Category: Finance

April 25th, 2014 by admin

If you’ve used one of the most popular weather apps, called Clear Day, you might be surprised that it comes from a company that started in Egypt. Despite constant news reports about violence and oppressive regimes (often funded and supported by Western democracies), the Middle East is actually one of the fastest growing Internet regions. Wherever you find problems, you can find entrepreneurs making money providing solutions.

In the book “Startup Rising,” author Christopher Schroeder surveyed a variety of technology startups that are creating more disruptive change in the Middle East than any wars could ever do. After seeing videos of how companies recycle materials from discarded computers, another Egyptian entrepreneur founded a recycling company called RecycloBekia. Despite knowing nothing about recycling, this entrepreneur taught himself how to recover precious metals from used computers and make money from the process.

Although the Middle East has a reputation for oppressing women, that didn’t stop from Hind Hobeika from starting a company called Instabeat (http://www.instabeat.me) that sells a wearable heart rate monitor so swimmers can monitor their performance in real-time. As you swim, you can see your current heart rate compared to your optimum heart rate just by looking inside your own swim goggles.

Plenty of Middle East entrepreneurs are looking to the West for ideas to bring back to their home countries, but that also means many Westerners can look to their Middle East counterparts for great ideas that could benefit people in America and other parts of the world.

As much as Americans might like to think that they somehow have a monopoly on technology, Silicon Valley isn’t the only place where technology entrepreneurs can start up and thrive. If a volatile region like the Middle East can spawn a new generation of technology entrepreneurs who have to battle dictatorships, civil wars, and terrorists to not only survive, but flourish, then what’s to stop anyone from any part of the world to look for problems they can solve and then go out and do it?

Entrepreneurs are people who see problems they can solve with technology. Any time you see a problem, there’s potential profit in finding a solution. With few people using credit cards in the Middle East, there’s a huge potential in mobile payments through smartphones, which completely upends the traditional banking system and government regulations of most Middle Eastern governments. Technology offers one way to change that part of the world through innovative products that solve pressing needs. Before governments can even recognize the world is changing around them, it’s already too late for them to stop it.

In the future, expect the Internet and technology to reshape places like Africa and the Middle East. While those regions will still have problems, entrepreneurs offer the best chance for changing that part of the world (for better or worse). If people in the Middle East can get rich despite dictatorships, civil wars, and terrorists, then it’s certainly possible for anyone in any part of the world to start turning their great ideas into a viable business and finally free themselves from working in a boring, dead-end job once and for all.

 

Posted in Entrepreneur, Finance, Programming

April 3rd, 2014 by admin

To absolutely nobody’s surprise, Michael Lewis, the author of the book “Flash Boys,” claims that the stock market is rigged. While it’s always been rigged, “Flash Boys” explains how it’s been rigged by high-frequency traders, also known as algorithmic traders who use computers to optimize stock trading. This basically means that technology and clever algorithms are more adept at rigging the markets than the traditional stock market manipulators of the past.

Basically the idea behind algorithmic trading involves these basic steps. First, computers follow systems that have been statistically proven to succeed. The trick is that at any given time, the right conditions for any system to succeed will change, but if you slavishly follow the right system, you can make money in the long run even if you lose money in the short-term.

Some of the ways to predict the stock market involve chart patterns, moving averages, and candlestick charting. The basic idea behind any system is that it gives you a statistical advantage over just randomly picking stocks and hoping that they might go up.

The stock market is out of your control, but the two things you can control are:

  • When to buy
  • When to sell

Stock market systems optimize the time to buy and the time to sell. You want to buy at a time when your system predicts the stock will soon go up. You want to sell when a stock starts sinking. That can be right after you’ve made a quick profit or to cut your losses.

What most people do is that they buy a stock and hold on to it even as it drops. The smart thing to do is to cut your losses as soon as a stock drops a certain percent such as 5%. By always cutting your losses, you preserve your capital. By never cutting your losses, you’ll always risk taking massive losses.

