£2.95 Monday 22 September 2014 Vol III, Issue XII HNW MAGAZINE The market leading weekly micro- magazine, exploring profit and wealth strategies for business angels, investors, entrepreneurs and high net worth individuals. hnwmagazine.co.uk September 2014 IN THIS ISSUE FEATURE P3 So We’re Better Together, But What Happens Now? RUTHLESS P5 The World’s Biggest Scapegoat READ‘EM & REAP P7 The Market Voices You Should Listen To THE UK’S £350M P7 BUSINESS THE F&J INDEX P9 Measuring the Media’s Market Sentiments CROWDFUNDING P11 116% Returns in only 5 Hours? Peanuts…. CROWDFUNDING P13 “NY SLICE” HOW THE FCA P14 BIT OFF MORE THAN IT COULD CHEW Policing Social Media Marketing in Finance Because the media has never predicted a market crash, nor demonstrated any clairvoyance for spotting a recovery, we look at media sentiment, combined with good market insights, as a useful barometer. The F&J tells us to be wary when the headlines read euphoric, and euphoric when the headlines read doom….and everything in-between. Page 9 READ ‘EM & REAP JOSHUA BROWN The Reformed Broker Joe Weisenthal has a post up about the awful action in gold these past few years. He posted a chart of gold’s price action from FRED, which I’ve annotated to remind you of something that actually happened exactly three years ago, a moment in time at the end of the summer of 2011 during which the investor class had temporarily lost its collective mind. Page 7 THE FEAR & JUDGEMENT MARKET INDEX “If, in the words of Edward Abbey from The Journey Home, “Growth for the sake of growth is the ideology of the cancer cell” then the one and only man imprisoned for the 2008/09 crisis was a sacrificial benign freckle torn from the ass of Wall Street, leaving the network of cancer ridden lymph nodes inside to fester and grow again.” Page 5 THANK GOD IT’S OVER…BUT… WHAT HAPPENS NOW? BY STEVE FORBES Removal vans cancelled, English property schedules ripped up and the rebuilding of Hadrian's Wall stopped. The turnout was a post-war record with 85% of the population casting their vote which shows that people do care if the stakes are high enough and their vote will count. From a financial point of view, the result brings certainty which is always regarded as a good thing by the markets, and importantly in my view it also means that Scotland is once again open for business which is something that I doubt I could have said if we had God knows how many years of separation discussions taking place. The truth is that ever since the devolution vote was announced there has been a hiatus in certain parts of the Scottish economy. High end properties and es- tates have barely moved in the F & J RUTHLESS BUSINESS Following a morning that was as gloomy as Eck Salmond’s mood, we can at last start looking forward, and the scale of the referendum result means that hopefully it will be many years before we have to endure another vote on Scotland becoming independent.
Transcript
£2.95
Monday 22 September 2014
Vol III, Issue XII
HNW MAGAZINEThe market leading weekly micro-magazine, exploring profit andwealth strategies for businessangels, investors, entrepreneursand high net worth individuals. hnwmagazine.co.uk September 2014
IN THIS ISSUEFEATURE P3So We’re Better Together,But What Happens Now?
RUTHLESS P5The World’s BiggestScapegoat
READ‘EM & REAP P7The Market VoicesYou Should Listen To
THE UK’S £350M P7BUSINESS
THE F&J INDEX P9Measuring the Media’sMarket Sentiments
CROWDFUNDING P11116% Returns in only5 Hours? Peanuts….
