Eurozone PMI Data 'Points To New Recession'

The eurozone's economy is set to contract by 0.5%-0.6% in the July to September quarter, tipping it into its second recession in three years, a closely-watched survey suggests.

The Markit Flash Eurozone PMI Composite Output Index, which measures new orders in manufacturing and services, was 46.6 in August, compared with 46.5 in July. A score below 50 indicates contraction.

Output declined in both the manufacturing and services sectors, Markit said in a statement.
This is the seventh consecutive month of contraction in the eurozone's private sector.
Rob Dobson, senior economist at Markit said: "The August Markit Eurozone Flash PMI reinforces the prevailing view of the economy dropping back into recession during the third quarter of 2012.
"Taken together, the July and August readings would historically be consistent with GDP falling by around 0.5%-0.6% quarter-on-quarter, so it would take a substantial bounce in September to change this outlook."
The eurozone's economy contracted by 0.2% in the second quarter of the year. A recession is generally defined as two consecutive quarters of negative growth.
Julien Manceaux, senior economist at ING, said: "The composite PMI still indicates a contraction of activity in the eurozone as a whole.
"In our view, this confirms that the decline in eurozone GDP [gross domestic product] in the second quarter is likely to be the first leg of a technical recession."

Public Finances Even Germany, the eurozone's strongest economy, showed an accelerating decline in output, with its Composite Output Index falling to a 38-month low of 47.0, down from 47.5 in July.
German blue-chip companies ThyssenKrupp and Opel are reducing working hours because of weaker demand, while Bosch has announced it is negotiating reduced working hours with its workforce.
The findings contrast with more positive news relating to Germany's public finances, which were back in the black for the first six months of the year, according to Destatis, the country's federal statistics office.
Germany's public accounts showed a surplus of 8.3bn euros (£6.6bn), about 0.6% of gross domestic product, thanks largely to record low unemployment figures.
But Germany's second quarter economic growth of 0.3%, down from 0.5% in the first quarter, could fall further if Markit's surveys prove accurate.
In France, decline in output slowed, with the composite PMI output index rising to a six-month high of 48.9.
However, some analysts saw glimmers of hope in the Markit figures.
Marie Diron, senior economic adviser to the Ernst & Young Eurozone Forecast body, said the data showed "signs of stabilisation" in the eurozone economy and "supports our view that, while probably shrinking further, the eurozone economy is not falling off a cliff".
She added: "The manufacturing surveys for both Germany and France showed better results for the manufacturing sector than last month."

US Growth Earlier, the HSBC PMI survey for manufacturing in China indicated that activity in the sector fell to a nine-month low in August.
The PMI index was 47.8 this month, compared with a final reading of 49.3 in July.
Some analysts said the data indicated that the Chinese government's efforts to boost the economy had not boosted firms' confidence.
Meanwhile, the PMI measure for US manufacturing indicated that the sector saw a slight improvement this month, with the index rising to 51.9 from 51.4 in July.
Markit said that despite the increase - the first for five months - weak export markets meant overseas demand for US goods was subdued.

Source: BBC

Hewlett-Packard Sales Slump Shows CEO Whitman’s Challenge

Hewlett-Packard Co. (HPQ) posted a record (HPQ) quarterly loss and reported slumping sales for personal computers and services aimed at businesses, underscoring the turnaround challenge facing Chief Executive Officer Meg Whitman.
The fiscal third-quarter loss of $8.86 billion includes a writedown for the enterprise-services unit and reflects a 10 percent decline in PC revenue. The company pared the high end of its full-year forecast for profit excluding some items to $4.07 a share, from $4.10, missing the average $4.08 analyst estimate (HPQ) compiled by Bloomberg.
Almost a year into her tenure at the helm of the largest personal computer maker, Whitman is boosting investment in research and development and revamping the PC, printer and enterprise-services units. Hewlett-Packard, which will discuss its 2013 outlook at an analyst meeting in October, is under pressure (HPQ) from rivals such as Apple Inc. in computing devices and International Business Machines Corp. among corporate clients.
“HP seems to have lost share in all of the key enterprise segments,” Abhey Lamba, an analyst at Mizuho Securities USA Inc. in New York, wrote in a research note after the results.
Hewlett-Packard fell 8.2 percent to $17.64 at the close in New York, the biggest decline since August 2011. The stock (HPQ) has dropped 32 percent this year.
The PC market remains weak, and the company is in the “early stages of a turnaround,” Whitman said yesterday on a conference call with analysts.

