EMC seems to have quite a problem on its hands now that rumors have circulated that their RSA division has been accepting payoff from the NSA. We have seen shareholder lawsuits against IBM for not disclosing business risks involved with losing business internationally as a result of working with the NSA. Related risks for EMC include failure to disclose NSA involvement to shareholders in their regular SEC filings, loss of business internationally and domestically from the customer backlash, and regular reaming from the security community at conferences and other venues.
The weekly chart of EMC shows support/resistance below 26. A play in the direction of the break down/out could be available. This is a wait and see trade where we need confirmation before entering.
After the breaking news over at KrebsOnSecurity that Target (NYSE:TGT) has been impacted by a payment card breach it is time once again to look for a dip to buy. The low point at approximately $61 matches up with some decent support and resistance levels from 1Q13. TGT is riskier than other sectors due to the retail environment at this time of year. Any attempt to buy the dip should be done close to $61 with a very tight stop. Any general bad news from the retail sector could blow this trade up. Low trading volumes from the financial industry taking vacation could also cause large price swings in either direction. Short Put Verticals are not the best for this, though an ATM Long Call Vertical will give about 50/50 odds over the next week.
Update: We decided to go with a weekly 62/63 Long Call Vertical. Closing out one day before expiration gets about a net 18.00 per contract.
Business Insider is covering the use of Emoji in communication. This is something that is sure to outrage Grammar Nazis and those who are proper language traditionalists. Rather than panic and wonder how the youth are going to make it, we should step back and think outside the box. We already have situations in business where proper English is not spoken. Go into any warehouse or assembly line staffed by immigrants and you will find less than perfect written and spoken English. Chinglish is also a term applied to products that have had poorly written translation software applied to make the translation from Mandarin to English. The translation may not be perfect, but we understand what the general meaning is.
A well known SciFi writer has created a world in the future where English and Mandarin are the official languages of the human race. What if that isn’t the case? What if a new abbreviated language such as the one teenagers use for texting is the unified language of the world? What if we become like the Ancient Egyptians and move to a hieroglyphic language to be all inclusive? This is where emoji may fit in. The old view of business is dying out as the Baby Boomers retire from the workforce. There are many VP’s today who don’t perform drug testing because it’s outdated and it takes away from the bottom line. There are also many people in GenX and GenY who will hire subject matter experts, no matter what their fluency in English is. If we can communicate in the made up language of Chinglish, why not communicate using other ways? The only thing holding us back is an outdated mentality of thinking something has to be done a certain way, rather than something has to be done.
The NZD is struggling against resistance and may be a good short candidate if it can not push any higher.
Accenture is interested in buying Booz & Co., a spin out from Booz Allen Hamilton. Someone became a little jumpy and decided to buy shares of Booz Allen Hamilton thinking they were getting access to Booz & Co. For a company that has leaks there is enough interest to continue our hypothesis that hacking or leaking does not value of a company.
At first glance it looked like $BAH would never get another government contract. But now $BAH is up 30% from when it was revealed that Edward Snowden worked for them. They are unlikely to be “leaked out of business” by Snowden’s actions. This adds to the historical evidence that companies do not go out of business if IP is leaked or stolen. It appears that the cliche of any publicity is good publicity is at work.
Business Insider has a nice slideshow titled How To Opt Out Of Prism. Most of the usual applications and networks are listed. Piwik stands out as a self-hosted replacement for Google Analytics.
There has been some criticism of Yahoo’s acqui-hire strategy. There are those who believe that it clearly sends the wrong message to existing staff. Rather than work for a meager salary, one should simply quit to become part of the acqui-hire bandwagon. Yes, that is clearly the advice that staff should follow for the right reasons.
Contingent workers are becoming the norm in the US. It is estimated that 50% of the workforce will be contingent workers by 2020. The trend is that there will be fewer full time employees and most workers will be self-employed and have multiple clients to make a full week. Workers have nothing to lose by going out on their own and potentially a lot to gain. Will everyone win the lottery by selling their company? Of course not, but we should look at business ownership for what it is.
When a startup is acqui-hired, there are assets other than the people that are transferred. These assets could be servers, and patents among other things. The buyer is getting a complete company as part of the deal. The technology may be integrated into the buyer’s offerings or it may simply be shut down. In the latter case it is clear that the acqui-hire was purely for the talent and not the technology; however, the assets still have value and can remain on the buyer’s balance sheet continuing to add value.
A commodity small business such as book keeping or project management is less likely to have patents, lots of source code, and tons of servers. That does not diminish the value of what they have to offer. The value of the owner’s investment is different, but not less. Most small businesses will not have an early exit strategy. Instead they become lifestyle businesses that will maintain the founder for many years.
When starting a small business, the founder must consider what the exit strategy (if any) will be. A business is a form of investment in terms of time and capital. Since a business is an investment we should consider the various types of investments in one’s time to illustrate the various value propositions.
- Employee – employees can be seen as investment-grade bonds. Investment-grade such as high rated corporate or certain government bonds are considered a safe investment for the long-term. They tend to pay very little interest, but it is unlikely that the investor will lose their capital. Working at a traditional day job is a low risk opportunity because the employee has little to no capital invested in the business.
- Commodity Business Owner – this class of worker represents the next and most common step in entrepreneurship. They can be seen as high yield bonds. High yield bonds do pay more, but they have a higher probability of losing money. This represents the higher professional rate that a commodity business owner can charge. The downside is there is volatility risk such as lack of steady work that the Employee (investment grade bond) does not face. There is also the possibility that the investment in the high yield bonds could be worth less than the initial investment. This would occur where the business fails and is worth cents on the dollar in liquidation when the owner shuts down.
- Acqui-Hire Business Owner – the acqui-hire business owner invests time and energy with the expectation that the sale of valuation will increase in the future. The acqui-hire is like an equity investment. The value is based on the appreciation of the asset and the expectation that someone will pay more in the future than the previous investor.
Most entrepreneurs will set out to be the commodity business owner. While it does not have the safety and routine of being an employee, it does have the potential to be a medium to long term investment in one’s time and energy. In the world of bonds this is referred to as the hunt for yield. All things being equal, an investor will sell a bond and replace it in a portfolio with a bond that pays a higher yield. A commodity business owner will replace lower paying customers with higher-paying customers. It does lack the excitement of being an acqui-hire, which is the equivalent of seeing a stock portfolio double, triple, or more. On the other hand it can be the best of both worlds in terms of having an easy to manage investment strategy.