Through clever programming, it’s possible for smart people to outwit the old world of financial stock manipulators who relied on rumor to manipulate prices in their favor. If you want to match wits with the stock market, you can. Just read books like “Flash Boys” to learn more about algorithmic trading. Even if the stock market is rigged, you can still make money off it by rigging it in your favor.

There will always be corruption and manipulation in any industry. The trick is knowing that it exists and then making sure you’re on the side that’s always winning.

Posted in Finance, Programming

March 30th, 2014 by admin

If you want to get your blood boiling, you can read this Bloomberg article about how the big banks, which created the financial crisis, have gotten away with trivial fines while none of their executives risk any jail time. Instead, bank executives wind up getting millions in golden parachutes when they leave the company, even though their mere existence can’t definitely prove that they created value for the company.

For example, Bank of America’s executive, Kenneth Lewis, will receive pension benefits of $53 million, according to the New York Times, as well as $81 million in stock. Here’s the big question. Did Kenneth Lewis create value for Bank of America that at least equaled $53 million as well as the $81 million in stock options? If Bank of America can’t specifically point to how Kenneth Lewis created at least $81 million, why reward him for that same amount? In other words, if Kenneth Lewis didn’t create at least $81 million dollars for Bank of America, the company is losing money by giving him such a rich reward for his retirement.

You can get mad all you want about these golden parachutes, or you can do something about them. That means not relying on companies to fairly distribute profits to its workers. If you really want to break out of the rut called a job, you need to start a business of your own either part-time or full-time. Most people start businesses part-time and then if it becomes successful, they go full-time.

What stops many people from starting even a part-time business is that they’ll have to take extra time to do so. After working in a job you can’t stand, the last thing you might want to do is work on a business so pick something you enjoy. That way you’ll be playing with your hobby instead of forcing yourself to do something else that’s just as mind-numbing.

While you can start any business, the best ones to start involve low start-up costs and minimal hassle. Although not everyone may want to do this, the ideal business would be selling information products over the Internet, such as selling e-books, video courses, or software. This eliminates the need for retail space, inventory, delivery costs, and manufacturing.

Whatever you decide, it’s clear that you can’t rely on corporations to treat anyone fairly but their own top executives who, like Congressmen, have the power to vote themselves massive pay raises for no reason other than they can. It’s time to break away and become financially independent, so get started now so future stories of yet another executive getting a multi-million dollar payout won’t bother you so much any more.

Posted in Finance

February 23rd, 2014 by admin

In stock trading, the two emotions that will wreck your chances of success are greed and fear. When greed kicks in, you’ll often take unwise risks, which ultimately wind up losing money. When fear kicks in, you’ll often hesitate and miss out on near perfect opportunities to make money. The reason why algorithmic trading consistently proves successful is that computers never experience greed or fear. They simply trade based on the odds and when they lose, they continue following their trading systems anyway while humans often panic and deviate from their trading system.

The way most stock trading systems work is by statistically turning a profit over time. That means sometimes the system will work and sometimes it will fail, often spectacularly. However as soon as you deviate from your system, you risk greater failure while if you stick with your system (assuming the system has been proven statistically accurate), you’ll always profit over time.

By eliminating human decisions, algorithmic trading earns consistent profits. In case you’re curious about developing your own stock trading algorithms, you can rely on an open source module called TA-Lib, which you can download here.

This open source financial analysis code, written in the C programming language, provides code for identifying favorable trading opportunities based on moving averages and candlestick charting patterns. By using TA-Lib, you can create your own program to identify the best trading opportunities and alert you when to buy or sell.

If you’d rather not fiddle around with an open source solution, one commercial solution comes from a company called Modulus, which sells technical analysis source code that you can incorporate in your own programs. FM Labs is another company that sells technical analysis source code that you can use as well for a price.

