The top 5 investment mishaps
By Scott Murphy | Thu 29 Oct 15
By Scott Murphy | Thu 29 Oct 15
1. Bite out of the Apple
The names of Steve Jobs and Steve Wozniak are synonymous with Apple - the mighty tech company touted as the world’s most valuable brand. However history has forgotten that there was a third founder of the firm. Ronald Wayne, a 41 electronics engineer was present for the founding of the Apple Computer Company on April 1st 1976.
As a member of the partnership he received a 10% stake in the business and you’d think that today Ronald would be a billionaire. However, sadly for Ronald, he sold his $800 stake just two weeks after joining, receiving a further $1,500 to close the deal. Today, estimates put the value of his share holding at more than $60 billion.
2. Print error for Google
In October 2012, $22 billion was wiped off the value of Google’s share price. Their unfinished results were inadvertently submitted to US stock market authorities, revealing that Google’s latest quarterly results were well below analysts’ expectations with a 20 percent fall in profits. As a result trading of the stock was suspended for several hours, with their financial printer, RR Donelly accepting the blame for the error.
3. The Swiss Franc breaks free
In the aftermath of the financial crisis, and continued economic problems in Greece, considerable volumes of money moved into the Swiss Franc, seen as a safe haven in times of economic uncertainty. This movement was having a dramatic effect, pushing up the currency’s value and crippling Swiss exporters. To remedy the situation, and save exports, the Bank adopted a “currency ceiling” in 2011, pegging the value of the Swiss Franc at a fixed exchange rate of 1.2SFr/€. However, despite announcements that the peg would be defended with “the utmost determination” The Swiss National Bank abandoned the ceiling on 15 January 2015. The move took the markets by surprise, with the value of the Franc rising by more than 30 percent compared to the Euro. The sudden change in policy triggered heavy losses, with Deutsche Bank and Citigroup saying they had lost $50-$150 million on their positions. Consumers in Eastern Europe who had taken out mortgages in the denominated in the Swiss Franc to avoid their own currencies high interest rates suddenly saw vast rises in their repayments.
4. Rogue Trades
In October 2014 a unnamed Japanese broker inadvertently placed an order for shares worth £380 billion - more than the size of Sweden’s economy. The order, for shares in 42 companies included more than half of the shares for the world’s biggest carmaker Toyota, Sony, Honda and Nomura. Luckily for the trader his firm were able to cancel the ‘fat finger’ trade as the order was carried out over-the-counter, allowing time to cancel before completion. At the time market analysts said they were unaware of anyone ever cancelling an order of such size.
5. The 36 minute Flash Crash
6 May 2010 was general election day in the UK, but the excitement of a change of Government was nothing in comparison to the rollercoaster ride the New York Stock Exchange experienced. Over the course of 30 minutes the Dow Jones Industrial Average lost almost 9 percent of its value and 2 billion shares worth $56 billion changed hands. The event quickly gained the moniker of the “flash crash”. The fall didn’t last long – the markets eventually closed down just 3 percent.
The investigation that followed took more than five years, but eventually blamed a London-based high frequency trader who used automated software to create large sell orders that pushed down prices. These orders were then cancelled allowing him to purchase the stock at a lower price.
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