HNW Magazine Weekly - Monday 8 Sept 2014 Vol III Issue X
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£2.95 Monday 8 September 2014 Vol III, Issue X CROWDFUNDING An Apprenticeship in Failure… Most of what you learn as an entrepreneur is by trial and error. And it’s those mistakes that sometimes offer the one thing necessary for a worthwhile achievement… HNW MAGAZINE Exploring profit & wealth strategies for entrepreneurs HNWIs (high net worth individuals business angels, and investors. hnwmagazine.co.uk September 2014 IN THIS ISSUE CROWDFUNDING P3 An Apprenticeship in Failure RUTHLESS P5 Banks’ Dirty Little Libor READ & REAP P7 The Market Voices You Should Listen To THE F&J INDEX P9 Measuring the Media’s Fear & Judgement FEAR AND LOATHING ON WALL STREET P11 The World Didn’t End This Summer FUNDING FREEFLOW TECHNOLOGIES P13 the world’s lightest, greenest electrical bike VANITY METRICS P14 The Mother of All Metrics is “Money in the Bank” THE F&J INDEX Measuring the Media Flotsam & Jetsam of Market Predictions… If history tells us anything it’s that the media, like the vast investor herd, always misses on market predictions. That consistent level of inconsistency is actually a pretty good market barometer that tells us to be wary when the headlines read euphoric, and euphoric when the headlines read doom….and all the stuff in- between. See page 9… “Of interest to the doggedly determined and risk-takers out there is that crowdfunding is perhaps the clearest route to funding, at least at present, that offers relative immunity from investor-based judgement from previous failure(s).” READ ‘EM AND REAP… “The market analysts and commentators you should be listening to.” JOSHUA BROWN The Reformed Broker “There is a new terror movement on the other side of the world that is crowdsourcing social misfits from every corner of the globe, recruiting via interactive marketing and social media in a manner befitting a Fortune 500 company rolling out a new product…” BY ED EMERSON
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Exploring profit and wealth strategies for HNWIs, Business Angels, Entrepreneurs and Investors.
Transcript of HNW Magazine Weekly - Monday 8 Sept 2014 Vol III Issue X
£2.95
Monday 8 September 2014
Vol III, Issue X
CROWDFUNDINGAn Apprenticeship inFailure…Most of what you learn as an entrepreneur is by trialand error. And it’s those mistakes that sometimes offerthe one thing necessary for a worthwhileachievement…
HNW MAGAZINEExploring profit &wealth strategiesfor entrepreneursHNWIs (high networth individualsbusiness angels,and investors.
hnwmagazine.co.uk September 2014
IN THIS ISSUECROWDFUNDING P3An Apprenticeship inFailure
RUTHLESS P5Banks’ Dirty Little Libor
READ & REAP P7The Market VoicesYou Should Listen To
THE F&J INDEX P9Measuring the Media’sFear & Judgement
FEAR AND LOATHINGON WALL STREET P11The World Didn’t EndThis Summer
FUNDING FREEFLOWTECHNOLOGIES P13the world’s lightest, greenestelectrical bike
VANITY METRICS P14The Mother of All Metricsis “Money in the Bank”
THE F&J INDEXMeasuring the MediaFlotsam & Jetsam ofMarket Predictions…
If history tells us anything it’sthat the media, like the vastinvestor herd, always misseson market predictions.
That consistent level ofinconsistency is actually apretty good marketbarometer that tells us to bewary when the headlinesread euphoric, and euphoricwhen the headlines readdoom….and all the stuff in-between. See page 9…
“Of interest to the doggedly determinedand risk-takers out there is thatcrowdfunding is perhaps the clearest routeto funding, at least at present, that offersrelative immunity from investor-basedjudgement from previous failure(s).”
READ ‘EM ANDREAP…“The market analystsand commentators youshould be listening to.”
