Capitalogix

Capitalogix Commentary 12/27/09

Since I'm spending the holidays in Asia, I thought I'd share a few lighter things this week.

First up is the Elf-Yourself site from JibJab.  And my wife says I can't dance.

Send your own ElfYourself eCards

Click here to make one yourself.

Second, here is something I look forward to each year.  Uncle Jay sings the year in review.

Market Commentary.

At the end of each year, the big financial media outlets typically conduct roundtables to get outlooks from key players in the financial markets.  Over the past few years, the individuals that run the best financial blogs and websites have become key players in their own rights, and their opinions are highly regarded by millions of loyal readers.  This year, Bespoke asked twelve popular financial blogs/websites to respond to the same 25 questions regarding their 2010 outlooks as well as their take on 2009. 

 

The responses were thought-provoking, and hopefully they will help you form your opinions on what is to come for financial markets in the year ahead. 

Best Wishes for a happy holiday season and for a prosperous New Year.

Business Posts Moving the Markets that I Found Interesting This Week:

• Is the Recession Really A Depression? (ZeroHedge)
• One in Four Children on Food Stamps, One in Eight Overall. (GlobalEconomicAnalysis)
• 77% of Small Businesses Plan No Raises in 2010. (Financial-Planning)
• U.S. Foreclosures to Reach Record 3.9 Million in 2009 (Bloomberg)
• What's the Real Purpose & Risks Of Quantitative Easing? (WSJ)
• Physics Envy: Finance's Search for the Laws Of Human Behavior? (FT)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• The 10 Questions You Should Never Stop Asking. (Forbes)
• Founder of Salesforce.com Explains How to Start a Business. (Economist)
• Which IT Projects are Right for the Cloud? (Computerworld)
• Why Vegetarians Might Want To Think Twice Before Eating Tomatoes. (DigitalJournal)
• Will Science Allow Us to End Aging by 2029? (H-Plus)
• Russia's Highest Court Rules Against Religious Freedom. (DigitalJournal)
• More Posts with Lighter Ideas and Fun Links.

Simon Sinek Says "Start with Why"

Inspiration is stronger than persuasion.  It gives people a sense of purpose and belonging that has little to do with external incentive or benefit.

Simon Sinek, who is quite charismatic and well-spoken, is delivering this message to a rapidly growing fan-base. 

My team thought Simon was inspiring, engaging and insightful.

You can watch a short video that introduces his material below. 

In addition, you can explore more of his ideas in his book,
Start with Why: How Great Leaders Inspire Everyone to Take Action.

An Example of Finding the Right Person for a Job.

Who do you believe will do a better job, someone who takes a job because of the salary and benefits ... or someone truly inspired to accomplish the job's purpose? 

Phrased that way, of course you know the answer.  Still, how can you leverage this to better select customers and employees?

For example, Simon uses the story of Sir Ernest Shackleton to illustrate this concept.  Shackleton was preparing to lead the first expedition across Antarctica in 1914. Legend has it that when seeking crew members for his journey, Shackleton placed the following ad in a newspaper:

"MEN WANTED FOR HAZARDOUS JOURNEY. SMALL WAGES, BITTER COLD, LONG MONTHS OF COMPLETE DARKNESS, CONSTANT DANGER, SAFE RETURN DOUBTFUL. HONOUR AND RECOGNITION IN CASE OF SUCCESS.
- SIR ERNEST SHACKLETON"

When the expedition became stuck in the ice and could not be rescued for 22 months, not a single man was lost. The reason Simon gave for their unlikely survival was that Shackleton hired survivors that could deal with the situation and were aligned with the mission and purpose.

Can you imagine writing an ad like that to attract the right people to your cause?

Watch This Video.

Here is a video of Simon speaking at a Ted Conference.  It is a great intro to his stuff. 

Other Resources:

• Here is a link to Simon's Blog.
• Here is a link to Videos of Simon.
• Here is a link to an article on why to know someone else's Why.
• Here is a link to Simon's Book: Start with Why.

Related Posts:

• Getting Ready for the New Year.
• Sometimes Simple is Better.
• Is Knowing How and Why Enough?
• The Flow of Planning.

Capitalogix Commentary 12/20/09

John Mauldin and George Friedman were in Dallas this week.  Several hundred people came out to hear their thoughts on the world and the economy. 

For what it's worth, Freidman's Stratfor service and Mauldin's Thoughts from the Frontline and are both terrific reads.

I take it as a bullish sign that so many people made time, in the middle of the day, for an event like this. 

