Many people invest their money in the stock market, but only a small percentage gains experience necessary in order to become a truly seasoned investor. This is because a large percentage of new investors don’t stay long enough in the stock market before they drop out.

Selling And Buying

We have gathered the most common tips that the experts suggest that a  new investor should learn before entering the big stock exchange game:

1. Just because you have earned anything on the stock market doesn’t mean you’re an expert. Enjoy your earnings but always keep in mind that the stock exchange is more complex than any single person can understand.
2. Options have a small life span. Always check closely for the expiration date and mark potential selling points.
3. Sometimes the party ends. As we saw in October 2008, the market can wipe out years of profit in a matter of months or even weeks. Understanding that the market has reached its peak is what differentiates the biggest winners and the worst-off losers. When you feel that the market reached its peak, you should sell.
4. Daring might reward you in remarkable profits. A sophisticated and daring investor can achieve what might seem impossible to all other average investors. Keep in mind, though, that rushing into a complicated situation without a real understanding is not sophisticated it is just plain stupid.
5. Sometimes, no matter how much you planned and thought about it, you lose money more and more. Knowing to cut your loses is an important attribute in an investor that expect to survive in the rough stock market. Even the great Warren Buffet lost from time to time, but the only difference is that he can afford losing a couple of million dollars and you can’t.
6. Every time that you lose money on the stock exchange, you gain a unique chance to learn from your mistakes. To waste this opportunity by not learning from your mistake will only assure that you will make the same mistake again.

Ailon.

The CEO Game

Creating Your Own Luck

Why do we need Luck?
Two people are applying for the same position. Both have about the same GPA from the same university. Both have a good background and experience. Only one will get the job–do you think that the interviewer will know which one is better skilled for the job? He`ll probably base his decision on factors that have nothing to do with the candidate’s skills. It might be gender, age, skin color, the ethnicity etc. You`ll never know what the final decision was based on.
People will tell you that you don’t need luck. They will also tell you that the only thing you need is ambition and hard work. I`ll give you all the time in the world, but you still won`t be able to convince me that the last person who won the lottery`s jackpot had high ambition and worked hard for that. I`m not trying to tell you to play the lottery now, but this extreme example can show us that luck is a factor in life that should be taken under consideration and for sure you want it to be on your side.
Turn your luck into calculated risk:
The lottery is not the place you want to put effort to increase your odds. This is because there is nothing legal you can actually do in order to change your odds of winning – every ticket you buy has the same odds of winning, but if you buy all of the possible tickets you will end up losing money – not a great deal. You need to increase the odds in scenarios which your actions can actually make this difference.
If you own a startup, and your main goal is to sell it to a big company, you`ll need to go out and meet with people. Make sure everybody in the industry knows you. The more people that know you, the bigger your chances are to make the big exit. There might be a chance of 1:1,000,000,000 (this number has no statistical evidence) that a stranger who has no idea who you are or what you`re doing will come up to you and ask you “Hello, is there a chance that you`re working on this startup and you want to sell it?” But if more people know what you are doing, the odds increase magnificently. Focus your efforts in the right directions and in the right places in order to maximize your chances. In this example you control your luck by letting people know about your business.

In a different example, I want to invest money in the stock market. There is a constant risk in the market; we never know what`s going to happen tomorrow, things changes constantly and rapidly. New information sends the stocks up and down without prior notice. If you`ll buy one stock, you`re relying mostly on luck. We have seen good stocks go down in good market and we have seen bad stocks flying in a bad market. Nothing we can do about it. If we want to control the luck and turn it into a calculated risk, we need to have a wide and diverse portfolio.
The statistical error:
I personally look at good luck and bad luck as statistical errors. If we`ll look at the normal distribution, I believe that if something occurs on the right side of the distribution that’s a result of good luck, if something occurs on the left side that’s a result of bad luck. The middle is where we expect the result under normal circumstances. At this point, we want to put our efforts in moving to the right side of the scale, creating, by doing so, more “good luck”.

Assaf Arie.

The CEO Game.

You do something that goes exactly how you planned, and even better. You buy a stock that rises 20% the day after you bought it. You sell your startup and make a couple million dollars before you even have the final product. What does it mean? Does that make you successful in what you do? Does it make you invulnerable?