JOSHUA BROWNThe Reformed Broker
“There is a new terror movementon the other side of the worldthat is crowdsourcing socialmisfits from every corner of theglobe, recruiting via interactivemarketing and social media in amanner befitting a Fortune 500company rolling out a newproduct…”
BY ED EMERSON
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SALES
John BeasonHead of [email protected]
EDITORIAL
Ed Emerson, EditorLawrence TaylorSid LyonsMark Dennison“The Brunette”[email protected]
DESIGN
David TodMartha TodFull Circle [email protected]
DISTRIBUTION
Cath Emerson, [email protected]
DIRECTORS
Ed Emerson, [email protected]
Cath Emerson, [email protected]
The views expressed in HNW Magazine are those of invitedcontributors and not necessarily those of HNW Magazine Ltd.HNW Magazine Ltd does not endorse any goods or servicesadvertised or any claims or representations made in any adver-tisement in HNW Magazine, and accepts no liability to anyperson for loss or damage suffered as a consequence of theirresponding to, or reliance on, any claim or representation madein advertisements appearing in HNW Magazine. By respondingor placing reliance, readers accept that they do so at their ownrisk. ©HNW Magazine Ltd. Reproduction in whole or part isforbidden without the written consent of the editor.
Top Crowdfunding Stats:
● Rewards Based Crowdfunding has grown140% during Q1 2014
● Equity Based Crowdfunding has grown391% during Q1 2014
● Global Reward Crowdfunding Raised $124Million during Q1 2014
● Global Reward Crowdfunding Pledged $156Million during Q1 2014
● Over 400 Rewards Based CrowdfundingCampaigns are launched everyday.
● Worldwide Crowdfunding is currentlydoubling 10x faster, every two months.
● Over $60,000 an hour is raised usingCrowdfunding
Of interest to the doggedly determinedand risk-takers out there is thatcrowdfunding is perhaps the clearestroute to funding, at least at present, thatoffers relative immunity from investor-based judgement from previousfailure(s).
Keep in mind that the roots of this multi-billiondollar e-funding industry have adeptlyinterconnected with the more traditionalbusiness finance sources.
What then are the greatest mistakes to try andavoid in the crowdfunding process?
Marc Zorn of crowdfunding platform VisionLaunch @Vision_Launch writes:
“A crowdfunding campaign can offer you theopportunity to make a dream into a reality.
READ MORE HERE
The great industrialist Henry Ford was the authorof that latter sentiment. And when the man whoapprenticed himself in failure before producing15 million or so Model T’s talks, you shouldlisten.
Ford was twice written off by Detroit’s“motorati”, particularly the prominentbusinessman William H Murphy (a venturecapitalist extraordinaire of his day), beforelearning three crucial lessons:
1) Obtaining finance is not the objective– avoid financiers when you can;
2) If you have to use finance, find like-minded souls; and
3) Don’t try and make your product servetoo many customer needs.
The architect of the “Tin Lizzie” eventually foundhis backer in an émigré from Scotland (the cradleof entrepreneurialism) named AlexanderMalcomson, an unconventional sort who madehis money in the coal business and, crucially,agreed not to meddle in Ford’s manufacturingprocess. And the rest, as they say, is history.
Finance, or financiers, as it happens isoften the dealmaker or breaker ininnovation. And one of the neatermethods that adheres to bullet point twoabove is the crowdfunding option, anindustry that’s grown faster than bambooplanted in a bed of coca leaves.
A recent report from The Crowdfunding Centreon global crowdfunding trends puts that growthinto statistical perspective, as social mediatrendmaker and commentator Roy Morejonwrites:
“So far we have tracked and analyzed over75,000 Crowdfunds worldwide:
hnwmagazine.co.uk September 2014
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RUTHLESS
“It has long been suspected that banks haveadded in hidden margins to the fixed rate loansof their corporate customers. But accusationsof this type have remained largely unproven,until now.”Just when you thought we had wadedthrough the deepest layer of prehistoricfrog shit at the bottom of the globalmeltdown’s financial scum swamp, we’rereminded to think again.
It now appears that previous reveals ofLibor-fixing, swap mis-selling and Forex-rigging misdeeds were a mere falsebottom.
An innovation on the part of Glasgow-based firm Aperia Financial has called intoscrutiny the lending practices andemployee bonus scheme enticements thatsaw hidden profit margins added to ‘Libor’
rates used by banks while selling complexloans to small businesses.
The discovery, an algorithm that promisesto calculate and identify overchargesdating back to 1st April 1987, could wellopen the door to £hundreds of billions incorporate client compensation.
