Sunday, January 30, 2011

Facebook: Friends with Benefits

Facebook is now the place where friends meet. The info service TechCrunch counts nearly 600 million Facebook members. But the social network has also a growing number of own friends: The big companies.

Take for example Intel. The chip-goliath has a fan page with more 300.000 people, who claim to like the company and their products. The Intel fans discuss new Intel products and strategies and communicate with the Intel staff. Tiffany & Co. has also huge fan community on Facebook (more than 700.000 fans). Thousands of people who communicate about jewelry, company-strategies and products.

You can find a lot of brands on Facebook: Starbucks, Coca Cola, Wal-Mart, Abercrombie & Fitch, you name it. All these companies use the social network for communicating with their fans (customers and would be customers) and for advertising. Facebook is therefore a cheap platform for public relations and marketing.

It looks like, thousands of people are happy to advertise for companies, without being paid for it. All the clicks of Facebook's "Like" button and all the check-ins at restaurants, stores and other establishments on Facebook are valuable marketing material. Many companies now use the social network as an additional big marketing department for almost no costs.

And now some companies start to sell their products via Facebook. Some days ago, Quidsi, a subsidiary of, has opened up a few stores selling household items on the social network. Quidsi has created electronic commerce pages for their sites, and Existing users of these shopping sites can now shop for products directly from the social network under a tab called "Shop My List". Amazon, the mother of Quidsi, found another way for selling products: You can now send Amazon gift cards via facebook, for example on birthdays of friends.

You can bet, that Facebook also wants a piece of the big cake it is baking. Last week the social network announced an advertising program, called "Sponsored Stories". Companies and individuals can buy the rights to republish some actions of the Facebook members (clicking the "Like" button) in ads -- including the Facebook member name and profile photo -, the Washington Post reported.

No wonder that the Wall Street values the empire of Mark Zuckerman (founder and CEO)  already valued at around $80 billion (Bloomberg). Having a lot of friends has a lot of benefits.

Wednesday, January 26, 2011

Stock Market: A New Clinton Effect?

It looks like the Wall Street likes the "state of the union". The S&P 500, the barometer of the Wall Street, rose today 0,4%, one day after the US president gave his annual "state of the Union Address". Since last September the Wall Street gained around 23%. One of the reasons for the current rally wave is the new political climate in Washington DC.

It seems that the president recently altered his behavior regarding to the economy. In the first months of his regency the Wall Street Journal and other financial Media complained about Obama´s anti-business policy. They referred to his plans for raising taxes, expanding regulations and implementing an expensive health reforms, burdening companies with high costs. The intended tax hikes would especially endanger the healing of the economy, they declared.

But now it looks like that Obama changed his course. This seems to be a reaction to his party`s defeat in the midterm election in November. Now, Mr. President sounds much more business friendly than before. We see an alteration, especially in the tax policy. No tax hikes anymore. Shortly after the midterm elections Obama gave in and extended the Bush tax cuts. The extension of the low tax policy helps to stimulate the economy, the financial media explained.

The current wave of the stock market rally therefore could also be a reaction to the more business-friendly policy in Washington DC and the extension of the low-tax-policy. The current rally surge started already in September 2010. In these weeks the polls showed a high probability of a Republican win in the midterm election and therefore for the extension of the low-tax-policy.

The new status quo in Washington DC is like the epoch of Bill Clinton. This president started also with an anti-business left-wing rhetoric and revised his course after of a midterm election defeat. The then business-friendly policy of Clinton kindled a strong economy in the late 90s and lead to enormously gains on the stock market. Does history repeat? Do we get now a copy of the Clinton-effect?

Tuesday, January 25, 2011

Criminal Minds: The Paranoid Portfolio (Part II)

2. Surveillance Systems for Airports

Who isn´t afraid about the terror risks in airplanes, on airports and other public places? There is a growing industry which deals with these risks, and companies that are in the market for the so called "home security".

Every one who travels to the USA knows now the eye- and finger-scanners which the US Homeland Security uses for immigration control. One of the leading manufacturers  is L-3 Communications Holdings (NYSE: LLL). This big technology conglomerate (market capitalization $8 billion) offers also the full-body scanners which are already in use at Amsterdam´s Shiphol Airport.

Although LLL has a lot of opportunities,  the company relies upon on the US defense spending. In the last months, the risk that the US government cuts the expenses to control the budget deficit, set the stock price under pressure. Speculations about the US deficit and about US military expenses could therefore generate fluctuations for this stock price.