In business, as in real life, every step we take is affected by factors we have no control over and that influence each other in a way we can`t always understand. A famous theory is “the butterfly effect”, which states: “a butterfly`s wing movement on one side of the world can cause a tornado on the other side”. If we`ll try to analyze this theory, we will come to a conclusion that in some way we can reach full control of our actions – only we have full knowledge of everything that happens around us. But in real life, there are a lot of things that happen without us being aware. Those little things can affect our actions without us being able to understand their impact.

How can we overcome this?

Planning Your Next Gamble

At first, before we even do anything, we need to have a plan. It doesn’t matter if we are running a business or investing in stocks, we need to have a plan that considers most of the factors we can think of and the way they may affect our actions.

During our process, we need to act as we planned. If not, we need to remember to write down the changes we made and the reasons for those changes. If we have no actual reason to make the change, we shouldn’t make it.

After the process we need to look at the results – We have three conclusions:

1. As we expected.
2. Better than we expected.
3. Worse than we expected.

Regardless of the conclusion, we need to analyze the results and figure out whether it’s a result of factors we took under consideration or a result of new factors which popped up during the process.

Why is it important to know what affected the results?

The results of your actions will motivate you to your next step. If this motivation is based on false information it can cause a catastrophe. For example: you buy a stock and at the next day or week it climb 20% – now you think you are a great investor which can predict the market way better and faster than any other investor, so you make another trade, and another one, keeping yourself uncovered whiletaking more risk than you could afford, which leads you to catastrophe as soon as the market turns on you. In the good case you will lose some savings you had for a rainy day while at the worse case you end up losing your house or car payments and start taking loans to cover your loses (and even lose those loans).

On other hand, you might have done everything right, but some rare combination of coincidence made you end up with results worse than you expected, which will make you give up trying in the future, even though there was nothing you could have done better.

How can you control the results?

By creating a good plan and analyzing the results each time, you can build and improve your actions from time to time. Keep in your state of mind that there is an option that everything you do is affected from pure luck and things can go wrong at any point. What`s amazing in random-action is that sometimes it doesn`t seem random at all.

If you understand the risk and put it under control, with a good and solid plan you should do ok in the long run. Never get too excited when you succeed, never get too down when you fail. Do your best to understand what have happened and what the things aer you need to change for the next time. Also keep in mind that there are things you will never be able to predict.

Assaf Arie

The CEO Game.

Well, how does it work?

Using the virtual stock market, the business simulation allows players to predict the success of the video game/console or what reviews a video game might get. The players create these predictions by using a global stock market in which they can buy or sell stocks of the upcoming video game. Using those stocks the game tries to forecast the how one video game might succeed or fail. The trade inside the game consists of three types of contracts: Stocks, NPD Futures (Assuming Sales) and Metacritic Futures (Assuming critic reviews).

Who uses this game?

The simExchange business simulation has been noted to be used by real-world investors who seek data that will assist in analyzing the future of the market. Also the data received from this business simulation was noted to be used by Wall Street analysts such as Michal Pachter.

The idea behind the CEO game is based on the same concept: Allowing the wisdom of the crowds to predict the success or failures of management process or products. This is way using the CEO game as business simulation might assist in improving your business management skills.

Console Sales Prediction

Ailon.

The CEO Game.

G20 - Pittsburg Summit 2009

Now it is happening, all eyes are on Pittsburgh, Pennsylvania the host of the two-day long, tens of millions of dollars staging costs ,G-20 Summit; With President Obama chairing the event and welcoming the guests, nothing less is expected than a mega media fiasco. Leaders and important personal will come a-knocking from countries all around the world that constitute together eighty five percent of the world’s economy. At the summit, all aspects of the progress made since the Washington and London Summits will be reviewed and the leaders will discuss more actions regarding sustaining the ongoing recovery from the global economic and financial crisis. This article looks at what should we expect.

The central debate is going to revolve around reforming the way the world economy is governed and the obvious follow-up question: who should run the global economy. Furthermore, another main issue to be discussed by the G-20 members is placing limits on bankers’ bonuses worldwide. But what is the G-20 actually? The G-20, The Group of Twenty, to give it its full title, was formally set up in 1999 as a result of the Asian financial crisis, in order to bring together major finance ministers and bankers from industrialized and developing economies to discuss the hot issues in the world economy. Among the desirable members you can find: Australia, China, France, Germany, India, Saudi Arabia ,Russia, the United Kingdom, the USA as well as the European Union itself and more, and they are usually joined by representatives from widely renowned institutions such as the World Bank, World Trade Organization and the International Monetary Fund.

