HBM370 E-commerce Strategy
Research topic: Virtual Investment
Prepared for:
Mr. Rodney Lim
Prepared by:
Jee Kar Jung 4200519
Alvin Foo 4196406
Executive Summary
The purpose of this report is to highlight the revolution of investment from traditional method to online investment. Firstly, we briefly go through the situation of 1990’s bubble burst that influences people behaviour in buying stock. Due to wrong perception of e-commerce and invest a lot of money without any knowledge have caused this bubble burst to happen. Besides, people perceive the value of investment as a form of gambling. There are a lot of people suffer huge amount of loses.
In addition, we identified several of virtual investment such as GCI Financial, Saxo Bank and etc. These are a few of example that initially build up the trend of online investing. There are other platforms for students to participate for the investment challenge to gain better knowledge or techniques of investing such as OSK Investment Challenge. Saxo bank and others do provide platform for public to have both live and demo account.
There are several benefits of virtual investment such as easy access, eliminating middleman and brokerages fee, rich information source, and quick commerce. However, there are a few challenges to prevent such as technical reliability, invest alone, and forgetting of real money. From this topic we choose, we search and analyse some of our findings regarding to difficulties of making investment decision, reason to trade online, people that influenced investment decisions and etc.
Furthermore, we are able to stress some of the impact of virtual investment, privacy and security issues, and future of virtual investment. We like to summarize that there are possibility of the traditional investing method is going to change to more modern method of investing.
Table of Content
Executive Summary
1.0 Introduction
2.0 1990’s bubble burst that influence people behaviour in buying stock
3.0 Various virtual investment
3.1GCI Financial
3.2 Saxe Bank
3.3 Virtual Trader
3.4 EuroInvestOnline.com
3.5 Investment Game ‘10
3.6 OSK Investment Challenge (OSKIC)
4.0 Advantages of virtual investment
4.1 Easy access
4.2 Eliminating middleman and brokerages fee are possible
4.3 Rich Information source
4.4 Quick commerce
5.0 Challenges of virtual investment
5.1 Technical reliability
5.2 Investor is alone
5.3 Forgetting of real money
6.0 Findings
6.1 When trying to make investment decision, what were the
top 3 most difficult stage among the following?
6.2 Why people choose to trade online?
6.3 When you heard big news on stock market about something
that concerns or interests you which are the top 3 places
you go for clarification?
6.4 Top 3 that influenced of your investment decisions?
6.5 The reasons of not participating in online stock market?
7.0 Impact of virtual investment
8.0 Privacy and security issues
9.0 Future of virtual investment
10.0 Conclusion
11.0 References
1.0 Introduction
Investment is the commitment of money or capital to purchase financial instruments or other assets in order to gain profitable returns in the form of interest, income, or appreciation of the value of the instrument. Investment is related to saving or deferring consumption based on mapsofworld.com. When seeking information in the financial marketplace, individuals have many choices. Some individuals turn to financial information sources such as stockbrokers, financial planners, financial counsellors, books magazines and the Internet to help shape financial knowledge and behaviours (Bei, Chen, & Widdows, 2004; Lee & Cho, 2005). There a various type of investment such as stock investment, bond investment, real estate investment and so on. Growth of investment is significant and bank or stock exchange are finding new platform to attract more potential investors.
Virtual investment is about doing investment online. It’s like a platform at where it enables people to buy stock in the virtual environment base on real stock market exchange. Virtual investment allows trader to make live trade with real stock market situation in virtual money to learn about the fundamental of trading and some investing skill in virtual environment without using real money (OSK, 2010).
With virtual investment, a lot of potential market from the medium or lower income group can actually get to learn and test their investing skills as the high cost of intermediaries have been eliminated. Also with the virtual game contest held by various stock exchange company have also encourages people to start investing online by giving them free virtual money to start offs. Once they master it, they can deposit their real money to play. Stock exchange Company like Forex advice its member to trade with a demo account to test and master their investing skills before opening a live account with real money (Forexmalaysia, 2010). Besides, let online resources help with investments and use these helpful sites to keep track of news, portfolios, mutual funds, and bonds ( Urology Times, 2003).
2.0 1990’s bubble burst that influence people behaviour in buying stock
During the late 1929’s, USA stock market has collapse leading to the world most worst global recession in the 20th century. During that time, industries sector mainly canals, railways, shipping and electricity has arisen. A lot people thought that it will improve the economics and the market could support higher share prices. Many new start-up companies during that time were not making any money, and their inflated share prices were justified by expectation of what they might make in the future (Nick Foster 2005). Followed by the 1980’s incident at where Japan stock market burst due to misbelieve that the Japan industry and management techniques were going to dominate the world and 1990’s incident at where Hong Kong stock market burst due to assumption that the territory would become main gateway into China after handover in 1997(Shiller, 2000).
In the 1990s, with the fast moving pace of information age, a lot people belief that the virtual or e-commerce would quickly reach out the market globally. The stock markets of the dotcoms company have risen dramatically. According to Nick Foster 2005, there were little solid evidence showing that most of the new start-up e-commerce companies were offering anything that was truly innovative, in terms of the goods and services they provided. A lot of people invested a large amount of money even thought those companies were simply financed based on future market projection with no assurance that they can actually achieve it. Some companies didn’t even publish the business plan and financial forecasts. Emma 2000, said that this people make a harsh decision without even learning about the rigors of the market. Even with high investment on the stock of the dotcom companies, those companies still contribute to a tiny proportion of national gross domestic production around the world. A lot of dotcom companies forgot the basic needs that they still need to provide good products and services and maintain good relationship with clients and customer (Nick Foster 2005). According to Emma 2000, Many companies that should never have been made public came to the market just to follow the trends, more effort was put into building stock prices rather than the companies itself. Many big dotcom companies such as Liberty One, new Tel, and Lucent Technologies went burst due to little profit earning. Investor watch their accumulated stocks become virtual worthless. The dotcom crash have left some 500,000 people in USA and Europe unemployment for the next 18 months causing inflation and also recession loom from the ripple effect of the crash around the globe. This incident has left some lesson to those who think that the e-business is simply about investing in the right technology and software only. Companies must not forget the core value of a business too and not thinking that e-business is only about computers and internets as they are just some add on devices that can help bringing business into new marketplace, delivering value product and quality services to their customers and clients as efficiency and profitably as possible (nick foster 2005). Based on Emma, the internet stock boom was also mainly due to putting a team together, spinning a story, hitting the market and hope to get rich quicker. According to research done, companies in US spent more than $1 billion on television and radios advertising just about spin causes public’s hunger for internet stock. Although some academics, investor and a small band of “hi-tech heretics” warn about investors about the danger of overvalued internet and technology stocks its seem that it can’t convinced the rash students from business schools such as Columbia and Harvard from dropping out MBA programs or turning down jobs with top consulting firms and banks to run their own internet business start-ups (Emma 2000). There also some who actually gamble their tuition loans on the stock market and pays their degree with credit cards hoping for earning in the stock market. Few professional and retail speculators that survive the crash eventually go back to the old way of investing based on company turnover and profit.
According to Charles Darwin, “many speculators are attracted by the gold rush aspect, the idea of get rich quickly”. A very few would likely to survive, as there is no doubt that most money that being throw at the Internet is a huge gamble and only few will be lucky enough out of the 500,000 to be able to collect money and everyone else losses money (Charles Darwin). Charles also mention that if the internet bubble burst is slow, investors might still have time switch their investment to a safer and proven companies.