CROWDFUNDING P13“NY SLICE”
HOW THE FCA P14BIT OFF MORE THANIT COULD CHEWPolicing Social MediaMarketing in Finance
Because the media has never predicteda market crash, nor demonstrated anyclairvoyance for spotting a recovery,we look at media sentiment, combinedwith good market insights, as a usefulbarometer. The F&J tells us to be warywhen the headlines read euphoric, andeuphoric when the headlines readdoom….and everything in-between.Page 9
READ ‘EM & REAPJOSHUA BROWNThe Reformed Broker
Joe Weisenthal has a post up about theawful action in gold these past few years.He posted a chart of gold’s price actionfrom FRED, which I’ve annotated to remindyou of something that actually happenedexactly three years ago, a moment in timeat the end of the summer of 2011 duringwhich the investor class had temporarilylost its collective mind. Page 7
THE FEAR &JUDGEMENTMARKET INDEX
“If, in the words of Edward Abbey fromThe Journey Home, “Growth for thesake of growth is the ideology of thecancer cell” then the one and only manimprisoned for the 2008/09 crisis wasa sacrificial benign freckle torn from theass of Wall Street, leaving the networkof cancer ridden lymph nodes inside tofester and grow again.” Page 5
THANK GOD IT’S OVER…BUT…WHAT HAPPENS NOW?
BY STEVE FORBES
Removal vans cancelled, English propertyschedules ripped up and the rebuilding ofHadrian's Wall stopped.
The turnout was a post-war record with 85% ofthe population casting their vote which showsthat people do care if the stakes are high enoughand their vote will count. From a financial pointof view, the result brings certainty which isalways regarded as a good thing by the markets,and importantly in my view it also means that
Scotland is once again open for businesswhich is something that I doubt I could havesaid if we had God knows how many years ofseparation discussions taking place.
The truth is that ever since the devolutionvote was announced there has been a hiatusin certain parts of the Scottish economy.
High end properties and es-tates have barely moved in the
F&J
RUTHLESS BUSINESS
Following a morning that was as gloomy as EckSalmond’s mood, we can at last start lookingforward, and the scale of the referendum resultmeans that hopefully it will be many years beforewe have to endure another vote on Scotlandbecoming independent.
We may well see a difference in taxrates between Scotland and the restwhich will probably be collected viathe PAYE tax coding, and it wouldnot surprise me if this happened in thenext couple of years.
Given Scotland's political leaningsthis may well result in higher rates oftax being paid by high earners sothere may still be some good news forBerwick estate agents!
For Scottish business owners it may bewise to consider taking dividends fromthe business before any change toScotland's tax raising powers is enacted.
Given there is a UK GeneralElection next May it wouldbe sensible for everyone inthe UK to ensure that theymaximise savings intopensions and ISAs underthe current legislation asthere is no guarantee that achange of governmentwould not further restrictthe amount that could besaved into both schemes.
So, for those able to do so, doing thisas soon as we get into the new taxyear next April would also makesense.
As developments unfold in the comingweeks we will, as always, keep youinformed.
Sláinte.
READ MORE HERE
last two years as prospective purchasershave been waiting until the devolutionresult was known before committing,and who can blame them. I am surethat any businesses consideringexpanding into Scotland have also beenwaiting until the vote was over forobvious reasons.
As well as this, cross-border businesseshad to make contingency plans in theevent of a "Yes" vote which not onlyhad a cost but also meant that timeand effort had to be expended onsomething that has ended up notbeing required, a bit like the"millennium bug" when you thinkabout it.
But as the lyrics ofFlower of Scotland state"these days are past nowand in the past they mustremain" so it is thefuture that we need tolook toward.
Firstly, I do feel that the UK willbecome more federal in nature.
For any union to work you cannothave one party operating underdifferent rules from the others, and iffederalism is the end result I do notthink this will necessarily be a badthing.
In terms of savings it also removesany uncertainties that would haveexisted if independence had been theresult, as at least we know that ISAand pension rules will be no differentbetween Scotland and the rest of theUK.
Are you fed up with earning littleor no interest on your savings
If you’re looking for an income to safeguard your long term financial future thensimply having all your eggs in a bank or building society deposit account basket
AS MA L A N T E E L S S E T A N A G E M E N TAlan Steel Asset Management Limited is authorised and regulated by the Financial Conduct Authority.
