The Pit - IMI Trust

As technology advances, it feels like the world is becoming smaller and smaller. Simply go back just 10 years and the idea of trading stocks on the NASDAQ or on the New York stock Exchange, was only for the elite traders. In fact go back 10 years and no one in Australia has ever heard of CFD’s.

Now… Online Trading has broken down all barriers and given Australian traders an all access pass to the world’s leading markets. Whether you are trading Stocks, CFD’s, Currency or Futures, if there is a market open… you can trade it.

Previously companies which has seen phenomonal growth in the US or UK were unable for Australian traders. Imagine if you were able to place trades on Microsoft, Dell, Yahoo, Ebay and Amazon at the beginning of the tech boom.

Now companies that we associate with on a daily basis are available for trading. Whether it be clothes, shoes, food, software, internet, electronics or cars from international companies… we can now trade them.

You dont have to go through the hassle of researching US brokers, placing your money in a US account, having currency risk (on placing your money in US dollars in an account) and having to stay awake at all sorts of strange hours to make trades.

Now, you just go on your computer, click on an icon to open your trading platform, and within seconds the world’s stock exchanges are ready for trading. You can also trade internationally, with your money in an Australian account. Another example of technology making life easier.

What is interesting is the CFD phenomenon. Australian can trade CFD’s over American stocks, but American’s can’t. it has been estimated that over 50% of trades on the London Stock Exchange are CFD’s.

This is what Australia Stock Exchange potentially has to look forward to. It is no wonder, that you can now trade ASX CFD’s on the top 50 stocks and a few major currencies.

Unless you have been hiding with the weapons of mass destruction this week, you would have noticed that Microsoft have released Windows Vista.

You have to love the hard sell. Not many corporates really do it to consumers anymore. Not Apple, not Google, not the oil companies, not the car manufacturers. They are all into the brand.  Microsoft have allocated US$500million to marketing their new operating system and it shows.  Come back Crazy Frog all is forgiven.

Actually, Microsoft, well done for bringing back blanket coverage in marketing and sticking it in my face everywhere I look. It is a good reminder as to why you are a $300 billion company.

The truth is the only companies persistantly doing the hard sell is the credit card companies and the banks. Can’t understand why they keep on announcing record profits.  Probably because if you put a product in front of a consumer that services a need then they consume it…

When I checked out the Microsoft site to read the Vista marketing, i was stunned to see 100 reasons as to why Vista is so great. If you were absolutely insane… that is perfect for you to discover all of Vista’s benefits. if you are a bit more human, they had the highlighted benefits. From a marketing perpective, this warmed my heart.

The truth of the matter is I am going to Harvey Norman, or similar electrical retailer, and ask for a PC that is loaded with XP.  I know for a fact they will be fire-sale-ing that stock so I can get one or seven really cheap.  That is only one reason but better than the 100 reasons Bill gave me for getting Vista. 

Experts have come out of the their holes to comment on Vista.  Us included. The reality is in 2 to 3 years time, we all know we are going to be using it. This should impact their share price of (MSFT) Microsoft significantly. Will its recent bull run continue until then?  Maybe.

PS. Bill, I dont care that you have copied Apple, nor do I care that they will release something even more impressive with Leopard. Which they won’t because I’m over operating systems named after big cats.  Just please be taking notes when they do. Look forward to my Wow beginning Now!

With all the popularity surrounded the Davinci Code, we thought this would be a post most would enjoy.

This has nothing to do with anything regarding the movie, but it is designed to guide you through what made Leonardo Da Vinci, a man that will be remembered throughout time.

I do not believe I have seen anyone refer to DaVinci as a businessman… and yet he was!

Leonardo was a genius in many different ways. He was an inventor, an artist, an exhibitionist, an engineer, a scientist and a brilliant sales person.

The Mona Lisa is one of the most famous paintings on the planet, and is a priceless piece of art. There are so many things I could write about Leonardo Da Vinci, but I want to stick to his incredible ability to sell and market himself.

