What is a good environment for start-up businesses?

Countries and governments love innovation and invention, since innovation and invention can make the economies grow faster and generate more incomes and improve productivity and efficiency. Countries and governments love seeing more and more startups, because startups do not only introduce new business ideas, they also generate new innovation and invention and create more jobs for the economies. Many governments have introduced various policies for start-up businesses. What is the best that a government can do to create a friendly environment for startups?

Governments love start-up businesses, because they tend to be more energetic. Governments want to protect start-up businesses from hostile takeovers by the large companies, but do not want to protect startups too much, since governments want to keep the market competitive and the startups energetic and innovative. Governments want to let banks more willing to lend money to start-up businesses, but they are also worried pushing too hard will make banks have a large amount of bad debts on their balance sheets, which can potentially cause a financial instability for the entire economy. It seems that governments always want to protect start-up businesses to encourage their innovation and competitiveness; however, at the same time, governments also worry protecting start-up businesses too much that make start-up businesses lose their competitiveness and energy as well as innovation and invention.

Governments also try to find a balance in the attitudes towards start-up businesses. However, I think that instead of thinking about what can be done for start-up businesses, it is better to think how to reduce the market power from the giant companies which are real and direct threat to the growth of these start-up businesses.

Should Apple eliminate the leaks?

Tomorrow is Apple Special Event, which is probably the most important Apple’s event in a year since new iPhone models will be announced and iPhone is Apple’s biggest source of revenues. However, there are lots of leaks that report the possible iPhone models which will be announced tomorrow. People expect there will be four iPhone models, Apple Watch Series 4 and a new version of 12 inch iPad Pro announced tomorrow after reading all sorts of leak reports. A security analyst Ming-Chi Kuo is famous of his accurate predictions about Apple’s products. However, such leaks did not happen during Jobs’s period. Here comes a question that whether these leaks benefit or damage Apple.

On one hand, leaks can help Apple to gather more attention that leaks make people talk more about Apple’s products for a much longer period. This can improve Apple’s popularity and publicity. In addition, leaks can give Apple more feedback about its coming products, this gives Apple some chances to improve their products before Apple officially announces its products, although Apple does not necessarily do that. On the other hand, Apple may be able to create more publicity for its products; however, it will definitely reduce the publicity of its Special Event, especially when many of the previous leaks are proved to be true, since people expect nothing surprising will be announced during the Special Event. In addition, if Apple does not leak the information voluntarily, then it means Apple loses the control of its internal information and secrets. This is a huge problem if Apple wants to launch some game changing products, like iPhone in 2007; because Apple’s competitors can get the information about the game changing products through these leaks and design their similar products.

Overall, leaks do not always damage Apple but if Apple wants to be a game changer again, then leaks are a big problem to Apple.

Can Apple produce its products at home?

‘Designed by Apple in California Assembled in China’ is engraved on most Apple products. Design which is the most important part of a product’s production process is made in the USA; however, the majority of the parts is produced outside the USA. The US President Trump is asking Apple to produce its products at home. How likely is Trump’s proposal to be true?

Apple’s suppliers are all over the world and some are significantly large companies which support their countries’ economies. If Apple does not renew their contracts, not only these companies will be hurt and even face bankruptcy, also the economies which depend on these companies will be hurt and even face recession as well. Therefore, Trump’s proposal is a huge threat to the emerging markets, Apple’s 1 trillion dollar market value exceeds some emerging markets already. However, these countries which have some degree of dependence on Apple’s orders will strongly oppose Trump’s trade policy. In addion, Apple may not like this idea. The labour cost in the US is much higher than the labour costs in the emerging markets that if Apple changes to use American suppliers, its costs will increase dramatically. In addition, changing suppliers will affect production efficiency. The current suppliers have produced Apple’s parts for years, they are experienced suppliers who can produce more efficiently. Once Apple switches its suppliers, the production efficiency will decrease, this will affect Apple’s supply chain and cause a huge problem for Apple.

Therefore, Trump’s proposal is just a proposal or a threat, it won’t come trune.

Is Elon Musk hurting his company

Tesla’s share price slip today after the human resources director announced her leave from the company, following the leave of the company’s chief accountant officer. Some people suggest that Elon Musk is the core of his company’s problems because of his instability. Elon Musk is undoubtedly a genius with excellent ideas and brilliant imagination; however, he does not deal with other people with differences very well. He has been constantly attacking the investors who short Tesla’s shares, he attacks a British diver who helped rescue a Thailand boys’ football team and called Tesla’s miniature submarine a ‘PR stunt’ three times. Moreover, he even smoked marijuana during an online interview. We know from his previous interview with New York Times that he is using drugs; however, this is definitely something shocking to many people that a public and well-known company’s CEO uses drugs publicly, though it is legal in California. On the other hand, he went on an interview with YouTubers who love him and his company(ies) and got along with them very well. The YouTubers may be Tesla’s shareholders but they are not institutional investors; they may be influential on YouTube, but hardly influential in the financial market. In this way, Elon Musk is like Trump who likes to be surrounded by the people who love him and hates to be disagreed.

