How do you lose R7 billion in a day?

In a world where time is money, how much is six hours worth in trading terms?

Recently, a computer glitch that hit the JSE cost the market an estimated R 7 billion. A journalist from The Times, Robert Laing reported that the problem was picked up at 6h30am and was resolved at 3h10pm. What kind of system glitch takes nine hours to fix? One that should not be repeated.

As an advocate for online commerce and the joys of digital dollars, the crash of Africa’s economic stock-trading powerhouse came as a serious loophole in my argument for e-trade. While e-commerce has tangible trade benefits, for example instant exchange with international traders, immediate access to information regarding market changes and a convenient means of raising revenue in a short-term period, there are also tangible difficulties. For example, a single system glitch can bring the country’s trading share tumbling down, somewhat like a house of cards.

If the biggest trading house in Africa can lose over R 7-billion (from an average of R12 billion to R5 billion) in a day despite extending office hours to 7pm, how can the investors recoup the losses? Unless, they have a few millions sitting around to invest in shares and buy international stocks - they don’t.

Potential stock traders may be put off by the high risk involved in trading, market volatility and trading jargon. Investors sceptical about JSE trading may revert to lower risk investment likes such as property, business assets and government stocks and bonds. But the JSE’s draw card is potentially fast returns on short-term investments. Technical glitches are the last thing our economy needs.

The link between economic power and digital communication could be our greatest advantage but also our biggest shackle. The world trade system could not exist were it not for developments in Information and Communicaton Technologies (ICT’s). However, the stock market is as volatile as the network on which it hinges. The implications for traders could be greater hesitance in investing on the market, considering South Africa’s increasing inflation, plummeting bank stocks and low all share index.

Several notable points spring from the crash.

1. We live in a very small world. The US economic plunge has affected the international economic arena and increased global inflation. The Times reported that a Johannes burg based trader said, “The market is growing more and more nervous that problems in the US mortgage sector are going to trouble the global economy.” Two US mortgage financiers Fannie Mae and Freddie Mac have been tapping into international investor potential to create a safety net for the US mortgage market. They’ve been greeted with scepticism because investors are hesitant to dedicate more funds to the US economy.
2. A glitch in one part of the system may send shockwaves into the world. The global capitalist economy is structured so that trading is highly competitive, but countries form an interdependent network. On the 15^th July, the day of the JSE crash, The Times reported that the world markets fell 1.32% by 11h25am. By the end of the day, “Anglo American was up 3.4 percent and BHP Billiton was up 4%,” says a source from Nedbank Securities. The global market is highly volatile and most market, especially those of developing countries, are sensitive to market changes. The big (capitalist) dogs still reap from trade movements - positive or negative.
3. Learning from disaster is a key success strategy. Chief executive officer of JSE Limited, Russell Loubser, says the JSE crash was caused by network failure, not the exchange’s trading system. He added, “I suppose we have to realise that even the best systems can go wrong. Nasa lost a space shuttle or two and they are the best.” Loubser is right. The National Aeronautics and Space Administration (Nasa) lost a seven-member crew in Space Shuttle Columbia in 2003 and Space Shuttle Challenger in 1986. But in both cases, engineers discovered where the problems lay. The post-mortem anaysis revealed Space Shuttle Columbia crashed because a wing broke and Space Shuttle Challenger, exploded because of booster failure. The precise technicalities of the JSE system failure are still unknown. One similarity between the incidents is learning the lessons of disaster management. Econarch Data Centre Services operational director, Craig Jones says “Disaster recovery is always a learning experience. There is no way to foresee every eventuality.” The JSE will have to review its impact assessment, and decide whether this kind of failure is now worth the cost.
4. Don’t crack your eggs too soon. In international trade relations, caution is key. The JSE network crash came two weeks after a JSE fee-reduction of 7.5% because of growing trading volumes. Traders, who were probably delighted at the initial decision, said the surplus value could have been used to improve the computer system.
5. Don’t put all your eggs in one basket - try three baskets. In late 2007, the JSE brought its IT function back in-house after two years of outsourcing to Accenture. Analysts say the decision had no bearing on therecent crash as the bourse’s CIO, Riaan van Bamelen, was well equipped to deal with the issue at hand. General Manager for service delivery at Continuity SA, Mark Beverly, argues that the JSE would have done a risk mitigation exercise. Had inspectors identified its network as a risk area they would have built in extra surety features. He says: “To reduce their risk, they should [now] do some kind of duplication of their network infrastructure, which is where their DR site comes in. They can triangulate to it, or they can have multiple [data] feeds into their production site [the JSE itself].”

