BlackBerry

BlackBerry

By Simarjeet Kaur & Vafa Azadi

In our presentation, we discussed about BlackBerry’s current position in market. BlackBerry is Canadian Telecommination and wireless equipment company, which is started in 1984 as a known as Research in motion limited. It was founded by two people named Mike Lazaridis and Douglas Fregin. In 1999, they introduce their products name BlackBerry Enterprise Server and BlackBerry 850 pager. Those two devices were famous for giving access to emails, web browsing, and many other features  Most of the corporative people used those phones over period of the times. Then they introduce another blackberry wireless handset RIM 957. The primary functions of these devices are receiving or send email.

In later years, they introduce couple other models such as BlackBerry Pearl, Curve and Bold. Pearl includes a digital camera, audio and video playback, blackberry maps and voice activated dialing. These different models were specially designed for non corporative people and spread the BlackBerry all over the nation, but in 2007, apple released their first iphone which affected BlackBerry in market. Since apple’s iphone was only exclusive to AT&T network, Verizon wanted BlackBerry to come up something similar in order to gain customers’ interest back in BlackBerry so then BlackBerry released their new product BlackBerry Storm in late 2008, but it didn’t gain much attention from customers. In order to keep up with market, in 2010 blackberry released playbook which was very expensive in the beginning and they had almost 90% loss in sale.

In share market, in 1997, BlackBerry’s IPO price was $7.25 and there highest stock price $144 occurred in June, 2008. Now, there current stock price is $6. BlackBerry’s Market shares from 2008 through 2013 are constantly dropping down. In 2008, the market share was 16.6%, In 2009 the market share was 19.9%. There was gain of 3%. In 2010, the market share was 14.6%. In 2011, the market share was 8.8%. In 2012 the market share was 5.2% and in 2013 the market share is only 1.8%. By comparing to other companies like Apple and Android, there share market is increasing every year compare to the previous year, but in case of BlackBerry, there share dropped down every year. As the other companies are growing faster, the BlackBerry is keep going down.

In recent news, there are lots of things happened in BlackBerry. In past week, they replaced their old CEO name Thorsten Heins with new CEO John Chen. Chen was previously chairman and CEO with Sybase inc. in 1998. In his contract, Company also agreed to give him 13 million BlackBerry share units which are worth US$85 million based on last week’s closing stock price. There was other news about BlackBerry buyout. Companies like Google, Intel and Cisco were interested in buying BlackBerry and other partnerships are still possible with the conditions of new stock price deal with Fairfax. At Same time, the Smartphone maker announced that they aren’t selling itself for $4.7 billion to a group of companies led by Fairfax Financial Holding Limited, but they are agreed for $1billion stock purchase with that group. BlackBerry released their secret investors for $1 billion US dollar investments such as Canso Investment Counse LTE will invest $300 million, Fairfax Financial will invest $250 million, Mackenzie Financial Corporation with $200 million, Market Corporation and Qatar Holding LLC will invest $100 million each, and Brookfield Asset Management will invest $50 million. Most of these investors are Canadian investor.

 

References

¨  http://www.gartner.com/newsroom/id/2623415

¨  http://crackberry.com/evolution-blackberry

¨  http://rebecca-reeve.com/constant-connectivity/ch02.htm

¨  http://finance.yahoo.com/echarts?s=BBRY+Interactive#symbol=bbry;range=my;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

¨  http://www.cantechletter.com/2010/03/my-1996-investment-in-rim-adam-adamou-remembers/

¨  http://www.nextiphonenews.com/2013/11/blackberry-ltd-bbry-the-1-billion-struggle/

¨  http://kitchener.ctvnews.ca/hiring-agreement-could-net-new-blackberry-ceo-85-million-1.1532848

¨  http://finance.yahoo.com/news/blackberry-abandons-buyout-ceo-quits-200356685.html;_ylt=A2KJ3CWVTYZSXS4AYlKTmYlQ

Insider Trading

By Xiqian Chen & Jianing Lu 

In recent news, Steve Cohen of SAC Capital Advisors have agreed to plead guilty to insider trading. Although he claims he himself has not done anything wrong, he is convicted by the SEC of failing to supervise his employees. For many years the SEC has been tracking SAC Capital Advisors since many ex-employees have been convicted of insider trading.

Actually over the last three years, the SEC has filed more insider trading actions (168 total) than in any three-year period in the agency's history with illicit profits or losses avoided totaling approximately $600 million.

What is insider trading? It is the trading of public stocks by individuals who has access to non-public information about the company. There are legal and illegal insider trading. The only legal action is that insiders trade their company’s shares inside their company and report to SEC about the trade. Others are illegal.

Why is it important? Because the holder of the private information can either sell or buy a stock first and so his risks is less than the average and his return will be greater than the average stockholder, which is unfair and so under law it is illegal. 

