Cloud computing has been one of the buzz words in recent months as various companies have been putting workforce to compete. We had ourselves wrote about cloud computing as `the next big thing”. Of course, one of the major players in this arena is Google. The threat is serious enough for Microsoft to even be working on a free version of its Microsoft Office to be offered online. That is enough to convince me how seriously companies are taking this.

However, one of the more important critics made towards cloud computing is around the security involved. In a typical company, it is rather difficult for outsiders to get access to important or critical documents as they would usually need either very impressive skills to connect from a distance but usually will need to physically connect from a company pc and get the documents. It happens, but it is rare. And this week, one company got caught in a MAJOR way. It is a company that has been mentionned quite a few times; Twitter. One of the most interesting stories right now in technology. Of course, surrounding the company are many questions about how many users it truly has, how it intends to become profitable, etc.

Many of those questions have now been answered as a hacker has sent “TechCrunch” over 300 files that he gained from hacking into one of the executives emails. Among the findings are:

• the complete list of employees
• their food preferences
• their credit card numbers
• some confidential contracts with Nokia, Samsung, Dell, AOL, Microsoft and others
• direct emails with web and showbizz personalities
• phone numbers
• meeting reports (very informatives)
• internal document templates
• time sheet
• applicant resumes
• salary grid (time for me to move..lol)

How incredible humiliating. TechCrunch and others have since been publishing financial forecasts, infos about future plans for a tv show and a lot more is to come. No doubt, this will have many impacts on the company, all because these documents had been posted with Google’s apps. Now Google is not at fault here from what we know but there is no doubt that it will have a more difficult time selling its “cloud computing” solution. Twitter is a private company and most of these infos should never have made it in the public. Imagine those Google or Microsoft employees who have applied (without success) to work at Twitter.. they might have some interesting meetings with their bosses in the next few days.

Of course, I still believe that Cloud computing will recover and still be the next big thing. But clearly, the solutions offered currently lack security features that are necessary. By the way, Twitter did post an official response, that can be seen here. I don’t know about you, but personally I would not want my company’s documents to be one password away from being published all over the internet.

How do you feel about cloud computing after such an event??

If electronic trading does account for such a high proportion of Goldman’s trading, it is certainly worth looking into as many in and outside of the markets consider this to be a potential danger. To be sure, electronic trading is now the norm and in fact now represents over 70% of trading done on us exchanges by many estimates. Many of the recent critics have said that in such a high tech game, it is now impossible for small or retail investors to compete. And yes, I agree that any small investor trying to arbitrage two markets has pretty much no chance to make it happen on his own. He would need high tech equipment, programmers and good real estate (yes, location does matter when you are talking about hundreds of a second).

But let’s be real. How many small investors are actually investing for a few seconds at a time? Very few in fact. Most investors will buy and hold, at least for a few hours or longer. And in that case, liquidity is important and I don’t think anyone would argue that these electronic traders bring lots of liquidity in the market. Having a bid-ask spread that is less than a cent will be to the advantage of most investors and that will traditionally happen a lot more on stocks that trade electronically. So yes, I do believe that these traders actually do help small investors do well, and certainly would not be the one criticising…at least not because of liquidity!

Personally, I consider the more valid criticism to be about what happens in a crash, as all these electronic programs could decide to sell at once and it would send the market down very very quickly. It might be something to be looked into but considering how the markets were “fairly” calm during the past few months, which were a very good test I would say…do you agree?

“We allow trademarks to be used as keyword triggers in Adwords because users searching on Google benefit from being able to choose from a variety of competing advertisers” said a spokesman of Google. Of course, that defence seems very poor to me as there is no way a company can defend its actions simply by saying it is doing what is best for its users. Can you imagine all those torrent sites and others such as The Pirate Bay trying to defend themselves legally by saying that they are doing it for their users? Seems highly unlikely. Of course, Google will have a lot of other of arguments but I do think that this case should be followed very closely by all Google analysts. Today, the stock barely moved and actually rose 4,01$ to 414.40$ as few analysts give Rosetta Stone much of aa chance to succeed in this case. The story everyone is talking about is really about Google’s upcomming play on operating systems.

So is it the law case that will define Google? Of course not. But I think it is one we should follow closely as it might have an important impact on the search operations of Google, which to date, remain the only very profitable area in the internet giant.

What do you think? Think thaat Google should feel threatened by this legal action?

It will probably take 5-10 years to actually see results on this but it’s true that recent attacks by Google for example on the Office suite (with Google docs) have yet to show much progress and in fact have barely even had an impact on Microsoft’s business. There is no doubt that entering the highly complex world of operating systems will prove much more of a challenge. Google has also ventured into the browser game and while Chrome has some market share, its growth has been a disapointment to many. So this all comes down to analysts predicting that Google will remain a superior company, superior in search that is. For now, Google has very few believers in the fact it could pull off such a major offensive.

But then again, don’t you think that is exactly what Google wants to be? The underdog who nobody gives a shot to? Not too long ago, Google was a tiny company battling it out to try to make a name for itself.  Even its progress in the browser war seen by many as a failure is not seen as such by insiders of the company simply because they know how much time it takes for individuals and companies to switch gears.. and the operating system will be as long of a war as either company has ever seen…

It seems that this programmer has transferred the code and Goldman Sachs is now very worried about the idea of finding the code made available on the internet. This would instantly make hundreds and thousands of institutions aware of how exactly Goldman is trading (on this particular program) and would make it easy to replicate. Of course, once that happens, the program that currently makes millions every year might become a lot less profitable.