To fund his work, Leonard had to generate an income which would be able to pay for himself, his students and his side projects in which he would work on.

DaVinci knew exactly where to go! He went to the “Warloards” of his era and propositioned them. His idea was simple ‘Go where the money is!’ Now you may ask… how does an artist get a gig with power hungry and ruthless “warlord.”

One of his employers killed his own brother, committed incest with his sister and would regularly poison his dinner guests. A meal to savour to say the least! This man was the most hated, feared and envied man of his time and known for his blod thirsty mentality.

And beside him, working for him was one of histories greatest men. Imagine one of Adolf Hitlers artists being regarded, as one of the greatest that ever lived. This same man was that deluded, that he would hire historians to search his bloodline, to prove he was from the bloodline of the Gods.

Leonardo was smart… he knew what the “Warlords” valued and he gave it to them! Leonardo would not pitch them on his ability as a painter! No… He would pitch them on his ability to create War Weapons and then artwork which would appeal to their Vainity.

He was able to satisfy some very powerful motives! He was able to satisfy the desire for Power, Wealth, Social Status and through his art… their vainity.

He also created for his employer one of the most powerful tools he could ever offer a war lord. It was absolutely revolutionary for his day. This tool came in the form of a detailed and exact “MAP”. This gave his employer vision and power… and for Leonardo… it gave him money!

He would play stage manager and conductor to some of the greatest parties of his era. He became renowned throughout the wealthy and powerful as the master orchestrator of parties.

He moved to Venice… a city of new money at the time and also a city in crisis.

Leonardo used this opportunity to sell his invention (the idea of an underwater army complete with armour). Yes… the first recording of the idea of scuba diving equipment.

He used his ideas and art to generate income, as well as to protect his own interests! This idea was far fetched, but studies today on his exact designs have been tried, tested and successful.

What was brilliant about this is that without his ability to promote his services, he would not have garnered the reputation he did. The interesting thing is that Leonardo was completely against war, but yet he designed some of the most brilliant war weapons. He actually designed the first tank. Something which was not first used until the first world war.

Now this was not designed to be a motor powered tank, but a man powered tank! His design is ingenious! It wasn’t until World War 1, that a tank would be designed and used in a war.

This work allowed him to fund his studies into nature and the human body! More then that, it allowed him to create art pieces which are now recorded in history. Whilst working for the Vatican during the day, Leonardo would be performing autopsy’s of the evening. One of his discoveries was that the aging process was linked to excessive nutrition of the blood. We know this today as cholesterol.

The ability to prmote your service is a powerful skill. The ability to market your services and products determines how your clients remember you. Sometimes… you need to sacrifice for the sake of your long term vision, exactly as Leonardo did. Leonardo always tried to make sure that everything he did, generated a uniqueness.

Even though he painted objects, scenes or portraits which had been done many times before… Leonardos unique touch would not be rushed, and would have him known by millions of people after his mortal death.

So as business owners, how can we make what we do unique? How can we have our clients remember us? How can be satisfy the desires of our cleints through our business and through our website?

Leonardo mastered this nearly 500 years ago!

What are some of your ideas about how you build loyalty with your clients?

Michelangelo in his time was considered very wealthy. He made a fortune from his artwork. His genius has transcended his mortal life and his art is now timeless and priceless.

His “Statue of David” is a masterpiece, created out of a single piece of marble which, when it was discovered, was considered one of the most beautiful ever seen. They felt it was so beautiful that they decided to store it for 20 years until the right ‘commission’ and ‘person’ came along that could make this splendid piece of marble into a divine creation.

There were two artists who commissioned for the work… Leonardo Da Vinci and Michelangelo. The most revered renaissance artists. Even though Leonardo was on the selection committee for who would create the ‘Statue of David’, Michelangelo got the approval.

Michelangelo delivered to the universe an art piece which will be known and talked about throughout history.

Michelangelo was a shrewd businessman who lived like a pauper. He was known for his filthy stench, which would drench the air, creating a horrible aroma for those who were in his presence. This foul wretched smell, would ensure Michaelangelo would work alone.