Investors have also to consider, that LLL is not alone, and has to deal with a lot of (hungry) competitors. One of them is L1 Identity Solutions (NYSE: ID). They also offer face recognition systems and software which should protect against counterfeit IDs, created from stolen identities.

Also in the market is FLIR Systems (Nasdaq: FLIR). This technology company focuses on authentication technologies. Such devices rely on sensor cameras, key cards and scanners to collect and verify data.

Other competitors in this market include American Science and Engineering (Nasdaq: ASEI) who produce X-Ray machines for security checks and OSI Systems (Nasdaq: OSIS), whose products check for explosives under clothes.
3. Cyber Security

You can also find a lot of companies which offer protection against cyber crime, for example against computer viruses transmitted via the Internet or hackers who manipulate your computer or steal your virtual identity. The leading provider in the market for the so called Cyber Security is VeriSign (Nasdaq: VRSN).

4. Hurt Locker 

If you are searching for specialties in the security market you will also find iRobot (Nasdaq: IRBT). Their name alludes to the famous books by Isaac Asimov. This producer of cybernetic systems (robots) offers 2 product categories: Self-steered vacuum cleaners for households (the "Roomba Vacuum Cleaner") and military robots. These so called "Small Unmanned Ground Vehicles" are robotic machines, which detect and deactivate bombs and land minds. Cinema fans may know them from the Hollywood blockbuster "Hurt Locker".

While the household section is still waiting to be accepted by consumers (these robots are still expensive), the army sectors seem to prosper. The stock almost doubled in the last 12 months because the US Army is ordering more of the life saving robots.

5. Resume: No Chance without Risks

Global dangers and the permanent threat of terrorist strikes besides the variety of risks described in "Criminal Minds" generate a growing market for iRobot and many other security providers, especially when they use cutting edge technologies.

But be careful, no stock is without risk. We live in a imperfect universe, there is no such thing as perfect security. A stock price depends not just on economic development, which is favorable in the moment, Management must always react to competitors, who are trying to steal their market. Even in a growing market the danger exists that the management fails.

It may be helpful, even in the stock market, to be a bit paranoid.

Take care.

Monday, January 24, 2011

Criminal Minds: The Paranoid Portfolio (Part I)

I started to watch the US-TV-Series "Criminal Minds" on DVD. It`s about a FBI team which uses behavioral science to trace murderers. Most episodes begin with a innocent individual suddenly attacked and killed by an unknown person. You can get paranoid by watching the series.

Being a long time economist and a stock market investor, I thought there must be a huge market for companies offering security  solutions.  How could a investor benefit from this market?

Indeed, there are a lot of public companies (traded on stock markets) which offer some kind of security products, but you have to be very careful.

1. The Lock Makers

Sometimes it may help to lock apartments and houses to keep intruders out. The stock market seems to like this idea. The stock of Kaba (KBN.SW) did well in the last months, plus 35%. Kaba is a Swiss company which is listed on the Swiss Exchange (Zürich).

Kaba claims to belong to the leaders of the global security industry. They offer access control solutions for buildings, facilities and areas, including key systems, door systems, access systems & enterprise data collection. The newest financial report (2009/10 per Jun 30, 2010) shows that profit climbed in this period 23% to CHF 86,9 million. The analysts of Vontobel Research report that Kaba - as most Swiss companies - earns most of its revenues on foreign markets (Americas 25%, Asia-Pacifik 11%, Europe, Near East, Africa 45%). They see it as a growth stock, but refer to the risk that a rising value of the Swiss Franc could hamper exports (because then the product get more expensive in $, € and other currencies).

Looking much more risky is Napco Security Technologies (Nasdaq: NSSC). They are manufacturers of electronic security equipment including alarms, locks and building access control systems. But Wall Street doesn`t seem to like them. The stock is stagnating just above one buck. The financial website of Yahoo shows that they had losses in the last quarters. Better to be safe than sorry.

Saturday, January 22, 2011

Stock Market Philosophy: Always Look on the Bright Side of Life

It´s dark and chilly. The East Side of the USA has just 21 F (minus 6 C), in Germany the temperatures are fluctuating around freezing point. And on Wall Street the Tech Stocks are tanking. Gee!

But, why not follow these girls (spotted near Manhattan`s Grand Central Terminal)?  Yes,  "Always Look on the Bright Side of Life". Have a nice weekend everybody!.