While the mood in the room was that the easy money has already been made in the equity markets, people were looking for places to put money to work. 

Sentiment Soaring ...

Up-and-Down ... the ride continues.  Still, sentiment is quite bullish.  How bullish?  AAII's weekly survey showed the fewest bears since April 30th. That was just about the time the Russell 2000 rolled-over to start an 8% correction.

Market Commentary.

Here is a daily chart of the Dow Jones Industrial Average.  It shows the market at a decision-point.  The month-long consolidation has taken the market to a place just above major support and resistance level ... And back to the upwards sloping trendline.  

Traders expect a big move after periods of compressed range (like the one we are in now).  Bollinger Bands are often used to represent volatility. You can construct by plotting bands two standard deviations on either side of the 20-period moving average (note the pink bands in the chart above).  One of the indicators I keep an eye on, is the band-width of these Bollinger Bands (it is plotted in the bottom pane of the chart shown above). When it gets narrow for an extended period, that "squeeze" puts me on alert for expanding volatility. 

What do you do?  You watch price.  This is the classic buy point in an up-trend.  On the other hand, there's everything else.

Insight: Price is the Primary Indicator.

What do you think is the most bullish indicator of our markets?  It's not a trick question; the answer is "price".

The markets have held-up nicely, throughout this rally, despite lots of bad news about the economy. And that, in-and-of-itself, is bullish.

It doesn't matter what technical analysis indicator you use (increasing negative divergences and selling on down days ... or less positive momentum and market breadth), the markets have given us a clear message recently. Price is the primary indicator, and it has stayed above support. 

While there will likely be a bearish divergence when the trend finally ends, it is clear that a strong uptrend trumps most bearish divergences.

The Implications of America's Rapidly Expanding Debt.

Here is a video from Consuelo Mack's WealthTrack, about the lessons of history. Best selling author and historian Niall Ferguson talks about the seismic global economic and market shifts of recent years mean for our future, particularly the longer term implications of America's exploding debt.

Here is the transcript.

Business Posts Moving the Markets that I Found Interesting This Week:

• Volcker: No Growth Besides What the Fed's Pouring Into the Economy. (BusinessInsider)
• M&A Activity: Google Buying Start-ups Again. (BusinessInsider)
• A Start-Up Jokingly Touted a $100 Billion Valuation. Now VCs are Calling. (Forbes)
• Wal-Mart's Web War Against Amazon Risks Little. (WSJ)
• What's Glittering Isn't Always Gold - Other Metals Doing Well.(WSJ)
• Thoughts on the Market's Recent Gap Activity. (Quantifiable Edges)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• A Glimpse at the Future from Microsoft's Lead Tech Visionary. (CNet)
• Forbes Gave Ken Auletta’s ‘Googled’ a Great Book Review. (Forbes)
• Milken Institute's Journal of Economic Policy Worth a Look. (Milken)
• Craziest Google Street View Shots. (HuffingtonPost)
• Jewish Delis Are Dwindling, Traditions and All. (NYTimes)
• MIT's Next Bionic Breakthrough ... Stepping Beyond Human. (Forbes)
• More Posts with Lighter Ideas and Fun Links.

Observations on Holiday Season Economic Indicators

Hopefully, you are having a happy holiday season.

Technology is changing how I prepare this year.  A major portion of my gift purchases happened online, rather than in-person.  What about you?

 

I did go to the malls; and what I found was lots of parking spaces and deals that I could easily better with an internet connection.

It will be interesting to see how consumers spent, and which retailers were naughty and nice.

Here are a few of the other things I noticed recently.

The Christmas Lights Economic Indicator?

In past years, my neighborhood was a flashing Wonderland of Christmas lights.  This year, the displays are much more down-to-earth.  Are people feeling less jolly?  My guess is that fewer people chose to pay someone to hang the lights for them.

The Blockbuster Indicator?

When I went to see Avatar, on its opening day at the theater, a quarter of the seats were empty.   Box Office Mojo reports that the opening numbers were respectable, though not phenomenal.  The reviews have been great ... so perhaps fewer people chose to pay the $3 per ticket premium to see this movie in 3D because they are more in touch with their budgets and spending limits.

Avatar Delivers the Wow!

I highly recommend seeing James Cameron's new movie, Avatar, in 3-D.  It was terrific ... much better than I hoped or expected.

It was so good that none of us would leave to refill the popcorn ... And my wife didn't use the bathroom once (which means you should expect Avatar to win a bunch of Oscars).

The story and underlying message were good. Yet, that isn't why people will flock to see it. This is one of those "you have to watch this on a big screen" movies. It is a spectacle.