In his memoirs, he recounts a story where he wore a pair of hide boots throughout the Venetian Winter, not even taking them off to sleep. When he did take them off finally, he also removed layers of skin which had moulded to the boots.  He did this during his creation of the Sistine Chapel.

It has been said that Gerry Harvey from the Harvey Norman chain of electronic goods stores is known for his frugal way of living, but Michelangelo took being frugal to a new level. 

He wanted to prove that artists could be wealthy. He valued his work very highly and because of this, the wealthy and powerful of the time were willing to pay.

The value he placed on his work is a lesson for us all. Every day we go about our work, but do we ever truly understand the value it has to someone else’s life? Do we ever understand how the work we do can influence the generations which will follow.

Most financial planners and accountants never truely understand the impact and value of their work. Many undercharge for their services because they cannot communicate their value to the marketplace. 

The question to “The Pit” readers is simple… “What is the value of your work and how does it benefit your clients in the long term?”

Earnings announcement US Tech style.  I find it amazing everytime I watch the earnings announcement period, the massive jump in share prices that companies experience.

In the last silly season, Apple, Microsoft, Nvidia, Yahoo and Ebay all had dramatic price shifts after their earnings announcements.

Where it gets confusing to a layman like myself is when Google comes out and beats the analysts expectations and their share price goes down.  That makes perfect sense doesn’t it? I thought not.   Apple came out and announced their earnings and it is less than expectations.  Of course, their share price goes straight up.

The announcement which was really odd was Ebay. Ebay anounce… earnings are up. The stock soars! Over the next few days it goes below the price it was at before the earnings announcement. Now it is up nearly 40% from that point.  Investors and traders… are you confused?!

For some people ‘The Silly Season’ is their favourite time of year! The potential for profit can be phenomenal and of course it has it’s obvious downfalls.

To all the bears and bulls in the Pit, we would like to hear your earning announcement stories.  Or at very least a tale about how you read the market and it did the exact opposite of what you were expecting.

Here is an article our Pit Dwellers will enjoy! It appeared in the Sydney Morning Herald.
Business is better than sex

Who would have thought the day would come, when business would be more interesting than sex?!

This highlights the power the internet for business today… and in the future!

How many “Pit Dwellers” have started to see and experience this transformation for themselves?

Even though the heat has fallen off slightly everyone’s still talking about Gold. It seems that no matter what country we are in, Gold is the subject they like to talk about. Especially when it’s potential girlfriends. They love talking about Gold but that’s another story.

In Australia, the nightly news displays the price of Gold and every night they are checking it. People that have never invested a cent in their lives are asking me “Have you seen the price of gold?”

I stand there thinking… “Did you see where Gold was at late April?” Try $120 p/oz more then where it is right now. But it doesn’t matter because it’s totally arbitrary to the average man or woman in the street.

At Financial Expos, the commodity traders are there in force. This is their time to shine. Their commodities have seen phenomonal growth. They pull out their little 2 year charts and show you, “Well if you bought Gold 2 years ago when it was $375 p/oz, your investment would have increase by 68% which is 34% per year.” Not quite right as compouding affect the numbers slightly but close enough.

Then it is always fun to go and see what the analysts think. Now of course what they believe (sorry I mean comment) to be true is determined by what happened last night on the markets.

One commentary discusses how Gold is the choice for hedging against inflation. Did anyone see what happened to the price of Gold when figures from the US got the entire market nervous about inflation?

If you didn’t see what happened… check out Gold’s highest point in the last 6 months. Then check out what happened the 4 weeks after the high point.

Bombs start to fly in the Middle East. Gold starts soaring! Iran’s President Mahmoud Ahmadinejad, if he’s talking Nuclear development continuing, the markets are watching Gold go for a ride. Gold has the world’s attention!

How much would you pay for this rock?

So my question is, where is Gold going? What price are we going to be watching Gold go to this time? The highest price prediction we’ve seen is of Gold going to US$2000p/oz. We have no idea where it’s going and do you want to know why we don’t know.