Friday, January 21, 2011

Gold: Barometer of Hysteria

Gold is losing a bit of it´s glamour in the financial markets. Right so, there is no fundamental reason behind the gold rally.

 “All things are subject to interpretation; whichever interpretation prevails at a given time is a function of power and not truth", said Friedrich Nietzsche. This fits to gold speculation. The yellow metal doesn´t have much economic substance. Ok, a golden necklace on the skin of a girl, oh what a pleasure. But gold doesn`t have a place in the economic policies of today.

The rally of gold is just a kind of mass hysteria. The media reported two alleged reasons for the gold buying spree.

1. The expansive monetary policy worlwide creates inflation and gold is considered as a protection against inflation, the gold bugs tell us. Indeed, the reserve banks in the USA, Europe and Asia pumped a lot of money into the world financial system to restart the world economy. But, the Chinese government is already applying the brakes, rising interest rates and pumping liquidity down from the markets. And the reserve banks of the USA & Europe will follow soon, when they see that the economic rebound is sustainable. Therefore the inflation will not get out of control, as many gold bugs suggest.

Yes, energy and food prices are rising fast. But rising prices for products will animate their producers to produce more. They always did. Therefore the farmers will invest (planting) more and expand their harvests, pressing on the prices again. And the oil producers have more initiative to find more of the expensive commodity in the ground, as the example of Brazil shows, with the discovery of a lot of new resources offshore lately.

2. The other reason for the gold rally was the "crises", the media explained. Yes, we had a crisis at the end of 2008. But now the world economy is healing. And, gold is no protection against a depression. When people lose jobs & income, they have less money to buy commodities, like gold. Commodity prices must go down, even the price for jewelry. Buying gold, any time when the media transmitted negative news, was just a sign of hysteria.

The weakening gold price shows now, that the hysteria is cooling. It seems, the markets are gaining more rationality.

Thursday, January 20, 2011

Investing: Constructing Virtual Portfolios

Every reader of this blog knows, the Internet has a lot of advantages. One of these gains: Investing is much easier and cheaper. For example, many financial websites allow you to construct a virtual stock portfolio.

One of the pioneers is Yahoo. If you go on and search for example on Starbucks (Nasdaq: SBUX), the site shows you not just the current stock price and the latest news about the company. Yahoo also offers you the possibility to add this stock to a (virtual) portfolio. It needs just 1 click on the line "Add to Portfolio". You enter then a site which offers you some alternatives, namely existing portfolios or a new one. If you choose the new portfolio you can name it, for example "Consumer Stocks". Later you can add any stock which is traded in the USA, for example "Urban Outfitters" (Nasdaq: URBN) or "Wal-Mart Stores" (Nyse: WMT). The "Consumer Stocks" portfolio, which you find on  the line "My Portfolios"on Yahoo Finance, shows you then the stockprices and current news of all stocks in the portfolio.

You can add more information, for example, a (ficticious) number of stocks in your portfolio. The portfolio calculates than the current (fictional) value of this virtual portfolio and also the difference to the last trading day in $ and in percent.

Other providers, of course, allow you also to construct fictional portfolios, for example Google ( The portfolios cost just the time to construct and to revisit them, no money at all. They are a very cheap & comfortable possibility to learn about investing and to get a feeling for the stock market. If the stock market falls, it can just bother your ego. You don´t lose a penny. And regarding the low costs, you can construct many portfolios with Yahoo, Google and other providers and compare them, to find which portfolio is the best for your purpose.

Wednesday, January 19, 2011

Book Comments: Longitude

Imagine you want to travel by ship to England and you miss it because you cannot find it exactly? That happened quite often before the 19th century.

The seafarers didn`t have precise maps. The captains and steermen lacked the correct coordinates, the longitudes, to navigate their ships. Longitude is an imaginary line drawn from north to south pole, and combined with latitude (measured from the equator by parellels north and south of it) you create a gridt which helps finding any place on the globe you want. Without longitude captains steered their ships by guessing. Therefore sailors hit very often islands, which surprisingly got in their way. For example, in October 1707 British Admiral Sir Clowdisley Shovell and his whole fleet suffered wreckage and sank, just miles short of the safe British harbor, because the Admiral miscalculated the correct route home.

Missing the route was a big obstacle for the raising world trade and fledling economies. Therefore the governments of Great Britain and other seafaring nations offered high prizes for finding a workable method to discover correct latitude.