By using your programming ability to do analyze financial opportunities in the stock market, you can put your brainpower to work and deliver financial rewards that could supplement or even surpass your current income. Just remember that when you use technical analysis methods to analyze the stock market, you’ll be relying on statistics, not blind luck, to help you make money in the stock market.

No matter how good any trading system might be, there will be times when it will lose money, but if you stick with a system over time, it will statistically earn you more money than you lose. You just have to be disciplined enough to follow the advice of your own computer program.

For many people, they dump their money in a mutual fund and hope that the mutual fund manager will pick winning stocks. If you don’t want to rely on hope and prefer to rely more on yourself, trust your programming expertise and develop your own trading programs. Who knows? You may be better at creating stock picking algorithms than you might have ever thought possible.

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Posted in Finance

February 4th, 2014 by admin

The city of Detroit is so broke that they’re actually thinking about selling the city’s art collection housed in the Detroit Institute of Arts (DIA). Of course, while the city of Detroit is threatening to cut pensions and reduce wages for firefighters and police officers, the DIA granted their executives a 17% pay raise.

Does this behavior surprise anyone? The biggest threat to this country isn’t terrorists or countries like Russia or China. The biggest threat to this country is simply greed. When executives grant themselves raises while everything falls apart around them, that just points out the selfishness and senselessness of so many executives. This is why people revolt and choose radical dictatorships when their “leaders” simply steal as much money for themselves while doing nothing for the people they’re supposed to be serving.

While it’s easy to get mad at executives, the first solution is to never become like them. Many people feel that since executives steal from corporations that they have the right to steal too. While that gives temporary satisfaction, it’s no long-term solution and just makes you part of the problem you’re rallying against. To change the world, you can only change yourself and through your actions you can change others.

That’s it.

If you think the solution is to resort to violence and overthrow the current executives, then someone just as bad (maybe even you) will just slide into place and repeat the same selfish mistakes all over again. The real solution is to change yourself and change those around you so when enough people change, the greedy and the selfish will be in the minority and unable to hold on to their power any longer. The only reason they can get away with what they do is because few people know what’s going on. The more people know, the more people will rebel against this kind of greedy behavior.

If the typical stories of executives granting themselves pay raises while everyone suffers sounds too familiar, the first task is to make sure you never become that type of person. The second step is to start looking for ways to support yourself that doesn’t involve working for people who put greed ahead of everyone else. When fewer competent people work in organizations to support the greedy executives, the greedy executives won’t have anyone to do the work for them and they’ll be seen as the incompetent losers that they really are. When they have to face a world where they have to actually work to earn their own living, that’s the best revenge that anyone can force on them.

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Posted in Finance

January 24th, 2014 by admin

Here’s another stomach-churning moment. JP Morgan granted CEO Jamie Dimon a 74 percent pay increase. Now here’s the big question. Did Jamie Dimon increase the company’s profits by 74 percent? Was Jamie Dimon personally responsible for increasing JP Morgan’s profits through decisions he made? Or would the company have made that much money if a dead St. Bernard were placed in the CEO position instead?

More importantly, did anyone working at JP Morgan see a similar 74 percent increase in pay? Did they even get a 10 percent increase in pay?

Why companies grant CEOs so much compensation without revealing exactly what they did to deserve that much of a huge pay raise is the reason why the Occupy Wall Street movement got so many followers. There’s nothing wrong with people getting rich through their efforts. There is something horribly wrong with people getting rich just because some company decides to hand them millions of dollars without requiring them to do anything to earn it. There’s also something horribly wrong when one person gets a massive pay increase while everyone who actually does the work at the company gets far less.

Any time you hear of a CEO getting a massive pay increase, that’s a clear sign that either the CEO obviously deserves it, or the CEO is getting millions of dollars with no clear reason why, which means the company granting that pay raise is probably not a company you want to work for or do business with in the near future.

It’s easy to get mad at massive pay increases for CEOs, but channel that energy towards productive purposes. For example, consider starting up your own company. Then as CEO of your own company, you can be your own boss and take control of your destiny.

