Leading Lipstick Indicator vs Harvard MBA Indicator

Beauty industry insiders believe that sales go up when the economy goes down. The theory is that people turn to less extravagant indulgences (like say, lipstick) when they’re uncertain about the future. Leonard Lauder coined a name for this phenomenon after lipstick sales doubled after Sept. 11 – the Leading Lipstick Indicator – and while the name is a bit tongue in cheek, the correlation between cosmetics sale and economic woes seems to be strong.

The bad news? Cosmetic sales are up 40%.

What Does Harvard MBA Indicator Mean?

It’s a long-term stock market indicator that evaluates the percentage of Harvard Business School graduates that accept “market sensitive” jobs in fields such as investment banking, securities sales & trading, private equity, venture capital and leveraged buyouts. If more than 30% of a year’s graduating class take jobs in these areas, the Harvard MBA Indicator creates a sell signal for stocks. Conversely, if less than 10% of graduates take jobs in this sector, it represents a long-term buy signal for stocks.

Investopedia explains Harvard MBA Indicator

Started and maintained by consultant and HBS graduate Roy Soifer, the Harvard Indicator gave sell signals in 1987 and in 2000, which were both terrible years for the stock market. The esoteric indicator is meant to represent long-term signals based on the relative attractiveness of Wall Street jobs. The more grads that are enticed to go there, the more bloated Wall Street becomes and the more likely the market is nearing a top. When stock markets are doing poorly, fewer grads want to enter the sector.

This indicator runs on a similar theme to the old market adage that when everyone else is looking to get in, it’s time to get out.

What Does Harvard MBA Indicator Mean?A long-term stock market indicator that evaluates the percentage of Harvard Business School graduates that accept “market sensitive” jobs in fields such as investment banking, securities sales & trading, private equity, venture capital and leveraged buyouts. If more than 30% of a year’s graduating class take jobs in these areas, the Harvard MBA Indicator creates a sell signal for stocks. Conversely, if less than 10% of graduates take jobs in this sector, it represents a long-term buy signal for stocks.
Investopedia explains Harvard MBA IndicatorStarted and maintained by consultant and HBS graduate Roy Soifer, the Harvard Indicator gave sell signals in 1987 and in 2000, which were both terrible years for the stock market. The esoteric indicator is meant to represent long-term signals based on the relative attractiveness of Wall Street jobs. The more grads that are enticed to go there, the more bloated Wall Street becomes and the more likely the market is nearing a top. When stock markets are doing poorly, fewer grads want to enter the sector.
This indicator runs on a similar theme to the old market adage that when everyone else is looking to get in, it’s time to get out.

Source:
http://www.investopedia.com/terms/l/lipstickindicator.asp

Carbon Trading May Dwarf That of Crude Oil

If carbon cap-and-trade becomes a reality, get ready for a potential multi-trillion dollar commodities market that could sprout up quickly, but not without growing pains.

“I’m estimating carbon markets could be worth $2 trillion in transaction value – money changing hands – within five years of trading (starting),” says Bart Chilton, a Commodity Futures Trading Commission (CFTC) commissioner, who’s also chairman of its energy and environmental markets advisory committee. “That would make it the largest physically traded commodity in the US, surpassing even oil.”

Chilton’s estimate is based on futures activity in commodities. “It’s a fairly reasonable to estimate 10 times the expected cash market,” he says, pointing to a multimillion dollar voluntary carbon market in the US in 2008.

That could mean a carbon emissions market of 60 to 180 million contracts. By comparison, 135 million contracts of light sweet crude oil, 39 million contracts of natural gas and 53 million of all metals were traded on the Nymex in 2008.

“It’s very exciting, the opportunities are really unbounded,” he says. “We’re going to see innovation and really fast and furious growth. The potential for this market is truly impressive.”

US carbon markets are just getting started.

The World Bank estimates the value of global carbon markets jumped from $110 million in 2002 to $126 billion in 2008, while a recent report by New Carbon Finance and Ecosystems Marketplace shows 123 million tons of carbon credits worth $705 million were traded here in 2008.

Thinking Before Doing (Or Pushing Buttons)

Ever heard of Stanislav Petrov?

Probably not—but you may very well owe him your life.

Petrov, a former member of the Soviet military, didn’t actually do anything but that’s precisely the point.

In 1983, Petrov held a very important station: As lieutenant colonel, he was in charge of monitoring the Soviet Union’s satellites over the United States, and watching for any sign of unauthorized military action.

Petrov was stuck working a double shift at a secret bunker, monitoring satellite activity, when “suddenly the screen in front of me turned bright red,” Petrov told BBC News. “An alarm went off. It was piercing, loud enough to raise a dead man from his grave.”

According to the system, the United States had launched five missiles, which were rapidly heading into Soviet territory. The U.S.S.R. was under attack.

All Petrov had to do was push the flashing red button on the desk in front of him, and the Soviets would retaliate with their own battery of missiles, launching a full-scale nuclear war.

“For fifteen seconds, we were in a state of shock,” he told The Washington Post. “We needed to understand, what’s next?”

Though the bunker atmosphere was chaotic, Petrov, who had trained as a scientist, took the time to analyze the data carefully before making his decision. He realized that, if the U.S. did attack, they would be unlikely to launch a mere five missiles at once. And when he studied the system’s ground-based radar, he could see no evidence of oncoming missiles.