Enjoy it for what it is ... And later, think about how many cool technologies you saw the characters use that you can't wait for someone to develop in this world.  Visionary and very cool.

Here is a short example of what to expect.

Not All 3-D is Created Equal.

The CGI effects were way better than I expected.  Frankly it was hard to tell what was "real" and what wasn't.  The unsung hero, though, was the 3-D technology.  It was far and away the best I've seen, because it seemed real and natural, rather than a gimmick.  It was so good, you forget it is in 3D.

In contrast, the Dallas Cowboys handed out the older blue and red filmed 3-D glasses at their game against the San Diego Chargers last week.  The idea was to use the giant screen to show 3-D replay highlights. 

Here is a picture of people trying to use them at the game.  At first, it was novel.  However, as you might have guessed, watching the live game with the glasses was almost impossible.  After a few minutes, the crowd started booing until the stadium switched back to regular graphics.

After watching Avatar, though, I expect to see a lot more 3-D content. Major manufacturers are betting on it too. The technology is getting better ... And so is the experience.

Other Resources:

• Here is a link to the main Avatar Movie website.
• Here is a link to the Avatar Pandorapedia.  Yes, that's like Wikipedia for geeks.
• Here is a link to Avatar News and Trailers.
• Here are some reviews.

Chuck LeBeau on the Importance of Exits

Lots of traders are looking for the right pattern to enter a trade.  One of the great books on the art of exiting a trade is the "Technical Traders Guide to Computer Analysis of the Futures Markets". 

The author is Chuck LeBeau. He is someone I learned a lot from over the years.  He is the consummate "old pro" ... and I always enjoy his stories.  They often serve to remind that human nature is a constant in the face of changing markets.

Here is one of those stories.  It is from his System Trader Club website. He calls it "Trading Messages from Mars".

Back in the late 1960s, I was a young commodity broker at E. F. Hutton and Co. Our office was a brand-new high-tech office (for its time) that was considered the "flagship office" for E.F. Hutton.

In this office about 30 brokers and as many clients shared one very large boardroom, and there were no private offices. The brokers had elegant and expensive desks, and the clients had a comfortable seating area in the front of the office where they could hang out and watch the tapes and monitor our state of the art commodity "clacker board."

Sitting at my desk near the front of the boardroom, I could read my Wall Street Journal and keep track of the commodity markets without looking at the board. By just listening to the rhythm and tempo of the mechanical clicks as the prices changed, I could easily tell when anything important was going on, because the tempo of the clicks would increase noticeably.

Just in front of my desk were a half-dozen comfortable sofas facing a high mahogany-paneled wall with the tapes and the "clacker board." A gallery of traders, mostly retired "old-timers" who were trading real commodities like grains and pork bellies, lounged around on the sofas plotting their charts and talking about life and the markets. They typically arrived early to get a good seat in their usual spot and then spent the day trading, exchanging commentaries and offering unsolicited advice to one another on any subject.

For the most part, they were a very sociable group who would take coffee breaks together and greeted each other on a first-name basis. These traders enjoyed the elegant atmosphere and treated our well-appointed boardroom as their private men's club. (Were you aware that women were not allowed to trade commodities back in those days? My, how times have changed!)

One of these "old-timers" kept to himself and was not interested in becoming a member of the friendly and often boisterous social circle. He usually sat quietly by himself, intently watching the price changes on the commodity board and holding an old glass Coke bottle up near his ear.

The vintage-shaped Coke bottle had been emptied many years before and now contained only a 12-inch tube of bent and broken radio antennae, which extended awkwardly out of the top of the bottle.

Keep in mind that in the 1960s no one had yet heard of cellphones, so the purpose of this Coke bottle was a real mystery to everyone. When the trader would talk to the bottle from time to time, all the heads would turn, and the traders nearby would try to listen to the conversation. But the trader spoke very softly, and no one was able to eavesdrop on his conversations with the bottle.

The traders knew that the fellow with the Coke bottle was a client of mine, and eventually a representative of the group came to me and said they were extremely puzzled about this guy and his Coke bottle and asked me if I knew what was going on. I didn't know the purpose or meaning of the Coke bottle, but I was as curious as anyone was, and I promised I would find out. The next time the client came back to my desk, I promptly placed his order and then politely asked him about the Coke bottle.

With a serious expression and no embarrassment, he explained to me that the Coke bottle was an inter-planetary communication device that had been given to him by aliens. He said the aliens were very interested in our commodity markets and they often gave him trading advice from their various observation points on other planets. He said he had just had a message from Mars and they were buying soybeans, so he had also purchased soybeans. After revealing his unique trading methodology, he returned to his seat and resumed his whispered conversations with the Coke bottle.

