Friday, 25 October 2013

A quick post...

UK GDP grew by 0.8% in Q2 according to data released by the Office of National Statistics today. The services industry grew by 0.7% in Q2, and manufacturing 0.8%. This is pretty good for our current situation, and fits with other recent positive economic data. Royal Mail shares are around 550p today, over £1 more than the price I paid for mine during conditional trading. Anyway, told you it would be a quick post ... and happy half term to anyone else who's got next week off like me!

Tuesday, 22 October 2013

Alibaba IPO

So this post will affect my share trading and Amazon business interests rolled into one. Alibaba's rumoured IPO. For those of you who don't know, Alibaba is a website based in China where you can order goods directly from the manufacturers. I use it sometimes when buying stock for my business. Anyway, Alibaba is supposed to triple its volume of sales and overtake Walmart as world no.1 by 2016. It's predicted that the IPO will sell shares worth $10-15 billion, valuing the whole company at about $100 billion!!!! That's a huge valuation, but it's backed up by last years growing profits of over $1 billion. Apparently, sometime after Twitter's IPO, billionaire Jack Ma, will announce that Alibaba will float on the NYSE. It's eventual performance though, will depend massively on the developed world's demand for Chinese made goods, which may be slipping. The Chinese government have increased wages significantly more than inflation gradually over the past decade, and it's predicted that by 2015 it will be actually more expensive for US manufacturers to outsource to China, when you factor in shipping etc. These wage rises could be a massive blow for Alibaba, who rely on it being cheaper for firms to buy in from abroad than to build at home. Anyway, the whole thing isn't even official yet, so maybe I'm getting ahead of myself.

Friday, 18 October 2013

Choccie chop - the price of your chocolate fix

Here's an issue close to a lot of us. Chocolate. To be specific, the price of it. The cost of a 100g chocolate bar has risen 28% in the last year, even though cocoa powder and white sugar prices have dropped massively. Why? About a quarter of every bar is made from cocoa butter. Bad weather and social tensions in the Ivory Coast and Ghana, which combined produce just under half of the world's cocoa beans, points towards a bad harvest this year. On top of that rising demand from China, South America and Russia and pushing up demand. Europeans still eat the most chocolate though. The top 5 (Ireland, Germany, Belgium, Switzerland & the UK), eat on average 11.7kg of it per year (1.7 stone to us Brits, 24.7 lb to you American readers). Surprisingly, well surprising to me anyway, Americans only eat about half of that on average. Anyway, with less being invested in cocoa farms and more being demanded every year, it looks like the cost of producing a chocolate bar could increase massively in the next few years. According to CNBC, we may have a shortage on our hands within the decade.

This will have a big impact on the big producers. Here are the publicly traded top 5 companies 

Mars Inc. is no.1, but apparently privately owned. 
  • MDLZ   $15.5m sales    no.2
  • GRBMF   $14.1m sales     no.3
  • NSRGF (Nestle)      $12.8m sales   no.4
  • 2269:JP    (Meiji)     $12.4m sales   no.5
  • HSY     (Hershey)    $6.4m  sales    no.6
These companies will have to raise price and risk losing sales; keep prices the same and cut profit per bar or fill bars with cheaper ingredients like palm oil, veg fat, nuts and raisins. Doesn't sound good to me!

Wednesday, 16 October 2013

Christmas Selling in Toys and Games on ... the deadline looms closer

If you're an Amazon seller like me, you'll definitely recognise this post's title. Since early September we've been receiving these emails warning us that if we don't sell our minimum quota (25 items for most) by the end of this month. I wrote a post about 1 month ago about using book sales to boost your numbers, but if you haven't had chance to stock up on cheap books, and it looks like you might miss the requirements, you can use a strategy that led to me developing my current book one. It's not pretty, but it will raise your sales numbers. In another earlier post I wrote about creating your own gap in the market by buying out competition. This works in the same way but is less glamorous and could actually lose you some money in the immediate short term. Sounds crazy? The way I see it is if you don't take the small hit (mine was £26 when I did this in 2011), you miss out on the 2 golden months for toy sales. About £10.13bn was spent on toys in Nov/Dec last year, more that 60% of annual toy sales. You'd be crazy to miss out on your share of that for £26. Anyway, the technique is very simple. Go to Amazon's bestselling books page and buy however many books you need to make up your sales gap from any of the books that've been selling well for a while (at least 10 days). When they arrive, relist them straight away on Amazon, undercutting the lowest price by about 10p.  Obviously the more popular the book, the quicker it'll resell. I tested this out for you guys and bought 5 copies of The Fault in Our Stars , all of them sold within 4 hours of me relisting them. An easy way to work out the rough loss per book is to just take the postage cost as your loss value. Like I said, see this as paying for your masive Christmas profits. Anyway, hope this helps anyone who thinks they'll miss their sales minimum.

Sunday, 13 October 2013

High volatility this week ... or another financial crash.

We're only 5 days away from the US government defaulting on its debt. If that happens, everyone will have something to worry about. But let's just assume (and hope!) that the US senate will sort it out somehow, however incompetent they may seem currently. Reports say that the Republicans are slightly more willing to negotiate on reopening government than Obama, but I wouldn't worry, I'm sure Obama would prefer to lose face surrendering his "Obamacare" plans to the Republicans than be remembered as as the 1st black president ... and also the man to plunge the world back into crisis just as it was showing signs of recovering.
Whatever happens, we can expect higher volatility while more cautious investors dump more vulnerable stock and plough money into defensive shares. At the same time, optimistic investors will be trying to snap up the subsequent bargains and volume. I expect almost everything will be increasingly more volatile the closer we get to "default day" as big buyers of US debt (China, Japan etc.) will lose confidence in the states' political system, even if it is resolved, suggesting lower future investment. Retail shares in particular would suffer so look out for bargains (or chances to get out, depending how steely your nerves are), this coming week.

