This is a classic title, Extraordinary Popular Delusions and the Madness of Crowds.
The crowd isn't always right. In fact, quite often, it falls prey to delusion, lack of perspective, group think and wishful thinking.
Bottom line: you gotta understand the psychology of ignorance and emotion.
First published in 1841, it analyses three great outbreaks of mass-investment psychosis: the Mississippi Scheme and the South Sea Bubble in the 18th century, and Dutch tulipmania in the 17th century, which is also the subject of Joseph de la Vega's eyewitness account, first published in 1688. All three instances provided anecdotes as scary as any stemming from the 1929 crash.
Read the full book review (excerpt above) here.
Monday, April 4, 2011
Thursday, March 17, 2011
Breakdown the Earnings of Giant Corporations
Let's say you want to know how much a giant conglomeration like GE earns from each type of its businesses (they do everything from television to home supplies to nuclear reactors).
They don't always get broken out in traditional financials. SO:
Go to MINT, type in your company, and select SEGMENTS as a value.
You'll get earnings (in the case of GE) by infrastructure, home solutions, entertainment, etc....
They don't always get broken out in traditional financials. SO:
Go to MINT, type in your company, and select SEGMENTS as a value.
You'll get earnings (in the case of GE) by infrastructure, home solutions, entertainment, etc....
Monday, March 14, 2011
GINI Index Can Predict Social Unrest
May you live in interesting times.
Ever heard of the GINI index? Basically, it measures just how the poor are and how rich the rich are in relation to each other in any given country (full definition included on the link).
If you have allowed for differences in outcomes and ability, and your country still has an unusual disparity in wealth, that is a sign something isn't working.
Because you want to be careful investing in, exporting or importing to/from, or starting a business in a country that is about to go up in revolution.
Ever heard of the GINI index? Basically, it measures just how the poor are and how rich the rich are in relation to each other in any given country (full definition included on the link).
If you have allowed for differences in outcomes and ability, and your country still has an unusual disparity in wealth, that is a sign something isn't working.
Because you want to be careful investing in, exporting or importing to/from, or starting a business in a country that is about to go up in revolution.
Tuesday, March 8, 2011
Outsourcing Production in China Is Risky
Interesting article about the risks of outsourcing your production to China, especially if you're a small business.
Main points of article:
1. Poor Quality of Product to the point of recalls, destroyed production runs, and damaged reputation.
2. Delays in getting your product run going. Chinese factories serve a variety of clients and as a small business you have last priority.
3. High Shipping Costs
4. Theft of your intellectual property. Expect to see knockoffs of your product in the marketplace.
If there were ever an argument for capitalism being linked to democracy and rule of law, this would be it.
Main points of article:
1. Poor Quality of Product to the point of recalls, destroyed production runs, and damaged reputation.
2. Delays in getting your product run going. Chinese factories serve a variety of clients and as a small business you have last priority.
3. High Shipping Costs
4. Theft of your intellectual property. Expect to see knockoffs of your product in the marketplace.
If there were ever an argument for capitalism being linked to democracy and rule of law, this would be it.
Sunday, February 6, 2011
Austin a Top Market for Personal Care Products
Austin is a huge market for personal care, gym memberships, fancy haircuts, grooming and all kinds of dandified metrosexual shennigans:
"The average household in Austin, Texas spends $143 a month on personal care, or $1,716 annually — the highest of the top 100 largest cities in the country, and more than two times the national average."
Click the link, but personal care includes gyms, drug stores, hair salons and a few other things.
Not 100% precise, but gives you an idea of a town's flavor and what else they might go for.
"The average household in Austin, Texas spends $143 a month on personal care, or $1,716 annually — the highest of the top 100 largest cities in the country, and more than two times the national average."
Click the link, but personal care includes gyms, drug stores, hair salons and a few other things.
Not 100% precise, but gives you an idea of a town's flavor and what else they might go for.
Monday, January 31, 2011
A Lesson in Commodity Futures
In the near future, you are going to have to understand how commodities are bought and sold. Both growing global demand and the pressure for money to go somewhere are lighting up commodities. Oil, gold, cotton, wheat and rice are just some of the commodities that are about to figure prominently in your life.
Why this is important: Many businesses - like airlines and fuel options - engage in options due to their operational needs. And inflation - and growing demands - makes this an attractive trade in the future.
Unlike equities, commodities often involve contracts to deliver the actual product at a certain price. Most of the time, no actual physical products change hands.
This is good because people sell and resell options and contracts in excess of the actual amount of physical products available. A lot of people don't really have the products to deliver at certain prices either.
Ruh-roh.
Most of the time markets engage in this 120 mph, highwire act without undue consquences. The Great Maine Potato imbroglio of 1976 is a great example of what happens when you find you need to deliver 3 million potatoes to lower Manhattan by 3 pm the next day.
Another take on the whole sordid episode here.
Why this is important: Many businesses - like airlines and fuel options - engage in options due to their operational needs. And inflation - and growing demands - makes this an attractive trade in the future.
Unlike equities, commodities often involve contracts to deliver the actual product at a certain price. Most of the time, no actual physical products change hands.
This is good because people sell and resell options and contracts in excess of the actual amount of physical products available. A lot of people don't really have the products to deliver at certain prices either.
Ruh-roh.
Most of the time markets engage in this 120 mph, highwire act without undue consquences. The Great Maine Potato imbroglio of 1976 is a great example of what happens when you find you need to deliver 3 million potatoes to lower Manhattan by 3 pm the next day.
Another take on the whole sordid episode here.
Tuesday, January 25, 2011
Book Review: F'd Companies
This book chronicles the worst, silliest and least thought out ideas of the dotcom era. The writer is profane and harsh, but it makes for entertaining reading.
It also makes for very educational reading if you are starting a company or testing out business ideas. That goes double for companies doing business on the internet.
There are lots of bad ideas in these business plans to curdle the soul - lack of competitive advantage, high shipping costs (relevant for internet retailers), failure to improve on value for the consumer, and many more shortcomings so glaring you need polarized sunglasses to read this book.
It also makes for very educational reading if you are starting a company or testing out business ideas. That goes double for companies doing business on the internet.
There are lots of bad ideas in these business plans to curdle the soul - lack of competitive advantage, high shipping costs (relevant for internet retailers), failure to improve on value for the consumer, and many more shortcomings so glaring you need polarized sunglasses to read this book.
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