Capitalogix

Some Interesting Links for Your Weekend Reading

Let the Buyer Beware ...  What you see at first is not always what you'll see if you look more closely.

 

 

Here are some of the posts that caught my eye. Hope you find something interesting.

Lighter Links:

• Nokia Claims Apple Rigged Siri to Name iPhone Best Phone. (News)
• Everyone Has Been Hacked. Now What? via Threat Level column in Wired (Wired)
• Why Anonymous ‘Might Well Be the Most Powerful Organization on Earth’. (NP)
• Video of the Dalai Lama. "I shout and say harsh words." (Telegraph)
• The Frequent Fliers Who Flew Too Much. The cost & consequences of unlimited first class air travel (Latimes)

 

Trading Links:

• The Commencement Address That Won't Be Given. (RobertReich)
• Economic Alert: If You’re Not Worried Yet…You Should Be. (Alt-Market)
• Japan Shrinking. It now has routinely more deaths than births per year. (WQuarterly)
• Hedge Fund Stars Have a Sixth Sense --They See Dead Countries. (Forbes)
• The Once and Future Dollar. The benefits and drawbacks to the dollar as reserve currency. (The-American-Interest)

Putting Context in Perspective

Can two people look at the same thing, and see something totally different than each other? 

It clearly happens often.  To illustrate, in the following picture, is that 'a cute little fish' or 'lunch'?

 

 

Apparently, it depends on the perspective.

 

Context Changes Your Point-of-View.

When I'm in a meeting, I often assume that the majority of people in the room are on the same page and communicating reasonably well.  Unfortunately, that's probably not likely.

For example, if I said the word "Red", what does that mean to you?

If I asked people randomly, you might guess I'd get answers like: 'hot', 'danger', 'loss', 'important', 'powerful', or even ... "a color". 

The point is, even though we all knew what the word means, we were not all evaluating the word from the same context. The disagreement didn't come from misunderstanding the word, it came from conflicting contexts.

Instead, what if I had said: "What does 'Red' mean in the context of driving?" Then, I suspect, that everyone in the room would have said that it means "Stop".

 

How Often Does That Happen To You?

What about word "Growth"? Does that mean 'top-line', 'profit', 'headcount', 'number of customers', 'number of products', 'number of locations', 'number of orders', or perhaps even 'height'? Without context, it's pretty easy to see how someone in finance, sales, operations, or development might think that they were having the same conversation, while instead they are talking about something slightly different than the other people in the room.

Next time you get frustrated that a simple conversation or agreement is taking too much effort or time, think to move one level higher and agree on a context.

Setting the context makes getting on the same page a lot easier. You can even agree to switch contexts to get a fuller picture.  It makes prioritizing and coming to consensus easier as well.

 

This Applies to the Stock Market Too.

We've seen that people can interpret something as simple as "red" radically differently. Imagine what happens with more complex or subjective concepts.

This helps explain why the markets are so challenging.

 

 

Markets exist and trades happen because of a disagreement between the buyer and the seller. If the buyer didn't believe that price would go higher, it wouldn't make much sense to make the purchase. Likewise, if a potential seller believes that price is going higher, he would be less likely to sell.

How does that happen? Often, they are evaluating the markets from different perspectives or contexts.

 

So Are We in Up-Trend or Down-Trend?

Which way is the primary trend?  Something as simple as this seems objective; but even it is subjective without the context of the time-frame.  Are you talking about the past year, the past quarter, the past month, the past week, today, or the last 100 bars on a chart?

In addition to time-frame ... some other areas for disagreement might include: how you interpret investor sentiment, or how you react to a piece of news, or whether you think you see a particular pattern (which to you implies or predicts a particular outcome) while someone else is responding to a different pattern that they think they see (which to them implies or predicts a different particular outcome).

 

Attempt To See The Whole Picture.

The point is simple, though; different people can look at the same thing and see something totally different from someone else.

It is helpful to identify the areas people are likely to disagree (or use different contexts) and attempt to see things from those perspectives. 

After you've got a reasonably complete picture, all you can do prioritize what's there and do the best you can with what you've got.