Windows 8

To help revive the PC division, Hewlett-Packard plans to release a tablet computer running Microsoft Corp.’s Windows 8 software later this year. The device will be aimed mainly at businesses rather than consumers, Whitman said in an interview. The company decided to design a tablet that’s “desirable” to workers while including security and durability features, rather than trying to take on Apple’s iPad directly, she said.
“Make no mistake about it, the consumer tablet market today is an Apple market,” Whitman said. “Our decision was not to just go straight at Apple with a me-too product.”
The company wants to ship the tablet this year, after the October introduction of Windows 8, though it may land on store shelves until next year, Whitman said.
Sales in Hewlett-Packard’s PC division declined 10 percent to $8.62 billion, Palo Alto, California-based Hewlett-Packard said yesterday in a statement. That added to evidence of a slump that showed up in results this week from Dell Inc. (DELL), which forecast third-quarter sales that missed estimates and cut its full-year profit outlook.

Defending Position

Even as she avoids chasing Apple on the consumer side, Whitman said she plans to defend Hewlett-Packard’s leadership in the larger market.
“We’re going to defend our No. 1 position” in PCs, Whitman told analysts. Lenovo Group Ltd. (992) has almost caught up with Hewlett-Packard as the world’s top PC supplier.
Profit excluding costs was $1 a share and sales (HPQ) were $29.7 billion in the third quarter ended July 31, matching analysts’ predictions. The per-share figure also met Hewlett-Packard’s forecast. Earnings excluding some items for the fiscal year ending in October will be $4.05 to $4.07 a share.
Results were affected by global economic weakness as customers take longer to agree to purchases, Chief Financial Officer Cathie Lesjak said in an interview.

Challenging Environment

“It was a tough, challenging economic environment,” she said. “The amount of time it takes to close deals is lengthening.”
One bright spot was sales of servers aimed at helping consumer Internet companies handle the rising tide of data coursing through user-profile pages.
“It’s where all the growth in the market is,” Whitman said on the conference call.
Third-quarter revenue declined 3.1 percent to $8.75 billion in services and slumped 2.7 percent to $6.02 billion in printers. Sales also slipped in the servers, storage and networking unit. Software climbed, increasing 18 percent.
In services, IBM has emulated the more efficient models of rivals such as Wipro Ltd. (WPRO) and Tata Consultancy Services Ltd. (TCS) by staffing up in India, said Lamba, who has a neutral (HPQ) rating on the shares. Hewlett-Packard hasn’t done so, he said.

Cutting Jobs

Whitman is cutting 27,000 jobs over two years and plans to invest in areas including security, cloud computing and data- analysis software. She’s also dismantling the acquisitions (HPQ) of Electronic Data Systems Corp. and Palm Inc., which were made by Mark Hurd, who was CEO from 2005 to 2010.
The company had said on Aug. 8 that third-quarter profit would be $1 a share. The company also said at the time that it would write down the value of its enterprise-services business by $8 billion, and take a higher-than-expected $1.5 billion to $1.7 billion charge for early retirement packages offered to workers.
The company is eliminating 10,000 to 15,000 jobs from the enterprise-services unit as part of the job cuts. The writedown reflects the dwindling value of EDS, bought by Hurd for $13.2 billion in 2008.
About 11,500 workers will leave Hewlett-Packard by the end of October, and the company plans to spend the savings on new software for its employees, cloud computing services, and “rainy day funds” to help bolster profits, Whitman said in the interview.

Source: Bloomberg

Why Bank With Trust Bank?

