Bitcoins are on the headlines of many financial news articles, and it seems like everyone around me is reaping profits from the hype. Since Bitcoins can be bought in parts, many of my friends have invested in it and made a hefty profit. My first-year friend who goes to University of Toronto flamboyantly showed off on Facebook how he made his entire first year tuition by buying into bitcoin cash, which its values quadrupled in a week.

In the ocean of information that the internet offers today, I am wondering if this invisible money is qualified for long-term investment, and I am grateful to find a blog of a cryptocurrency trader that offers his take on bitcoins. The blogger has 5 years trading bitcoins, which a portion of it being full time. He posts his trades and give detailed explanations of the reasons for his trades, and how his portfolio is diversified. He dissects the bitcoin and other cryptocurrency markets into different tiers, and offers his strategies for each one of them. His years of experience are very valuable and pragmatic for any traders who are interested in this field.

I align with his beliefs with the huge profit potential of Bitcoins in the short-run. The profit can be made by buying or shorting based on the believe of Bitcoin’s huge upward and downward potential. However, I fundamentally disapprove the investment of bitcoin in the long-term, as there are too many risks to justify the stability of returns for bitcoins. Many illegal institutions use and drives up price of bitcoins because of its ability to be untraceable. Bitcoins also fluctuates erratically when policy changes, such as when China banned the trading of bitcoins. There is a large possibility sudden policy changes will appear in the future for regulation.

Based on the fundamental analysis of the soundness of investing in bitcoins, my conservative investing values still align with the value of the Sauder Portfolio Management Foundation. I admire the countless hours of research they are involved into knowing the inside and outside and talking to the company executives to know more about the company. The research mitigates the risk and fosters long-term growth.

I believe in the short-term opportunities of bitcoins. I applaud my friends for making back their living expenses for the year or their tuition. However, I do believe some of their winnings are driven simply by market forces, and they do not know why they won the money, or why they lost the money. In the long-term, to be an evergreen force of investment like Warren Buffet, one needs to know what they are doing inside out, and it is hard to achieve that with bitcoins.

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Citations:

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https://www.bloomberg.com/news/articles/2017-06-28/cryptocoins-are-the-new-penny-stocks-and-that-s-a-good-thing

https://www.whatbitcoindid.com/

https://coinmarketcap.com/currencies/bitcoin-cash/

https://www.whatbitcoindid.com/strategy/

https://www.cryptocoinsnews.com/china-ico-ban-worlds-oldest-bitcoin-exchange-shuts-doors/

http://www.sauder.ubc.ca/Faculty/Divisions/Finance_Division/Programs/PMF_Program

https://www.fool.com/retirement/2017/06/15/what-3-billionaires-think-about-bitcoin.aspx

Image:

https://www.bitcoin.com/info/what-is-bitcoin

One of my biggest goals after graduating from Sauder is to eventually start my own business. In the first class of Comm 101 I was introduced to Nolan Watson, a fellow Sauder alumnus and the CEO of Sandstorm Gold. Throughout Comm 101 classes, I was exposed constantly to many names of successful graduated Sauder entrepreneurs. The big question is, whether to start my business after graduating, working, or better yet, next year? Timing must be impeccable in today’s fast-paced, competitive business world. In the entrepreneurship class in Comm 101 the i-clicker survey showed most people finding themselves wanting to work for a big company after graduation. In a perfect world, it is nice to have to work for a company to gain some experience then to start my own business. Nolan Watson is an epitome of this scenario, working with Deloitte and Silver Wheaton before starting Sandstorm Gold. However, time and tides tarry for no one, and business opportunities doesn’t either. On October 27, Toronto Stock Exchange (TSX) hit an all-time high of 15953.51 points. My classmate Jason Quan wrote his blog about in the south of the border, Utah transformed into a hub for young entrepreneurs to start-up their tech businesses. I wondered if such opportunities exist in Vancouver. Just last week, Hootsuite, a company based on Vancouver, founded a new charity firm for young entrepreneurs. The wind of change for youth entrepreneurship is blowing in Canada. In 2016, 15.4% of start-up firms in developing countries were owned by young adults aged 18-24. However, in the developed countries such as Canada, the number falls to about 7%. Canadian youth start-up programs now exist to close that gap. The biggest risk for starting a business from scratch is financial instability and an infeasible business model. Previously, lack of credit history and harder to secure a loan is a big problem for youths in developed countries. Nowadays, programs such as Futurpreneur  and Youth Social Innovation provides loans to young entrepreneurs and even mentorship to secure the success of the business model. Looking at other sources of financing, many sources exist in BC such as crowdfunding and private offerings. The proliferation of e-commerce also offers other sources online such as Kickstarter and Indiegogo can also help young entrepreneurs excel their business without giving up shares. While the top companies do dominate the market with many advantages, the global hegemony of corporations is never set. In 2004-2007 Apple spent 9 times less than Nokia in R&D yet still won the smartphone battle. The status quo is a rare time of history where the risk is less than the reward for entrepreneurship, it is best to take a leap of faith and start now.