Last year, the frightening ongoing recession pushed G-20 officials to hold the first summit that had primary heads of state as guests in the Washington summit, when the leaders agreed on an action plan that included issues such as promoting integrity in the markets, strengthening worldwide cooperation, reforming international economic institutions and more. The theme in the April 2009 summit in London was similar: dealing with the crisis. In London the leaders continued to work on the previously made resolutions and agreed upon six pledges centering on restoring confidence, repairing the financial system, restoring financial regulation, preventing future crises by building up international institutions, promoting global trade and building a stable, green recovery. Altogether, the counterparts pledged they would spend an astronomical five trillion dollars on efforts to salvage their economies and another trillion dollars to help out struggling nations. In London the leaders also requested another convention to be held before the end of the year; Obama enthusiastically agreed to entertain and chose Pittsburgh for the setting.

Thus, why Pittsburgh? Officials like to say the city of bridges was chosen because of the remarkable transformation it made from a grimy old steel industry to high-tech innovation including green and clean development over the years, a positive change that Obama surely wants to showcase. “Pittsburgh stands as a bold example of how to create new jobs and industries while transitioning to a 21st century economy” he has said. Pittsburgh is a perfect spot to show off local green achievements made this year such as the revival of “East Penn Manufacturing”, the city’s medical laboratories, and transformed industrial plants that went hybrid. Yet the proximity to New York is kind of comfy since many of the attendees must attend the UN General Assembly as well and the fact that, well let’s face it, Pittsburgh is important for the second cadence also must be taken into account. A great deal of thought was also made in selecting the convention center itself, the David L. Lawrence center, the world’s first green convention center.

Another question to be asked is did they do what they promised? At this time, the picture isn’t clear enough to say, but much of the dough promised to struggling countries has been transferred to them. However, there still remains a lot of work ahead with complex issues like who is going to be running the global economy and regulation of banks and hedge funds as mentioned before.

More importantly, what should we expect from the Pittsburgh Summit? Since many prime economies are slowly recovering from the recession, there is no need (nor could it be fulfilled) for another round of big spending pledges, instead the summit will concentrate on the ones its members already committed to. The center stage will focus on regulation and reform, with the topic of the day being dealing with banker’s bonuses; there is a good chance to see an agreement on that.  Another hot item, is making sure that all countries are on the same page and don’t mess around with staggering companies. Will India and China be presented better in the International Monetary Fund? The IMF, The UN’s agency that facilitates international commerce and aids developing countries, will also be under discussion. Obama also claimed that we must stay clear of the asset bubbles by setting up a path for “sustainable growth while steering clear of the imbalances of the past”. Hence that’s going to be a key part of the agenda as well. Although the recovery is in progress, the fact that many people are still unemployed, should and probably will be a noticeable subject.

In conclusion, as financial crises fear no international boundaries, these meetings offer an opportunity to discuss economic problems and maybe even agree on the appropriate actions that need to be taken in response. As the conductors of the world’s largest economies, these leaders have a responsibility to work together in order to insure this kind of crisis won’t happen again. “The Pittsburgh Summit is an important opportunity to continue the hard work that we have done in confronting the global economic crisis, and renewing prosperity for our people”, said Obama on the eve of the summit’s jumpstart. Prior to Obama’s election, critics said that after the campaign ends, Obama will be tested by major-hard-to-cope-with events and by his reactions to them. Now it’s up to him and his administration to deal with the crisis in order to prove themselves. Now is the time to see whether the Pittsburgh Summit will be remembered as an important milestone or a complete disaster in terms of financial pace making and use of the tax payer’s cash. Will it be a prestigious achievement, one that may prove that Obama’s administration is better than his predecessor’s Or will the summit be just another brick in the wall of history?

Omer Shachnai

The CEO Game.

In part 2, I talked about the definition through the eyes of an investor. In this article I go through some key definitions for traders. As I mentioned in previous articles, there are big differences between an investor and a trader. In the last article I told you that the important thing for an investor is the seek for value (I gave you Warren Buffet as an example for the value method); an investor is constantly searching for assets which trade for undervalue, discounted prices. A good trader does not care for the “real” value of the asset (it can be a stock, or any other tradable asset), the only things he cares is whether he will be able to sell it tomorrow, or at any other future time, in a higher price.

Knowing When To Trade

What makes you a good trader?