In the year 1997 when Trust bank came into being there were just 5 banks in The Gambia. Most of these banks were located in the greater Banjul Area and the total number of bank branches did not exceed 20. Bank head office branches closed for the day at 1300, their branches closed at 1230 and reopened from 1600 to 1830. Computerization was already a reality but neither widespread nor versatile.
The market was far from saturated and the banking industry had all the hallmarks of a sellers’ market. Customers had limited choice and had to accept most of what was dished out from the banks irrespective of its suitability or the lack of it. There was limited scope for telecommunication and interaction between the bank and its customer was more transactional than customer-centric. The product range of banks was very limited because banks were more preoccupied with efficiency from their own perspective than providing specifically targeted products to satisfy customer needs.
Financial sophistication was not very high and customers made very few burdensome demands from their banks.
These were the realities of the banking industry on the day that Trust bank was born when we made a solemn, sincere and very challenging pledge to become a highly successful Gambian bank offering world class products and services brought to the doorstep of our customers.
Since then we have worked diligently and persistently to make this promise a reality. We know that a lot of work still needs to be done but today we are proud to say that our bank has played an incomparable and unparalleled role in changing the financial services landscape of The Gambia. In so doing we have given our owners excellent returns, become the highest employer in the industry and contributed immensely to the socio-economic development of this country while always staying true to the values that we have held since inception which have so endeared us to the market. Today we are open for business from 0800 to 1600 (Monday to Friday) and 0900 to 1300 on Saturdays.
Today we operate from fifteen branches spread all around the country with a presence in almost all the regions.
Today we have a robust online banking platform that allows access to our services through the internet.
Today we have 10 ATM machines in 9 of our branches and a 10th one strategically located at the Kairaba Shopping Centre on the Kairaba Avenue.
Today we have a Point of Sale payment system that allows our customers to effect payments by swiping their Quick Cash card through terminals installed at selected partner merchants around the Greater Banjul Area.
Today we have the Trust Bank SMS Banking service, the most comprehensive and resourceful of its kind in our sub-region.
Today we have the Trust Alerts that send an automatic SMS or email to a customer whenever there is any transaction on their accounts. The feedbacks we have received from the market suggest that this one is fast becoming a crowd favorite. It gives the customer the assurance that he will be the first one to know whenever there is any movement in or out of their account. Information is power and with the Trust Alerts we have really raised the bar in our quest to empower our customer with real time information.
Today we have the Trust receipts which, not only provides information but does so in a way that tells our customers that their money has reached its intended destination without a shred of ambiguity. Fraud and wrong entries have always been an undesirable part of banking reality and it is incumbent on all well-run banks to continuously reassure its clientele as to our unwavering commitment to our fiduciary responsibility. With two diverse bodies like the Central of The Gambia and The Ghana Stock Exchange regulating our activities, our customers continue to be reassured of our standing. In the same vein we look at our conventional receipts and the Trust receipt as an additional source of comfort.
Our bank continues to provide core banking products with more and more commitment and conviction just like the automobile industry continues to provide vehicles that take you from A to B. Also, just like the mobile phone industry makes it possible for us to make and receive calls.
With both of these industries additional features have provided safety, comfort and convenience although not necessarily part of their core product. In the same vein our bank remains passionate about its core activities and there is no doubt that the cumulative effects of the augmentations witnessed since our inception has made us unrecognizable from the Trust Bank of 1997. We believe strongly that this passion will propel us to a level that, the Trust Bank of 2020 will be positively unrecognizable from that of 2010.

Mission Statement

Our mission is to be the leading bank in The Gambia by operating a profitable banking institute, which meets the needs of all local, international, corporate and individual clients and returns excellent results to our shareholders.

To achieve this, we shall continue to set new standards by delivering quality services and innovative products with an inspired team dedicated to serving our Customers, Environment and Community at large in the most caring manner.