According to the International Monetary Fund (IMF), in 1976 the average price of gold was US$128.70 p/oz, five years later the price had risen to an average of US$482.50 p/oz. That’s an increase in price of 374%. The gold reserves had only dropped in by 6%. There wasn’t a big difference in supply at all.

In 1986 the average price for the year was US$344.75. So there was a significant drop in price however supply remained steady with less than a 0.1% drop in reserve quantities. Jump forward a decade and supplies have dropped by 10% over the decade the price remained steady over that period. Leap forward again to the present day and the price has skyrocketed but the reserves actually contain more gold than it did in 1996. It is patently clear that Gold is erratic but because it glistens it attracts everyone, even if they don’t understand it.

Are you interested in Gold and its performance? Or is it a sideshow that distracts people from real investment?

Honestly… Apple are brilliant!  I say this as a previous Apple hater.  I am now a convert.  Apple’s products and their marketing of them is pure genius.  Though, that is a Guinness slogan but it applies perfectly well here.

Who else could hold a conference call, to talk about their future product development and tell their biggest competitor to “Get out your photocopiers!” I thought it was brilliant how they highlighted that their major competitor is continuously delaying their release of their next Operating System version.  

In the last 5 years, Apple has re-invented the way we listen to music and even the way we buy music. Never again do we have to carry around gloveboxes full of CD’s, or purchase mammoth CD cases to house a collection.

The Ipod has been, and continues to be, an amazing profit centre for Apple. What I love about the iPod, is that it is everywhere and even when you dont realise it… it is being promoted to you.
Think about these points…

* If you see someone on a train or street with a white cord and white ear phones, what are they listening to their music on?
* When you are getting onto a plane… they ask you to turn off your MP3 player or your iPod
* When the plane is going to land, what are they telling you to switch off again?
* If you like todays music, what is the only MP3 player they will show in music videos?
* Even popular TV programmes like The Simpsons are parodying it with its famous DiePod eutanasia experience.

What is amazing is that, every day on most plane flights around the world, in multiples of languages, airlines are marketing the iPod and they don’t even know it. The other thing you have to love about the IPod, is find me 1 person on this planet that has… and has not purchased any more accessories. By the time you get the belt, the microphone, the speakers, the additional case etc. It is almost a 25%to 50% on the original sale.

Household Items Now Include Apple Products

iTunes, responsible for changing the way we purchase music. Over 1 Billion songs have been downloaded! That is insane if you consider the enormity of it. The best part is… people are chosing to pay the US$0.99, instead of downloading it for free. How rare is that? You have the choice of Free vs Paid, and people are chosing to pay.

Being in the finance industry, all we seem to care about is the latest earning announcements and or the potential future earnings. It saddens me that sometimes we miss the genius behind the growth of these companies, and how they evolve their success. When Apple announced they were going to be using Intel chips in their computers, their share price skyrocketed. Thankfully for me… I was on it! The true merging for Mac users being able to use all the software the PC users could, was coming closer.  

Now the whole world is convinced of Apple. From consumers, to Mum and dad investors, to retails shops and the institutions. The hype of Apple is backed up with brilliant products, which keep evolving the digital world. 2 Years ago, I did not know anyone that owned a Mac computer. Now, I feel like I am one of the few that don’t.

That is an amazing turn around! Web Designers are now having to design their sites with Apple in mind! Even though the savvy designers use an Apple to do their design in the first place.  The web designers that do are the ones that are getting the financial rewards for their clients. It is that extra business, the extra profit, the extra sales that are making companies take notice. Trading platforms which don’t have Mac capability, are losing business every day!  

Over the next few years, it will be great to see how Apple keeps growing. One of my Mac owner friends, recently commented to me, how his whole digital world now revolves around Apple products. From Music, to Photos, to Videos, to Radio and for people who are blind… Apple has them catered for too. Apple has me convinced! Check out their new Operating System being released… Leopard

I am quite confident my next laptop or desktop will have an Apple logo on it.  Financial groups tend to use PC based technology though.  Are there any groups out there that use Apple? 