3.0 Various virtual investments
3.1 GCI Financial
GCI Financial is a securities and commodities trading firm, specializing in online Foreign Exchange (“Forex”) brokerage. In addition to Forex, GCI is a primary market maker in Contracts for Difference (“CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services (GCI Financial, 2009). GCI is one of the premier foreign exchange market makers and profession in industry research and analysis. GCI is recognized in many press such as FX Week, March 2003 and Canadian Economic Press, February 18, 2008. Besides, there are many well recognized organizations and major financial portals such as Global-View forex forum, and www.ino.com recommended GCI Financial. GCI delivers one of the most important factors in financial industry which is assuring client fund safety.
3.2Saxo Bank
Saxo bank is a global investment bank specialising in online trading and investment across the international financial markets. Saxo bank has emphasised technology as a vital element for being competitive in the online trading industry and recognised for excellence in service and technology. Safeguarding client information and securely controlling, executing and managing real-time internal systems is of utmost importance to the bank (Saxo Bank, 2010). Saxo bank designed this platform to meet the varying needs and demands of modern financial investors and traders for example browser-based SaxoWeb Trader, downloadable SaxoTrader and the phone-based Saxomobile Trader. Saxo bank offers forex strategy, education, and various of analysis.
3.3 Virtual Trader
Virtual Trader is the UK’s largest and best Stockmarket simulation game. It is free and there are strategies, trader tricks, knowledge of basic investing and even dictionary. This is a learning platform for learners to try investing without any risk and it is totally free. There are prizes and ranking are awarded every month.
3.4 EuroInvestOnline.com
EuroInvestOnline is a short time, reliable, and secure investment program, run by a group of investment professionals that especially made for everyone who wish to have a better future and better income without working hard. EuroInvestOnline invest finances in a various types of e-commerce activity. They are expert in reducing risk and rising profits so customers delivered profits from real analytical work. Its benefits are instant withdraw, fix rate of deposit-guaranteed interest, no hidden fees, DDOS &SSL protection and free signup $ easy access.
3.5 Investment Game ‘10
Investment Game is a real-time stock market simulator allowing players to manage their portfolios by making virtual investments on the 6 Stock Exchanges: Latvia, Lithuania, Estonia, Russia, Sweden, and Finland. The original and durable idea of the game was to provide an opportunity to get a hands-on approach on the stock trading without taking any tangible risk. The event is organized by the Investment fund board elected annually from SSE Riga students (IFund, 2007). This game offers tutorials about investment strategy and tactics, forum and market overview.
3.6 OSK Investment Challenge (OSKIC)
This game is a system that creates a mirror version of the live Bursa Malaysia environment. In this virtual environment, players make live game trades with virtual game money and watch as their investing decisions mature. Most important of all, players are able to test and hone their investing skills in a virtual environment without using actual money (OSK Holdings Berhad, 2010). It is simply a campus edition for students to participate and being educated to gain knowledge about investment skills. This game offers daily highlight about recommendations and news of stock. There are several seminars or talks through out Malaysia to give tips on picking stocks.
4.0 Advantages of virtual investment
4.1 Easy access
Online stock brokers can easily access with internet as all they need is to have an online stock trading account. The traders can check out real time stock quotes and stock trends up to three four years before. They can even access the market analysis and do own research on any listed companies. Besides, the latest value of online investment is the interactions between online brokers via video calls or chat rooms or even forums.
4.2 Eliminating middleman and brokerages fee are possible
This is one of the biggest advantages that online traders can benefit of. Normal brokers would charge high fee while they handle your investments. Online brokers will offer low commissions and more profits will be earn. This allows the traders to invest wisely and make buying and selling to be more flexible. Furthermore, online traders can directly contact with online brokers anytime and at any place. Online stock trading is much more economical then getting assistance from the traditional brokers whom always looking for chance to make money from the clients.
4.3 Rich information source
Online stock trading has allowed online traders to be more close to the information of stock trading with the help of internet. Fully utilise the information in internet can help to gain any kind of information that related to stocks such as latest price, trends and even strategies. There are different types of social networks that provide a lot of information about tips for trading such as forums, blogs and etc. People tend to exchange information or views towards the stocks. Latest news is always provided in social network because it can share to a lot people.
4.4 Quick commerce
Online stock trading speeds up the process of e-commerce. It makes all things accessible and available to traders and decreased time of all procedures. Recently, introduction of M-Investment is less aware by people but it is very convenient and easy than using computer. Since Apple iphone and Blackberry are very popular, more and more people can try to use mobile investment.
5.0 Challenges of virtual investment
5.1 Technical reliability
Internet connection problem is one of the greatest challenges faced by all online traders. A lot of problem might occur because internet can go failure to log on, power failure, traffic overload and so on. People can gain a lot from online investment but they can lose a lot too when technical faulty happened. Traffic overload is very common because they are too many people participate online investment. The websites are not able to load quickly and the stock price appear on the screen might not change. This cause the price you selling might not match the stock selling price.
5.2 Investor is alone
Own research and analysis might not enough for stock trading because news and share experiences are very important. Stock brokers may give bad or wrong comments but their profession is to recommend stock to clients. This is the reason of collecting more commissions for premium analysis and strategies. Novice investors will have no or little knowledge about investing skills and this will make the wrong decisions. Hence, online stock trading website provides demo account or simulated games to educate novice investors.
5.3 Forgetting of real money
This is very common that trading online might forget they are using own real money. When I participate in OSK investment challenge, I keep forgotten that I spend too much money when I have more money at hand. Investors that change from traditional investment to online trading make take too quick decision because of technology advancement. Although it is virtual money in online investment but it will be real money when it is transfer out.
6.0 Findings
6.1 When trying to make investment decision, what were the top 3 most difficult stages among the following?
a) Identifying a good company
b) Gathering company's info
c) Interpreting company's financial data
d) Deciding on the right trading price & vol
e) Evaluating how risky your decision
f) Finding the right time to buy & sell
g) Monitoring & evaluating portfolio
h) Other
Participants were asked to list their top three most difficult stages when trying to make investment decision. From the chart above, finding the right time to buy and sell is the most difficult stage followed by deciding on the right trading price and volume. Thirdly, identifying a good company, gathering company’s info and interpreting company’s financial data are the difficult stages after the top two. There are the top three most difficult stages to decide when making investment decision. There are other reasons such as evaluating how risky the decision, monitoring and evaluating portfolio and etc.
From my own experience, finding the right time to buy & sell and deciding on the right trading price & volume are the most difficult stages because it happens frequently and the decision needs to make quickly. I would like to analyse on the behaviour during making investment decision that they do not want to earn less if the time to sell or buy is not accurate. Besides, investors need to decide on the amount of stock need to sell for other considerations.
6.2 Why people choose to trade online?
I conduct a survey and found out that the main reasons to trade online are convenient and low brokerage fee. Convenient for online investors are easy access, easy to manage, and waste no time. The second main reason that is low brokerage fee helps online investors save a lot of money. Some of the participants think privacy is another reason to trade online.
It is very convenient for the investors to own an account and able to trade anywhere and any place. There are more and more people prefer more convenient ways of doing something to save time and money as well. From my analysis, brokerage fee can cost a lot include both buying and selling process. Some of the participants think it is more private when trading online. All the transactions are secured and certified by banks. There is black and white for all the transactions.