Source: Trust Bank Ltd

The Ghost Of Lehman Brothers Still Haunts Real Estate Investors

It wasn't a big private equity firm or luxury developer. Rather, it was the estate of Lehman Brothers, which is still making deals nearly four years after its demise. In the past year, it paid $3 billion to take over Archstone from its creditors, and it is now preparing to take the firm public.

The failed bank still has condos, hotels and mortgages in its portfolio, which it values at $12.9 billion, according to Bloomberg. And instead of going quietly into liquidation, Lehman has been reminiscent of the aggressive firm that gorged on subprime assets as it continues to buy.
“The entire strategy was ‘don’t put yourself in a position of having to sell',"Jeffrey Fitts, Lehman’s head of real estate, told Bloomberg. “If you’re selling with a gun to your head and people know it, you’re dead and you will leave hundreds of millions of dollars on the table."

Lehman is betting that it will be able to sell its assets for higher prices as the real estate market recovers. It plans to pay creditors $53 billion, or 18 cents for each dollar owed by 2016, said Bloomberg. Lehman's assets range in size and area. They include Manhatan's On the Avenue Hotel, which Lehman took over for $191 million last June, a ski-and-golf resort in Montana, 73 condos at a Ritz-Carlton in Hawaii and development parcels in Arizona.

Source: International Business Times

S&P 500 Up For Sixth Week; Fear Index Hits Five-Year Low

The S&P 500 held near a four-year high on Friday, and the market's key gauge of anxiety sank to its lowest since 2007, suggesting a belief that the problems stressing investors might be closer to a resolution.

The Nasdaq outperformed the broader market as Apple shares reached an all-time high. The CBOE VIX volatility index (.VIX) hit a 5-year low of 13.43 before closing down 5.9 percent at 13.45.

The S&P 500 made a solid move above the closely watched 1,400 level in the last session, posting its biggest gain in two weeks. But trading volume remained low.

"From a sentiment point of view, the market has little to inhibit it from proceeding higher," said Ralph Edwards, director of derivatives strategy at ITG in New York.

"The best rallies are, of course, the broadest, so it makes sense to view, in real-time, the stocks that are propelling the index so as to make sure that the advance is not just being carried on the shoulders of one sector. Here, the news is also good."

Edwards noted that 47 S&P 500 stocks in all industry groups except for utilities have recently hit a 52-week high, among them Home Depot Inc (HD), PepsiCo Inc (PEP), Chevron Corp (CVX), SunTrust Banks Inc (STI), Covidien Plc (COV), 3M Co (MMM), Google Inc (GOOG), CF Industries Holdings (CF) and Sprint Nextel Corp (NYS:S).

With few news headlines and light participation during summer holidays, traders are increasingly taking their cues from market technicals. The S&P 500 needs to close above 1,41904, the index's April high, to make a new four-year high.

Shares in Apple Inc (AAPL) jumped to an all-time intraday high of $648.19 earlier in the session. The stock ended up 1.8 percent at $648.11. The Broker Jefferies raised its price target on the stock to $900 from $800 and gave it a 'buy' rating.

But Facebook shares continued to slide after the expiration of a lockup period on some of the company's stock following its initial public offering. The shares fell as low as $19 a share on Friday.

Groupon Inc (GRPN.O) also slumped to a new low on Friday after Evercore Partners analyst Ken Sena downgraded shares of the largest daily deal company and set a $3 price target on the stock. The stock closed down 5 percent at $4.75, after falling as low as $4.51.

The Dow Jones industrial average (^DJI) was up 25.09 points, or 0.19 percent, at 13,275.20. The Standard & Poor's 500 Index (^GSPC) was up 2.65 points, or 0.19 percent, at 1,418.16. The Nasdaq Composite Index (^IXIC) was up 14.20 points, or 0.46 percent, at 3,076.59.

For the week, the Dow was up 0.5 percent, the S&P 500 was up 0.9 percent and the Nasdaq was up 1.8 percent.

The S&P 500 has risen 2.8 percent in August and about 11 percent since a year low in June as traders eye some encouraging U.S. jobs data and highly anticipated policy meetings at the European Central Bank and the Federal Reserve in September.