The potential windfall for tens-of-thousands of corporate sector businesseswho agreed fixed rate loans over the pasttwo and a half decades offers up anArmageddon-sized liability for the banks;payback for the endemic and wilfulovercharging practices by senior level staff
hnwmagazine.co.uk September 2014
The Banks’ Dirty Little Libor…
BY ED EMERSON
Q Court, 3 Quality Street, Edinburgh, EH4 5BPFor further information, please contact Stephen Patersonon: Telephone: 0131 625 5151 [email protected]
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“The market commentators that youshould be following every day...”
BARRY RITHOLTZThe Big Picture
“You can’t spell ‘terrorism’ without ‘oil’. The U.S.is backing the most radical Muslim terrorists in theworld: the Salafis, who are heavily concentrated inSaudi Arabia, while overthrowing the moremoderate Arabs.”
RYAN DETRICKYahoo Finance
“September is historically very bearish. Also, we’veseen a huge uptick in bullish sentiment recently,which could be a near-term contrarian warning.But at the same time, the overall price actioncontinues to look very strong. In the end, price iswhat pays.”
ALAN STEELPoints of Few
“The CXO Advisory group gathered 6,582predictions from 68 different investing gurus madebetween 1998 and 2012, and tracked the results ofthose predictions. There were some very well-known names in the sample, but the average guruaccuracy was just 47%—worse than a coin toss.”
BEN CARLSONA Wealth of Common Sense
“The market has nearly tripled in a little over fiveyears, and the Standard & Poor’s 500 index closedabove 2,000 for the first time on Tuesday. With eachrecord, the temptation grows to take your winningsand flee.”
READ ‘EM AND REAP
The FDIC has sued 16 of the largest banks in theworld plus the British Bankers Association (BBA)alleging that they engaged in fraud and collusion tomanipulate the London Inter-bank Offered Rate(LIBOR).
BBA called LIBOR “The most important number inthe world.”
LIBOR is actually many numbers that depend on thecurrency and term (maturity) of the loan. Thecollusion involved manipulating most of these rates.A vast number of loans and derivatives are pricedoff of these “numbers.”
Estimates of the notional dollar amount of dealsaffected by the collusion range from $300-550 trillionin deals manipulated at any given time.READ MORE HERE
Hidden Margins – What Went On?
Accusations of banks adding hidden margins tofixed rate loans have bubbled up for years.
The dilemma has been in proving the actual Liborrates at the time of a loan agreement, a formerlyimpossible task and thus a license to manipulateagreed rates with corporate customers.
Equally, for those outside the banking communitythe London Interbank Offered Rate or Libor is arank and file financial obscurity.
For most, “Libor” arrives as either a crypticyawn-inducing term hidden in the small printamongst reams of loan agreement garble, or aneyebrow-raising headline; a searing bit of economicshrapnel from the 2008/09 conflict, blown out
BY LAWRENCE TAYLOR
Innovative Scottish firm Aperia Financial has called intoquestion the difference between the market ratesbusinesses thought they were receiving whenborrowing money and what they’ve actually beencharged….or rather, overcharged.
hnwmagazine.co.uk September 2014
(Cont….from page 1)in the treasury departments of high street lenders.Aperia has employed former bank treasury staff inan effort to reveal the full extent of interest ratemanipulation on corporate borrowing andascertain; if a business has been overcharged, andif so by how much.
Not dissimilar to PPI mis-selling, where thestructure of retail banking bonus schemes bothcreated, and then made endemic the greed in thesystem, fixed rate loan overcharging practices arerife, according to Aperia.
But while the banks have jointly set aside circa £22billion for PPI to compensate people wrongly soldpayment protection insurance, the expected pricetag for Libor overcharges is exponentially larger.
against the weary troops of colateralised debtobligations (CDOs), asset backed securities, creditdefault swaps and other such economic maladiesof the day.
Libor is best thought of as a daily marker, aninterest rate derived from those that major bankscharge one another for loans, and every day at11:30 a.m. (GMT) banks report their estimatedborrowing costs to Thomson Reuters, who thenpublish the average.
That average, Libor, is then calculated for fivedifferent currencies. The terminology can bemind-numbing; a purposeful Wall Street design, asif to say: “Don’t worry folks. We understand it sothat you don’t have to. Now sign here.”
(Crowdfunding Cont….)