Word Count: 450

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https://blogs.ubc.ca/jasonquan/

http://theconversation.com/forget-the-apprentice-where-are-all-the-young-entrepreneurs-86190

https://betakit.com/hootsuites-ryan-holmes-launches-charity-supporting-young-entrepreneurs/

http://www.youthsocialinnovation.org/for-si/apply-now/

https://www.bcsc.bc.ca/For_Companies/Private_Placements/Crowdfunding/

https://www.bcsc.bc.ca/For_Companies/Private_Placements/Private_and_early_stage_businesses/#Offering

https://www.thestar.com/business/2017/10/27/energy-sector-helps-toronto-stock-market-hit-new-high.html

https://blogs.wsj.com/tech-europe/2012/05/14/nokia-outspent-apple-nine-times-on-rd/

https://qz.com/682517/after-analyzing-200-founders-postmortems-researchers-say-these-are-the-reasons-startups-fail/

http://www.futurpreneur.ca/en/get-started/financing-and-mentoring/

https://www.kickstarter.com/

https://www.indiegogo.com/en

http://video.foxbusiness.com/v/1795556551001/?#sp=show-clips

Picture:

https://www.rationalwine.com/wp-content/uploads/2015/09/Leap-Of-Faith.jpg

I recently just got my driver’s license and two options lie in front of me: an electric car, or a traditional gasoline-powered car. In the status quo, I would pick the gasoline-powered car in a heartbeat.

Electric cars are separated into two categories: plug-in hybrids, which are powered by gas and electric, and purely electric cars (EV). It is not advisable to buy a hybrid, because the leading indicator is that countries around the world are implementing policies that support the sales of EV cars. China and India are implementing the policy to support the sale of EV cars in 2030. European countries follow with similar laws and regulations. With these regulations, companies would be more likely to support EV cars. Furthermore, a hybrid car is also 20% more expensive than its counterparts that run on gasoline. A hybrid is the worst option based on price and future policies.

The value proposition of EV car companies, is differentiation, and they advocate for green cities and is priced higher than plug in and gasoline. Tesla motors currently dominates the EV market with 62.52% market share. Differentiation advantage will soon evaporate with more companies developing EVs. As discussed in Comm 101 tutorials, companies like Mercedes Benz are coming in and taking market share. Mercedes aim to have all its cars EV by 2022 and many other companies are following. When supply shifts to the right the price comes down. With the competition, there will be better models in the future, with a higher quality at a lower price. For gasoline-powered cars, with less suppliers in the future the supply will shift left being more and more expensive in the future. The owner of tesla even owns two gasoline cars, and calls one his “first love”. The mass quantity of gasoline-powered cars are here to stay.

When I am buying a car, I’m not looking just for the automobile, but the good service that is provided as well. In the status quo, the lagging indicators of these electric-car companies are in jeopardy. Faraday Futures, an electric car powerhouse, is mounted in debt, while the asset of its billionaire Chinese financier frozen by the government. Tesla Motors just fired hundreds of people in October based on performance management. The production of its new Model 3 is currently only at 260 units, far less than expected 1500 units projected. When these companies are having trouble now, it is difficult to see how they will maintain a good customer service while also keeping high profit margins when different car companies invade the market.

Within the next five years, gasoline-powered cars are the best option. I will consider EVs when they dominate the market with cheap prices and stable customer service.

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Citations:

Picture:

http://www.ulyces.co/wp-content/uploads/2016/07/autoblog.com_.jpg

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https://www.nytimes.com/2017/10/13/business/tesla-fires-workers-model-3.html?mtrref=www.google.ca&gwh=CD94055C2ED98ED4AD0705C15D462C09&gwt=pay

https://www.forbes.com/sites/jackperkowski/2017/10/10/china-raises-the-bar-with-new-electric-vehicle-rules/#68d9f35177ac

https://www.theverge.com/2017/7/10/15948976/faraday-future-halts-factory-nevada-cash-woes

https://www.engadget.com/2017/09/11/mercedes-benz-electric-versions-2022/

http://www.businessinsider.com/leeco-jia-yueting-assets-frozen-amid-cash-crunch-2017-7

https://www.cnbc.com/2017/10/12/tesla-ceo-elon-musk-reveals-he-owns-two-gasoline-cars.html

http://www.hybridcars.com/june-2016-dashboard/

When I lived near Oakridge Mall back in 2008, I frequently visited Sears to buy their discounted mittens and sweaters, and Toys r us in Lansdowne for Christmas gifts. Fast-forward to 2017, it is heart-breaking to see Canadian retail brands that shaped my childhood file for bankruptcy. Why are these Canadian retail companies filing for bankruptcy in 2017? The root of the cause lies in the Accounting and Business Model Canvas of these companies.

Retail stores on street-sides and malls are known as Brick and Mortar shops. When comparing different retail brands, there are three things that they follow in delivering their value proposition. According to Michael Porter’s Competitive Strategy, they either focus on cost advantage, differentiation, or focus. Examining the model of Sears, it aims to have an advantage in cost, but loses out in this battle compared to its counterparts such as Walmart. Toys r us aims to differentiate by offering a wide variety of toys, but Amazon beats it in variety of toys and provide toys at a lower cost. No specific advantages in value proposition hinders Toys r us and Sears’ revenue stream, contributing to the bankruptcy of these brands.

