 hospital beds and its people live to 78.2 years.
The question is how do we cut down medical costs? There has been some pressure to do so, but costs go relentlessly higher. Senators and congressmen receive hundreds of millions of dollars from the industry to continue their gravy train. Then there are the investors, bureaucrats and preexisting conditions.
Mr. Obama doesn’t have the answers and neither does the industry.
How can anyone not expect interest rates to rise? Mandated programs such as Medicaid, Medicare, Social Security and the FDIC and the Pension Benefit Guarantee Corp., and a host of others have us over $100 trillion the short-term.
We have been in a crisis financially and economically for 23 months. We were in recession from February 2007 to February 2009, and we have been in depression since this past February. The budget deficit for the fiscal year ended 9/30/09 should be about 15% of GDP the largest deficit since WW II or five times last year’s deficit. The Treasury and the Fed have created money and credit of some $14.8 trillion and next year we project over $20 trillion - this as our government acquires large stakes in banks, brokerage houses, insurance companies, health-care, mortgage companies and auto and truck manufacturers.
As a result of this dreadful profligacy last month in May we began the beginnings of inflation resumption that will soon become hyperinflation. Interest rates will continue to rise as will gold, silver and commodities and bonds, stocks and the dollar will decline against other currencies and gold and silver. Business will be forced to pass on price increases or go out of business. Currency in circulation, which nominally is 10%, is now 50% of the monetary base and bank reserves have risen by 20-fold. Banks have this huge position as a reserve against their liabilities. This allows banks to float or extend the day they’ll have to write off their losses.
Banks are able to expend their loan making abilities, but they have not done so as yet. As this loan constriction continues the expansion of money and credit is running at about 18% annualized. This will in time result in higher interest, which are underway and higher inflation, which we’ve begun as well. By way of example, M1 is near 15% the highest level in 50 years.
We are looking at a monetary policy far more inflationary than in the late 1970s, we know we were there. That wasn’t a pretty picture and neither will this be. We saw inflation at 13.5% and the prime rate at 21.5%. We saw gold rise from $35.00 to $850.00. This time it could go much higher.
Inflation Simplified!
TV Channels blaring that India's inflation rate slipped into the negative for the first time in 30 odd years. What does it really mean ? It really means nothing to the common man!
Prices are still soaring or atleast stable at their peak - and why is this not reflected in the Inflation numbers ?
This is because India calculates Inflation differently than other countries
India uses something called the Wholesale Price Index (WPI) to calculate and then decide the inflation rate in the economy.
Most other developed and developing countries use the Consumer Price Index (CPI) to calculate inflation.
Whats the difference between the two ?
Wholesale Price Index (WPI)
WPI, published in 1902, is a economic indicator that was used by many policy makers and it was replaced by CPI by most countries in the 1970s
WPI measures the change in the average price level of goods traded in wholesale market. In India, about 435 commodities data on price level is tracked through WPI. This price index is published on a weekly basis with a lag of about 2 weeks.
Consumer Price Index (CPI)
The CPI or the Consumer Price Index is a statistical time-series measure of a weighted average of prices of a specified set of goods and services purchased by consumers. It tracks the prices of goods and services that consumers actually buy therefore providing a more accurate picture of the inflation.
Although India doesn't officially follow CPI - they do publish the CPI index numbers - however, only monthly with a delay of more than 2 months
While the WPI Inflation numbers have slipped into the negative and is reported to be at -1.6%, the CPI numbers are at a whopping 8.7% as declared for April 2009
Next time the inflation numbers are announced - you know what to make of it :)
Prices are still soaring or atleast stable at their peak - and why is this not reflected in the Inflation numbers ?
This is because India calculates Inflation differently than other countries
India uses something called the Wholesale Price Index (WPI) to calculate and then decide the inflation rate in the economy.
Most other developed and developing countries use the Consumer Price Index (CPI) to calculate inflation.
Whats the difference between the two ?
Wholesale Price Index (WPI)
WPI, published in 1902, is a economic indicator that was used by many policy makers and it was replaced by CPI by most countries in the 1970s
WPI measures the change in the average price level of goods traded in wholesale market. In India, about 435 commodities data on price level is tracked through WPI. This price index is published on a weekly basis with a lag of about 2 weeks.
Consumer Price Index (CPI)
The CPI or the Consumer Price Index is a statistical time-series measure of a weighted average of prices of a specified set of goods and services purchased by consumers. It tracks the prices of goods and services that consumers actually buy therefore providing a more accurate picture of the inflation.
Although India doesn't officially follow CPI - they do publish the CPI index numbers - however, only monthly with a delay of more than 2 months
While the WPI Inflation numbers have slipped into the negative and is reported to be at -1.6%, the CPI numbers are at a whopping 8.7% as declared for April 2009
Next time the inflation numbers are announced - you know what to make of it :)
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