Although The Securities Exchange Act of 1934 was Act that made insider trading illegal after the stock market crash of 1929, Congress who passed the law didn't seem to think this applied to themselves. In 2012, 60 Minutes did a expose on Congress's inside trading. In response to this embarrassment, Congress passed the STOCK Act in April 2012, which required 28,000 government employees to disclose their financial transactions to the public via a online database, which could be easily accessed with a login. 

In April 2013, Obama signed a reversal of a key provision of the STOCK Act. Instead of 28,000 employees now only about 67 executive officials need to disclose their financial transaction but of these 67 executive officials, majority of them by law are not allowed to participate in stock market anyways. Not only the targeted persons have been decreased by a large percentage, Congress has also made it harder for financial transactions to be retrieved by taking it down from the online database. This reversal provision was passed by the house and senate in less than 30 seconds with unanimous consent. Although it was a unanimous consent, a large number of officials were not even aware that they gave a consent since they were not present at the time.  And so although inside trading is illegal to the public/private sector, the Congress still has its way around it.

http://en.wikipedia.org/wiki/Insider_trading

http://dealbook.nytimes.com/2013/11/03/sac-nears-an-insider-trading-guilty-plea-but-legal-cases-arent-shut/

http://www.cnbc.com/id/100647407

http://www.npr.org/blogs/itsallpolitics/2013/04/16/177496734/how-congress-quietly-overhauled-its-insider-trading-law

http://www.rollcall.com/news/congressional_insider_trading_revisited_but_dont_tell_anyone_commentary-224674-1.html

No Motor in Detroit

                  On July 18^th, Detroit filed for bankruptcy after being unable to pay back their debts.  In an effort to avoid any sort of bankruptcy, Emergency Manager Kevyn Orr tried to convince creditors to accept a tenth of their money in return, to which they declined.  Orr then tried to cut retiree benefits in an effort to reduce the city’s budget.  As a result, Detroit’s two largest pension funds filed lawsuits against Orr so that their benefits would not be cut.  The next day, Detroit filed Chapter 9 bankruptcy in an amount between $18 and $20 million.  On the 19^th of July, a judge named Aquilina found that the bankruptcy was unconstitutional.  According to the constitution of Michigan, no division of the state can default on pension loans.  Aquilina order Governor Snyder to withdraw his bankruptcy filing, but instead, he chose to appeal her decision.  This caused Detroit to be in and out of court with a final court date set on October 23^rd, to which no decision has yet been made. 

                  On November 8^th, the bankruptcy court had the final trial of the Detroit case regarding the eligibility of Detroit to file for bankruptcy. The case went to trial, as mentioned before, for being unconstituitional. Case Judge Steven Rhodes addressed the main allegations that the city of Detroit did not use bankruptcy as a last resort and rather, they were not able to conduct negotiations of good will to avoid filing Chapter 9. Lead Counsel, Bruce Bennett made the statement that filing for bankruptcy was not desired but rather inevitable because creditors were not willing for compromise. Kevyn Orr released a statement that despite negotiations failing he plans on introducing a new plan of payments to reduce the debt and eventually find the optimal way to pay off creditors. Rhodes has not made a decision on the eligibility yet and further review is underway.

                  A common source of income for Detroit is through filming.  As a short-term attempt to help with the bankruptcy, Detroit offered the new Superman movie about $35million in tax incentives to film there.  According to Zack Snyder, “Detroit is the quintessential example of an American City”.  It is anticipated that movie will hire about 420 new full time employees; the crew will use about 500 vendors and about $5million on hotel bills for the cast and crew.  Detroit will also make money from the cast and crew who will have to use their paychecks while staying in the city for an extended period of time.  Detroit commonly uses various films to make their money, but because of their situation, they were forced to offer incentives to Zack Snyder to encourage him to film in the city. 

                  Detroit, like New York and Chicago, has been recognized as one of the “true” American cities of the United States. It is very important for the Motor City to once again flourish. It’s not going to be easy and as you can see, there are very few options to start this rehabilitation, or revival of sorts. One of the possibilities is do what the city did with movies and other industries. The movies create jobs; market the city and potential increase income flow into the city.  Chapter 9 perhaps isn’t the most ideal scenario but it was one that really opened the eyes of Detroit and of the United States to find an economic plan that will help conserve and progress the economy of the United States.