The last time a crash took place in the JSE was in 1996 (twelve years ago) - not a bad track record considering trading withstood Eskom’s loadshedding and xenophobic attacks in Johannesburg. Still, it would be wise to invest in an alternative safety net plan.

Fraudsters, skelms and scoundrels target you online

In the online banking world, paranoia is synonymous with protection.

If you’re mugged on the street, it’s easy to run after the guy who grabs your handbag and screech: “Help! That man stole my bag,” in hopes that a stranger could tackle the skelm and return your valuables. It’s also easy to hold tight onto your bag, look the villain in the eye and scream in startled panic. But fighting crime online is much more difficult.

In 2006, at a forum organised by BMI-T for online banking, Standard Bank’s Herman Singh estimated that the annual cost for consumer crimes alone is $52.6 billion per year. That’s roughly R 420.8 billion.

Scammers have developed new strategies to get hold of your hard-earned bucks through “phishing”. This is when users receive e-mails which link them to a false banking home page. In Johannesburg, Absa’s online bankers have been hit with a new scams where customers receive an e-mail which says funds have been transferred to their bank account. Using verification details, i.e. personal identification number (PIN) and personal information, these scammers gain access to your bank account and withdraw money. Advanced conmen are finding innovative ways to scam clients: they ask victims to provide information to protect them from internet scams. How ironic is that?

TheRandToday.com offers more advice for online banking users:

“If you try to login to your online banking and the username, pin and password you always use fail, contact your bank straight away. If the website design and layout of the banking website you normally use has changed be sure to check with the bank first that they have changed the design on the website. If not, you could have been taken to a ‘fake’ website which will be capturing your banking details.”

Sounds like good advice.

But Absa is not the only South African banking institution vulnerable to online banking scammers. A Cape Town non-governmental organisation (NGO) which banks with Standard Bank was swindled of R90000 rand, which was donated by Swedish donors. The NGO, Novulis Ubutu Institute aims to ” inspire Ubuntu through educational programs that promote personal growth and awareness, one person at a time” and runs projects a project to help schools around Cape Town develop comfortable learning environments”.

So how did Ubuntu’s bank, Standard Bank offer customer support and resolve the problem? They didn’t. Standard has contributed R40000 to Ubuntu - less than half of the stolen money - and issued a statement saying: “All of Standard Bank’s security features prevented the fraud up until this point, the breakdown in the security procedure in this case lies with the mobile operator.” Hm.

The Southern Africa Institute of Fundraising warns fundraising communities of eleven scams which have been doing the rounds. The Bill and Melida Gates Foundation scam for example, tells its recipient that: “The Distribution Committee of the Bill & Melinda Gates Foundation wishes to inform you that a grant of $550,000 United States Dollars has been awarded to your organization to support their overall mission, goals and future projects.” After this, they ask for the organisation’s bank account details so they can transfer the money. This gives them access to the organisation’s online account.

According to the Mail and Guardian, “there has been a 50% growth in spyware , and a 16-fold increase in virus manufacturing over the past three year.” This is cause for concern because online banking is an increasingly insecure means of managing your finances.

The most useful banking tip is offered by director of architecture and technology engineering at Standard Bank, Herman Singh: use the bank’s notification system so you know when there is activity on your accounts. FNB’s cellphone banking system, for example, sends an sms everytime I log on the online banking portal, withdraw money and when money is deposited in my account.