A trader looks for short-to-medium term trades, meaning that a trader looks for quick movements in the market. In order to become a good trade,r you`ve got to be cold-blooded and follow specific rules you set to yourself. You also need to understand the movements, trends and the psychology behind the market and the other investors or costumers. You need to remember that trading is all about buying cheap and selling expensive. As a trader, you don’t care about what it is that you are buying, the only thing you care about is to sell it in a higher price than you paid. It can be a stock, land, house, commodity or any other merchandise that have a market you can buy and sell at any time. Liquidity is very important for traders; the last thing you want to happen is to be stuck with an asset without the ability to sell.

The three questions that need to be answered are the same from part one and two of the article:

1. What are you buying?
2. Why are you buying?
3. When are you selling?

What are you buying? This time, the answer is a little different from part one and two. You want to buy an asset that is tradable at any time. As I wrote in paragraph two, liquidity is one of the most important factors for traders; you cannot be a trader in an illiquid market (unless you have very high margins to cover the risk you are taking).

What is an investor?
An investor is someone who looks for value, he cares about the company, he needs to know what the company does, he needs to understand the main business of the company and how the market is changing, he also needs to know how changes in the global market effects this company. An investor needs to have some kind of valuation to the price of the company, according to the business it is operating in (different businesses demands different valuations theories). A good example, or maybe even the best example of an investor, is Warren Buffett; you can read more about him at Wikipedia.

Warren Buffett - Best Example of an Investor

The three questions that needed to be answered are the same from part one of this article:
1. What are you buying?
2. Why are you buying?
3. When are you selling?

What are you buying? – The answer to this is the same as specified in part one

Why are you buying? – As we said in part one, this is where the hard work starts. In an investor’s view, he needs to find value in the stock, so what does it mean? It means that he needs to do a valuation to the company and compare it to the market value; the difference between different companies will be the value. When your valuation is higher than the market value you say that there is an upside in the stock, when your valuation is lower you say there is a downside in the stock. After you find a stock with an upside that you think is good enough for you and you decide to buy, it`s not enough to buy and wait till it reaches your target, you need, every reasonable period of time, which changes from business to business, to update your target price according to the changes in the businesses market. This is not a simple task; you need to have a lot of knowledge and information about your company and its market.

When are you selling? – Here you have two choices:
1. Having a stop loss
2. Not having a stop loss
Before I will continue I will define the meaning of stop loss for you – a stop loss, as you can understand from the name, is a point you stop your loss automatically. For example, if you buy a stock for 10$ a share, and the maximum loss you are willing to absorb is 15%, then your stop loss will be placed at 8.5$, means that if the stock drop to 8.5$ or less, it`s automatically being sold.
I think that if you are considering yourself as an investor, and you know and understand what is that you are doing, you don’t need to have a stop loss, but you need to remember that investing can take couple of hours to study, but life time to master. Also, investors are long term players; you can not consider yourself an investor if you are a short term player, because economic theories work only at the long term.
A good use of stop loss is when changes appear in the market or the company after the stock price had slumped. The last crisis we were going thru is a good example of that, but even then – a good investor, that is looking at the market as one big piece, could see, and needed to see, the distortion in the market prices, and could expect the globally slump.
Regardless to having a stop loss or not, you need to constantly analyze the company you are investing in, the market of this company and the global market. Always remember that in the real economy it’s all about mutual influences (I will talk more about it in future articles).

So, are you an investor?
Like everything else in life, it’s all starting with a decision. Not everyone can be an investor, remember that if you put money in a company, it doesn’t necessarily make you an investor – it only makes you to someone who invest money in the company or bought their stock, nothing more than that.
In the 3rd part of the article, I will discuss a little bit about traders and trading.

Assaf Arie

The CEO Game.

Ailon.

The CEO Game.

Learning From The Crisis

The root of all evil, can be traced back to October 2007 roughly, with a market slowly declining from a record height, influenced by problems associated with way-to-many delinquencies and foreclosures(forced and caused by mortgage borrowers). Then came the near collapse of titanic companies including the American International Group, Fannie Mae and Freddie Mac. Chapter 11: Next to follow, was the horrific bankruptcy of the Lehman Brothers, rattling an already stressed market and leading panicked investors to invest in U.S. Treasury Bonds, assuming it a safe haven. Bonds Buzz, Piggy Bank frenzy call it what you will. This mega chain of events (any many more not mentioned) totaled to 30$ trillion losses.