Theory and Practice - Sometimes nothing works and no one knows why

I love the moment of discovery, when something unimaginable springs into being.

 

Sometimes frustration or seeming failure is the catalyst for something better.

 

With that in mind, I saw something that made me smile.  Here it is.

 

Theory is when you know everything, but nothing works.

Practice is when everything works, but no one knows why.

Sometimes, however, theory and practice are combined ... that's when nothing works and no one knows why.

 

Here is a Dilbert comic that pokes fun at how hard it is to stay tech savvy these days.

 

 

Facebook Pokes the Public Market - Here are some stats worth glancing at ...

The third largest IPO in history created a whole new network of billionaires.

Facebook's IPO valued the company at about $104 billion, slightly more than Amazon.com, and well above well-known corporations such as Disney, McDonald's and Kraft.

For now, the public value of Facebook puts it at number 23 on the list of biggest U.S. companies, ranked by market capitalization.

 

Here are some other stats about Facebook - from The Daily.

 

 

Related articles

• Facebook Is Worth More Than McDonald's and 4 Other Giant Brands (mashable.com)
• The Price Is Right: Facebook Closes Near Opening Price (allthingsd.com)
• A Day After Facebook's IPO, Mark Zuckerberg Marries! (FB) (businessinsider.com)

Here Are Some Fun Links for Your Weekend Reading

  

Here are some of the posts that caught my eye. Hope you find something interesting.

Lighter Links:

• 8 Angel Investors That Entrepreneurs Should Avoid. (Fortune)
• The NSA Is Building the Country's Biggest Spy Center (Watch What You Say). (Wired)
• CISPA: A Guide to the 'Big Brother' Cyber Security Bill. (The Week)
• The Fiction to Reality Timeline. (AT&T)
• On Tiger Moms. Reconsidering Amy Chua's parenting advice. (ThePointMag)

 

Trading Links:

• Putin Skips G-8 Meet to Signal Displeasure with the U.S. (Bloomberg)
• Nouriel Roubini Says "Get Ready for the Spanish Bailout". (EconoMonitor)
• A Facebook Founder Renounced His U.S. Citizenship. Clever Tax Planning? (Bits)
• Why AT&T and Verizon Are Rooting for Windows Phones. (Bits)
• U.S. Economy Currents. Does the 25% decline in the wholesale price of milk warn of economic slowdown? (SeekingAlpha)

Are You Planning On Getting In On the Facebook IPO?

With Facebook's IPO set to happen soon, I was thinking about some of the other big tech IPOs. 

The first few weeks of trading may not be a good estimate of how successful a company will be over time.  The charts below, from a Mashable post showing how nine tech giants did after going public, highlight that point.

First, here is a normalized index chart showing the initial 15 days of trading for each company.

 

 

Second, here is a chart showing growth to date.  This chart illustrates how much a $100 investment, at the IPO price, would be worth today.

 

 

Some of those returns are surprising, aren't they?

Related articles

• Facebook's IPO Is A 'Bit Slow' And 'Investors Don't Like Some Of What They're Seeing' (businessinsider.com)
• Barron's Goes Negative on Facebook (ritholtz.com)

Some Interesting Links for Your Weekend Reading

Another school year is ending.  That means it is graduation time.

Likewise, it also means we have a group of summer interns starting, and I wanted to convey a sense what's to come.

The L.A. Times reports that, in this economy, only half of college grads are working full time ... with less pay and deep debt.

 

 

Nonetheless, I believe that cream always rises to the top and that we have a bigger future than our past.

Here are some of the posts that caught my eye. Hope you find something interesting.