All the best,  

From The Pit

Have you notice that nearly every product you purchase today is marked very clearly “Made in China”.  When you see pictures of the skylines, of even just the small cities, you can visibly see where all the steel the country is buying is ending up.  It is a massive economy that few from Australia rarely venture into.

While in the air, I was reading about an Australian entrepreneur who is now worth approx $70m and was featured in the BRW Young Rich list. What did he do?  Simple… He imported power tools from China and priced them accordingly.

Likewise, I have a friend who a few years ago was one of the clients of an emerging export company. When i say emerging… really he was just starting.  Fast forward a few years and this business is now turning over US$50 million per year. Scarily enough, he has an entertainment budget for his clients of $10,000 per week.  Does your company do deals this way?  It is unlikely as you don’t want to get in trouble but it’s amazing the power wielded by even these ’small’ players.  I wish I had learned Mandarin at school. My ears are wide open!  However, you don’t even have to do that as all Chinese businessmen are fluent at English, especially when dealing with import and export markets.

Even if you can’t be a part of the ‘entertainment’, realise that there are numerous benefits with being open to international markets.  China is growing and expanding at a rapid rate.  As well as supplying the world they are the 4th largest (soon to be third largest) consumer of international goods.  The buy and they buy big.  For instance, China used 1/2 of the world’s cement, with Australia exporting a large portion of this, the Australian economy can only benefit.   And Australian’s have the opportunity of investing directly into these markets by having interest in domestic companies that deal in China or investing directly in Chinese companies. 

The growth is amazing and we are reaping rewards at home.  Are there aspects of this that encourage you or scare you or make you think?  What do you think Pit Dwellers.

Ben S. Bernanke was sworn in on February 1, 2006, as Chairman and a member of the Board of Governors of the Federal Reserve System in the United States.

Like his predecessors, it is frightening how much this man can swing the economy. The entire investment world tunes into his every speech waiting with anticipation and hope.  However, his power is such is that even when he is not saying something, he is saying something.  His demeanour, the time in which he gives a speech, the length of the speech everyone hope they will read a clue, a sign, a mere glimpse into his plans.

Some camps suggest he wears certain ‘neck ties’ as part of his communication on his mood about the market.  Imagine if, you as a financial planner or accountant, offered advice to a man about his super because you thought the market was going to be flat because the ‘boss on the TV wore a paisley tie - not a good sign, no’.  Would it make financial planning easier, yes, on the decision making front but on the justifying your decision front, not good at all.

Mmm…The State Of The Economy Is Clearly Uncertain! 

Bernanke’s words and decisions could literally wipe out hundreds of billions of dollars of value off people’s and institutions values… overnight!  Could you manage to sleep at night with that sort of power?  I’m sure you could if you had the same salary and bonuses but I didn’t ask that question did I?

One day in May this year, a Sydney newspaper brought attention to the fact that over $25bn had been wiped from the Australian Stock market that day. Throw in the Dow Jones, Nasdaq, Nikkei, London Stock Exchange and you get the picture of the cascading effect of decision making on the economy.  Picture it this way.

1.  Mum and dad investors sell on the word of their planner or accountant
2.  Their planner makes decisions based on the economic trends,
3.  The trends are defined by the marketmakers
4.  The marketmakers base their trend on raw financial data.
5.  Raw financial data is collated by research houses
6.  Research houses get their data by asking industry of their outlook
7.  Industry gets their data but looking at their balance sheet
8.  Their balance sheet is controlled by the cost of their suppliers
9.  Their suppliers costs are driven by a poor crop
10.  A poor crop could have occurred because the underpaid trainee put the wrong mixture of pesticide in the irrigation system.
11.  The trainee was distracted by the fact his girlfriend didn’t love him anymore.
12. The story continues…

Can you see how the economy is driven by forces beyond your control and the interpretation of these forces by the decision makers?  Of course, you can…but can your client?  How do you get your client to understand?