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“The media’s consistent level of inconsistency is actually a pretty good market barometerthat tells us to be wary when the headlines read euphoric, and euphoric when the headlinesread doom….and all the stuff in-between.”
single variable assumptions and spuriouscorrelations. And like a good portfolio, all theiranalytical eggs are never in one basket.
But there is no Yang without Yin…….cue thetheme from Jaws…
….then on to the dark side of financial marketreporting from the TV talking heads; an exercisein myopic analysis, speculation and shiny teeth.
Today, as I struggled through the latter itoccurred to me that we’ve got little by way of ameasure of the media’s sentiment at large…
Why should we care? Why is that important?READ MORE HERE
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.”
THE F&J (FLOTSAM & JETSAM) INDEX (key)
MEDIA VIEW MARKET VIEW1. Extreme Bear = Clear Market Sailing2. Bear Enough = Positive Market Outlook3. Bear-a-Bull = Inconclusive4. Bull Enough = Poor Market Outlook5. Extreme Bull = Market Warning Sign
BY ALAN STEEL
Every morning I troll the views of dozens offinancial market commentators - the good oneslike Reformed Broker Josh Brown, Barry Ritholtzof The Big Picture, Ben Carlson’s A Wealth ofCommon Sense, Ryan Detrick, Bob Seawright, JeffMiller’s A Dash of Insight, Scott Grannis as theCalafia Beach Pundit, Tadas Viskanta, HowardLindzon / StockTwits…so many great opinion-formers and so many I haven’t mentioned here.
They are, in the majority, a thought-provokingand insightful lot, and more often than not lessthan militant about their particular bull/bearsympathies, warning instead of the danger of
hnwmagazine.co.uk September 2014
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“People are still afraid. Don't believe me? As was noted in ‘Riddle Me This’ recently, liquidassets in US savings accounts are approaching $9 trillion plus! Recall this is a vehicleliterally earning nothing and even at a measly 2% inflation it's losing value each yearover the long run.”
Alas, as we will likely discover many moons from nowthe odds are greater that we have witnessed precisely theeffect fear can have, as we wrote about in October 2012:
"We remain of the mind that we will find, years fromnow, that the best thing that could happen for corporateAmerica is the stark raving fear which has gripped us allfor years. That fear drove a huge demand for 'safebonds', and any bonds will go because the world hatesstocks. That fear has capped rates and is likely to do sofor many more years to come as the 'Great Recession'was our generation's 'Great Depression.'
"Our Fear? It remains the same as recent notes willsuggest; that we may very well be seeing the last dayswe can look forward to great corrections to buy value forthe long haul.
"When the secular bull market of 1982 to 2000 embracedus all, if you did not buy a two- to three-day setback, youpaid more for it later...period.
"Yes, I did say two- to three-day setback. Indeed, wesuspect quite a different world ahead versus what wehave all lived through in the latest 'lost decade.'"
In time, many will find fear may have been the mostexpensive thing we have embraced this century."
Burning the Candle at Three Ends
In "Techtonic Shifts" we stated that several secularevents would light up the growth of the United Stateseven as many still suffer through the impact of the 'GreatRecession.'
FEAR & LOATHIING ON WALL STREET…
We hinted that these secular events were slowmoving but would have wide ranging impact.
They were:● The wave of growth ahead with Gen Y
crashing to the beach;● The rebirth of manufacturing on our shores;
and● The massive energy finds we are making
and the shift taking place on a global scale
Add those elements to increasing technology,productivity and margin gains and one gets thesense that the world just might be missingsomething.
Crazy right? I mean, we all know by now that Isound much smarter if I simply list all the thingswe should worry about in the future. And wemust embrace this idea about the crowd psycheat this point:
If I express the future is dangerous and fraughtwith risk, I am deemed worthy, understanding,wise and aware of the real world.
If I express that the odds are high we havelearned monumental, life changing lessonsthrough all this pain, and that the future is farbrighter than we may be willing to accept, I amtold "Aw, Mike, that's just positive thinking,don't you see all the problems we are facing?"READ MORE HERE
BY MIKE WILLIAMS
The world did not end during THE summer of2014 despite having been offered numerousreasons for it to do so.
Somehow we made it through…just like allthose other times!
But there remains an elephant in this otherwisecrowded room….
How do you spell growth?
For the better part of the last five years we'vewritten it like this: F. E. A. R.