Keep in mind that scammers can also use your cellphone, SIM card, the internet, your e-mail or personal online bank account to get their grubby paws on your cash. But, as my dad said when I complained about FNB’s excessive bank charges on my bank account last month, “When the money’s gone, it’s gone.” Between the bank’s charges and the scamming skelms, it seems there’s little hope for customers to keep a positive bank balance (and attitude).

Are you drowning in paperwork?

I’ve come to dislike paperwork. Hundreds of pages, newspapers, journalism readings, essay drafts and copies of my CV, application forms are piled up on my floor waiting to be read or recycled. I’m scared to enter the room because of the plethora of outdated documents which I have to weave through. One of these days I’ll get around to sifting through these documents and filing them in a way that makes sense. If that’s humanly possibly in this lifetime.

Recently, I discovered a company established to allow us all to reap the benefits of digital communication. In a rush to collect copies of my matric certificate and bursary awards for my application for a bursary which were at home (in Witbank, some 1200 kilometers across the country), I discovered an online service that saves time, effort and money.

Integr8 Fax is an innovative electronic transmission service for individuals and corporate institutions, which immediately links your fax number to your e-mail address. You don’t have to buy hardware or download software.The best part? The service is free. Let me clarify that:

• Set-up is Free
• Installation is Free
• Training is Free
• Support is Free
• The entire inbound solution is Free

It seems like they’ve got a leg up on the South African telecommunications provider, Telkom.

Owner of Intgr8 IT, Walter Bredell says, “If you have no electricity to check your e-mail inbox for faxes, our fax server will store the faxes that were sent to you and release them at a later date when you when you are up and running again”.

In the midst of South Africa’s loadshedding debacle (state-planned blackouts) which had no economic benefits, Integr8 still managed to transmit fax-to-email documents. So whilst small businesses were struggling to survive and business-owners were wondering how they would run the shop each day, Integr8 Fax had no worries because it is based on transmission of digital data, not hardware so it does not rely on electricity inputs.

Integr8 Fax saves copies of all your documents for up to 30 days after the transmission so you don’t have to stress about lost documents. On the one hand, this is great because it means that you can track down missing files or double check contractual obligations on the digital copy. But, on the other hand, if my million-dollar business deal contract were lying around in a server, I’d be concerned about who can access it. If I can access it, well… a very smart, sneaky scoundrel can too. Which brings us to the question of security.

The release for Integr8 Fax says that “all internet fax transmissions from fax server to fax server on the Integr8 Fax Network are encrypted with 128 bit Secure Socket Layer (SSL) across the globe. 128 bit Secure Socket Layer is a “commonly-used protocol for managing the security of a message transmission on the Internet.” It sound really fancy but basically SSL prevents any digital technologies interrupting the transmission of your documents. Wikipedia says that SSL was the predecessor to Transport Layer Security which “provides secure communications on the Internet for web browsing, e-mail, Internet faxing, instant messaging and other data transfers”. Technically speaking, you shouldn’t have any hackers interrupting your digital communications. At least, not yet.

Satisfied clients include Nedbank, computer hardware company IBM and paper production company Mondi, who had this to say:

 Nedbank: “I’ve only had positive feedback from the people and am please to say that there are more staff who requires the facility if this is still available, please advise. Gr8 to see that you are still enthusiastic about your work for showing so much interest, shows that you care.”

IBM: “IBM successfully submitted the proposal for ROSA View 2 this morning and I just wanted to send a note to say a huge thanks for all of your support, effort and sleepless nights in turning this around.”

Mondi Packaging : “This facility is being used extensively and like most technologies not missed unless it stops working. Thanks for making this possible.”

And now they can add my name to their satisfied customers list.

Could wireless be the demise of the happy shopper?

Imagine a world with no queues in the mall. Where customers stroll up and down aisleswith products calling out to them.