Don’t let massive CEO pay increases make you feel bad. Channel any anger towards productive purposes like starting your own company in your spare time. A friend of mine has started four different companies and sold each one of them. His strategy is simple:

  • Stick with software since it’s far easier and less expensive to create
  • Focus on creating a product that compliments, not competes, with bigger companies

If you wanted to sell physical products like an electric car, look how expensive it would be just to get started. If you sell a software product, you can get started with a relatively cheap computer in your bedroom. Eliminate the major costs of startup and you immediately increase the chances of success.

Second, most people make the mistake of trying to compete with larger companies. A much smarter strategy is to see what larger companies aren’t doing, and then create a product that compliments their own product line. This gives you startup two ways to succeed.

First, your company can just keep growing. Second, a larger company can see what you’re doing and buy your company, giving you millions in the process. However, if you insist on trying to compete against a larger company, that larger company has the resources to crush you. You don’t want to fight larger companies. You want to work with them so one of them will see your company as more valuable to buy than to spend the time duplicating your products on their own.

To learn more about my friend’s strategies for creating and selling companies for millions, you can read his book that I helped him write called “Strategic Entrepreneurism.” In any event, think less of getting mad at CEOs making millions and start doing something to earn your own millions, and you can do that by starting your own company.

After all, your job probably won’t give you a 74 percent pay increase with a six-figure income, so you really have nothing to lose by starting your own company after all.

Posted in Finance

January 8th, 2014 by admin

In the old days, you could work for a company for decades and retire with a comfortable pension. Nowadays you can work for a company for decades and retire with a pension, only to lose it later when the company doesn’t fund it or simply decides that it can’t afford to give you a pension after all. When I worked at Cubic, you could get a pension after twenty years of service, which meant that as soon as you worked for nineteen years, the company would find a way to get rid of you so they wouldn’t have to pay for your pension. One guy got fired several months short of his twenty year anniversary, walked out to the parking lot, and dropped dead of a heart attack.

Since you can’t rely on a pension and you can’t rely on Social Security, you have to take matters in your own hands. For many people, they simply get a low paying job. Former executive Tom Palome didn’t save enough for retirement so now he’s working two jobs to earn money. Before retirement, he earned a six-figure income and flew first-class to Europe regularly. If someone with his position could find themselves running out of money after retiring, it can happen to anyone (except the top executives who grant themselves golden parachutes in return for doing nothing productive for the company).

Instead of working in a job after they retire, many people are choosing to start a company instead. By starting your own company, you can control your own destiny. Of course, you can start your own company at any age, but doing it after retirement can be another route to pursue instead of working in a job or trying to live off a pension and Social Security.

What kind of company should you start? There are many options, but what my friend and author, Jon Fisher, recommends in his book “Strategic Entrepreneurism” is to look for a service or product that would be beneficial to both customers and a much larger company. Many people start a company and hope to turn it into the next Google or Microsoft, which could happen, but isn’t likely. A better option is to build a company designed from the start to sell to a larger company.

So when thinking of a company to start, think first of how your company could help a larger company. Jon Fisher’s last company focused on encryption, which proved useful to banks. Ultimately, he sold his company to Oracle, a major technology powerhouse. Oracle saw his company as filling a void in their own product offerings so they bought his company.

If you try to start a company to compete against a much larger company, you’ll probably lose. However, if you start a company to compliment a much larger company, you’ll not only avoid competing directly with a much bigger rival, but you’ll also fill a need that has fewer rivals. Once you establish your company, then larger companies will suddenly be interested in buying your company rather than developing their own equivalent solution from scratch. That’s the basic idea behind “Strategic Entrepreneurism” which is to design your company from the start to be acquired by a larger company. That way you work with larger companies rather than compete against them.

Such an approach is just one of many options to pursue when starting a company, but if you’re tired of dealign with incompetent workers and executives, it may be time to start your own company and show everyone how it should be done. At a certain age, it gets harder and harder to find a job anyway, so you really have nothing to lose by starting your own company.