6.3 When you heard big news on stock market about something that concerns or interests you which are the top 3 places you go for clarification?
a) Friends & families
b) Search Engine
c) See what others comment on social networks
d) Search the blogosphere
e) News website/ Newspaper
f) Television
g) Other - Please Tell
People concern about something and wish to clarify from the list of options. The most places that people will go visit first are newspaper or news websites. Newspaper gives the most reliable news about the stock market followed by social networks and other place to clarify. News is spread fastest in social networks nowadays because people tend to post the most concerned news to share to everyone. They tend to clarify the least from friends and families because friends and families might not know or not very sure about the latest news of stock market. There are other places to clarify such as blogs, search engines, television and so on.
6.4 Top 3 that influenced of your investment decisions?
a) Family
b) Friends
c) Tutors/Lecture
d) OSK Analyst Report
e) External Analyst Report
f) Online Community including forums, blogs and newsgroup
g) Press include online & offline newspaper and magazines
h) News Channels
i) Other
Based on the chart above, the top three influenced of investment decisions are the press include online & offline newspaper and magazines with 18 people, external analyst report with 12 people, OSK Analyst report and friends with 9 people each. We can determine that the news in newspaper either online or offline actually provided a lot of useful stuff regarding to what the big company next project going on, what are their company direction, how is their stock price going and so on. This report will show their company financial statement, income balanced sheet and so on which provide more evidence and confirmation that those news is true as some company might just want to blow up story to boost their stock prize. All this sort of information is influencing enough for their investments decisions. The less of influencing of investment decision comes from the tutor/lecture with only 1 people. This might because of not many lectures are interested in the virtual investment stuff. However those 6 peoples who choose others might be influenced with other type of information such as the internal news. Internal news is news that could be obtained if you have good relationship with the internal people of that particular company. As they work within the company, they are clearer regarding to the trueness of the news spread out.
6.5 The reasons of not participating in online stock market.
a) No knowledge about stock market
b) Perceive stock market as gambling
c) Not aware of it
d) Too complicated to understand
e) No time for it
f) Not interested
Based on the survey, 10 people which was the most to choose not aware of it as the reason why they do not participating in online stock market. Although a lot of online stock market company have been set up, a lot of people are still unaware of it. This might be due to most of the time, people tends to go online for personal things such as playing game, visiting social networking site, downloading music and so on. They don’t search for those investing stuff as it is not their interest. Stock Exchange Company has tries to held contest with attractive price to attract move people from different ages to try out the virtual investment. However, it is still not so successful. Hence, in future a lot of campaign and advertising need to be launch to increase awareness for the online stock market. Besides that, those companies should also try to educate more clearly and give details tutorial regarding the online stock market as there are still 3 peoples chooses no knowledge about stock market and 5 peoples chooses too complicated to understand as their reasons of not participating in online stock market.
7.0 Impact of virtual investment
1. “Virtual” brokerages will replace full service traditional brokerages over the long run
• The main reason of no or low brokerage fee attract people to invest online. Sooner or later the traditional way will be replaced.
2. Creating a platform for more buyers and sellers to come together to carry out transactions
• People tend to follow the trend of using internet as a platform to learn or do trading. There are many platforms such as gaming, investing, education and etc.
3. Provide wider help in educating new investors
• There are advisor in the platform to give tutorials or recommendations to assists new investors.
.
4. Improving the speed and conveniently for people to trade
• Stock price or news are easily spread out to greater coverage and this is another reason people want to invest online.
8.0 Privacy and security issues
The privacy and also security issues needed to be taken into account when people going for virtual investment. This factor can also influence people decision into going back the traditional way of investing at where the brokers will invest for them. In order to keep people aware of internet fraud and scammers, U.S. Securities and Exchange Commission have come out with an article educating investors how to avoid internet investment scams. They even have so-called internet police the Security exchange commission to track fraud or investigating companies that have suspicious action.
Fake online investment newsletters are one of the most commons fraud used by the fraudsters. The messages of fake newsletter can looks really real and credible. Furthermore, this newsletter is provided free of charge unbiased information regarding to the featured companies or recommending potential stock pick based on monthly basic. Even though it’s hard to differentiate between the fake and real newsletter, there are some other important information that can be obtained on those newsletter. Based on the U.S Securities and Exchange Commission, it is require that the newsletter must disclose who paid them, the amount been paid, and type of payment they received. Most fraudsters will try to cover this information by lying about the payments they received, their independence, and their so-called research, and their track records. They will always falsely claim to be research the stock they profile independently and make some false information and promote worthless stock. They made money if they get to convince investors to buy or sell their particular stock on hand. Some fraudster even sold their own holdings at high price to the investors based on their baseless recommendations. Several steps can be taken to check whether those newsletters are true or fake. First of all, take note what you have been told and ask more question regarding the information received. Question to be asked based on the U.S Securities and Exchange Commission are the following:
• Is the investment registered with the SEC and the state securities agency in the state where I live or is it subject to an exemption?
• Is the person recommending this investment registered with my state securities agency? Is there a record of any complaints about this person?
• How does this investment match my investment objectives?
• Where is the company incorporated? Will you send me the latest reports that have been filed on this company?
• What are the costs to buy, hold, and sell this investment? How easily can I sell?
• Who is managing the investment? What experience do they have?
• What is the risk that I could lose the money I invest?
• What return can I expect on my money? When?
• How long has the company been in business? Are they making money, and if so, how? What is their product or service? What other companies are in this business?
• How can I get more information about this investment, such as audited financial statements?
Beside that, investors are increasing in using bulletin board as a platform to share information about various investment opportunities. This is also a place where fraudsters like to scam people moneys by pretending to reveal “inside” information about upcoming companies event, new products, or big contracts making company to invest in worthless company. Investors must be careful when trusting all this information, as bulletin boards allows user to hide their identity behind multiple aliases. They can be competitors paid promoters, company insiders or even the large shareholders who try to create the illusion of widespread interest in a less traded stock posting a series message under various aliases. This type of fraudster is known as the “Pump and Dump”. After investors were convincing about the inside information they will start buying the stocks. The fraudsters’ then gain by selling their shares after the stock price is pumped up by those victim investors. Once all the stock in the Fraudsters hand are sold, they will stop promoting those stock they claim to be good at first, eventually the stock price will fall and investors lose their money. Investors should go for the following question before taking any step to invest their hard earns money.
• get financial statements from the company and be able to analyze them
• verify the claims about new product developments or big contracts
• call every supplier or customer of the company and ask if they really do business with the company
• Check out the people running the company and find out if they've ever made money for investors before.
Lastly, the most commons scam used would be the e-mail spams. Actually a lot of people are aware with it yet some of them still believed the information in hoping to make big money out of it. They were simply overwhelmed by the greedy thoughts of making big money. There were increasingly fraudsters using email spam to find investor for bogus investment schemes or spread false information about the company due to its cheap and easy to create. This way, fraudster can also personalized messages to millions of internet users at a time. It is far more effective compare to cold calling (unexpected calls) or mass mailing (same email content).
