Erik Schatzker, Waddell & Reed #flashcrash

A guy by the name of Erik Schatzker (Bloomberg Anchor) put out this tweet earlier: Breaking on Bloomberg: SEC fingers Waddell & Reed trading in #flashcrash. Official report won’t ID firm. $WDR

Makes it sound like Waddell & Reed in Kansas City caused the Flash Crash.  The real story is here:

http://www.bloomberg.com/news/2010-09-30/waddell-reed-e-mini-trades-are-said-to-have-helped-trigger-may-6-crash.html?cmpid=yhoo

Waddell & Reed was only a questioned participant, not the cause, according to the Bloomberg story.  Erik needs to get the story a little more accurate.  He was right, they won’t be in the report but “fingered” is not correct in making it sound as if Waddell & Reed was the sole cause.

Stock Markets Are Wrong Today

Wow, look at that!  A big upside in the markets!  Are the traders wrong or is the media just gunning with the wrong story?  Do you really believe the markets should be up on hype about companies buying more computer infrastructure?  What does that have to do with the bottom line for companies other than computer manufacturers?  Something isn’t right here.

Business owners already know that gross, margin, and net are the only things that matter when evaluating whether a company is doing well or not.   At the beginning of the day we all know that you have to make a profit or nothing matters.

We have the news media telling us computer purchases are a reason to buy stocks.  Those computers are a commodity expense only and have nothing to do with earnings in the end, unless properly utilized.  If these companies were buying more pencils would we hear about it?  Would we say they are going to write more info on paper faster and thus the economy will get better?  We are at a point when companies need to upgrade hardware to keep up with software.  It isn’t an economic expansion event.

Reality is, if they are not investing in humans but are investing in technology you can bet the future is a lower standard of living for the population and a higher standard of technology and efficiency for companies.

There is no reason to drive the markets up on this news.  We have increasing taxes, increasing government debt, fewer jobs… you get the picture?  The markets should only rise if the economy is rising, the standard of living is increasing, and profitability is realistic.

Do you buy computers because you expect sales to increase or do you buy them to increase your efficiency and keep up with software?  Maybe the best investors are business owners.

Currency Trading Replaces Stock Trading?

A headline on MarketWatch yesterday morning stated that the lost decade in investing has caused higher interest in currency trading.  That’s an interesting thought, since currency trading isn’t for everyone, and most firms might warn against placing much of a portfolio in currency hedging.  As a business owner, how does this even matter?

It matters because it measures how much money will be headed towards corporate and business investing in the future, and that may not be a whole lot.  If business owners would put their heads down and ignore the trend but focus on business, this could all be past us a little quicker.  We’ve gotten used to the idea of going to the bank every time we want to start, expand, or purchase a business.  Little kids do the same thing, asking for money when they want candy… “Please?”  At some point, don’t we want our kids to grow up?  So let’s do the same, when it comes to business and banking.

If you really have a good idea, won’t it fly without the bank?  Two days ago I was walking downtown and I passed a guy on a park bench who asked me for money because he lost his job.  He had a cardboard sign which stated the same.  I asked him what kind of work he does.  He said landscaping.  My reply was that if he couldn’t find work, nobody could.  He looked stunned.  My next comment was to tell him that he didn’t lose his job, he had only lost an employer!  Now his mind started working.  You could see his face change as he realized he should be working rather than hoping for a job.  I gave him some ideas on how to start his own business, where to start, what he needed, and most of all how much he could earn.  He looked like a different man.

I know not everyone is up to the task but this guy looked and acted fully capable.  He was suffering from the belief that someone needed to hire him or he couldn’t survive.  I don’t know how cowboys and Indians lived in the old days but I don’t think they always had jobs, instead they worked, regardless of for whom.  This is the great mistake of today, believing you need a job when in fact you just need to work, and there is a difference.   Business owners get trapped into the same mentality, believing they need the bank to be in business when the opposite it true.

Business owners need to work, keep on working, keep on growing, but don’t depend so much on the pockets of finance.  If you have a good business idea, it will fly if you work hard.  Yes, I know that your business may grow at a slower pace then if you borrow money.  I’m really speaking to those who can’t borrow or can’t borrow as much.  In the meantime we all need to get the work done so we can be prepared for better times ahead.

Good Business, Good Politics

Is it good business to want the Federal Government to be supportive of small and mid-size business in this country?  Yes!  Is it also good business to vote for representatives, presidents, and laws which support small and mid-size business?  Of course!  Then isn’t it also good business to talk politics as a business owner or entrepreneur?  Absolutely! 

Where does this notion come from that it is bad business to discuss politics in business?  How is it possible that doing so is a negative thing?  The men who founded this country were the top business owners and entrepreneurs of their day.  How would they have ever created the United States if they didn’t believe that good politics was also crucial to good business?  Isn’t that the entire reason behind the Tea Party of their day?  I can see where employees of large corporations may think that politics has no place in business, but they are not in business, not really, they are just employed and fear for their jobs, not their freedoms. 

Because small and mid-size business owners, as a group, are the biggest employer in this country, they need to have a loud voice. Since many of those currently running the Federal Government are not in business, and would simply like to take away as much as they can from business owners to further their own power and spending needs, it is economically important for the well-being of our country that our business owners have a loud voice.  Our business owners and entrepreneurs need to do all they can to make sure our representatives support small business because how else will jobs increase, demand increase, the economy increase?

The point is, it’s very important for business owners to talk about their needs, their ability to make a profit, their ability to employ more people.  It is rare that a business owner is in the business only for the money.  They usually want satisfaction in a variety of areas like helping customers, helping community, helping employees by providing jobs and good benefits.  They help the economy in more ways than just making and spending money.  They buy property, save money, build communities, and much more.  So why should they be quiet about what they believe regarding politics?  Business owners and entrepreneurs can claim to be a member of a party or independent, it doesn’t matter.  What does matter is that they realize the importance of the position they are in and how to increase the power of business rather than allow any party to hamper opportunity.  Owners and entrepreneurs need to speak out and help their employees and friends understand the importance of good business with good politics, thus good representation.

“All of us need to be reminded that the Federal Government did not create the states.  The states created the Federal Government.” – Ronald Reagan

Grow Your Business, NOW

Most business owners are rightfully using caution in their business growth plans.  With the economy remaining in a slow pattern and apparently higher taxes beginning next year, it is definitely a good time for caution.  It may not be a good time for the same old business style.

Part of caution should be utilization of re-thinking your business model and to grow the business in a more cautious way, maybe more aggressive at the same time.  In the 1990s and into this first decade of the new century, one method of growth involved simply throwing money into new ideas and see which ones would stick.  Google has done well with this model, and of course they also have the cash pool to afford excess risk.  For the rest of us who don’t have billions of dollars to burn, it’s much wiser to truly think your way through the problem of how to grow your business.

Now is the time to take a more cautious and prudent approach to growth.  Notice that I still expect a good business to grow, even in this economy, through wise management and good growth tactics and strategies.  Diligence can save your business.  Reducing overhead and expenses are a given but after you reduce costs you still need to grow the business in a meaningful way, especially if you have good competition.  More on this later…