The economic data on Wednesday was mixed, leaving investors wondering if the recovery was real.

The Thomson Reuters/University of Michigan consumer sentiment survey for August showed the main index rose to its highest since May to 73.6, buoyed by sales at retailers and low mortgage rates.

Separately, the Conference Board said its leading economic index climbed 0.4 percent, reversing a 0.4 percent decline in June and pointing to slow growth through the end of 2012.

"It's interesting because we've had this mixed bag from the economic data. Today's is a good step and yesterday was a little disappointing, with the housing data, so we are all just kind of wondering, is this recovery real?" said Ryan Detrick, senior technical strategist, Schaeffer's Investment Research in Cincinnati, Ohio.

Trading volume, which has been meager over the past several sessions during a seasonally slow period, was at 5.3 billion shares on the New York Stock Exchange, the American Stock Exchange and Nasdaq.

This week has seen the lowest and second lowest full-day trading volumes of the year.

The low was hit on Monday with just 4.54 billion shares on the Nasdaq, the NYSE and the Amex, about two thirds of the daily average this year.

The S&P rallied for six days through August 10, boosted by the anticipation of more actions from central banks in the United States and euro zone.

The S&P 500 rose to a four-month peak on Thursday after comments from German Chancellor Angela Merkel reinforced investor expectations for action to tackle the euro zone debt crisis.

Gap (GPS) advanced 4.8 percent to $35.99 after the clothing retailer posted a higher quarterly profit and raised its full-year forecast.

Marvell Technology Group Ltd (MRVL) dropped 14.1 percent to $10.54 after the chipmaker posted second-quarter earnings and said current-quarter results may miss expectations.

Source: Yahoo Finance

European Economy Slumps In Q2

The eurozone economy stumbled through the second quarter with a modest decline in gross domestic product, according to preliminary estimates released Tuesday, but Germany trumped expectations as a bright spot in the zone.
GDP for both the nations that use the euro and all 27 members of the European Union fell by 0.2% in the second quarter, compared to the prior quarter, according to a flash estimate from Eurostat, the EU's statistical office. In the first quarter, the eurozone GDP was unchanged and the EU-27 GDP grew by 0.1%.
Germany's GDP rose 0.3% compared to the prior quarter, while the French GDP was flat. Both figures beat expectations.
Deutsche Bank analysts Colin Tan and Jim Raid said the markets were expecting a 0.2% decline in the eurozone, a 0.2% gain for Germany, and a decline of 0.1% for France
"The German economy has once again escaped the technical recession many other eurozone countries are currently experiencing with no more than a fright," said Carsten Brzeski, senior economist at ING. "In fact, the economy remains the strongest of the eurozone."
But Brzeski said that German growth could slow down in the near future, since new orders from its European neighbors -- a big part of the German economy -- are drying up.
"The safety net of richly filled order books and low inventories have become thinner very rapidly, not boding well for growth in the second half of the year," he said. "We should not get carried away by a seeming invulnerability of the German economy."

Source: Cnn Money

The Gambian Man Who Made Millions Without A Business Plan

The Gambia’s Muhammed Jah clearly remembers the day, in the late 1990s, when a friend told him that he was going to the airport to pick up a consultant who was coming to teach his department a word processing application popular at the time, WordPerfect.

“I said: ‘How come we have a consultant coming all the way from Europe just to teach our people how to type a letter on a computer?’” MrJah told the BBC’s series African Dream.

“That was funny but serious to me, and there and then I decided that I was going to start teaching people computing.”

QuantumNet, the company that he set in motion with four employees, now has more than 300 information technology (IT) professionals on its payroll and, according to his estimates, is worth around £100m ($156m).

For him, that is no mean feat. After all, MrJah - whose father was a school teacher - was the first in his family to go into business.

It all started when, having finished school in The Gambia, he got a scholarship to do a diploma in Islamic Studies in Saudi Arabia.