Jay Hirpara & Kayla Rhodes

Works Cited

http://abcnews.go.com/Business/judge-detroit-bankruptcy-unconstitutional/story?id=19716119

http://www.myfoxdetroit.com/link/647187/orr-chapter-9-recommendation

http://www.usatoday.com/story/news/nation/2013/11/05/detroit-bankruptcy-borrowing/3448411/

http://www.latimes.com/nation/la-na-detroit-bankruptcy-race-20131110,0,1560272.story#axzz2kNEkzhIa

http://www.usatoday.com/story/news/nation/2013/11/08/detroit-bankruptcy-trial/3479621/

Financial Report on Recent FOMC Meeting & SAC Advisor Plea Bargain

By Jeni Merino & Ellen Yu

For our in-class financial presentation, we reported the overall effect of the Federal Open Market Committee on the S&P 500 index and the Dow Jones Industrial Average index. Before their meeting, the returns for S&P 500 and DJI indexes increased. However, after the results of the meeting were given, there was a decrease in returns for the two indexes, which may be because many expectations that the Fed would not taper with quantitative easing were not met. Also the Federal Reserve decided to limit monthly bond purchases to $85 billion until they observe that the economy continues to improve.

One major result of the government shutdown is that many institutions that evaluate the performance of the financial markets were not able to produce data, which is necessary in order to determine proper changes from the last FOMC meeting. Also the central bank left unchanged their decision, from September, to hold target interest rates near zero, so long as overall expectations for inflation do not increase higher than 2.5 percent.

The results of the FOMC meeting changes the behavior of other investments, who may now start to questions how effective the economy has been at recovering after the government shutdown. Also the answers needed to resolve the questioning of the market traders may not be dependable due to miscalculations given as a result of the government shutdown.

Later in the week, on Monday, the company SAC Capital Advisors, L.P., made a plea bargain of $1.2 billion due to prosecutions of five counts of insider trading. Even the founder of the company, Steven Cohen, faces criminal charges of failing to properly manage his employees, or “turning a blind eye,” according to some of his prosecutors. The company also agreed to terminate their business of managing outsider investments.

Currently the present value of the SAC hedge fund is $15 billion. And since SAC is no longer able to manage outsider investment, there is a $6 billion cut in the company’s value. This leaves $9 billion of manageable investments that belong to Cohen. However if he is found guilty of encouraging insider trading in the company, it will result in a loss of the company’s only investment that it manages. Essentially this could lead to a shutdown of the hedge fund.

Some of the major effects of  the penalties SAC faces is that other hedge fund companies will be discouraged from insider trading. Moreover, the government is showing that it’s getting better at prosecuting those who practice insider trading. This is especially true since JP Morgan Chase, another major company on Wall Street, has also recently been forced to make a plea bargain deal due to some of their questionable mortgage practices.

This leads to another question about the government seeking to bring down these major companies. Can they be too large to jail? In other words if the penalties that these companies face leads to their shutdown, will it affect the economy negatively? Also, if other current major hedge funds allow insider trading practices, they may choose to refrain from using this strategy, leading to a change in the investment game. This leads to a final question, how might the strategy change in investments influence our economy? This is definitely something that many people worry about and can lead to even further insecurities amongst traders.

Is Bitcoin a Stable Alternative Currency?

“As with all emerging technologies, the federal government must make sure that potential threats and risks are dealt with swiftly; however, we must also ensure that rash or uniformed actions don’t stifle potentially valuable technology”   

      -From a letter by The U.S. Senate, Homeland Security and Government Affairs Committee (8/12/2013)

It seems pretty clear, at this point, that Bitcoin is not going anywhere any time soon, so where exactly does it fit into the markets? Bitcoin is a peer-to-peer, encrypted digital currency, a first in its class. It is now in its third year of operations and has already been exposed to more than its fair share of success, criticism, and controversy. Despite these challenges, Bitcoin does appears to have some staying power and now regulators, economists, and private interests are left with the task of trying to figure out what to do with this dynamic new virtual currency; and how can it be put on a safer, more sustainable path. 

In late August, lobbyist on behalf of Bitcoin met with the U.S. Secret Service, the IRS, the Federal Reserve, and at least 4 other government agencies. This meeting followed growing concerns surrounding current and potential misuses of Bitcoin to finance illicit activities, and law enforcement’s lagging ability to monitor and respond to highly sophisticated cyber criminals. 

These concerns are not unfounded.

Unlike most fiat currencies, bitcoins are digitally transferred between anonymous users anywhere in the world in a matter of minutes; without the need for financial intermediaries or third-parties and with as much ease as sending an email. Although every transaction ever made using the virtual currency is a permanent public record in the blockchain ledger, transactions are still extremely difficult to trace back to individuals or the item(s) that were purchased. Obviously, privacy is the most attractive feature of Bitcoin to its growing base of users—a feature that law enforcement officials believe will also makes it more attractive to criminals. Despite this criticism, Bitcoin’s popularity has grown virally, prompting some technology and internet privacy advocates to question whether the government can get the poorly understood currency under regulatory control.

Needless to say, federal and state law enforcement agencies have already begun responding.