As soon as I revealed my discovery of the meaning of the Coke bottle to the other traders, all attention was immediately focused on the Coke bottle trader and the soybean market. The soybean market proceeded to go the wrong way, and the trade from Mars was eventually closed out at a loss. The other traders had no sympathy and were quick to begin ridiculing the trader and to poke fun at his beliefs.

The next trade, however, turned out to be a big winner, and the Coke bottle trader went from sofa to sofa telling his story and pointing to the clacker board while waiving his Coke bottle and bragging about the profitability of his most recent message from outer space. Because he was making money now, his previous critics had to endure his bragging about his success on the current winning trade.

After a few winning and losing trades later, a clear pattern of behavior began to emerge. The Coke bottle trader was ridiculed unmercifully on his losing trades but was able to get his revenge and the last laugh during the winning trades. This trader might have been a little bit crazy, but he wasn't stupid. He soon learned that his only defense against ridicule was to hold on to winning trades as long as possible and to quickly get out of his losses.

As long as he was sitting on his sofa with a winning trade, no one could tell him he was crazy and make cruel jokes about his messages from Mars. In fact, while he was winning he was quick to wander around the room and ridicule the methods of the other traders who were not making as much money as he was. He displayed the profits in his trading account as hard evidence of the validity of his methods and offered copies of his statements as irrefutable proof that he was getting valuable advice from his alien contacts. Who could argue when his advice from other planets was obviously working?

For a young broker, this experience and the firsthand observation of the Coke bottle trader who suddenly became profitable gave me my first important lesson about the importance of exits. I knew the entry signals had nothing at all to do with his success. His batting average was not any better than that of any other trader. However, this crazy old trader seemed to be able to make money consistently, while other traders with more "sanity" and more valid entry methods were losing.

Before long I was able to recognize that this man had become a successful trader simply by his efforts to avoid ridicule. He knew he was vulnerable during his losing trades, so he closed them out very promptly. His winning trades became his shield against the ridicule of the other traders, and he kept his winners much longer than before his unorthodox methods were revealed.

In the many years since this experience, I have encountered many claims of success for entry methods that probably have even less validity than the Coke bottle messages. I have learned to look only briefly at the entries of winning traders and to examine their exit strategies very carefully. I am very fortunate that more than 30 years ago I learned from the Coke bottle trader that success in trading depends on our exits and not our entries.

Video: Controlling Risk in Volatile Markets.

Chuck says "Buy and Hold" is flawed because it encourages a wait-and-hope outlook among investors and does nothing to provide badly needed control of gains and losses. He claims that the most obvious problem with buy and hold is that it is not a strategy at all. Worse, it sacrifices any semblance of control and relies on luck and hope rather than planning and control. Instead, he advocates a number of clever risk control techniques, and often uses Average True Range (ATR) and the Average Directional Index (ADX) in his calculations.  Here is a video he made about controlling risk in volatile markets.

Other Resources:

• Here is a link to one of Chuck's posts about Exit Techniques.
• Here is a link to Chuck's SmartStops Blog.
• Here is a link to his Precise Exits & Entries DVD Course.

Palin and Shatner's Strange Word War

Words alone, won't do this justice.  You should watch for yourself.

Sarah Palin and William Shatner channel something strangely reminiscent of beatnik poetry or Haiku.

Enjoy.

It is like a competitive poetry performance, except they are reading each other's words out of context.

Other Resources:

• This is generating some press.
• Here is a link to Palin's book, Going Rogue: An American Life.

 

Capitalogix Commentary 12/13/09

It was a slow news week, as long as you weren't Tiger Woods.  Numbers and charts can tell only so much of a story.

Market Commentary.

Why has the market stayed so strong?  The first thing that comes to mind is massive government intervention.  The next thing that comes to mind is that there have been more buyers than sellers.  That is not a pun.  Perhaps it is more telling to say there hasn't been a lot of committed short sellers.  Recently, however, there hasn't been a lot of committed buyers either.  The result has been a month-long, narrow trading range.

Here is an intra-day chart of Dow Jones Industrial Average. It is easy to see the trading range that has constrained prices for the past month.  Notice how many times price has turned-down off the highs, and bounced off the lows.  The question is, will it happen again?

Technical traders will see this as a likely time to turn back down.  The Dow is at the top of its recent trading range and has several negative divergences (like the MACD shown at the bottom of the chart).  However, markets aren't known for rewarding the "easy" trade.

