How a 16-yo Kid Made His First Million Dollars

His name: Christian Owens. His age: 16. He made his first million dollars in two years, "inspired by Apple's CEO Steve Jobs". This is how he did it.

The British teen—who lives in Corby, Northamptonshire—got his first computer age seven. Three years later he got a Mac and taught himself web design. Four years later—at age 14, in 2008—he started his first company. It was a simple site that some of you may know: Mac Bundle Box. The site was pretty, rooted into Apple's own design guidelines and style, but actually was even closer to MacHeist, which has done the same package-bundling price plan for a while now.

How a 16-yo Kid Made His First Million Dollars Following His Hero, Steve JobsThe page sold a package of very neat Mac OS X applications for a discounted price and for a limited time. He would negotiate with the developers to get a discount deal on their apps. The resulting bundle had a combined retail value of around $400, but he would sell it for a tenth of that price. (You know, like MacHeist, which we've featured before.)

Not only that: If enough people bought the package, a new application would get unlocked for all buyers, which guaranteed very good word-of-mouth promotion. And to top it all, Owens dedicated a percentage of all sales to charity.

The idea did well. Very well, in fact: In its first two years, Mac Bundle Box made $1,000,000 (700,000 British Pounds).

Not happy with that success, Owens jumped into a new venture called Branchr, a pay-per-click advertising company that distributes 300 million ads per month on over 17,500 websites, iPhone, and Android applications. The company, which claims to deliver "contextual, behavioral, publisher-defined, and geographically" targeted ads in those platforms, has already made $800,000 in its first year and employs eight adults including his 43-year-old mother, Alison.

He doesn't know where he would be in 10 years, but the next thing he wants to do is to make one hundred million British pounds with Branchr. He seems to be on his way to success. He claims his business is growing strong—Branchr has already bought another company—and he reinvests all the money back into the company.

His secret to success? There's no secret, he says:

There is no magical formula to business, it takes hard work, determination and the drive to do something great.

Letting the Machines Decide - New Wave of Investment Firms Look to 'Artificial Intelligence' in Trade Decisions

Wall Street is notorious for not learning from its mistakes. Maybe machines can do better.

That is the hope of an increasing number of investors who are turning to the science of artificial intelligence to make investment decisions.

With artificial intelligence, programmers don't just set up computers to make decisions in response to certain inputs. They attempt to enable the systems to learn from decisions, and adapt. Most investors trying the approach are using "machine learning," a branch of artificial intelligence in which a computer program analyzes huge chunks of data and makes predictions about the future. It is used by tech companies such as Google Inc. to match Web searches with results and NetFlix Inc. to predict which movies users are likely to rent.

One upstart in the AI race on Wall Street is Rebellion Research, a tiny New York hedge fund with about $7 million in capital that has been using a machine-learning program it developed to invest in stocks. Run by a small team of twentysomething math and computer whizzes, Rebellion has a solid track record, topping the Standard & Poor's 500-stock index by an average of 10% a year, after fees, since its 2007 launch through June, according to people familiar with the fund. Like many hedge funds, its goal is to beat the broader market year after year.

"It's pretty clear that human beings aren't improving," said Spencer Greenberg, 27 years old and the brains behind Rebellion's AI system. "But computers and algorithms are only getting faster and more robust."

Some sophisticated hedge funds such as Renaissance Technologies LLC, based in East Setauket, N.Y., are said to have deployed AI to invest. But for years, these firms were the exception. Some firms that have dabbled in AI are skeptical it is anywhere close to working.

Rebellion is part of a new wave of firms using machine learning to trade. Cerebellum Capital, a San Francisco hedge fund with $10 million in assets, started using machine learning to invest in 2009. A number of high-frequency trading firms, such as RGM Advisors LLC in Austin, Texas, and Getco LLC in Chicago, are using machine learning to help their computer systems trade in and out of stocks efficiently, according to people familiar with the firms.

The programs are effective, advocates say, because they can crunch huge amounts of data in short periods, "learn" what works, and adjust their strategies on the fly. In contrast, the typical quantitative approach may employ a single strategy or even a combination of strategies at once, but may not move between them or modify them based on what the program determines works best.

"No human could do this," said Michael Kearns, a computer-science professor at the University of Pennsylvania who has used AI to invest at firms such as Lehman Brothers Holdings Inc. "Your head would blow off."