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RUTHLESS
“If, in the words of Edward Abbey from TheJourney Home, “Growth for the sake ofgrowth is the ideology of the cancer cell”then the one and only man imprisoned for the2008/09 crisis was a sacrificial benign freckletorn from the ass of Wall Street, leaving thenetwork of cancer ridden lymph nodes insideto fester and grow again.”
BY ED EMERSON
Earlier this year Jesse Eisinger of the New YorkTimes revealed how only one top banker to datehad gone to jail for the financial crisis. Six monthson, and just before US Attorney General Eric Hold-er reportedly might step down, he made it known
that the Justice Department will “…really reallyindict Wall Street executives in financial fraudcases. This time, definitely.” But who was it WallStreet tried to make into the world’s biggestscapegoat?
“The market commentators that youshould be following every day...”
BARRY RITHOLTZThe Big Picture
“Reorganise Europe. Sell off France, privatise Spainand Italy, nationalise Germany, buy Switzerland,put Greece on six months performance watch,promote Poland, retire off Luxembourg and makeBelgium redundant.”
RYAN DETRICKYahoo Finance
“The average year since 1950 peaks on September19 and doesn’t form a major low again till October26. Wouldn’t you know it, but this year we peakedon September 18. Could it take another month tillwe can form a tradeable low? History says thatcould be the play.”
ALAN STEELPoints of Few
“CDOs were a vile product concoction of good andbad debt that drop-kicked the real estate bubble of“the noughties” squarely through Wall Street’smoney making uprights. They grew to be socomplex that dissecting the value from the dross inthese products became like trying to sort fly shitfrom pepper!”
BEN CARLSONA Wealth of Common Sense
“Mean reversion is one of the most powerful forcesin all of finance. Above average performance iseventually followed by below average performance.Good times can lead to bad times and the best timeto invest is during the bad times.”
READ ‘EM AND REAP
made it known that the Justice Department will really reallyindict Wall Street executives in financial fraud cases. Thistime, definitely. ‘We expect to bring charges in the comingmonths,’ Holder said. I guess the first six years of an AttorneyGeneral’s tenure is all just a wind-up.”
And in an amazing footnote: “…a yet little-noticed story in TheWall Street Journal uncovered that federal prosecutors havefailed to collect $97 billion in civil and criminal fines, a figurethat has tripled since 2004. (The) average annual collectionsof fines over the past decade total less than 25 percent of thepenalties imposed. A spokesman said that only $10 billion ofthe remaining $97 billion will ever get collected, as theindividuals or businesses cited simply don’t have the ability topay.”
Don’t have the ability to pay?
Nope. But taxpayers do.
Justice has proclaimed that the person most respondible forthe crisis was in fact former Credit Suisse executive KareemSerageldin.
Who?
Enter The “Breu Crew”
In 2009 the Obama administration appointed Lanny Breuerto lead the Justice Department’s criminal division and “takethings to the next level”. That order to serve up justice bygathering evidence and securing prosecutions has been amainstay following recessions past, where the rolling headsof top executives from companies like Enron, WorldCom,Qwest and Tyco serve as grim reminders to the next genera-tion of would-be financial scoundrels.
And what then were the results of four year’s work by LannyBreuer and his team of elite lawyers (the Breu Crew)?
BY LAWRENCE TAYLOR“Earlier this year, in a Lower Manhattan courtroom,Kareem Serageldin who lied about the value of hisbank’s securities and approved the concealment ofhundreds of millions in losses in Credit Suisse’smortgage-backed securities portfolio, was given 30months in jail.”
hnwmagazine.co.uk September 2014
(Cont….from page 1)Let’s start at the top: Was it Fred Goodwin at RBS? MaybeAdam Applegarth at Northern Rock (the first UK high streetbank to suffer a full-scale run on its branches since the1860s)?
How about Dick Fuld, the man in charge at Lehman Broth-ers when it went belly-up, or Jimmy Cayne, who spent thefirst month of the crisis playing bridge rather than runningBear Stearns.