In addition, big moves often happen after tight ranges.  So, the next move might be a big one.

For a clue as to the direction of the next move, it may help to look to the Financial Sector.

Financials are Often Early Indicators of the Broader Market.

Here is a chart of Goldman Sachs. It is going through a downside correction, beneath its 50-day moving average, and is testing support.  A sustained move above this level could be a very bullish early indicator for the U.S. Equity markets.  A further break-down, from here, would also be telling.

Business Posts Moving the Markets that I Found Interesting This Week:

• The Post-Recessionary Global Economy: In Search of the New Normal. (Wharton)
• Think The Worst Is Over? Think Again, VCs Say At Tech Showcase. (WSJ)
• BusinessWeek's List of the World's Most Intriguing Companies. (BusinessWeek)
• Where Does the Money Go From Each iPod Bought? (Telegraph.UK)
• Is Time to Be Brave and Buy the Dollar? (TimesOnline)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Time Magazine's The 50 Best Inventions of 2009. (Time)
• Loneliness is Contagious: Even If That Sounds like an Oxymoron. (Slate)
• Six Social Media Trends for 2010. (Leader)
• Learning From Porn: Lessons from the Cutting-Edge Of Technology. (MediaPost)
• Dissecting the Dollar's Re-Design Project. Is This Re-Branding? (Mint)
• More Posts with Lighter Ideas and Fun Links.

A Water Drop Filmed in Ultra-Slow-Motion, at 2000 Frames-per-Second.

What looks "normal" in real-time, is something quite different when you have the means to perceive it. 

Very cool stuff.  See for yourself.

Here is a video showing a water-drop in ultra-slow-motion (2,000 frames per second). It is from the Discovery Channel's series 'Time Warp', where MIT scientist and teacher Jeff Lieberman and digital-imaging expert Matt Kearney use the latest in high-speed photography to turn never-before-seen wonders into an experience of beauty and learning.

What it Means.

Wisdom comes from finer distinctions. 

Think about how being able to make more distinctions per unit time is changing the world. 

It is changing everything ... from auto-landing airplanes, your car's thermostat or cruise control, to Goldman Sach's recent trading record from high-frequency trading.

Need Energy, a Clear Head, or a Power Nap ... There's an App for That.

pzizz (pronounced puh-zizz) Relax is a power-nap app. 

Whenever you feel tired or frazzled, put on your headphones, set the time you have available - and pzizz creates a new and unique soundtrack, each time you use it.  There's nothing to learn - and no effort required by you. 

Simply press a button, and you get a surprisingly effective and pleasant relaxation session.

Increase Energy and Performance.

I've been a pzizz user since 2005.  Frankly, I'm still surprised by how much it helps when you need a quick nap, pick-me-up, or boost of energy (even if you only have 15-20 minutes).  It is nice that it works to relax you; it is even better that you wake-up feeling good and ready for the rest of your day.

Here's How it Works.

First, find a comfortable place.  Second, choose how long you want your power nap to be.  Third, adjust how much talking you prefer. Fourth, headphones are better - but not necessary.  Fifth, press the button and let yourself relax.

What Happens?

Each session has three parts, the Intro, Main Session, and Wake-Up Sequence.  Throughout all of them, a deep, cool, British voice guides you through some relaxation techniques and gives you encouragement and positive feedback.  The voice is done by Michael Breen, a well-know NLP Expert.

Sound Waves Affect Brain Waves.

In addition to the NLP guidance, pzizz  also leverages binaural beats and ambient sounds to help you relax.  Yes, there is also a pleasant background track complete with music, bells, wind chimes and other assorted ear candy designed to lull you to sleep. Bottom-Line: You'll like it.

Try It Yourself.

If this all sounds new-agey, I can't blame you. I mocked the idea of pzizz when I first heard about it. "Actions speak louder than words".  If you need proof, try it yourself. Click this link to download a sample 15 minute energizer soundtrack and a sample 15 minute sleep soundtrack to see how it works for you. 

The software is available for PCs and Macs.  Also, pzizz has two iPhone apps.

Keep an open mind and you may be pleasantly surprised.

Related Links:

• Review - Energize Your Sleep With pzizz - 40Tech
• Review - pzizz for iPhone- Gear Diary
• Review - pzizz Napping Software at Work - MacNN
• Review - pzizz "How"s and "Why"s - SleepWarrior
• 7 Soothing iPhone Apps to Help You Relax

Related Posts I've Written:

• Light and Sound Machine
• Holosync