9.0 Future of virtual investment
In future, we might have some innovative company making virtual investment into more interaction with those investors who do investment virtually. We may see something like the second life is doing. Investors get their own avatar, walking into a virtual community where they can interact and share knowledge and information with others investors. The stock exchange company might open up a virtual company inside the virtual world. They will have their virtual workers working inside to guide those virtual investor and give them financial advice regarding to buying stock. Other stock listed companies can set their virtual company too. For example, BMW is setting up their company virtually. Investors get to use their avatar and explore those companies. Information like the companies annual reports, company background, pass history and so on which will relate in promoting the company stock should be available. There will also be a commission set up inside to track those scammers, and bans those user that spread fake company information.
10. Conclusion
In conclusion we found out that investment is no longer unknown in the world today. Investment contributes to major part of the economy which helps in developing country like Malaysia. It has evolved form the traditional way of trading stock to the online stock trading today’s. More and more stock company are trying to create platform for people to learn how to invest using the virtual investment contest. We have highlighted the benefits and challenges in virtual investment hoping that through this study we can help to create awareness of virtual investment to give people more knowledge about doing investing online which will indirectly help makes our country prosperous and powerful. With the appropriate ways of promoting investment, people will no longer have negative perceptions or misinterpretation regarding investment. This is due to the fact that people will have a clear understanding of the benefits and challenges that investment has to offer. Hence, stock exchange companies should make good use of the social sites and other communication forms in creating awareness of trading online.
11.0 Reference
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Tuesday, November 30, 2010
Thursday, October 28, 2010
Proposal for Submission
Proposal for Submission
1.0 Research Topic
Virtual Investment
Our research topic is about virtual investment. Investment have allows people to regenerate their money in terms of high return. In this era, we do have internet and investment has grow to another form which is online investment or virtual investment. Investment is one of the major contributors of economy. Growth of investment is significant and bank or stock exchange are finding new platform to attract more potential investors.
We think that virtual investment is another revolution for the traditional stock market. Internet is the reason that we need to do further study on the relationship between virtual investments and applied on the stock market. Internet is the common channel for all teenagers and adults as a main tool to communicate and solve problems. However, Malaysians are not using this channel to participate in virtual investment. Most of the people go online for social networking but is the virtual investment not aware by people or they prefer to go personally rather than online. Hence, this is very interesting to find out the reason of not participating in online stock market.
2.0 Reasons for doing this topic:
We are interested to find out how dotcom’s bubble burst on the 1990’s actually affect people behaviour in buying stock. Internet has made stock market investment widely available for investor all around the world. People can now access to business world information and examine the economic and made financial decision on their own whether to buy or sell stocks. This has eliminate the high intermediaries commission from the traditional way of buying stock where high commission will be charge when people wanted to buy stock which discourage a huge potential market to hold back from investing.
Besides, we would like to understand about the benefits and challenges for virtual investment. Although Malaysia is promoting a lot on innovation or ICT, there are still lacks of awareness in online stock market. We are keen to find the benefits that can lead to more people involve in online stock market rather than the ordinary method.
Other than that we would also like to know the security factors and other potential issues that will discourage virtual investment such as economy condition where people preferred do individual online or seek for financial and broker adviser. From another perspective, through this study we hope to help create awareness of virtual investment to give people more knowledge about doing investing online which will indirectly help makes our country prosperous and powerful.
3.0 The objectives of our research paper are to:
1. Find out how the 1990’s bubble burst actually influence people behaviour in buying stock online.
2. Understand the benefit and challenge for virtual investment.
3. Highlight the future of virtual investment
4.0 Report Outline
Table of content
Executive Summary
1.0 Introduction
2.0 1990’s bubble burst that influence people behaviour in buying stock
3.0 Various virtual investment
4.0 Advantages of virtual investment (benefits)
5.0 Challenges of virtual investment (problems)
6.0 Findings
7.0 Impact of virtual investment
8.0 Privacy and security issues
9.0 Future of virtual investment
10.0 Conclusion
11.0 References
5.0 Literature Review / Background
Investment is the commitment of money or capital to purchase financial instruments or other assets in order to gain profitable returns in the form of interest, income, or appreciation of the value of the instrument. Investment is related to saving or deferring consumption based on mapsofworld.com. When seeking information in the financial marketplace, individuals have many choices. Some individuals turn to financial information sources such as stockbrokers, financial planners, financial counsellors, books magazines and the Internet to help shape financial knowledge and behaviours (Bei, Chen, & Widdows, 2004; Lee & Cho, 2005). There a various type of investment such as stock investment, bond investment, real estate investment and so on.
Virtual investment is about doing investment online. It’s like a platform at where it enables people to buy stock in the virtual environment base on real stock market exchange. Virtual investment allows trader to make live trade with real stock market situation in virtual money to learn about the fundamental of trading and some investing skill in virtual environment without using real money (OSK, 2010).
With virtual investment, a lot of potential market from the medium or lower income group can actually get to learn and test their investing skills as the high cost of intermediaries have been eliminated. Also with the virtual game contest held by various stock exchange company have also encourages people to start investing online by giving them free virtual money to start offs. Once they master it, they can deposit their real money to play. Stock exchange Company like Forex advice its member to trade with a demo account to test and master their investing skills before opening a live account with real money (Forexmalaysia, 2010). Besides, let online resources help with investments and use these helpful sites to keep track of news, portfolios, mutual funds, and bonds ( Urology Times, 2003).
6.0 Main References for major assignments
Blau, Joel M., 2003, ‘Let Online resources help with investments’, EBSCOHost , p. 42, vol. 31, no. 2, AN 9029477, viewed 23 October 2010
This journal focuses on various types of online resources that actually can help investments to keep track of news, portfolios, mutual funds, and bonds. For example, a student who needs technical analysis, the site to visit is Prophet.net that allows building charts using exceptional sets of technical tools.
CRM Magazine, 2007, ‘Next Generation Online channel Reporting for Banking and Investment Firms’, EBSCOHost, p. 1-4, vol. 11, no. 3, AN 24287378, viewed 23 October 2010
The focus on this journal is on the change of financial services industry to evolve how it approaches customers. It highlights the types of online channel to reach and service customers.
Foster, N, 2005 “ A pratical guide to leading and managing people at work”, Maximum performance, pg 444, viewed 24 October 2010
This articles talk about many start up companies during the 90’s are not making money while their inflated share prices were justified by expecting they might make profit in future. Most people thought that the rise of internet and technology of e-commerce could take over the world and bring profit for them and they started to buy dot com stock. They believe that the overblown of stock market expansion with the dot com company can actually brings big profit. There were no evidence showing that the new e-commerce company have been truly innovative in the good and service they provided. There were only future market projections with no assurance they would achieve it and yet a lot of people still invest lots of money in this companies.
http://books.google.com.my/books?id=bBT0WS26gWQC&pg=PA444&dq=how+dotcom+bubble+burst+happen&hl=en&ei=Ky3ITMvHGIqlcZzcqJkO&sa=X&oi=book_result&ct=result&resnum=6&ved=0CD8Q6AEwBQ#v=onepage&q&f=false
Garmhausen, Steve, 2008, ‘ARE YOU READY TO DO IT YOURSELF?’, EBSCOHost, p. 35-36, vol. 38, no. 7, AN 28860809, viewed 23 October 2010
The journal is about discipline and self-study can help to earn profit from online trading. Searching on discount brokerage, internet chat rooms provide several of information on investment are the highlights in this study.