Rebellion has struggled to raise money, in part because investors since the credit crisis are dubious of opaque math-based strategies.

The firm has attracted at least one long-time "quant" skeptic: famed value investor Jean-Marie Eveillard, who recently invested several hundred thousand dollars of his own money into Rebellion. "My cup of tea is not quantitative investing," he said. "But I think they are serious investors, and I'm impressed by the fact that they don't have a high turnover…and don't use leverage."

Rebellion's Mr. Greenberg is no stranger to the investing world. His father, Glenn Greenberg, is an iconoclastic value investor and manager of Brave Warrior Advisors, who recently split from his partners at Chieftain Capital Management Inc. His grandfather, legendary baseball slugger "Hammerin' Hank" Greenberg, played for the Detroit Tigers in the 1930s and '40s.

Past success doesn't mean Rebellion will continue to beat the market. As with many quant strategies, its system could stop working if market fundamentals change in ways that trip up its computer program, known as "Star."

What makes Star intelligent, says Mr. Greenberg, is its ability to adjust its strategy based on shifting dynamics in the market and broader economy. The program isn't wed to any single investing approach. Under certain conditions, the fund will buy cheap stocks, in others it will favor stocks with swiftly rising prices—or both at the same time.

Unlike the high-frequency funds that use artificial intelligence to aid rapid trading, Rebellion tends to hold stocks for long periods—on average four months but in some instances more than two years. It also doesn't short stocks or use leverage, or borrowed money, which can amplify returns but also boost risks.

The program monitors about 30 factors that can affect a stock's performance, such as price-to-earnings ratios or interest rates.

The program regularly crunches more than a decade of historical market data and the latest market action to size up whether to buy or sell a stock. When certain strategies stop working, the program automatically incorporates that information, "learns," and adjusts the portfolio.

For instance, it may detect data indicating stocks with low price-to-earning ratios are likely to rise and load up on those stocks. Then, if the program later finds that the strategy is likely to lose steam, based on shifts in the factors it tracks, it will dump those stocks and buy stocks it deems more favorable.

Every morning, Star recommends a list of stocks to buy or sell—often it offers no changes at all. A human trader implements the moves. The firm says it never overrules the computer program, which is largely the same system they started with in 2007, with a few nips and tucks. Rebellion typically holds about 60 to 70 stocks at any time.

Mr. Greenberg started designing Star in mid-2005, soon after he graduated from Columbia University with an engineering degree. He was joined by Alexander Fleiss, a high-school friend with a background in finance and math, as well as Jonathan Sturges, who has a master's degree in music composition, and Jeremy Newton, a mathematician who helped design the AI program.

In January 2007, with $2 million in capital, the program started picking stocks. That spring, it started moving into defensive positions such as utilities. Rebellion gained 17% in 2007, compared with the 6.4% gain by the Dow Jones Industrial Average, according to people familiar with the fund.

It stayed defensive throughout most of 2008, holding gold, oil and utility stocks. Still, it lost money like most investors, sliding 26% but topping the 34% decline by the Dow industrials.

In early 2009, Star started to buy beaten-down stocks such as banks and insurers, which would benefit from a recovery. "He just loaded up on value stocks," said Mr. Fleiss, referring to the AI program. The fund gained 41% in 2009, more than doubling the Dow's 19% gain.

The firm's current portfolio is largely defensive. One of its biggest positions is in gold stocks, according to people familiar with the fund.

The defensive move at first worried Mr. Fleiss, who had grown bullish. But it has proven a smart move so far. "I've learned not to question the AI," he said.