The case is certainly interesting but it brings up even more questions. How in the world can a company protect itself from such cases happening. Probably the easiest way is to pay its employees well enough for them not to ever be tempted, but even that has its limits. It is becomming increasinly difficult for companies (not only financials) to protect their corporate secrets as they are always one upload away from a major disaster. I would personally predict that over the next decade we will see many more cases such as this one and that the topic will become increasingly important.

If a trading program or software code can be sent away with a simple click, it becomes very very difficult for companies to monitor the activity an employee and makes you wonder if simple individuals could destroy important revenue sources or even worse, put their companie’s future in jeopardy. Of course companies such as Goldman Sachs in this case will always have the possibility of legal recourse (as they do now), but that still has its limits….

China is certainly the prime example of this censorship as the central government has things fairly in control despite dealing with the world’s largest population. The main way to do this is for the government to have an army looking at websites day after day looking for “illegal content” which could be anything related to Tibet for example. When that happens, they simply block access for their citizens to the server. The tough part is dealing with proxy servers. Those make it possible for users to “indirectly” access websites so really the only way for the government is to block access to those as well. But with hundreds popping out every day, it is quite a task to say the least! Because of this, the government is constantly looking into ways to improve its technologies.

The other big story lately has been Iran, which has undergone much political tension following elections from a couple of weeks ago. With massive protests going on, Tehran was doing its best to not show either its citizens or the world it was losing control. Being new at this, it proved quite a challenge as users found numerous ways to post pictures, videos and texts from the streets of the capital. Having cell phones all over the country of course adds to the challenge tenfold.

This of course raises numerous questions as companies such as Google try to maintain their core while avoiding being blacklisted and then blocked by these governments. There are no easy ways to go about this though as any censorship performed by companies such as Google are doomed (with reason in my opinion) to be heavily critiqued by the entire world and can even lead to reputation issues for such companies! Do you have any thoughts as to how these companies should go about these issues?

I personally believe that it will become more and more difficult for companies to maintain such censorship. It will be easier to make reading outside news difficult but the thought of making it difficult for citizens to express themselves is almost impossible as almost any cell phone or internet connection can be used to spread news and multimedia by even “non geeks”.  Of course, that will probably not stop these governments in the short term but I would still think that regional or national censorship is doomed in the end!

The Wall Street Journal as well as Bloomberg have been reporting news of funds that are putting up huge bets on inflation going out of control, also called “hyperinflation”. Will it happen? Difficult to know. But having an increasing number of very smart people place bets on this certainly is a worrying trend. “Inflation uncertainty is probably wider today than at any time before the financial crisis,” says John Hollyer, co-manager of the $22 billion Vanguard Inflation-Protected Securities fund. “So having that protection in your portfolio is still valuable.”

What are good investments to hedge against inflation? There are many different ways to play it, but the two main ones are:

-Commodities
-Inflation protected bonds

Basically, commodities have generally been known as a good inflation hedge. Why? Because when prices go up, these assets keep their values while other assets can lose theirs. It is mostly because they have concrete value and if prices of everything goes up, owning “stuff” will mean that their value will go up as well

Inflation protected bonds are quite simple. They are bonds issued by the uS government but have one major difference. While the government might issue a bond paying 5% for example, these bonds would pay a differeny payout:

Inflation+3% for example

So yes, if inflation flies to 12%, then the government would be paying interest of 15%, not bad right? So far, the prices that inflation protected bonds (TIPS) are trading at imply a very low expected inflation. Why? Because most investors expect the US government to act on time. When we say government, we mostly mean the Fed. The Federal reserve’s main task in fact is inflation control.The Fed defends itself by saying that the economic law regarding inflation does not relate to the amount of money available but rather:

Money x Velocity

Velocity is the number of times that each dollar is used in one dollar. A few years ago, an individual would borrow to buy a house, then the bank would sell the mortgage to an investment bank, who would sell a repackaged product to investors, etc. But lately, money is not flowing as easily and because of that, the Fed maintains that inflation is still very much out of control. The real task if they are right is to carefully monitor the velocity so that when it picks up, the US starts to withdraw all the liquidity it added into the market… it should make for some interesting next few months and years.

Our top pick remains Baidu.com (BIDU), which as increased over 100% so far this year.

2nd off is Ebay which has returned 22.71% despite some very tough competition

While compared to others we had little exposure to oil, our USO pick has returned a decent 14.59%

And finally, our fourth pick, which has been disappointing but is still in positive grounds, GLD, at 5.39%

Here is the leaders board:

It might not be possible for us to make a difference to the same degree that Greg Carr is able to make. But even helping out by donating time or money can make life out there just a little bit better. And isn’t that what life is really about? I certainly hope that one day I will be able to increase my contribution to the world. There are of course no bad ways to do that. So many good causes, so many ideas and so many problems to be resolved. There are so many good examples to follow and thankfully many of them have been getting good press, not for their egos, but because it inspires people like you and I to do more, and that might lead to something even bigger…

I don’t think there is much to add to this video, let’s keep investing and hopefully make good enough returns to make a difference in the world.. and thanks to 60 minutes for brining such an inspirational story…