Goldberg, Steven T., Baldwin, Ian, Pulfrey, Christine, 1999, ‘Online Brokers grow Up’, EBSCOHost, p. 92, vol. 53, no. 11, AN 2343273, viewed 23 October 2010
This journal highlights on the little or even no awareness of many investors that brokers can jack up the cost of stock trading.
Grimshaw, D, Kwok ,S, 1998,The Virtual Workplace: The business benefits of virtual organization, Ideal Group Publishing, USA
This article talks about the benefits of virtual organization. The points are relevant in relating benefits of investment going virtually.
http://books.google.com.my/books?id=nK5EgZrQcRAC&pg=PA45&dq=what+the+benefits+of+virtual+investment&hl=en&ei=9jbITLOEC82kcaqK1bEF&sa=X&oi=book_result&ct=result&resnum=1&ved=0CDEQ6AEwAA#v=onepage&q=what%20the%20benefits%20of%20virtual%20investment&f=false
Suzanne Slesin, 1993, ‘CURRENTS; A Shed for Every Intention’, EBSCOHost, p. 3, AN 30248211, viewed 23 October 2010
This study used classification tree analysis to examine who is and who is not willing
to use online employer-provided retirement investment advice. Using data from the
Retirement Confidence Survey (Employee Benefit Research Institute. 2004). the study
focused on who was more likely to use online retirement investment advice when it
was available from their employer.
Young, M, Jude, M, “Reduce cost, improve efficiencies and focus on your core business”, The case for virtual business process, pg 144, viewed 24 October 2010
This article highlighted that the competitive advantages of virtual organisation. It stated that virtual business will have identified that there is a potential opportunity and being able to exploited the opportunity and prepared to leverage it for additional opportunities. As we enter true information age, we will find that only information-enabled infrastructure will make possible kinds of business dynamics that will required for growth and survival based on this book. We can related it to a point which makes investment to growth into virtual environment and what the benefits it will bring.
http://books.google.com.my/books?id=-5OQR9oiIuQC&pg=PA174&dq=what+the+benefits+of+virtual+investment&hl=en&ei=PDfITIesMoiXcfvewLIF&sa=X&oi=book_result&ct=result&resnum=2&ved=0CDIQ6AEwATgK#v=onepage&q=what%20the%20benefits%20of%20virtual%20investment&f=false
7.0 Other sources
AllBusiness, 2000, What if…the internet bubble burst?, viewed 23 October 2010, http://www.allbusiness.com/technology/internet-technology/882825-1.htmlBBC, 2010,
BBC News – Dotcom bubble burst: 10 years on, viewed 22 October 2010, http://news.bbc.co.uk/2/hi/business/8558257.stm
Bloomberg Businessweek, 2000, Why the Burst Internet Bubble Didn’t Break the Economy, viewed 23 October 2010, http://www.businessweek.com/bwdaily/dnflash/july2000/nf00721d.htm
Desai, Anil, 2007, The Definitive Guide to Virtual Platform Management, Realtimepblishers.com, http://books.google.com.my/books?id=dbi0Mn5XHuQC&pg=PA84&dq=what+is+the+challenges+of+virtual+investment&hl=en&ei=kQrJTKu5LobKvQOyg6nFDw&sa=X&oi=book_result&ct=result&resnum=1&ved=0CCwQ6AEwADgK#v=onepage&q=what%20is%20the%20challenges%20of%20virtual%20investment&f=false
NetHistory, 2010, The dotcom Bubble, viewed 23 October 2010, http://www.nethistory.info/History%20of%20the%20Internet/dotcom.html
Rfintentindex, 2010, RF intent Index, viewed 23 October 2010http://www.intentindex.com/
Slideshare, 2010, Dot-com bubble effect on Commercial Real Estate, viewed 23 October 2010, http://www.slideshare.net/cbcommercial/review-of-cre-dotcom-bubble-5395859
Stocks And Futures Trading, 2010, Stocks And Futures Trading, viewed 23 October 2010, http://stocksandfutures.adjrevolution.com/
The Investor’s Journal.com, 2010, Lessons from the Dot-com Bubble, viewed 23 October 2010, http://www.theinvestorsjournal.com/lessons-from-the-dot-com-bubble/
Web Strategy, 2008, Social Network Stats: Facebook, MySpace, Reunion, viewed 23 October 2010, http://www.web-strategist.com/blog/2008/01/09/social-network-stats-facebook-myspace-reunion-jan-2008/
Wharton, 2002, How Does the Internet Affect Trading? Evidence from Investor Behavior in 401 (k) Plans, viewed 23 October 2010, http://finance.wharton.upenn.edu/~rlwctr/papers/0114.pdf
Wired, 2010, 10 years After: a Look Back at the Dotcom Boom and Burst, viewed 23 October 2010, http://www.wired.com/magazine/2010/02/10yearsafter/all/1
WiseGeek, 2003, What was the Dot-com Bubble?, viewed 23 October 2010, http://www.wisegeek.com/what-was-the-dot-com-bubble.htm
Witiger, 2010, E-commerce Statistics, viewed 24 October 2010, http://www.witiger.com/ecommerce/ecommercestatistics.htm
U.S. Securities and Exchange Commision, 2007, Internet Fraud: How to Avoid Internet Investment Scams, viewed 23 October 2010, http://www.sec.gov/investor/pubs/cyberfraud.htm
1.0 Research Topic
Virtual Investment
Our research topic is about virtual investment. Investment have allows people to regenerate their money in terms of high return. In this era, we do have internet and investment has grow to another form which is online investment or virtual investment. Investment is one of the major contributors of economy. Growth of investment is significant and bank or stock exchange are finding new platform to attract more potential investors.
We think that virtual investment is another revolution for the traditional stock market. Internet is the reason that we need to do further study on the relationship between virtual investments and applied on the stock market. Internet is the common channel for all teenagers and adults as a main tool to communicate and solve problems. However, Malaysians are not using this channel to participate in virtual investment. Most of the people go online for social networking but is the virtual investment not aware by people or they prefer to go personally rather than online. Hence, this is very interesting to find out the reason of not participating in online stock market.
2.0 Reasons for doing this topic:
We are interested to find out how dotcom’s bubble burst on the 1990’s actually affect people behaviour in buying stock. Internet has made stock market investment widely available for investor all around the world. People can now access to business world information and examine the economic and made financial decision on their own whether to buy or sell stocks. This has eliminate the high intermediaries commission from the traditional way of buying stock where high commission will be charge when people wanted to buy stock which discourage a huge potential market to hold back from investing.
Besides, we would like to understand about the benefits and challenges for virtual investment. Although Malaysia is promoting a lot on innovation or ICT, there are still lacks of awareness in online stock market. We are keen to find the benefits that can lead to more people involve in online stock market rather than the ordinary method.
Other than that we would also like to know the security factors and other potential issues that will discourage virtual investment such as economy condition where people preferred do individual online or seek for financial and broker adviser. From another perspective, through this study we hope to help create awareness of virtual investment to give people more knowledge about doing investing online which will indirectly help makes our country prosperous and powerful.