Move over London,New York,Mumbais the place to cut deals

A New World Order May Upset Global Financial Top Rankings Forever: Experts

Don Durfee SAO PAULO


LONDON and New York are not about to lose their spots as the worlds leading financial centres but they are being challenged by emerging market upstarts in a potentially lucrative area: the management of funds moving between developing economies.
With developed economies struggling and emerging markets thriving,more and more financial deals are being cut well away from the traditional centres.Rising trade between emerging economies,cross-border mergers,acquisitions by Indian and Chinese companies and moves by developing world businesses to raise capital in each others markets will spur growth of financial centres in the fastest growing economies,according to industry experts who addressed the Reuters Emerging Markets Summit in Sao Paulo last week.
For the bankers,clustering in cities like Sao Paulo and Mumbai,the intra-emerging markets movement of funds represents an alluring chance to make money.We see flows between Africa and India,India and China,India and Korea being much bigger, said Neeraj Swaroop,CEO of Standard Chartereds India business.Not just big companies but also small- and medium-sized companies are making outbound investments.For banks like Standard Chartered,these are immense opportunities to pursue.
Stephen Jennings,CEO of Renaissance Capital,said he is already seeing a rapid integration of capital flows in emerging markets.In our M&A practice,80% of our deals dont have a western face.The same thing will happen with financial flows, he said.London cannot possibly retain its role as a primary capital markets centre for emerging markets ... I think it will be displaced totally over the next two to three years, he said,adding that high taxes,intensifying regulation and unfavourable immigration policies all work against the City.
While other industry experts expect New York and London to remain dominant for years to come,examples of the worlds changing investment flows abound.Chinese investment is surging in Africa,Latin America and Southeast Asia.Russian and central Asian resources companies are lining up to list shares in Hong Kong.Jennings says UC Rusals $2.2-billion IPO in Hong Kong in January was the tip of a massive iceberg.
Both New York and London have a long list of advantages over emerging market rivals,ranging from loose capital controls and the strong rule of law to sound infrastructure and high quality schools and universities.Jim ONeill,Goldman Sachs head of global economic research and the man who coined the term BRICs,says it will take many years before the traditional financial powerhouses are overtaken by emerging market rivals.
For any of these emerging markets to truly be an international financial centre,they have to do something about the basic ingredients,including the use of English and adopting very credible and acceptable rules of business law, he said.Without those two basic things,these countries have no chance. Nevertheless,some of the new centres may soon dominate lucrative niches.
Singapore is challenging Switzerland for the worlds wealth management business,Hong Kong which led the world in IPOs last year is becoming an equity hub for Asias growing resources companies and Shanghai,not New York,is coordinating the financial resources driving Chinas private sector.To Jennings,these are the seeds of a new model: one in which the savings of emerging markets no longer flow to the US and Europe,but rather to the areas with the highest growth rates.
In the last 10 years,emerging markets savings have,through the dollar as the reserve currency,been intermediated through the West, he said.But that capital is much more efficiently deployed in emerging markets because returns are higher and in some cases risk is lower.So those connections,the new financial plumbing,are being built now. Reuters