He says that although the stipend was very generous, he lived frugally and saved money - including the funds he had for holiday flights home - to pay his way through university.

He then read for a degree in Electronics and Communications engineering at the University of Sierra Leone.

When he returned to The Gambia, he considered working as an engineer but then saw - thanks to his friend’s illuminating trip to the airport - that there was an opening for computer entrepreneurs in the country.

No business plan

“When I finished my studies in Sierra Leone, I had money left over from what I was saving in Saudi Arabia, and I also had a family loan, from an uncle of mine, but I remember I started my whole business with about $16,000 which enabled me to buy a few computers to start a training centre,” MrJah told the BBC Africa’s Victor Okhai.

“My business instinct showed me that there was an opportunity so I quickly transformed myself from pure engineering to computing which is almost the same, so I did a few courses in computing to give to my people what I had learned.

“Though I don’t have a PhD or a Master’s degree in computing, at that time I didn’t need that high level to teach people how to type or how to use Excel.”

MrJah said that he felt he had received so much from his country that it was time to give something back.

But when he started out, he did not have a business plan - “I didn’t have time for that,” he said.

“I went straight into the business. I bought some machines, started training people, a lot of them for free because when you teach people for free, even though they’re not paying you, they’ll bring you people who will pay you.”

In 2006 his training centre became the QuantumNet Institute of Technology which, according to MrJah, is one of the biggest private institutes in The Gambia.

It offers a series of IT courses, from basic to advanced levels, including a diploma programme in Computing Science and Business Management, delivered in partnership with the University of The Gambia and Saint Mary’s University, in Halifax, Canada.

From computers to cars

The firm, which was one of the West African country’s internet pioneers, gradually expanded into selling products and became a distributor for companies such as Dell, Samsung, and Nokia.

“Two-and-half-years ago, I decided to move into telecom proper by investing in the first 3G mobile telecommunication company in The Gambia which is QCell,” the entrepreneur said.

QuantumNet is now a group of companies which has also gone into the car business - distributing, amongst others, Mercedes-Benz.

MrJah - who has won a number of national and international awards, including Gambian Businessman of the Year three times - says that he tries to avoid borrowing money or using credit because interest rates are usually too high, often more than 20%. So he prefers to grow the business slowly and to add products when he can afford to do so.

“If I had the finance at the right price 20 years ago, I would have probably been where I am today 10 years ago. But then, based on the type of person I am, I would rather reach my goal in 18 years than to fail in five years,” he pointed out.

According to MrJah, the biggest risk he ever took was venturing into the internet business because at the time The Gambia only had one telecommunications company (or “telco”, as people in the industry call them), the state monopoly Gamtel.

“Overnight, you have this young boy - with no money - just deciding to compete [against] that telco in delivering internet services. And, remember, the internet gateway was owned by that monopoly and I’m supposed to buy bandwidth from them and compete with them on the retail.

“But the government telco was operating on normal government working hours, from 8.30am to 4pm. For me, as a small internet service provider, I was operating 24 hours and this is how we captured the clientele,” he explained.

Marriage

He has not only competed with the government, he has also worked with it, in both a formal and an informal capacity, as an advisor on IT issues. He sees this as part of the role of the private sector.

The Gambia now has 90% mobile phone penetration rate and a very good internet access.

A new internet cable is due to reach the country in October 2012 and MrJah’s company has bought the most private shares in this public/private partnership.

This new venture is core to QuantumNet’s expansion plans, as the cable will improve internet speeds in the country and make things like video conferencing easier.

MrJah believes there will be more opportunities for young Gambians to build businesses around the fast internet that the cable will provide.

He says that when he was starting out, it was “madness” for bright graduates like himself not to seek a job with the government, since most opportunities were in the public sector.

Now most young people dream of setting up their own companies. Technology has changed everything. The private sector has overtaken the public, and this is the way MrJah thinks it should be.

He would advise young people to be disciplined, honest and hardworking. He says that the main challenges he faced at the beginning were social attitudes, like getting employees to come to work on time, to be well organised and show good customer service skills.