Stan O’Neal who saddled Merrill Lynch with $8billion of baddebts, HBoS whiz kid Andy Hornby, Lloyds’ chairman SirVictor Blank, Alan Greenspan, Sir Mervyn King, GordonBrown…Bill Clinton?
You’re not even close.
Earlier this year, in a Lower Manhattan courtroom, KareemSerageldin who lied about the value of his bank’s securitiesand approved the concealment of hundreds of millions inlosses in Credit Suisse’s mortgage-backed securities portfo-lio, was given 30 months in jail.
Judgement levied. Take the guilty mandown. Feel the justice slip insidiouslythrough the streets of Manhattan and outacross the world. All hail the Breu Crew!
n the words of David Dayen of the Fiscal Times: “Now, rightin the middle of the midterm election season, and just be-fore Attorney General Eric Holder reportedly might stepdown, he
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“Because the media has never predicted a market crash, nor demonstrated any clairvoyance for spotting a recovery,we look at media sentiment, combined with good market insights, as a useful barometer. The F&J tells us to be warywhen the headlines read euphoric, and euphoric when the headlines read doom….and everything in-between.”
Case in point; the market doesn’t give an Alibaba about allthe speculation going on out there. It just keepsmeandering slowly upwards across the major indices.
What does that mean?
Well, it goes a step or two towards grounding our new Fear& Judgement (F&J) Index, which measures the mediasentiment every day from across 40 mainstream mediaoutlets.
The media reading for the best part of the week, is a “2”on the F&J Index scale, which means “BEAR ENOUGH.”What that means to investors is quite the opposite (aboveright).Because the media has never predicted a market crash, nordemonstrated any clairvoyance for spotting a recovery, welook at negative media sentiment as a useful reading.It means a “BEAR ENOUGH” reading actually means a“POSITIVE MARKET OUTLOOK.” But we also takeperspectives from the contrarian market commentators outthere who focus on facts instead of assumptions.
THE F&J MARKET INDEX…The F&J Index is a simple 1 to 5 scale of howbullish or bearish the media sentiment is onany particular day
The scale records “1 “ as “completely bear-ish” and “5” as “absolutely bullish.”
Over here on holiday on the White Island of Ibiza the“market orders” of the day are Verdejo in the sunshinefollowed by a nice red in the evening!
It seems I’m half a world away from the Keynesianeconomic breakdowns, Alibaba’s IPO, a Referendumhangover and the latest Wall Street word confusion of“Quadruple Witching” - a term that simply means that fourstock futures and options contracts expire today.
(Maybe the reference to “witching” means everyday onWall Street is a bit like Halloween; full of scares, masks,tricks and treats.)
"They" say that quadruple witching alone often leads tofrantic trading and market gyrations.
And so the media shouts out that Polar to Grizzly conditionsare en route, right? Wrong. The problem is that ”they”say a lot of things - and almost none of it ever comes topass.
hnwmagazine.co.uk September 2014
Mike Williams of Genesis in Chicago writes: "Literally, everyproblem we have been told to focus on in the headlinessince 2008-2009 (over 35 years ago in dog years BTW), hasindeed been a flop—often within days, usually no morethan a couple weeks. The horizon has become so cloudedthat the masses don’t seem to recognize what is happeningright under our feet.
Oil is falling, Food costs are falling, there’s robustproduction, railroads are full, Detroit is beingg remade,productivity - profit margins - earnings - all records, Check,Check, Check.
Jobless claims at/near multi-year lows! - Good.
$9 Trillion in the bank - earning zilch…and 3 of the last 4weeks, money has been pulled OUT of equity mutual funds(the one inflow week was ALL international funds).
"And the problem is?" That’s good news folks. Now tuneout the noise, tune in the sunshine and get some goodadvice.
By the time the market closed, the stock had more than doubled,trading at $25.60 per share. Investors that bought ReWalk at theopen made a fantastic return...
But it paled in comparison to the 381% the second group of inves-tors earned. 381% Returns... And Higher
Actually, as I write this article – with ReWalk trading at roughly$36 per share – their gains are even more impressive...