WINNERS CIRCLE



BRICS ACCOUNTED FOR



13.5% OF GLOBAL M&AS IN YR-TO-DATE



$41b IN IPOS IN H1 2010 vs $63.9 B IN 2009



$741m INFLOWS IN H1 2010



$17.4b INVESTMENTS IN GLOBAL EMERGING MARKET FUNDS

Get ready for the next Great Crash

DODD-FRANK ACT,IF PASSED,MIGHT HELP AVOID A 2008-LIKE CRISIS,BUT A CRASH SEEMS INEVITABLE

Andrew Ross Sorkin


The next Great Crash is coming.Guaranteed.Maybe not today and maybe not tomorrow.But,in all likelihood,sooner than we think.
How can I be so sure Because the history of modern markets is a story of meltdowns.The stock market crashed in 1987,the bond market in 1994.Mexico tanked in 1994,East Asia in 1997.Long-Term Capital Management blew up in 1998,Russia that same year.Dot-coms dotbombed in 2000.In 2007 well,you know the rest.
And that was just the last 20 years or so.The stagflation of the 1970s,the Depression of the 1930s,the panics in the 1900s ... and back and back and back it goes,all the way to the Dutch and their tulip bulbs.
In those giddy years before the Great Recession,it seemed as if wed grown accustomed to the wild ride.Wall Street certainly had.Jamie Dimon,the chairman and chief executive of JPMorgan Chase likes to say when his daughter came home from school one day and asked what a financial crisis was,he told her: Its the kind of thing that happens every 5-7 years.
No one should be surprised,Dimon insists,that booms go bust.Thats the way markets work.Most Americans probably find that answer unsatisfying,to put it politely.After all,millions have lost their homes,their jobs,their savings.Perhaps something is wrong if CEOs expect the markets to break down every half decade or so.
But now here comes the Dodd-Frank Act,which is supposed to ensure that we never repeat that 2008 finale of Wall Street Gone Wild.The bill,if signed into law,might help us avoid another sorry episode like that.But one thing it wont do is prevent another crisis if only because the next one probably wont be like the last one.
So amid all the back-and-forth over this bill,keep in mind that one of the most important aspects of the act: It would give Washington policy makers a powerful tool to mitigate the next too-big-to-fail blow-up,however that blow-up manifests itself.For the first time,Washington would have what is known as resolution authority,that is,the power to wind down a giant financial institution that runs into trouble.If policymakers had had that power during the tumultuous autumn of 2008,they might have averted the catastrophic failure of Lehman Brothers.They might have placed the teetering American International Group into conservatorship.And they might have taken over Bank of America and Citigroup,and possibly even Goldman Sachs and Morgan Stanley.Senior management would have been tossed out.
We will have a financial crisis again its just a question of the frequency, said the economist Kenneth Rogoff,who,with Carmen M Reinhart,wrote a terrific book titled This Time Is Different: Eight Centuries of Financial Folly.The title says it all.Weve been through this before and will go through it again.
While Dodd-Frank might avert another crisis in the short term,Rogoff says the legislation itself is less important than how regulators implement it and keep on implementing it over the years.Before World War II,banking crises were epidemic, Rogoff said.Then things settled down because regulation had become pretty draconian and laws were actually enforced.
But memories fade.Having a deep financial crisis is the best vaccination for another right away, Rogoff said.Down the road,a lot will depend on the regulators.Ten or 15 years after a crisis,and sometimes a lot less,watchdogs start to doze.Political winds change.Regulators loosen up.
Many on Capitol Hill insist Dodd-Frank means the end of too big to fail,period.Many on Wall Street insist it means the end of American finance.Bankers and their lobbyists argue that American businesses and consumers will ultimately suffer,since all these rules will end up throttling the vital flow of credit through the economy.
Dodd-Frank,whatever its pros and cons,helps prepare us for the next Big One whatever that might be.

Is the stock market a ‘barometer' of the economy?

Is the stock market a ‘barometer' of the economy? Any suggestion to that effect is usually met with howls of protest in India. Some question how the stock market can represent the economy when a good portion of the output originates from activities like agriculture which have nothing to do with listed companies.

Then there is the fact that stock prices gyrate wildly from day to day, when corporate or economic fundamentals certainly don't. This leads cynics to argue that stock prices are purely a function of liquidity and have nothing to do with esoteric notions of ‘fundamentals' or ‘intrinsic worth'.

Nevertheless, a section of economists have over the years made a brave attempt to explain the relationship between stock valuations and the corporate assets they represent. The market capitalisation to GDP ratio, Tobin's q (market value to replacement cost of assets) and price-earnings multiple are usually cited by financial analysts to explain prices. However, they still offer only a partial explanation to the puzzle of stock valuations.

Fresh framework

A recent paper, Indian Equity Markets: Measures of Fundamental Value ( http://www.nber.org/papers/w16061), by Rajnish Mehra, Department of Economics, University of California, offers a fresh and more comprehensive framework to examine if Indian equity valuations are in line with corporate fundamentals. It comes up with the somewhat surprising conclusion that they are!

Using a quantitative model to predict what ‘fundamental values' in the Indian market should be, it finds that actual stock values were broadly in line with them between 1991 and 2008.

The paper builds on the theoretical premise that if markets were fairly valued, the price that investors are willing to pay for firms (market value of their equity plus debt) should be equal to the replacement cost of the assets that firms employ. Both values are pegged to the country's GDP (excluding its agriculture component) to normalise them.

Three aspects are factored into the evaluation of fundamentals: corporate capital stock (assets), after-tax corporate cash flows and net corporate debt. An interesting aspect of the study is its attempt to quantify ‘intangible assets' (brands, research and development, technical know-how and the all-important human capital), drawing on earlier research in the American context (McGrattan and Prescott & Corrado et al). It finds that Indian firms have sharply enhanced their ‘intangible' capital in recent years, aiding stock valuations.

Watershed year

All the above research leads to the comforting conclusion that “in a large measure, Indian equity markets were fairly priced between 1991 and 2008.”