He also points out that young entrepreneurs should start moderately so they can learn along the way. “Big mistakes can cost big,” he says.

Mr Jah, who this year is 43, speaks fondly of his younger employees.

“The greatest satisfaction to me is when I start seeing my employees moving from bachelorhood to marriagehood. When we meet at our yearly family parties I feel very good because I see that, with the small steps I have taken, I’ve managed to change a few people’s lives, and I think I can do more."

 Source: Daily News

Reasons For the failure Of Internet Companies

Do you want to own a company that analysts value in the millions, with a product used by people all over the globe, which becomes a cultural phenomenon overnight? Start a social media site. The past decade has seen a new class of dotcoms that offer people a new way to connect to each other and spread information, and coupled with the massive proliferation of mobile technology, these startups have become a ubiquitous presence in the daily lives of people worldwide.

While the omnipresence of social media may give the uninformed the impression that they are massive "cash cows," the fact is that many of these companies fail to maintain a sustainable following after a few years. Why do some of these social media sites, which once monopolized the social media landscape and attracted the eyes of many hungry investors, crash and burn? Here are a couple examples of sites that are significantly less popular today than they were five years ago, along with some reasons as to why these sites lost momentum.

Digg.com
For starters, many dotcoms (which include social media sites and app developers) fail to develop loyal customers. Despite the Internet being a forum for innovation, users can be surprisingly sensitive, and often hostile, to change. For example, some news came out in July concerning Betawork's $500,000 acquisition of digg.com. For the uninitiated, Digg is a community in which web content is shared and recommended through a system of voting, with the highest-rated content rising to the front page and thus receiving the most traffic. At its peak, Digg netted visits ranging somewhere in the ballpark of 236 million hits a year. When Digg was at the peak of its popularity, Google was in talks of acquiring the site for approximately $200 million in 2008, making its then-CEO Kevin Rose an instant celebrity.

Cut to four years later and Digg's traffic is significantly lower, with average visits now at a mere fraction of what they once were. What happened? Critics have argued that Digg lost a significant chunk of its activity due to issues regarding the overall user experience. The biggest issue concerns the fourth redesign to the site, which suffered from numerous bugs and glitches - culminating in a migration of visitors to Reddit.com.

MySpace
Perhaps the most notable example of a dotcom losing popularity by ruining its user experience is MySpace. This website was the darling of the Internet before Facebook and Google took the spotlight. In 2006, MySpace attracted more users in the United States than Google. In 2005, News Corp. purchased MySpace for $580 million, which given its share of the market at the time, was seen as a smart buy for News Corp. In 2011, News Corp. sold MySpace for just $35 million. Again, what happened?

Users stopped visiting. Some of the reasons behind the exodus from MySpace include issues with security and most notably the abhorrent visual pollution that arose when MySpace allowed users more flexibility to individualize their pages. While granting users the freedom to customize designs can be an attractive way to market a product (see: Converse Shoes), in the case of MySpace, increased customization resulted in pages becoming virtually inaccessible, many often crashing upon visitation due to the poor use of code that users were able to embed when tailoring their pages.

Will We Ever See a Blue-Chip Web 2.0 Company?
While this frequently touted web 2.0 period has transformed global culture into one that embraces constant connectivity, the financial longevity of the companies born in the past few years still remain to be seen. Investors who endured the turbulence of the late 90s dotcom bubble are undoubtedly the first (and perhaps the most vocal) critics of this new wave of companies with bold ambitions but thin financials - and justifiably so.

Early dotcom companies operated on venture capital while offering their products for free in hopes of later profiting from brand recognition. Now, many companies have adapted business models wholly dependent on ad revenue (such as Facebook), with some companies offering additional content access - or simply the removal of ads - for a small premium, while offering services to consumers free of charge.