We should give the geniuses more tolerance and patience that Steve Jobs had not been a very good head of a company either in the beginning. However, Elon Musk’s instability has created a number of crises for Tesla, and even legal cases as well. For example, the recent privatisation tweets have made Tesla and himself be sued by several investment firms which will cost Tesla millions of dollars to settle these cases. These costs are unnecessary, and really distraction from the core of the company. The issue is not only about the argument about whether to be public or private, but also if Elon Musk controls himself as the market wants him to be. Elon Musk is not a common person, he is special; this is why some people love him and also why some people dislike or hate him. We cannot ask him to be a normal CEO, and Tesla’s value is not built on him as a normal CEO. It is Okay for him to be special to be a king in his company, to hang out with the people who love him; however, he should be more careful and speak less in public, just in case of avoiding some damaging effects.

The problem in the US economy

The US stock market is not performing very well and I am doubting if the longest bull market will continue its legend. In addition, US factory orders were reported to shrink by more than expected in July and the three consecutive months growth ended, according to Thomson Reuters survey. People blame the US current trade policy and the trade tension with other countries. In addition, although the Trump administration has issued several tax cuts for individuals as well as cooperation, people expect the economic growth of the third quarter is going to decline and the stimulation generated by the tax cuts will not last too long. The fear of the weakening US economy definitely affected the US stock market and has dragged down the market performance.

Besides the trade tension, there are several problems facing the US economy. The unstable political environment is a big negative factor. An unstable political environment means that the companies in the US are facing more uncertainty about the effects coming from the government, such as the interest rate changes, the tax rate changes and regulation changes. In addition, if the US president is impeached, then lots of attention and work will focus on the President impeachment rather than other issues, such as trade negotiation, economic growth and other economy-related topics. When less work is done on boosting and/or stabilizing the economic performance. the policies on the economic performance will not be made on time. Moreover, the economy of the rest of the world seems weakening. The US economy is not standing by itself, its companies and individuals are doing businesses with the individuals and cooperation from other countries. The factory orders decline shows the weak demand from other countries, and the weak demand is caused by other countries’ weak economic performances, which is likely to weaken the US economy as well.

To conclude, the US economy may be in a very good shape, its hidden danger is real and making influence on the economy right now. Investors and people need to be more aware of the increasing uncertainty and the downside risk of the US financial market as well as the US economy.

Is it wise to make money from sports?

It is a very exciting era that every day there is big news about politics and economics around the world. However, I want to talk something more relaxing and less serious, which is sports. CVC Capital Partner is attempting to acquire Premiership Rugby with a £275m. CVC Capital Partners is a private equity firm and this is not the first time for this firm to enter the sports industry that CVC Capital Partners owned a Spanish sports management company and Formula One previously. Therefore, we can see this private equity firm has experience in the sports industry and seems to be good at making money from the sports industry. Then how easy is it to earn money from sports?

When people look at Ronaldo and Messi and many other famous sports, people believe that it is easy to make lots of money from playing sports. However, people only know those successful sportsmen, there have been millions of unsuccessful sportsmen and those who put efforts but have failed to be professional sportsmen. Therefore, the expected return from being a sportsman is very low, so it is not worth of investing in being a professional sportsman.

How about actually investing in sports related assets including companies’ stocks? Sports is entertaining but not necessarily good for businesses or investment. Sports businesses rely on sports supporters who do not pay for enjoying their sports as frequently as surfing on the Internet. They are not stable income sources, as their consumption decide is made based on various factors, such as their incomes and their luxury choices. Sports businesses rely on sponsorship and advertisement. However, these income sources are dependent of sports achievement; meanwhile, incomes and achievement are correlated with each other Good results need high income incentives and good sponsorship goes to sports firms with good results since only good sports firms have more opportunities to play in front of large crowds.

What is the most important in the stock market?

Today Amazon joined Apple to be the second $1tn dollar company. Meanwhile, the electric car maker, Tesla, suffered a 4% drop in its share price, following Goldman Sachs maintain Tesla’s Sell rating at $210. Amazon and Tesla actually have some similarity. When Amazon first appeared in the stock market and showed its increasing debt level, investors were not very confident in investing in this stock, even now Amazon is still one the most shorted companies around the world. Tesla is still at its growing stage, and its market value is very high comparing with the market values of the traditional players in the auto industry; therefore, it is not surprising to see so many investors are shorting Tesla’s shares.The market does react to stories, when Elon Musk or any other company leader is telling a good story, the market will react to it and push the company’s share price higher; and vice versa. In some ways, investors could have more imagination than these companies’ leaders, even including the legendary Steve Jobs. When investors are making imagination to make expectations about a company, they can go very far and build a super glamorous picture that even the company’s leader is not capable of imagining; once this occurs, an overestimation about the company’s value appears. However, on the other hand, if investors’ imaginations cannot match the company’s leader’s imagination and capability, then they will underestimate the company’s value. Therefore, valuation is like investors receive a story from a company and use their own imagination to create more in this story then use the amended story as their investment guideline.

This may teach companies about how to be successful in the stock market. There have been some stories about some small cap companies are operating fantastic businesses and making good revenues but their share prices hardly increase. This is because no one pays attention to their stories so their companies’ values are not recognised by the market. Therefore, for a company to succeed in the stock market, the company has to draw people’s attention and tell good stories and make people believe their good stores will be continuously delivered (not only by making good revenues and paying good dividends, but also delivers the story about a “bright future”).