He still couldn’t say for sure what was going on, but “I had a funny feeling in my gut,” he told The Post. “I didn’t want to make a mistake. I made a decision, and that was it.”

Luckily for all of us, he decided not to push that button. Later, his instincts were proven right—the malfunctioning system had given him a false alarm, and the U.S. had not deployed any missiles. Thanks to Petrov’s cool head, nuclear war had been narrowly averted, and millions of lives were saved.

Unfortunately, Petrov didn’t exactly receive a heroic reward from the Soviet military: Embarrassed by their own mistakes, and angry at Petrov for breaking military protocol, they forced him into early retirement with a pension of $200 a month. Petrov’s brave act was kept secret from the outside world until the 1998 publication of a book by one of Petrov’s fellow officers, who witnessed his courage on that terrifying night.

Since the book’s publication, Petrov has been honored by the United Nations and presented with a World Citizen Award, and there has been talk of giving him the Nobel Prize.

“I was simply the right person in the right time, that was all,” he said in the upcoming documentary, The Red Button and the Man Who Saved the World.

Source: http://www.divinecaroline.com/22343/84651-prevented-wwiii/2

DOE-Sponsored Test to Evaluate Carbon Storage in Unmineable Coal Seams

The U.S. Department of Energy is sponsoring a new project to help mitigate climate change by providing an effective means to permanently store CO2 in unmineable coal seams.

CONSOL Energy Inc., West Virginia University, and the National Energy Technology Laboratory (NETL) are collaborating in the $13 million field trial, located in Marshall County, W.Va. The site was chosen because of its accessibility, availability, and typical northern Appalachian topography and geology.

Surface Area Required to Power the World

There is a fun website you might enjoy: http://www.informationisbeautiful.net/

Pre-money vs. post-money valuation

So today I was emailed the question,

“What is the difference between pre-money vs. post-money valuation of a VC funded firm?”

Pre-money valuation is how much the firm is worth before the VC invest in your company, post-money valuation is how much it is worth after. Pretty self-explainatory. It is interesting to note that this one of the most important negotiating points as it decides how much stock a VC firm would get in return for the money it gives you. Typically this amount is between 10% and 50% with an expected annual return of 20% or more.

An example

A VC firm invests $10 million in 10 companies for a total of $100 million. Most companies falter but one does really well and after 5 years, makes $50 million.

So today I was emailed the question,

“What is the difference between pre-money vs. post-money valuation of a VC funded firm?”

Pre-money valuation is how much the firm is worth before the VC invest in your company, post-money valuation is how much it is worth after. Pretty self-explainatory. It is interesting to note that this one of the most important negotiating points as it decides how much stock a VC firm would get in return for the money it gives you.

If a company and an investor agree on two terms:

1. a $1 million valuation
2. a $250,000 equity investment

then the latter would be either 20% or 25% of a company’s equity based on the pre-money vs. post-money valuation.  More information here: http://bit.ly/3GrhPZ

Meanwhile, the VC would have an expected annual return of 20% or more.

Timing

If this is indeed the path you want to do down, keep in mind it is a pretty time intensive commitment–it typically takes 6 to 9 months and between 500 to 1000 work hours. Things that need to be taken care of include:

• improving the business plan
• an offering memorandum
• due diligence items
• a targeted investor list

Source

http://bit.ly/H7OCy

http://bit.ly/hJ408

Venrock’s venerable reputation

Venrock is a pioneering venture capital firm formed in 1969 to build upon the fortunes of the Rockefeller family. A compound of “Venture” and “Rockefeller”, the institution currently has $2.2 billion under management. They currently have 24 professionals backing 122 ventures out of offices in Palo Alto, New York City, Cambridge, and Israel.

Crowdfunding Beer Companies & more

A British beer company has launched BeerBankroll.com which is using crowdfunding to start their new brewery company. It is currently recruiting a minimum of 50,000 members, each of whom will contribute $50 in exchange for voting rights on ideas such as the company name, logo, product design, product mix, marketing plan, advertising and sponsorship. It is a model that works better for businesses with people who are passionate about the company–bands, movies, sports clubs.

The benefits are that it allows for alternative financing and word of mouth promotion.

The down side is that it opens up the opportunity for copycat businesses with better financing.

One of the more interesting applications is in community-funded journalism.  A nonprofit called Spot Us has two main components:

1. ask people for story ideas, and
2. ask them to provide funds to defray the costs of producing the story

In the latter case, “the experiment has also raised concerns of journalism being bought by the highest bidder” according to the Times.

More to come on this fascinating business model.

Business Partner Featured on WOR – 710 AM New York, NY

Alastair Ong, my business partner and cofounder of GreenSoul Shoes, was featured on LaunchPad, WOR – 710 AM talk radiothis morning. http://su.pr/6Op4ne. He was talking about our innovative market-based restoration model that connects shoeless kids from around the world with local artisans and American consumers.

Liz and Joan Hamburg host the show and offer expert advice on how to finance your business, market it, deal with employees, and other entrepreneurial topics. It is heard live every Monday morning at 12:40 pm.

The Thomas Jefferson Tombstone Exercise

A great exercise to help guide folks in the next step of their careers might be to write out what you want your tombstone to say.  It was a famous exercise that Thomas Jefferson, one of our most influential Founding Fathers did, which today reads:

“Here was buried Thomas Jefferson Author of the Declaration of Independence of The Statue of Virginia for Religious Freedom And Father of the University of Virginia.”