It throws up other observations too that offer food for thought to investors. The paper notes that though corporate values have largely moved in sync with ‘fundamentals' between 1991 and 2008, the markets have become more expensive in recent years. It turns out that 2005 was a watershed year for India's stock market.

Through 1991-2004, stock values hovered in a narrow band around the adjusted GDP. Actual stock values in this period also hovered much below the ‘fundamental values', showing an undervalued market. However, the years from 2005 to 2008 saw stock prices suddenly shift gears, with valuations shooting up relative to adjusted GDP. The proportion of corporate values to adjusted GDP moved up to 1.468 in 2005-08, from 0.78 in 1991-2004.

However, this is not a cause for alarm, as higher stock values were supported by a step-up in private investment and the higher ‘intangibles' employed by companies. Nor did market values move wholly out of range of the ‘fundamental' values modelled. The paper goes on to estimate the current ‘fundamental value' at about 1.2 times and says that it may eventually stabilise at around 1.5 times. A hint that stock markets may have room for upside, if the economy continues to grow?

Qualifiers

The qualifiers to this paper are fairly important, though. The author cautions that “although our framework is well suited to examining secular movements in the value of equity relative to GDP, it is not suitable to address high frequency price movements in the stock market”, adding for good measure that “high frequency volatility remains a puzzle”. The other key effect that the paper has not accounted for is the demand for stocks from foreign institutional investors (FIIs).

However, actual stock price behaviour suggests that these two aspects could well be interrelated. As of today, more of the ‘demand' for Indian shares originates from FIIs, rather than domestic investors (only 6 per cent or so of Indian household savings go into equities). Therefore, whether we like it or not, irrespective of how robust or otherwise India's fundamentals are, it is liquidity from FIIs that decides stock values.

The money that FIIs allocate to the Indian market tends to ebb and flow on a daily basis, depending on global events and the attractiveness of other options in the FII basket. And there may lie the explanation for the unprovoked swings in India's stock market valuations and also its highly volatile stock prices.

Executive Training Swaps Whiteboards for Board Games

-- When NetApp Inc. executive Suresh Padmanabhan signed up for a class on honing management skills, he expected whiteboards and PowerPoint presentations. Instead he found a conference room full of board games.

“It did look a little bit silly,” said Padmanabhan, senior director of the critical accounts program for the Sunnyvale, California-based company, which makes data-storage technology.

His impression changed fast. The games weren’t checkers or Monopoly -- they were complex role-playing exercises where each team ran a fictional company similar to NetApp. His group won the game by increasing operating margins to 19 percent (NetApp’s real operating margin was 15 percent last quarter).

“I’ve been at NetApp for 12 years, and I came back from this more excited and stimulated than any other class I’ve had here,” said Padmanabhan, 51.

NetApp joins Hewlett-Packard Co. and other Silicon Valley giants in relying more on simulations and role play and shifting away from lecture-led training sessions. The companies are looking to avoid costly mistakes, encourage collaboration and help turn pretend profit into actual earnings. Stockholm-based BTS Group AB, which develops the customized simulations, also counts Cisco Systems Inc., Autodesk Inc., Salesforce.com and VMware Inc. among its customers.

More Realism

The programs provide a more realistic and relevant experience for participants than a lecture or reading materials, said Mike Hochleutner, executive director of the Center for Leadership Development and Research at Stanford University’s Graduate School of Business. The risk is that students who thrive in traditional settings may miss the point in cases where lessons aren’t spelled out clearly.

“While the learning may be deeper on average, you could have some participants come out who didn’t grasp what you were after,” Hochleutner said. Stanford itself has used a similar approach in its MBA program’s core curriculum since 2007.

At Autodesk, sales teams use BTS Group’s games to see the world through the eyes of their customers. Most of the company’s clients have different business models, so it helps to understand how they operate.

“It’s practical learning,” said Ken Bado, executive vice president of sales for San Rafael, California-based Autodesk, the top seller of engineering-design software. “You’re putting emotional energy into it -- it’s not just pure intellect.”

Common Mistakes

Bado said the teams that didn’t perform well tried to do too much without committing enough resources -- say, opening an office in China with only a handful of employees. Seeing the consequences of such actions in the simulation solidifies the lessons, he said. Bado also encourages participants to bet real money on the outcome.