 In the last 3 months alone, 22 companies, some of which were reported to have merely expressed interest in Bitcoin publicly, received subpoenas inquiring into their business practices; the world’s largest Bitcoin brokerage, Mt. Gox, had close to $3 Million in assets seized by The Department of Homeland Security; and The Silk Road, described by the FBI as “the most sophisticated and extensive” online black market which used Bitcoin, was shut down. NY’s chief financial regulator, Benjamin Lawsky, regarding the aforementioned subpoenas that were served from his office, stated, “If virtual currencies remain a virtual Wild West for narcotraffickers and other criminals, that would not only threaten our country’s national security, but also the very existence of the virtual currency industry as a legitimate business enterprise.” Putting aside the facts that Bitcoin itself is not illegal and is in no way culpable for its own abuse at the hands of criminals, it’s pretty clear that the intense political pressure surrounding Bitcoin is enough to dissuade private interests from embracing the technology, which could prove to be the virtual currency’s biggest barrier to stabilization. 

Notwithstanding the legal and political framework, economists are skeptical of the economical framework underpinning the virtual currency; a few even doubt its practical use as money in "real" transactions. Money, simply put, is a unit of exchange; it need not be physical in nature, it just has to be accepted as such and it has to be a relatively stable store of value—the problem for Bitcoin stems from the latter.

 

Bitcoins are extremely volatile.

Since January, the price of one Bitcoin has skyrocketed 1300% with a standard deviation of $47.70. Bitcoin’s FX market has grown rapidly, but it’s still tiny compared to the traditional FX markets. Furthermore, the supply of bitcoins grows at constant rate, but it’s long-run money supply is capped at just $21 million. Seems a bit arbitrary. Far different from traditional money regimes, the limits of Bitcoin’s money supply are imposed explicitly by an algorithm. It's small size makes it possible for a few investors with a large amount of bitcoins to have influence over the entire market.
Bitcoin's FX doesn't fit any of the criteria for an efficient market. Economists predict that the wild fluctuations in price will continue as a direct result of Bitcoin's unconventional approach to money, making it a very risky asset not suitable for everyday purchases.

Governments may be a little uncomfortable with Bitcoin, and economists aren’t sold on it either, but speculators love it.

Bitcoin speculators have generated enormous returns trading bitcoins. According to one famous story, one man bought 27 bitcoins in 2009 which he later forgot about, only to realize this year that his investment was worth well over $800K. Bitcoin has already made quite a few millionaires already. Ironically, the very characteristics which, economists say, makes Bitcoin a poor choice for spending money are the exact same traits that make it an excellent choice for arbitrage traders. Even though Bitcoin FX pairs exhibit a strong and positive correlation their spot FX equivalents, the instability of the Bitcoin market creates sizeable exchange rate deviations above and below the Spot FX exchange rates, thus, making arbitrage opportunities possible. 

Interestingly enough, the rapid inflow of Bitcoin speculators hoping to exploit these disparities have also increased market volume and competition which, in turn, has reduced the very disparities which were created by the inefficient conditions in the first place. Simply put, Bitcoin traders have improved the market's efficiency. From 2011 to 2013, The spread or the difference between major Bitcoin FX pairs and their respective spot cohorts in absolute terms has decreased steadily.

This finding is crucial because it suggests that even a digital currency, like Bitcoin, is not immune to market-based corrections and that, as market participation increases over time, bitcoin prices will become more precise estimate of  "real world" money. It's not likely that Bitcoin, in it's current state, will ever be able to compete with the dollar, but is it a stable currency?

Not yet, but it's getting there.

https://en.bitcoin.it/wiki/How_bitcoin_works

http://www.wired.com/threatlevel/2012/05/fbi-fears-bitcoin/

http://www.bostonmagazine.com/news/blog/2013/11/04/bitcoin-jeremy-allaire-circle-boston-university/

http://bitcoin.org/en/faq#what-is-bitcoin

http://blockchain.info/

http://www.cnn.com/2013/10/04/world/americas/silk-road-ross-ulbricht/

http://dealbook.nytimes.com/2013/08/13/officials-broaden-inquiries-into-oversight-of-bitcoin-and-other-currencies/?_r=0

http://www.economicpolicyjournal.com/2013/10/how-bitcoin-will-get-neutralized-by.html

http://reason.com/archives/2013/05/21/bitcoin-cant-be-stopped-but-can-it-be-sp

http://www.theverge.com/2013/8/23/4651926/us-government-seized-5-million-from-bitcoin-behemoth-mt-gox

http://www.technologyreview.com/news/520296/leading-economist-predicts-a-bitcoin-backlash/
http://www.techspot.com/news/54507-man-forgets-about-27-bitcoin-investment-made-four-years-ago-now-worth-1m.html