The primary purpose of a business is to provide a good or service in exchange for money, and many web 2.0 companies fail to fulfill half of that equation. The Nasdaq 100, an index comprised of 100 of the largest companies on the exchange, is full of tech companies, many of which operate under this simple financial formula. Even companies such as Blizzard Activision and EA Games, which debatably provide no economic benefit to their consumers, provide a tangible good. Though they may not grace the ranks of the DJIA anytime soon, questions regarding their ability to generate revenue are far from the mouths of critics.

Unlike video game companies, where the product is video games (obviously), the product for social media sites is you. Without charging members use of services, social media companies depend on targeted ads located in the margins of pages to earn profits. Thus, without your information and eyes on the page, the company loses money. If the site fails to maintain a strong user experience, or becomes unfashionable to use (such as Digg and MySpace), the decline in traffic equates proportionally to the decline in ad revenue. A company with revenue streams that sensitive to trends is unlikely to last.

Source: Investopedia

Three Ways To Invest In A Volatile Environment

The economy has slowed down and many economists predict continued sluggish growth for a considerable amount of time. There has also been mention of a double dip recession and how the European crisis may push the entire global economy into a dire situation. This has caused quite a bit of volatility as news has caused rapid spikes and drops in the market.

As an investor looking at a long time horizon, you may wonder when the right time to invest in the stock market is (if you haven't invested already) or whether to get out of the market until the economic environment has more clarity. The problem with this strategy is that it is very difficult to accurately time the market and many studies have shown that if an investor misses the beginning of a bull market, their long-term returns will be sub-par. So the key is to stay in the market and manage risk by adjusting your exposures. But how?

Well, there are several mutual funds and ETFs that have much lower volatility than other funds within the same asset class. The majority of these mutual funds are in the alternative space. But in the ETF world, there are several ETFs that can be great ways for investors to participate in the stock market and still be able to sleep at night.

The Easily RepeatableThe PowerShares S&P 500 Low Volatility Portfolio ETF (SPLV) is based on the S&P 500 Low Volatility Index. It is probably the easiest low volatility index to explain and if an investor really wanted to, they could also duplicate it. Basically, the S&P Low Vol index measures the standard deviation of the 500 companies in the Standard & Poor's 500 Index for the preceding 12 months. It then ranks all 500 companies from lowest standard deviation (lowest volatility) to highest standard deviation (highest volatility). It then assigns a pro-rated share to each stock, based on its standard deviation versus the standard deviation of other stocks; the highest weighted stock is the one with the lowest standard deviation.

The result is that the index typically has only 70% of the volatility of the S&P 500. That means, for every 1% drop in the S&P 500, the S&P Low Volatility index will tend to decline by 0.7%. However, the same may hold true for bull markets. In fact, in a very strong bull market, the S&P Low Vol Index will underperform. In addition to the lower volatility, however, the stocks in the index tend to have attractive yields, which as of June 29, 2012, was 2.87%.

By looking at the underlying sectors, we also notice that there tends to be concentrations in the consumer staples, utilities and healthcare sectors. This makes sense, since these sectors tend to be more defensive in nature and, hence, less volatile.

The Sophisticated MethodologyInvestors can also choose to invest in the iShares MSCI Minimum Volatility Index Fund (USMV), which is based on the MSCI Minimum Volatility Index. This index is constructed using a much more sophisticated optimization process designed to minimize the absolute risk of the index, within a certain set of constraints. These constraints may include replicability, investability, turnover, and minimums and maximums for each stock, sector and country. In many cases, it will not include those stocks with the least volatility, but rather, it strives to create the combination of stocks that together will have the least amount of absolute risk. Needless to say, it would be very hard to explain this to grandma, much less replicate it yourself.

The Dynamic ApproachIn addition to these two funds, Direxion offers a fund that is called the Direxion S&P 500 DRRC Index Volatility Response Shares (VSPY). Unlike the other ETFs, this fund has a set target volatility of 15% and is dynamically adjusted to try to achieve that level of risk. It adjusts its exposure to equities based on the volatility of the S&P 500, increasing exposure to equities when the volatility on the S&P is low and decreasing it when the volatility on the S&P is high.

Source: Investopedia