3.0 The objectives of our research paper are to:
1. Find out how the 1990’s bubble burst actually influence people behaviour in buying stock online.
2. Understand the benefit and challenge for virtual investment.
3. Highlight the future of virtual investment
4.0 Report Outline
Table of content
Executive Summary
1.0 Introduction
2.0 1990’s bubble burst that influence people behaviour in buying stock
3.0 Various virtual investment
4.0 Advantages of virtual investment (benefits)
5.0 Challenges of virtual investment (problems)
6.0 Findings
7.0 Impact of virtual investment
8.0 Privacy and security issues
9.0 Future of virtual investment
10.0 Conclusion
11.0 References
5.0 Literature Review / Background
Investment is the commitment of money or capital to purchase financial instruments or other assets in order to gain profitable returns in the form of interest, income, or appreciation of the value of the instrument. Investment is related to saving or deferring consumption based on mapsofworld.com. When seeking information in the financial marketplace, individuals have many choices. Some individuals turn to financial information sources such as stockbrokers, financial planners, financial counsellors, books magazines and the Internet to help shape financial knowledge and behaviours (Bei, Chen, & Widdows, 2004; Lee & Cho, 2005). There a various type of investment such as stock investment, bond investment, real estate investment and so on.
Virtual investment is about doing investment online. It’s like a platform at where it enables people to buy stock in the virtual environment base on real stock market exchange. Virtual investment allows trader to make live trade with real stock market situation in virtual money to learn about the fundamental of trading and some investing skill in virtual environment without using real money (OSK, 2010).
With virtual investment, a lot of potential market from the medium or lower income group can actually get to learn and test their investing skills as the high cost of intermediaries have been eliminated. Also with the virtual game contest held by various stock exchange company have also encourages people to start investing online by giving them free virtual money to start offs. Once they master it, they can deposit their real money to play. Stock exchange Company like Forex advice its member to trade with a demo account to test and master their investing skills before opening a live account with real money (Forexmalaysia, 2010). Besides, let online resources help with investments and use these helpful sites to keep track of news, portfolios, mutual funds, and bonds ( Urology Times, 2003).
6.0 Main References for major assignments
Blau, Joel M., 2003, ‘Let Online resources help with investments’, EBSCOHost , p. 42, vol. 31, no. 2, AN 9029477, viewed 23 October 2010
This journal focuses on various types of online resources that actually can help investments to keep track of news, portfolios, mutual funds, and bonds. For example, a student who needs technical analysis, the site to visit is Prophet.net that allows building charts using exceptional sets of technical tools.
CRM Magazine, 2007, ‘Next Generation Online channel Reporting for Banking and Investment Firms’, EBSCOHost, p. 1-4, vol. 11, no. 3, AN 24287378, viewed 23 October 2010
The focus on this journal is on the change of financial services industry to evolve how it approaches customers. It highlights the types of online channel to reach and service customers.
Foster, N, 2005 “ A pratical guide to leading and managing people at work”, Maximum performance, pg 444, viewed 24 October 2010
This articles talk about many start up companies during the 90’s are not making money while their inflated share prices were justified by expecting they might make profit in future. Most people thought that the rise of internet and technology of e-commerce could take over the world and bring profit for them and they started to buy dot com stock. They believe that the overblown of stock market expansion with the dot com company can actually brings big profit. There were no evidence showing that the new e-commerce company have been truly innovative in the good and service they provided. There were only future market projections with no assurance they would achieve it and yet a lot of people still invest lots of money in this companies.
http://books.google.com.my/books?id=bBT0WS26gWQC&pg=PA444&dq=how+dotcom+bubble+burst+happen&hl=en&ei=Ky3ITMvHGIqlcZzcqJkO&sa=X&oi=book_result&ct=result&resnum=6&ved=0CD8Q6AEwBQ#v=onepage&q&f=false
Garmhausen, Steve, 2008, ‘ARE YOU READY TO DO IT YOURSELF?’, EBSCOHost, p. 35-36, vol. 38, no. 7, AN 28860809, viewed 23 October 2010
The journal is about discipline and self-study can help to earn profit from online trading. Searching on discount brokerage, internet chat rooms provide several of information on investment are the highlights in this study.
Goldberg, Steven T., Baldwin, Ian, Pulfrey, Christine, 1999, ‘Online Brokers grow Up’, EBSCOHost, p. 92, vol. 53, no. 11, AN 2343273, viewed 23 October 2010
This journal highlights on the little or even no awareness of many investors that brokers can jack up the cost of stock trading.
Grimshaw, D, Kwok ,S, 1998,The Virtual Workplace: The business benefits of virtual organization, Ideal Group Publishing, USA
This article talks about the benefits of virtual organization. The points are relevant in relating benefits of investment going virtually.
http://books.google.com.my/books?id=nK5EgZrQcRAC&pg=PA45&dq=what+the+benefits+of+virtual+investment&hl=en&ei=9jbITLOEC82kcaqK1bEF&sa=X&oi=book_result&ct=result&resnum=1&ved=0CDEQ6AEwAA#v=onepage&q=what%20the%20benefits%20of%20virtual%20investment&f=false
Suzanne Slesin, 1993, ‘CURRENTS; A Shed for Every Intention’, EBSCOHost, p. 3, AN 30248211, viewed 23 October 2010
This study used classification tree analysis to examine who is and who is not willing
to use online employer-provided retirement investment advice. Using data from the
Retirement Confidence Survey (Employee Benefit Research Institute. 2004). the study
focused on who was more likely to use online retirement investment advice when it
was available from their employer.
Young, M, Jude, M, “Reduce cost, improve efficiencies and focus on your core business”, The case for virtual business process, pg 144, viewed 24 October 2010
This article highlighted that the competitive advantages of virtual organisation. It stated that virtual business will have identified that there is a potential opportunity and being able to exploited the opportunity and prepared to leverage it for additional opportunities. As we enter true information age, we will find that only information-enabled infrastructure will make possible kinds of business dynamics that will required for growth and survival based on this book. We can related it to a point which makes investment to growth into virtual environment and what the benefits it will bring.