The book "Longitude", written by Dava Sobeil,  describes how this problem was solved in the late 18th century. As the author reports, there was a hot competition to win the bounty which the British Parliament offered in its Longitude Act of 1714. 2 competing schools tried to find ways for determining the correct longitude. One group tried to find the coordinate with the help of astronomy, the other group focused on clocks.

Sobel`s "Longitude" focuses on the clockmakers and the pioneer John Harrison. In his lifetime the British constructed four timekeepers, called H1 through H4. These chronometers would display the correct time and therefore help the sailors to determine their exact position,  thus  longitude.

However, Harrison did not have just the problem of how to construct a clock which was robust enough to work exactly during extrem and changing conditions on long ship travels. Sobel also describes how Harrison had to fight with the Board of Longitude. This organization, which was determined by the British Parliament to decide about the bounty, was dominated by Harrisons competitors, the astronomers. And his rivals did everything to keep him from winning.

In describing the lifelong fights and frustrations Harrison had to accomplish, the author gives also insights to investors. She shows, that a strong idea doesn`t guarantee spontaneous success and quick fortune. Very often an idea needs a lot of time and patience to flourish. The stock market very often shows such setbacks. This book is not just a pleasant read, it is also a cheap and pleasant way to learn that.

Friday, January 14, 2011

Intel/Internet: How much are thousand exabytes?

The numbers didn´t make furor on the stockmarket, but they were impressive:  The Q4 report of Intel. The bellweather of the chip market reported yesterday, that in Q4 of 2010 the revenue climbed 8% year over year, the profit jumped 48%. In the whole year 2010 the revenue passed the $40 billion mark, a new record for the technology champ.

This was really surprising in the face of all the speculation about the shrinking PC-market, because of the rise of the tablets, which need less computing power. The explanation: Intel CEO Paul Otellini referred to the growth of Intel`s data center group, where the revenue jumped 35% year over year. "The world of PCs plus new emerging computing devices is increasing the demand for servers of all types", reported Otellini.

Yes, servers are the "Heinzelmännchen" of our times, meaning the little house gnomes who have done all the work of the citizens, as an old German fairy tale claimed. This blog runs on the servers of, which is a daughter of Google, and is distributed by the servers of Facebook. My E-Mails run on the servers of Yahoo, many people put their photos on Flickr and their videos on YouTube.  CloudComputing is the magic word, you don´t need much storage space or processing power on your own computer. You can use the servers of many providers in the Internet (the "cloud"), saving a lot of money.

This market, the backbone of the Internet, is exploding. "In 2010, total traffic crossing the Internet was roughly 245 exabytes", Otellini said. This was more traffic than all the previous years combined. Over the next five years, Intel expects that 1 billion more people will join the global online community with 15 billion connected devices, including PCs, smartphones, tablets, embedded devices, and smart TVs. The company estimates this will increase the data footprint across the Internet to over 1,000 exabytes. A exabyte is 1 billion gigabytes = 1 million terabytes, Wikipedia tells us, whatever that means.

This is also good news for investors. They can participate in this exploding market by investing not just in Intel, also in other promising players such as Google, Netflix (Movie downloads), and many others. But this needs some patience. In the short run the market often ignores facts & trends, as today with Intel, but in the long run the numbers will win, as the rising valuations of Google, or even Facebook show.

Thursday, January 13, 2011

Squirrels: What Blizzard?

Squirrels are hibernators, they sleep through the winter, say the textbooks. The squirrels don´t care. You see them now in the streets of New York, in the parks, on the fire escapes and before the windows of the tenant buildings. Even after the evil blizzard, which spillaged Manhattan for some days, the squirrels were everywhere. What blizzard?

The squirrels changed their behaviour because the people feed them in winter. They nurture the animals in the parks or put food before their windows, intending to feed the birds. Squirrels don´t care, they like bird food.Therefore they don´t need to hibernate anymore to survive in winter. More time to live.

Feeding the squirrels in winter compares somewhat to bailing out the banks. Ben Bernanke and other central bankers rescued the big financial institutions in the crises of 2008, otherwise many banks wouldn`t have survived the harsh banking winter.

Critics complain that this leads to moral hazard, a term coined by insurance economists. If someone doesn`t have  to deal with his own risks & misbehaviour, because other people (for example the insurance company) bails him out, he doesn`t care about risks. Hence he takes too many risks and misbehaves. Bailing out banks means rewarding them for taking too much risks and guids them to continue their mistakes, say the critics. Therefore the whole economy may suffer, because the banks invest too much in hazardous adventures.