They’re sitting on profits of 536%. How is that possible?
Well, it’s because this second group of investors owned the stockat a far lower price than the folks who purchased it on IPO day.
Instead of owning shares at $11.80, these investors owned it$6.72. Let me explain...
Private Stock Market
As you may have guessed by now, the second group of investorsgot into ReWalk before the company went public. They investedwhile the company was still privately held.
That’s what allowed them to see returns of 300% to 500% whileeveryone else was sitting on much smaller gains.
Those might be typical returns for professional early-stage inves-tors, like venture capitalists. But most individuals never see re-turns like that on an IPO.
CROWDFUNDING: 116% RETURNS IN ONLY 5 HOURS? PEANUTS….
The remarkable thing about ReWalk is that the VCsweren’t the only ones to make 381% on IPO day...
Regular investors – people just like you – were able toget the same returns.
You see, ReWalk recently raised money on one of thehigh-quality equity crowdfunding platforms we coverhere at Crowdability: OurCrowd.com.
In fact, they were featured on OurCrowd only 14 monthsago. So if you were an early Crowdability reader, youmight have seen ReWalk and had the chance to invest...
And taken part in a 536% gain in only 14 months.
High Potential Opportunities
It’s news and returns like this that make us so excitedabout early-stage investing, and more specifically, equitycrowdfunding.
Once the laws are finalized, all investors, regardless ofincome and net worth, will have the ability to invest inhigh-potential, private companies like ReWalk...
And hopefully see similar returns.
Happy Investing!
WAYNE MULLIGAN, CROWDABILITY.COM
BY WAYNE MULLIGAN
Have you ever doubled your money...
In just a few hours?
Last week, in one of this year’s most successful IPOs, agroup of investors made 116% on their money in a littleover 5 hours.
But there was a second group of investors that did evenbetter:
Trading in the same stock, on the same day, this secondgroup made 381%.
Let’s see how they did it...
Are IPOs Always This Profitable?
It might be tempting tothink that investing atthe IPO is always thisprofitable. We’ve allheard stories aboutstocks soaring on IPOday.But statistically speaking, that’s not the case.
In fact, according to a recent study conducted by theUniversity of Florida, over the last decade the averagefirst-day returns for IPOs was just 12.2%.
Which makes last week’s IPO all the more impressive.
ReWalk Robotics (NASDAQ: RWLK) began trading a littleafter 11 AM last Friday, September 12th at $11.80 pershare.
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hnwmagazine.co.uk September 2014
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Last month the Financial Conduct Authority (FCA) issued guidance entitled ‘Social media and customer communications: The FCA’s supervisory approach to financial promotions in socialmedia’. When looking through these guidelines, we couldn’t help but think ‘is it going to be possible to police compliance on social media?
The FCA’s own figures state that they supervise the conduct of over 50,000 firms. Even if only 1/10th of that number decided to start using social media platforms such as Twitter, Facebookand Google+ on a regular basis, how could this activity be effectively policed? The FCA have come late to the party in terms of social media, and judging by the response of many IFAs,the bottle they’ve brought isn’t very palatable.
Numbers, numbers and more numbers
Let’s take a look at an example. Based on 5,000 firms using just one social media platform (we’ll say Twitter), tens of thousands of tweets could be sent out every single day. And that’sbefore any activity on the other platforms. Will the FCA have the means at its disposal to monitor all these tweets to check if they’re compliant or not? For firms to have any confidencein the FCA’s social media guidelines, they’ll want to know everyone is being treated fairly and their online conduct being suitably scrutinised for compliance breaches.
The FCA may just have bitten off more than it can chew.
HOW THE FCA BIT OFF MORE THAN IT COULD CHEW…
hnwmagazine.co.uk September 2014
BY JAMIE GRAHAM
“Compliance may be king for financial companies and IFAs using social media. But what if the newrules can’t be policed?”