Lighter Links:

• This Is How Asteroid Mining Will Work. The new Manifest Destiny? (Gizmodo)
• How Does NASA Build Teams? (ExpertAccess)
• Top 13 Infographics that Mock Infographics. (SaveDelete)
• Design Thinking. Iterate prototypes through failure cycles as fast as possible. (FastcoD)
• Window seat to North Korea - YouTube. Here is an interesting vantage point to peer into the reclusive state. (Youtube)

 

Trading Links:

• Buffett Buys the Farm ... Adds Chicken Eviscerator to Berkshire Portfolio. (Bloomberg)
• Hulbert Explains Why a Major Market Correction Is Unlikely. (SmartMoney)
• Watchdog Report: TARP Will Not Turn a Profit for Taxpayers. (NewsObserver)
• Go Ahead and Sneer, But Microsoft's Windows 8 Could be Huge. (Forbes)
• Canada announces that foreign workers can now be paid 15% less than Canadians. Do you agree with a two-tiered wage system? (TheStar)

Great Visual Metaphor for a Bigger Future

"Interestingly, koi, when put in a fish bowl, will only grow up to three inches.

When this same fish is placed in a large tank, it will grow to about nine inches long.

 

 

In a pond koi can reach lengths of eighteen inches. Amazingly, when placed in a lake, koi can grow to three feet long.

 

 
The metaphor is obvious. You are limited by how you see the world."

--via Vince Poscente

Here Are Some Fun Links for Your Weekend Reading

Election years are interesting.

Many believe that the Presidential Election Cycle affects the stock market. 

Perhaps there is an easier explanation ...

 

 

Here are some of the posts that caught my eye. Hope you find something interesting.

 

Lighter Links:

• Rocks In Their Heads? Deep-Pockets Dreamers Pursue Asteroid Mining. (TheDaily)
• What Is Strategy? Choices made to maximize long-term value? (Strategy-Business)
• Are Superstitions Rational? Interesting. (WhyWeReason)
• A Profitable Exercise Merger – Combining Running with Walking. (HuffPost)
• Take a Moment to Watch This Rendition of “Flight of the Bumble-Bee”. Wow! (YouTube)

 

Trading Links:

• China Tells IPO Bankers to 'Like' Facebook. (CNBC)
• Stratfor's 2nd Quarter GeoPolitical Forecast. Lots of stuff to consider. (Stratfor)
• The Fed in 57 Words. (SmartMoney)
• Employers Likely to Step In If Obamacare Health Law Is Overturned. (Google)
• Does US Airways and American Need Each Other? What Are Merger Benefits? (WSJ)

Should You Sell in May and Go Away?

What you choose to look at ... matters.

Not everything that can be counted counts, and not everything that counts can be counted.

    ~ Albert Einstein

A close look at trading in May shows a pretty clear negative bias. Here is a 10-minute bar chart of what's happened since May 1st on the S&P 500 Index.

 

 

Is that a warning sign or a buying opportunity?

'Sell in May" is a pretty well known trading concept. Here is a brief explanation from Carl Swenlin of DecisionPoint.

 

May 1 marked the beginning of a 6-month period of unfavorable seasonality. Research published by Yale Hirsch in the Trader's Almanac shows that the market year is broken into two six-month seasonality periods. From May 1 through October 31, seasonality is unfavorable, and the market most often finishes lower than it was at the beginning of the period.

The period from November 1 through April 30 is seasonally favorable, and the market most often finishes the period higher.

... While the statistical average results for these two periods are quite compelling, trying to ride the market in real-time in hopes of capturing these results is not always as easy as it sounds.

Below is the one-year chart that that shows the most recent two six-month periods. It begins on May 1, 2011 and ends on April 30, 2012.

The left half of the chart shows the unfavorable May through October period, and the right half shows the favorable November through April period. The green line marks the beginning of the favorable period.  The red line marks the beginning of the unfavorable period.

Here is a Dow Jones Industrial Average chart illustrating that phenomenon.

 

 

Historically, the seasonality expected by 'Sell in May' has provided a trading edge.

However, scale and perspective do matter.  For example, here is a weekly chart of the S&P 500 Index. From this perspective, the markets are arguably in an up-trend - and sitting on top of a pretty strong support.

 

 

While the MACD is testing a move beneath the zero line, price is the primary indicator ... and is in a reasonably defensible buying area.

If the bulls hope to push things higher, this is where you would expect buying to occur. 

We'll see.

Related articles

• A Seasonal Quandary (pragcap.com)
• Sell In May And Go Away...Except In Election Years (ritholtz.com)
• Commodities Can Help With 'Sell In May' (wallstreetpit.com)