http://books.google.com.my/books?id=-5OQR9oiIuQC&pg=PA174&dq=what+the+benefits+of+virtual+investment&hl=en&ei=PDfITIesMoiXcfvewLIF&sa=X&oi=book_result&ct=result&resnum=2&ved=0CDIQ6AEwATgK#v=onepage&q=what%20the%20benefits%20of%20virtual%20investment&f=false
7.0 Other sources
AllBusiness, 2000, What if…the internet bubble burst?, viewed 23 October 2010, http://www.allbusiness.com/technology/internet-technology/882825-1.htmlBBC, 2010,
BBC News – Dotcom bubble burst: 10 years on, viewed 22 October 2010, http://news.bbc.co.uk/2/hi/business/8558257.stm
Bloomberg Businessweek, 2000, Why the Burst Internet Bubble Didn’t Break the Economy, viewed 23 October 2010, http://www.businessweek.com/bwdaily/dnflash/july2000/nf00721d.htm
Desai, Anil, 2007, The Definitive Guide to Virtual Platform Management, Realtimepblishers.com, http://books.google.com.my/books?id=dbi0Mn5XHuQC&pg=PA84&dq=what+is+the+challenges+of+virtual+investment&hl=en&ei=kQrJTKu5LobKvQOyg6nFDw&sa=X&oi=book_result&ct=result&resnum=1&ved=0CCwQ6AEwADgK#v=onepage&q=what%20is%20the%20challenges%20of%20virtual%20investment&f=false
NetHistory, 2010, The dotcom Bubble, viewed 23 October 2010, http://www.nethistory.info/History%20of%20the%20Internet/dotcom.html
Rfintentindex, 2010, RF intent Index, viewed 23 October 2010http://www.intentindex.com/
Slideshare, 2010, Dot-com bubble effect on Commercial Real Estate, viewed 23 October 2010, http://www.slideshare.net/cbcommercial/review-of-cre-dotcom-bubble-5395859
Stocks And Futures Trading, 2010, Stocks And Futures Trading, viewed 23 October 2010, http://stocksandfutures.adjrevolution.com/
The Investor’s Journal.com, 2010, Lessons from the Dot-com Bubble, viewed 23 October 2010, http://www.theinvestorsjournal.com/lessons-from-the-dot-com-bubble/
Web Strategy, 2008, Social Network Stats: Facebook, MySpace, Reunion, viewed 23 October 2010, http://www.web-strategist.com/blog/2008/01/09/social-network-stats-facebook-myspace-reunion-jan-2008/
Wharton, 2002, How Does the Internet Affect Trading? Evidence from Investor Behavior in 401 (k) Plans, viewed 23 October 2010, http://finance.wharton.upenn.edu/~rlwctr/papers/0114.pdf
Wired, 2010, 10 years After: a Look Back at the Dotcom Boom and Burst, viewed 23 October 2010, http://www.wired.com/magazine/2010/02/10yearsafter/all/1
WiseGeek, 2003, What was the Dot-com Bubble?, viewed 23 October 2010, http://www.wisegeek.com/what-was-the-dot-com-bubble.htm
Witiger, 2010, E-commerce Statistics, viewed 24 October 2010, http://www.witiger.com/ecommerce/ecommercestatistics.htm
U.S. Securities and Exchange Commision, 2007, Internet Fraud: How to Avoid Internet Investment Scams, viewed 23 October 2010, http://www.sec.gov/investor/pubs/cyberfraud.htm
Tuesday, September 28, 2010
How Internet affect the stock market? (For Discussion)
We think that internet is:
We would like to discuss on the DOT COM bubble burst during the late 1990s and early 2000.How this actually affect the behavior of people to buy stock online. Hope you all give us some comments or experiences.
Thank you.
- new method of delivering information
- new form of investment
- gives opportunities for people to learn
- internet is making high quality of stock information available almost instantly to investors. The large amount of information is useful on decision making process.
- predicted that online brokerage accounts would soon replace the traditional brokerage accounts. Online investment is lower cost, convenient and 24/7 accessibilty that makes investors attracted.
- there are many online trading platforms that allow people to learn and gaining knowledge such as Forex Trading Malaysia, OSK investment challenge and so on.
We would like to discuss on the DOT COM bubble burst during the late 1990s and early 2000.How this actually affect the behavior of people to buy stock online. Hope you all give us some comments or experiences.
Thank you.
Tuesday, September 14, 2010
Objectives
The main objectives for our blog are:
1. How internet affect the stock trading.
2. Benefits / reason to participate in virtual investment.
3. Challenges of virtual investment.
4. Future of virtual investment.
1. How internet affect the stock trading.
2. Benefits / reason to participate in virtual investment.
3. Challenges of virtual investment.
4. Future of virtual investment.
Friday, September 10, 2010
OSK Investment Challenge Campus Edition
OSKIC Campus Edition
This is the sample of game trading.
This is one of the virtual investment we would like to share. The main reason of this virtual investment is to let university student in Malaysia to invest in Bursa Malaysia with the given amount of virtual money. This challenge is a mirror image of the real Bursa Malaysia. In this virtual world, university students can trade lively with game money and watch their investment to mature. Most important thing is students can try their investing skills in a virtual environment without using real money.
Alvin and Jeffrey are involving in this challenge as well. We think it is meaningful for out future and do help us gain more knowledge in this field. The advantages of participating this virtual investment is to win the grand price of RM25,000, weekly price of a net book and Uni prize. Second, learn the actual way to invest in a stock market. Third, gain and share knowledge among friends and finally learn to research and read article related to business world. There are a lot more of advantages when you participate in the game.
We are going to post a few virtual investment during the next post. Hope you guys enjoy it.
Here is the example of Alvin and Jeffrey ranking now in OSKIC campus edition.
This is the sample of game trading.
This is one of the virtual investment we would like to share. The main reason of this virtual investment is to let university student in Malaysia to invest in Bursa Malaysia with the given amount of virtual money. This challenge is a mirror image of the real Bursa Malaysia. In this virtual world, university students can trade lively with game money and watch their investment to mature. Most important thing is students can try their investing skills in a virtual environment without using real money.
Alvin and Jeffrey are involving in this challenge as well. We think it is meaningful for out future and do help us gain more knowledge in this field. The advantages of participating this virtual investment is to win the grand price of RM25,000, weekly price of a net book and Uni prize. Second, learn the actual way to invest in a stock market. Third, gain and share knowledge among friends and finally learn to research and read article related to business world. There are a lot more of advantages when you participate in the game.
We are going to post a few virtual investment during the next post. Hope you guys enjoy it.
Here is the example of Alvin and Jeffrey ranking now in OSKIC campus edition.
Invest money for a better return in future.....
The reason why we choose to do something related to stock market is because we wanted to master it so that we can actually invest our money in stock to generate better returns in future.Everything's is about MONEY MONEY MONEY is this world..hahaha
How to Read Stock Tables For Beginners...
This video teaches us how to read the stock tables in the daily newspaper. After watching this hope that you guys have a better knowledge in understanding all those aliens stock index table under the business section in newspaper.
Stock Market Investing: Tips for the Complete Beginner
Here are some important tips for complete beginner like us. Its important to learn every possible knowledge about stock or else we will get our self into a huge debt.
Stock Market Investing for Beginners....
Here are video showing us beginners how to see the stock diagrams stuff in stock market.
A good lesson for investor...
I found this video interesting too.. The first thing came into my mind after watching this video is that its teaches us not to buy a stock/ share blindly and dream that it would actually increase and give us a lots of revenue. In stock market anything can happens, people must always research, watch out for news and some insider news and take a long look and prediction before determine which stock are eventually a potential one. With this, risk of losing money can be minimize.
How the Stock Market Works...
When i was researching for our topics i came across this nice video which show hows the stock market actually works in a short cartoon video by starting up a small oil business and then slowly expand it to the stock market which go globalize, and how the transaction of selling stock and buying stock happens in the past when there are no advance IT technology like internet, computer and so on. From the ending part of this video that i also learned that common stock investment from people saving can eventually helps to make the country prosperous and powerful.
Thursday, September 9, 2010
Top 10 worst financial crisis in U.S History!!
10. The Oil Crisis of 1973
Gas lines. Really long gas lines. In October 1973, the members of the Organization of Arab Petroleum Exporting Countries, or OAPEC (consisting of the Arab members of OPEC plus Egypt and Syria) proclaimed an oil embargo “in response to the U.S. decision to re-supply the Israeli military during the Yom Kippur war.” Essentially, OAPEC declared it would no longer ship oil to the United States if they supported Israel in the conflict. Independently, the OPEC members agreed to use their leverage over the world price-setting mechanism for oil in order to stabilize their real incomes by raising world oil prices. This action followed several years of steep income declines after the end of the Bretton Woods (which took the U.S dollar off of the gold standard, ending up devaluing the dollar worldwide), as well as the failure of negotiations with the “Seven Sisters” (the seven biggest oil companies) earlier in the month. Without question, the “oil shock” of 1973 showed the potential power of Third World energy suppliers in dealing with the “developed world,” and made the Middle East an area of primary world focus that remains to this day.