Furthermore, accounting issues also contribute to the bankruptcy of these companies. Canadian companies follow the International Financial Reporting Standards (IFRS), while companies in the US follow Generally Accepted Accounting Principles. One flaw in the IFRS is that it allows overvaluing of company property, plant, and equipment based on managerial estimates. One example is management can value a company property at $100 million in the future, while it might be sold at only $50 million in the future. This flaw causes a façade in the financial forecast of the company due to overvaluation. Based on IFRS, Sears was a healthy company even with negative net income , but the bankrupt clearly shows their inherent accounting flaws.

What is the solution to the decline of these retail brands? The brands who utilizes strong value proposition of cost or differentiation, and the channel it offers to customers. It is curious to note that Oakridge Mall is now filled with high end retail brands, while near Lansdowne there are three dollar stores and expanding. Dollarama reports a 4-year growth in net income, more than 10% a year.  Nordstrom  focuses on differentiation like Toys r us, has 6 stores in Canada and still expanding. Nordstrom plans to open new stores that offers no merchandise, only online shopping. This new effective online shopping and distribution channels combined forms a new business model called Click and Mortar.

New business model with quality value proposition and good accounting is the future of retail stores, and is what Toys r us and Sears lacks at.

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References image:

https://securecdn.pymnts.com/wp-content/uploads/2016/11/Is-there-an-empty-store-crisis.jpg

References Sites:

http://www.investopedia.com/terms/b/brickandmortar.asp

http://www.vnseameo.org/ndbmai/CS.pdf

http://www.ifrs.org/issued-standards/list-of-standards/ias-16-property-plant-and-equipment/

https://amigobulls.com/stocks/SRSC/income-statement/annual

http://quotes.wsj.com/CA/DOL/financials/annual/income-statement

http://www.npr.org/sections/thetwo-way/2017/09/11/550119193/nordstrom-tries-out-a-new-store-that-doesn-t-stock-clothes

http://www.investopedia.com/terms/c/click_and_mortar.asp

I imagine myself racing against Usain Bolt in a 100-meter race after watching him win in the 2016 Rio Olympics. The sad news is, Usain Bolt will probably win 100% of the time. When I check the financial news describing the recent quote of Nasdaq, a similar race is happening in the stock market with millions of traders participating, with the majority losing their race getting their trade orders to the stock exchange when racing against the accounts of Big Bank traders. The magic behind this phenomenon is called High Frequency Trading (HFT), a concept that some trades get to the stock exchanges faster than majority of trades because of wiring the right route to the stock exchange servers. The proliferation of HFT is causing investors billions of dollars every year, and raises the ethical issues of unfairness and government intervention.

I hate it when during a classroom discussion, I finally write down an idea and is about to talk about it when a fellow peer peeks at my paper and blurts out the idea to the whole class. HTF method “electronic front-running”, parallels this situation, the Big Bank traders can see what stocks their clients want to buy, and rush in.

Why can’t the government stop these unethical practices that these Big bank traders are initiating? The answer no lies in dark pools, “private exchanges created by banks that did not have to report real time what trading activities took place within them”.

Referring to the class discussion, it is also hard to justify government intervention into the free market with only a niche group of people earning these profits.

To eradicate the unethical practices of HTF, Brad Katsuyama, a former RBC trader, created the Investor’s Exchange (IEX) that is both profitable and fair. He provides a platform for all traders to trade at equal speed, at a commission price of nine-one hundredth of a cent per share. Brad making money off the commission from IEX helps himself, but also the fairness of Wall Street; contributing to the idea “collectivist ends can be attained without collectivist means”.

Many big banks also start to use IEX. This is an example of these firms respecting the stakeholder theory. The stakeholder theory is the idea that the different groups affiliated with a business is important to the contribution of overall success of the business.  While utilising dark pools will bring profits to the industry, the blame it gets from the community in a financial crisis will far outweigh the benefits.

Statistics from IEX shows from January to July 2017, it has generated an average of $6.1 billion trades a day; proving fairness and good ethics can turn into profit.

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447

Sources:

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Lewis, M. (2014). The Wolf Hunters of Wall Street Web. Retrieved from

https://www.nytimes.com/2014/04/06/magazine/flash-boys-michael-lewis.html

The Economist Group Limited (2016). Speed bumps in the night. Retrieved from

https://www.economist.com/news/finance-and-economics/21701137-american-regulators-approve-controversial-new-stock-exchange-speed-bumps

Friedman M. (2007). The Social Responsibility of Business Is to Increase Its profits. In: Zimmerli W.C., Holzinger M., Richter K. (eds). Corporate Ethics and Corporate Governance (pp 173-178) Springer, Berlin, Heidelberg.

Pictures:

http://www.marketwatch.com/story/on-its-first-anniversary-as-a-stock-market-exchange-iex-draws-both-critics-and-praise-2017-09-05

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