A world where chutney hails you because it knows you’re cooking chicken stew for dinner. A world where the products almost place themselves in your hand.

Imagine a world where your fridge let’s you know you’re out of milk, where the closest grocery store is and how much it costs. The future refrigator will “have a built-in computer and a display and be able to access the Internet.  The fridge will be complete with a scanner that records every item that is taken in or out of it.  That way, the fridge’s computer can keep track of what is in the fridge and automatically order the things that its owner wants.”

What if your fridge looked like this?

 

Or imagine this - You’re strolling through the park when you receive a message on your cellphone from the Belson park bench saying: “Hi there! See me on your left? Buy me. You can choose the style you’d like me in to suit your house.”

A world where Manolo Blahniks whisper seductively in your ear: “Come get me. I’m available in your size and your favourite colour. I’m right next to you. Take me now.” They cost R5000. So you think twice.

You continue walking in the mall and receive a message from Macy’s, an American clothing department store franchise, saying: “Buy one pair, save 50% on the 2nd, Kele. Just hop into Macy’s and choose your kinda shoes.”

“That’s more like it,” you think, so you scroll down your cellphone screen and select a pair of casual sandals to match the pants-suit you’re wearing. With a single click on your screen, you buy them and R55 is automatically deducted from your bank account. No cash or coins has changed hands, but you know that in 2 days, you’ll get two pairs of shoes delivered to your doorstep.

 It’s the world of spend spend spend.

Advertising evolves

Advertising has evolved. Canadian economics author, Kierzkowski and co. write: “the emergence of a new customer marketspace is no longer a matter of speculation or hype”. Digital media could enhance personalised interaction with consumers and there are incredible benefits for businesses to make money: “Digital marketing represents the opportunity to customeuse the interaction and tailor either the product or the marketing effort to one consumer at a time; interactive media provides unprecedented opportunities fotr a marketer to ‘relate’ to a consumer.” Right now, South African companies need to get into the digital groove.

It’s only a matter of time. Digital media allows people to speak to one another but it also allows objects to speak to people through blutooth wireless technology. So far, the gaming and entertainment world has grasped the concept of wireless connectivity but, given time, companies could also see the benefits of digital marketing.

Now what if companies could entice you with their information?

Walmer Park, a shopping mall in the Nelson Mandela Metropolitan Area (formally known as Port Elizabeth, South Africa) is already a Wi-fi hotspot.

Wikipedia defines wi fi asthe regular name for wireless technology used in home networks, mobile phones, video games and other media communications technology. Except this is not a home network, it’s a whole mall kitted out with technology that tells you about specific shops with real-time specials on specific products. It’s an alluring way to get your customers attention but it’s also bound to lead to information overload. 

It would be annoying to have every shop tell me about their latest products, services, sales and specials - even if they are personalised. The only time I’d enjoy the shopping experience is when I’m broke. Or I could switch my cellphone off to stop receiving Bluetooth messages. Of coures, that means I’ll also miss all my phonecalls and messages during that time. At least then I’d have peace of mind.

Imagine a world where a frazzled mother in the mall is dragged by her six year old son into a toy shop because he got a message on his cellphone saying: “Hi Timmy, Spiderman The Ultimate Power Game is waiting for you. Come to Toys ‘R Us and catch him!”

Digital marketing can be really good. But it could also be really really bad.

Risk It! Stock-Trading 101

For years, I’ve harboured a dirty little secret on my bucket list (i.e. a list of 101 things I want to do before I die). Smack-dash between item no 25 (buy a private jet) and item no 26 (have coffee with Nelson Mandela) is sky-diving. How does this relate to stock market trading? It’s all about risk-management.

Bid price, book value, bear market… if (like most people), you don’t understand these terms, then you’re probably not an economist, or a stock market trader. So in a bid to simplify my understanding of share portfolios, here’s the Student-Bloggers-Dumb-Ass Guide to Risk-Management (on the Stock Market).