9. Panic of 1837
This is the first “Panic” on the list, but certainly not the last. These “Panics” are named after the first year each started; for this one, it began in 1837 when every bank stopped payment in gold and silver coinage (after a run on the banks due to the closure of the Second Bank of the United States). What made this one so frustrating was just two years earlier, the government was able to pay off the national debt (the Treasury’s coffers were stuffed from government sales of land in the West). The Panic of 1837 was followed by a five-year depression, and included a large number of bank failures, the bursting of a real estate bubble (sound familiar?), and record-high unemployment levels.
8. Kennedy Slide (1962)
When President John Kennedy took office in January 1961, the stock market had been on a steady rise that began in the late 1940s. In fact, many spoke of the “soaring Sixties,” believing that the bull market would last. It didn’t. The bear market that began in December 1961 caused a 22.5% drop in the S&P 500 by June 1962. The name “Kennedy Slide” comes from the fact that many blame this bear market on Kennedy’s domestic difficulties in getting legislation through Congress, as well as his foreign policy difficulties (read: Bay of Pigs).
7. 2001-2002 Recession
In 1999, the growing use of high-speed internet by individuals and businesses meant that if you had “dot com” at the end of your business name, you didn’t need no stinkin’ business plan. Get a catchy name and the venture capital would follow, and you’d make a ton of money on the IPO. That was, of course, until potential investors started demanding silly things like actual business models. Beginning in March 2000, the stock market began wising up, and the “dot com bubble” fully burst in 2001. Ultimately, this wiped out a whopping $5 trillion in market value of technology companies from March 2000 to October 2002. What made this recession go deeper were the massive layoffs and “jobless recovery” in the time after the attacks of September 11, 2001. What stopped it? The dropping interest rates and freely available credit that fueled the housing bubble of the 2000s – see number 2 on this list.
6. Panic of 1819
Our second “Panic” of the list, this was the first major financial crisis faced by the United States (although the previously-mentioned Panic of 1837 was the first actual financial depression, technically speaking), and marked the end of the economic expansion that had followed the War of 1812. There are different schools of thought as to what caused this Panic. Some say it was simply the first “boom and bust” cycle experienced by a young country, and was inevitable. Others refuse that explanation, taking the position that it was a combination of inflation and public debt (from the War of 1812 and the Louisiana Purchase). No matter which school is right, one thing was for sure – whatever caused it made a gigantic mess. Banks throughout the United States failed; scores of home mortgages were foreclosed and property values dropped. In addition, the falling commodity prices severely hurt agriculture and manufacturing, which had the effect of triggering widespread unemployment, which rose as high as 75% in some parts of the East Coast (to put this one statistic in perspective, the Great Depression’s peak unemployment rate was about 25%). The country did not recover from this one until 1824.
5. Panic of 1873
Sometimes called the “Crisis of the Gilded Age,” this Panic had much of its start in Europe, where cheap mortgages spurred a residential real estate bubble (what is it with these recurrent real estate bubbles??) that, as with all bubble bursts, did not end well. When the bubble did burst, bankers in London tightened their credit terms, which triggered a financial crisis in the United States. The European credit tightening meant trouble for U.S. banks, which were already overextended because of the many speculative loans that had been made to railroads and railroad-related real estate. As a result, more than 10,000 businesses failed, and the U.S. endured a three-year financial depression.
4. The Bankers’ Panic of 1907
The Bankers’ Panic of 1907 (also known as the “Knickerbocker Trust Panic”) began with the lack of regulation that culminated a severe Wall Street crash. A loss of confidence among bank depositers , combined with the retraction of market liquidity by a number of New York City banks, ended up resulting in a 50 percent drop in the stock market from where it had been in 1906. To put the effect of this one in perspective, just remember that this Panic was the reason that the Federal Reserve and the modern system of financial regulations were created. Some would argue that, 100 years later, we did not learn from the lack of regulation of financial markets and “creative” financing vehicles.
3. Panic of 1893
This Panic was the worst economic crisis in American history to that point (and you’ve seen all the previous Panics listed already, so this is really saying something). Some argue that this was just a continuation of the Panic of 1873 (with the era being known as the “Long Depression”). However you look at it, there is no question that the 1880s had been a period of significant economic expansion, but it was driven heavily by speculative investment in railroads. In a nutshell, an ever-growing credit shortage created panic, which resulted in a depression. The result? 15,000 businesses, 600 banks, and 74 railroads failed. In addition, there were incredibly high levels of unemployment.
2. Mortgage Crisis of 2007
I think we’re all pretty familiar with this one, so let’s not over-discuss it just yet. It would be nice if this current crisis were not so high on the list. Let’s just hope it stays at number 2, eh?
1. Crash of 1929/Great Depression
This is the granddaddy of them all – the one that sent the entire world into financial crisis. The stock market crash of 1929 had several causes: an unbalanced world economy, European nations that were staggering under tremendous burdens of debts and taxes, and a speculation boom in the late 1920s that moved the prices of corporate stocks to levels ridiculously far above the real values. At the height of the Great Depression in 1933, 24.9% of the U.S. workforce (a total of 11,385,000 people), were unemployed. Moreover, even though farmers were not technically “unemployed,” the extreme drops in farm commodity prices resulted in farmers losing their farms and homes to foreclosure. Despite the efforts of the federal government through the New Deal, it wasn’t until World War II that the U.S. finally pulled out of this one. Many are comparing the current crisis to the Great Depression, but others say that we are nowhere near the troublesome Depression levels (such as unemployment). However, it can be noted that the 1929 Crash was preceded by the bursting of real estate bubbles in Florida and Southern California. You can draw your own conclusions.
References: http://akorra.com/2010/03/03/top-10-worst-financial-crisis-in-u-s-history/
Tuesday, September 7, 2010
Hi
Details about us before we are going to share knowledge together.
Jeffrey Jee Kar Jung
email: jeffrey_mmu@hotmail.com
facebook: facebook.com/jeffthejeff
Alvin Foo Phang Shen
email: thematrix_89@hotmail.com
facebook:facebook.com/alvin
This is the first time for me, Jeffrey to create a blog.. so do hope you guys will gain some knowledge from our posts. We are having lots of interest and fun by founding out many information from you all.
Have a enjoyable semester with Mr. Rodney and classmates.
Jeffrey Jee Kar Jung
email: jeffrey_mmu@hotmail.com
facebook: facebook.com/jeffthejeff
Alvin Foo Phang Shen
email: thematrix_89@hotmail.com
facebook:facebook.com/alvin
This is the first time for me, Jeffrey to create a blog.. so do hope you guys will gain some knowledge from our posts. We are having lots of interest and fun by founding out many information from you all.
Have a enjoyable semester with Mr. Rodney and classmates.
Thursday, August 26, 2010
Hi everybody
My name is Jeffrey Jee and I am currently taking Management and Marketing for the last semester. My another partner for this blog is Alvin with broken leg. He is taking Marketing for the last semester too. We glad to share knowledge together with all of you and Mr Rodney. Looking forward to all blogs and have a interesting semester.
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