Maybe. But the bailed out squirrels don´t care. They seem to enjoy their new behaviour and bring more life and nature to the streets of Manhattan. It seems also that the banks are flourishing again and with them the whole economy. Time will tell.

Tuesday, January 11, 2011

Tiffany Experience

Shops do not just sell things, they sell consumer experience. At least that is what their marketing departments tell us. Tiffany & Co. seems to have a special interpretation of this idea. Anyway, while shopping at Tiffany´s prestigious Manhattans 5th Avenue shop I had a very special consumer experience.

I tried to get a necklace for my American girlfriend as a christmas present. I was told that the preferred item, a chain with a beautiful snowflake made of tiny diamond splitters, was out of stock there. But no problem, they have it in their Wall Street Shop and can deliver it the next day to 5th Av, I was told. I accepted and agreed with the salesperson to fetch the item the next day at their midtown shop. I paid in advance with my creditcard. The salesperson also demanded my adress and I gave her my name and the Manhattan adress of my girlfriend where I staid then, just the street and the number of the tenant house where she lives.

Next day this salesperson wasn´t there. I approached another salesperson to get the ordered necklace. This person went away and some minutes later came back, without the item. Instead she showed me a paper, and claimed that the product has already been send to me at and the Manhattan adress of my girlfriend. I responded that this is a misunderstanding and there is a agreement that I get the necklace at the Tiffany`s shop 5th Avenue. The salesperson reacted unpolitely and uncooperatively. She claimed gruffly that the product was already handed out as stipulated. Therefore I should have it already. I tried to explain that I am not a citizen of New York and there is no adress with my name and a street number in Manhattan, therefore the product couldn´t be delivered there. No success.

I demanded to talk to a superior of the salesperson, who soon arrived. The superior was polite and friendly and listened to my explanations. She offered me a place to seat, asked me to wait and went off to research the transaction.

After some minutes the superior came back. And - voila - she had the snowflake, which she called "charm". But - no chain. "Didn´t she hand it out to you?" she asked surprised, referring to the salesperson, which whom I ordered the product the day before. I answered, that I should I get the whole necklace, thus chain and snowflake, in one piece. I didn´t think to buy both pieces apart. Some customers do that, I was told.

The salesperson went off again, searchig now for the missing chain. Finally she came back, with the chain. Reflief! The salesperson put the necklace, now complete, in a Christmas bag. She also refunded $21,78 with the first salesperson has billed me for sending the necklace to the non-existing Manhattan adress.

The whole procedre cost me around 45 minutes and a lot of sweat. Yes, it could have happened elsewhere, but at Tiffany & Co. Fifth Avenue in Manhattan, one of the famoust shops on the earth? Who have thought that. Maybe Tifffany & Co. should consider a new offer for their customers: Adventure shopping. There is a market for everything.

Saturday, January 8, 2011

Fighting on JFK

American airports have a bad reputation. They are considered as inefficient, messy and chaotic. Last week JFK New York tried to vindicate these allegations.

I was on my flight home from NYC to Europe, using Air France to Paris. There were daunting long lines at the Air France desks. I managed to avoid them, because I already had my boarding pass. I needed only to access the internet and a printer before.

After handing off my luggage at the security port I went to a bar nearby, accompanied by my American girlfriend, to celebrate the fast check in.

But then the problem started. A security person refused my access. "The boarding pass is not valid", she declared. Fortunately I got assistance by another security person. The second security person declared my boarding pass as valid.

The first securtiy person didn´t give in. "He has to go the airline desk again" she ordered. I went with the 2. security person to the airline desk, but it was already closed, around one hour before the scheduled liftoff.  We went back to the security area and tried to enter, now from another place. But the 1. sec. pers. was now shouting with the 2. , that I must not enter the area. We tried to enter the area on a third spot. Now I got more assistance. A third security person declared the boarding pass as valid. The 1. sp  kept shouting and the security persons were fighting about my right to enter. But now I had the majority of the sec. pers. and I could ignore the resistance and finally enter.

Later everyone accepted my boarding pass.

Conclusion: When you go via JFK you need strong nerves and a lot of patience. A Zen like enlightenment.

Birth of Blog

This blog is about markets, movies, books, travelling and other fascinations. I am planning to post in a sporadic way. Some words about myself. I am a German economist, trained in banking, with experience in research, public relations, editing and journalism.