People are still afraid. Don't believe me? As wasnoted in "Riddle Me This" last week, liquidassets in US savings accounts are approaching$9 trillion plus!
Recall this is a vehicle literally earning nothingand even at a measly 2% inflation it's losingvalue each year over the long run.
All the experts in the world cannot figure outhow we could possibly have "printed" trillionsof "worthless" dollars, tripled the Fed balancesheet and then watched inflation go down?
The experts were certain gold was the only rideand all else would shrivel to zero, at best.
hnwmagazine.co.uk September 2014
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CROWDFUNDING FOCUS ON…FREEFLOW TECHNOLOGIES
"FreeFlow Technologies has developed the world’s lightest, greenest electricalbike – the SALTIRE e-bicycle. They own a patented new technology in the electricalbike marketplace, used in the Saltire Electrical Bikes." GET INVOLVED HERE
hnwmagazine.co.uk September 2014
PRODUCTS & SERVICES
FreeFlow Technologies has developed the world’s lightest, greenest electrical bike – the SALTIRE e-bicycle. The SALTIREe-bicycle is designed with the user, and the climate, in mind and is over 30% lighter than any current model. FreeFlowTechnologies owns a patented new technology in the electrical bike marketplace. A technical review has already been carriedout and there is a big licensing opportunity, as well as their own manufacturing. This technology is used in the SaltireElectrical Bikes. FreeFlow Technologies will generate additional revenue via Licensing and Joint Venture rights to itsIntellectual Property.
PROBLEM SOLVED
In the electric bike marketplace, FreeFlow Technologies solves five main issues that the market needs before it will seestellar growth: 1. It handles like a normal push bike, it is the only e-bike on the market that you do not need to spin anadditional set of gears when not powered. 2. It looks like a normal push bike as the gearing system, motor, motor controllerand battery are all integrated into the down tube. 3. It uses a third less raw material in its construction making and is thelightest power to weight e-bike system on the market. It also brings down the city bike to a weight of 14kg, which is 9kglighter than the manual Barclay’s bikes in London.
PURPOSE OF FUNDING
Prototype Production
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– and some of which he was certain originatedfrom his own incessant checking.
Something just wasn’t working here. Frustratedhe thought: “Maybe it’s the design…”
Lesson: “Actionable metrics tell us what’sgoing on. They are the ones that correlatehighly with the mother of all metrics:money in the bank”
Iain wrote regularly about the impacts ofBockswellian Prognosticators (BPs) and theirascension into Yemen soil samples.
This was good stuff.
The impact of their migration was the fodder ofscientific legend; Nobel Prize-worthy insights andcommercial gold for the topsoil and fertilisationsectors involved with humus and marl.
Lesson: Whatever you do, be original. Beauthentic. Your social media marketingcampaign is all about these ideas. Standout from the crowd and do somethingdifferent. And write about what interestsyour audience, not you!”
“Why can nobody see this?” He said.
“Maybe if I can isolate theYemeni population who aresocial media active farmersand make them aware ofthe BPs. Then they caninform the scientificcommunity who can informthe commercialorganisations who can sellon my anti-bacterial soilsolutions to augmenta g r i c u l t u r a lviability….then maybe,just maybe…”
Iain paused in this latest epiphany, raised his eyesand looked out his office window as a streetlightflickered into life against the growing pale ofdusk.
“Goddamnit, its right under their noses…”
“It’s like a goddamned slap in the face,” hesaid to no one.
Iain loomed over the keyboard, pokingpasswords into a myriad of social mediachannels, checking follower numbers, analyticsand scores.
The results were a painful daily exercise indigital futility. For some reason no one seemedeven remotely intrigued by his Tweets,LinkedIns or “Facebookings”. His Klout scorewas stuck in the mid-20s.
Lesson: “Vanity metrics make you feellike you’re succeeding; countingfollowers, likes, views, users anddownloads. They are to contentmarketers what strokes are to thefamily dog.”
His Google analytics read like a dead man’spulse.
All of his social media marketing efforts overthe past twelve-months had produced 2,745Tweets, 45 followers and no customers. Thecompany’s daily pageviews ran in their teens
LETTING GOOF VANITYMETRICS
hnwmagazine.co.uk September 2014
“Actionable metrics tell us what’s going on. They are the ones that correlatehighly with the mother of all metrics: money in the bank”
BY ED EMERSON