Posted in Finance

January 5th, 2014 by admin

One of the strangest paradoxes in the world is that learning math and science is hard while learning business is much easier. Yet business majors tend to earn more than engineers and technicians and even get to boss them around. Business majors tend to go into management and executive positions. Engineers and technicians tend to get stuck underneath the executives.

One solution is for engineers to go back to school and get an MBA. When you don’t need any qualifications in business to get an MBA, other than a college degree, what does that tell you about how hard it is to learn business? When you can pop out of college with an MBA and suddenly be considered valuable despite having no experience in any particular industry, what does that tell you about the mythical qualities of an MBA?

There’s nothing wrong with getting an MBA and achieving one can certainly teach you much about business. Yet not every person who gets an MBA deserves to be treated like an executive right off the bat, yet that’s the way society works where people are more impressed by your past credentials on what you’ve accomplished than what you can currently do right now. Is it any wonder why so many businesses go down the drain when short-sighted executives make boneheaded decisions?

If you’re an engineer or science major, here’s one way you can rise above the MBA crowd. Go into financial engineering. The idea behind financial engineering is that you use math to predict the stock market. Since most business majors can barely do math beyond what their spreadsheets can do for them, most business majors have no clue how to do financial engineering on their own so they need to hire people who can do it, and that’s where an engineer can excel.

Financial engineering combines math, computer programming, and financial knowledge to predict the stock market. It’s the ultimate video game that can earn financial engineering graduates a starting salary of $100K right out of school. Best of all, the business executives know they’re highly dependent on financial engineers so they can’t screw them over like they can with ordinary engineers in a company. A good financial engineer can earn a high salary plus a percentage of whatever his or her equations can produce as profit from the stock market. You won’t see any similar kind of profit sharing in other kinds of companies or industries.

You’ll see more about financial engineering in future posts on this site, but get that idea planted in your mind that right this second, trillions of dollars are being traded on the stock market by algorithms. Black box trading or algorithmic trading is statistically proven to earn tiny slices of profit at lightning quick speeds that humans can never do. A computer can spot opportunities in the stock market and buy and sell stocks in seconds, shaving off a few percentages of profits each time. By the end of the day, these black boxes earn millions for their owners, and often billions in the course of a lifetime. Unless you have your heart set on working in a particular industry as an engineer, you can apply your engineering, math, and programming knowledge to financial engineering, make a killing and get the acknowledgement you’ll never get from being just a lowly engineer in a big company like General Motors or Boeing.

To learn about financial engineering, start with a book called “Nerds on Wall Street,” which provides an introduction to the world of artificial intelligence, genetic algorithms, and neural nets to stock picking.

In the old days, the people who made the big bucks on Wall Street were business majors. Today, they’re financial engineering majors, otherwise known as “quants.” Every year, Wall Street hedge funds hire Ph.D.’s in advanced math, C++ programming, and artificial intelligence to help them develop better black box algorithmic trading machines.

If you feel your career as an engineer is stagnating at your current job, or if you don’t like the idea of studying a hard topic only to get paid less and have less control over your future than a business major who didn’t have to study as hard but gets better job offers solely due to having a business degree without necessarily having any business experience or experience in the industry that’s hiring him or her in the first place, take a look at financial engineering. Many reputable business schools, such as the UCLA, offers financial engineering degrees for math, computer science, and engineering students so they can apply their scientific knowledge in a field that actually appreciates their brainpower.

After you read a book like “Nerds on Wall Street” that can explain how the field of financial engineering and algorithmic trading began, you can decide for yourself if that’s a field you want to pursue. As an engineer, math, or science major, you already know you’re smarter than the average guy who just gets an MBA and gets treated like royalty at major corporations solely due to the MBA degree. Financial engineering can be one way to apply your brains to extracting profits from the stock market and give yourself the good life you so richly deserve based on your intelligence and not a bogus credential like a business degree with no business experience behind it.

Posted in Finance

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