Nevertheless, the last few months represent one the biggest bull markets in history, with increasing investor confidence and an overall expectation to gain future profits. We can see examples of this in majorcomebacks in the U.S. stock exchange as indices such as the aforementioned Dow and the NASDAQ Composite (all common stocks listed on the market) that have risen by 45% and 60% accordingly. Sometimes good does come out of bad, fortunately for some investors. One can say that as amazing the market’s plunge is its rise, beating chilling predictions of the end of all there is.

Defying all odds, the market has eventually sustained the impact and some say there are signs that the worst is behind us and a recovery is well under way, but tell that to the ones who lost their jobs, businesses, and for the lots who will never those retirement dreams. However, the question which still remains is What have we learned?

• Diversification isn’t always the wise play, sometimes spreading money around doesn’t guarantee more safety. There is no need to abandon this risk management strategy, but to acknowledge its boundaries.
• Markets are symbiotic, when one market begins to fall other markets are influenced. When investors try pulling any money they can salvage from foreign stocks, even classical havens are affected as a result and can experience a bumpy ride. Therefore, we must understand every choice we make, taking time to realize all its aspects as even the sharpest knife in the drawer can become dull when experiencing with confusing investments. With the help of Serious Games, one may be trained to avert and stay clear of some risky investments.
• “Liquidate” your portfolio, private Investors must understand not only the ups, but the downs of their holdings. Make sure, your portfolio is liquid to the certain amount you need it to be, else it will liquidate you. Keep in mind, a “nice” portion of the mistakes made were caused by investors who simply thought their investments were more liquid, and they can exit any time they want.
• The big brother’s contribution. Sometimes the government does work, go figure. The combative measures taken by the public servants may have helped to avoid a much bigger crisis.
• The worst case scenario. Don’t be blinded by shiny glitter of safe-havens. Don’t rush into, “promised” profits being confident you can’t lose, investors who got caught in real estate adventures thinking they will never drop in national extent needless to say a global one, eventually ended up with nothing when the bubble popped.
• No one should be that big. We simply can’t allow having more of those too big to fail companies, meaning: companies who are so big that incase they fall their collapse will cause an economic vacuum. Firms like the Lehman Brothers and Fannie Mae and Freddie Mac had been criticized for years for growing too big and carrying to many debts around. Watch out for current growing megalomaniacs such as Goldman Sachs group and Morgan Chase.

What does that leave us with? Yet another question of whether and how hard inflation and other trouble makers are going to hit. That’s why it is so important to learn from the ongoing crisis and these conclusions, for bailing in time from future made mistakes. Furthermore, learning along with the CEO game can help one analyze the complexity and outcomes of his investments, watching out for issues revolving market interlocks (symbiotic relations), worst case scenarios and liquidity as discussed above. Nevertheless, keep in mind that not all is blue; like I have already pointed out in this article sometimes (some say always) good comes out of bad, so look out for opportunities as they may rise along the way.

Omer Shachnai

The CEO Game.

For start we have to understand what the hell an interest rate is.

Interest Rate.

The interest rate is a tool in the hands of the main bank (in most countries). This tool defines the rate of interest one will receive from the main bank if one invests in the main bank. This tool helps the main bank to control how much money will be in the banks and how much money will circulate in the market for the use of investment or consumption. Since the money is invested in the main bank, which is in the end a government agency, than the chances for receiving the promised interest are considered “safe”. Using this tool the main bank can control the circulation of investments since high interest rates offers investors a “safe” investment and low interest rate encourage them to invest in the market. The reason I use quotation marks around the word safe is because the main banks interest rate are a safest since a country can’t go bankrupt because it can always print more money.

So the next common question is why doesn’t the government always print more money? Well the answer for that question is quite simple and it is in one word “inflation”. Inflation means that the value of the local currency will be weakened comparing to other currencies or goods.

After we understood the definition of interest rates we can now start to grasp the influence of interest rates on every aspect of our modern business world. Most of the companies in the modern world invest their money in different kinds of investments (stocks, bonds, currencies and other goods) and since every investment has its own risk, than companies always find themselves jumping from one type of investment to the other.

In the CEO Game as the CEO you will have to lead your company in the financial world. Knowing where to invest your company’s money can be difference between being the local burger place or the next business tycoon. Inside the CEO game we implemented many of the common financial tools to allow you to act in the closest business simulation to reality as possible.

Omri.

The CEO Game.