Friday, 11 October 2013

A cuppa look at Royal Mail

So, before breakfast I wrote a short post about Royal Mail before conditional trading began this morning. Sorry if it sounded a bit rushed towards the end, I realised I needed to log in to my trading account so I could buy as early as possible. I managed to secure £215 worth at 437p. (I always use "At Best" and put in a value rather than number of shares). Anyway, I've got my after school cuppa and a bit of cake, and I've decided to write a post for you guys instead of doing my Additional Maths homework on calculus. 
So, Royal Mail (RMG) opened this morning at 420p for conditional trading (Conditional trading happens before a flotation on the stock exchange has officially taken place. It carries additional risk, because in the unlikely event that a flotation does not subsequently complete, investors who have taken part would be responsible for unwinding any conditional trades. - Royal Mail Group website). At the time of writing, shares are at 447.1p. Basically, they've rocketed. Today, the big funds that were allocated big stakes (10 big funds were allocated about 50% of the shares) will mostly have been trying to increase their stakes, while many of the smaller investors who got £749.10 of shares for 330p each will have sold their stakes for big profits, about £250 profit each (I expect I would've sold if I'd had £750 lying around to invest on Tuesday). Everyone's pretty happy.
I'm planning to hold mine for a while though, maybe a week, maybe a month or two (this is obviously the "wrong" strategy, but it makes sense in my head) Here's my logic. Today, and for most of next week and a bit of the week after, the little guys will be cashing in. Next Tuesday, Royal Mail employees will also be able to sell theirs (they were each given about £2000 worth of shares to try to win them over), so big volume trading. From Tuesday people will also be able to buy the shares for their ISA, so that'll push up demand a bit too. 
In about a fortnight, I expect the majority of postmen will have sold their holdings. Many will have accepted the shares (basically free money!) but won't have any interest in longer-term investment so will sell up, preferring the cash instead. Fair enough.
So, after that, the volume of shares on offer will drop significantly. The posties will have sold up to the 10% of the company that's been given to them, and a large amount of their shares (which they can sell on Tuesday), will be bought by the keen ISA buyers (who can buy from Tuesday). 
That just leaves mainly funds and people who didn't get their requested allocation (basically retail investors who asked for over £10,000 & got nothing) wanting to buy. When the posties and short term retail investors have sold their allocated shares for a hefty profit in the next fortnight, there will be a much smaller volume of shares on offer so, by law of supply and demand, share price will rise as the funds (only 1 UK fund is currently a top 10 stakeholder) bid higher for the shares, leading to a price rise until early to mid-December. So I'll hold mine until then.

That's my theory anyway ...    I'd welcome any thoughts, even complete criticism. Anyway, I'd best go and do my calculus homework.

Thursday, 10 October 2013

Royal Mail Goes on Sale!

In just under 1 hour Royal Mail shares will be able to be bought and sold on the London Stock Exchange by professional traders in conditional trading to establish a new price and check for any problems before the formal listing next Tuesday. The public can also buy shares today, but can't put them in accounts such as an ISA until Tuesday. 
The IPO was about 7 times oversubscribed, leading to theoretically a big jump in share price today and the next few days. Because it was so oversubscribed, it's been more complex on deciding how to allocate the shares. Smaller investors who applied for up to £10,000 worth will receive just £749.10 worth, which is actually less than the original minimal application value of £750. The big investors who applied for more than £10,000 will get ... nothing. So they'll have to buy on the secondary market if they still want them, again implying a rocketing early price.
This morning, the shares will open at 420p. Currently, the shares are already 412p on the grey market (trading futures etc.) so, we'll just have to see what the physical shares are at by the time I get back from school, when I'll write more on Royal Mail.

BBC's Royal Mail Page and Twitter Feed

Tuesday, 1 October 2013

Postage options for online businesses

As I've grown my Amazon business, postage costs have become a big part of my running costs. Until this year, I'd only ever used Royal Mail by dropping off parcels at my local post office. I still do this for most of my parcels but when Royal Mail upped their prices and I heard about the IPO, I decided to look around. Now, anyone who's been to where I live in Sedbergh, England (I expect that's none of you) will know that it didn't take me long to look. The Post Office is the only place I can obviously send parcels. I checked out other couriers (TNT, MyHermes etc.), for the size of parcel I generally send, they're still more expensive (although this might be different if I lived in a city??). So anyway, I did find a flyer for Collect+ at Sedbergh Spar. If you do the maths, they work out cheaper sometimes, so if you haven't tried them, they're at loads of corner shops and all Spar shops. If though, you're still stuck with Royal Mail, I found that you can sign up for Drop & Go, which discounts some parcel types. It's a pain to register, you need ID and proof of residence (I'm 15 so I used my passport and a bank statement) but I generally save about £1 per parcel, so it's really worth doing. Anyway, I didn't feel up to commenting on the US government shutdowns today, so I thought I'd post this instead.

Logox2 Royal Mail Logo