S: Safety first. Make sure you know what you’re getting into.

In South Africa, the beginners guide to the JSE explains why and how you should get involved in the stock-market. Once you’ve registered on site - in the personal finance section - you can access privileged areas of information. Registration doesn’t require an identity number or any form of verification. You can then personalise the daily information that you’d like to receive. I selected Key Indicators such as gold, Platinum, Rand-Dollar, Rand-Euro, All Share index, and Nasdaq (these are the major determining numbers which indicate shifts in the market). The site also offers news baskets -daily news which you can select - and simple charts. All for free!!

K: Keep the tears at bay

 No one likes to take a leap of faith alone so get some help: Not a person - a computer program. The JSE offers a share tracker, so you can see how your (hypothetical or real) investments are performing. For this trial run, I’ve invested in 13 companies including ABSA, Truworths, Edcon, Pick and Pay, AngloGold, The City of Johannesburg, Caxton, Telkom SA and Lesotho Unit. Please note at this stage I’m more interested in share performance on the JSE than it’s business. You can also invest in cities, commodities, oil and gold, large companies and franchises and BEE business-interest.

JSE online also offers company information on listed companies, so it’s easier to research entities you may invest in. For example, a thorough company review of Pick and Pay, an franchised investment holding company which that retails food, clothing and general merchandise in Southern Africa and Australia is available.

You can even download PicknPay Chairman, Raymond Ackerman’s Statement in Microsoft Word format and performance charts.

Unfortunately, you will have to check each company’s data on a separate page. With thousands of public companies, it may be time-consuming and frustrating to keep track so maybe you could invest through local banks.

Not all local banks offer stock-market investments. For example, FNB does not offer online share-trading services but focuses on savings instead. Standard Bank offers a free course on share trading  in all major South African cities. PSG Consultants, an international stock-broking company, also offers free “getting started” workshops for new traders.

ABSA’s meager services allow you to register for online trading in three simple steps, so you have complete control over your shares. But the bank’s online share trading page also warns that short-term investors should not trade unless they can afford to lose some or all of their investment.

Like freefalling, the first step is the hardest. Once you’ve taken the leap then the focus shifts to buying/selling or just maintaining.

Y: Yeehahhhh!

So you’re ready to get going! After all the preparation and research, you’ve got your portfolio up and running, you’ve been keeping updated on its performance and strategizing with other investors. Now what?

D: Don’t give up. It’s important to keep up an eye on your share’s performance if you plan to change any information.

Most local newspapers update their financial pages daily, which makes it difficult to keep track of the overall trends. Also, the newspapers market updates are generally cluttered and confusing for example, the key for acronyms used are placed in a corner on the middle page of the business section. Online market updates use graphs to show trends and information from specific shares you’ve invested in. Business Day’s online local market updates are simple and professional, however information is a bit delayed because it’s in a newspaper. This could affect your stocks negatively. For example, should the market crash, you may choose to sell your shares as fast as possible. A delay in information could limit the possible pool of local and international traders who would be willing to buy your shares and may be aware of it’s value sooner than you are.

I: I’ve made my bucks.

What now? It’s surprisingly difficult to find information on how to cash in your returns from online trading… Watch out for an upcoming post on this topic.

V: Virtual updates.

Sanlam itrade online share trading is an easy-to-use online portfolio website, which allows you to buy/sell shares, share data and create charts from your portfolio.

Sanlam itrade is the online portal which allows you to check your investment’s performance as often as you’d like - provided you’ve subscribed to their services.

Sanlami-trade also lets you know what services they offer on their site.

E: Evolveyour portfolio.

You can get online information on share performance through lots of companies on the internet. You can even receive trade updates on your Google or Yahoo! home page. Online trade is personalised, selective, simplified and uncluttered. But there’s still no guarantee that you’ll make money.

But with online (and mobile) technology, you have the added option of receiving market updates whenever it’s most convenient for you. That’s risk-management.