“I say, ‘You think you know what’s going on here, you’re confident? Put $20 in, put $100 in for the team,’” he said.

North American customers bring in the biggest chunk of revenue for BTS, generating 46 percent in the first quarter. Sales for the region increased 9 percent during the period, when adjusted for changes in foreign exchange rates.

Dan Parisi, the director of BTS’s San Francisco office, said companies that stopped spending on employee development during the recession are starting to open their wallets again.

“If you’re in a cost-reduction environment, you can cut some of this stuff,” he said. “You cut back for four or five quarters on development of talent. There’s a point where it’s going to affect a few things -- employee engagement, just general capability of the organization -- if you’re not building it.”

More Cooperation

Life Technologies Corp., a provider of gene-analysis tools for medical research, had 80 of its vice presidents take BTS classes. As a result, collaboration between employees has increased, said Elsa Guynes, the Carlsbad, California-based company’s director of global sales development.

“Even today, two years later, people that were in classrooms together across countries and geographic areas --they still maintain that relationship,” Guynes said. The company plans to use the approach with its sales force too, she said.

NetApp’s Padmanabhan says the simulations were thought- provoking and engaging. He also got free beer out of the experience, thanks to bets he made with a losing team.

“It’s much better than sitting through a 100-page PowerPoint presentation,” he said.

Billionaire College drop outs!

We all would have dropped the line in defense of our mediocrity in school, “You know what? Bill Gates was a college drop-out. I’m better – I just get low grades.” I am totally in the favor of college drop-outs and the underdog making it big, but not of mediocrity. As we all feel and agree, grades just don’t mean anything. I am not totally against formal education. We need schooling at a young age as its a leveler and instills some form of discipline & competitiveness into us. But there’s only so much formal education can do! To strengthen the argument I present to you some of the world’s richest men, all worth in billions who were college drop outs. These extraordinary people are more exception than the rule. Still, don’t be skeptic. And why would you slot yourself amongst the ‘rule’, than the exception?

1) Micheal Dell, founder – Dell

Dropped out of University of Texas, Austin at 19 to business full time. Founded Dell by opening up his Mac and rebuilt to see if he could. Today, he is worth $15.5 bn.

2) Sir Richard Brandson, The Virgin Group

Suffered from dyslexia in school, and dropped out of high school itself to open a music store named ‘Virgin’ in London. From there he expanded into telecom airlines, radio. He is worth $ 2.8 bn and is known for his lavish lifestyle.

3) Steve Jobs, Founder – Apple

Valmiki who wrote the Ramayana was once a thief. Jobs was once a hacker who made a machine that let people make illegal calls. And then, like the former he too drove his energies in the positive direction to do something that is remembered forever. Jobs was a geek who dropped out of Reed College, Portland after one semester to start out in business. Today he is worth over $5 bn

4) Ralph Lauren, Founder – Polo clothing line

Ralph’s surname was Lifshitz which he changed to Lauren to disguise his Jewish roots. He worked after school in the Bronx to earn money to buy suits. Dropped out of the City College of New York after two years. Dint attend fashion school either to start Polo, initially a necktie brand. Today, he is worth $3.5 bn.

5) Ted Turner, founder – CNN, owner – MTV, VH1, Nickelodeon

Dropped out Brown University to join his father’s billboard business. He sold that to fund ‘Cable News Network’, the channel that revolutionized TV viewing with its live coverage of the Gulf war. Turner went ahead to buy over MTV, Nickelodeon and is the head of the broadcasting empire – Time Warner, that he built. He also built ESPN which was later bought over by Disney. The maverick retired young at 67 and is worth $ 4.7bn.

These are just some of the few people from the western world. There are many other lesser known billionaires who quit studying. For every B-school topper who made it big, I can point out three who dint have great formal education. For all these men were not great ‘graduates’, but great ‘learners’ if you know what the difference is. There are many more people who fit into the ‘Drop-outs Hall of Fame’ like Thomas Alva Edison, Abraham Lincoln, Frank Sinatra, Bruce Willis and Woody Allen. But these great men weren’t entrepreneurs while some of them would be worth in billions too. So my fellow men, take pride in our tribe coz we redefined what success is with our failures. And purely co-incidental that there is no famous woman entrepreneur who was a college dropout. Oops!