Capitalogix

Capitalogix Commentary 07/12/09

Obama told the G8 that the "World has Staved Off Economic Disaster." So, its all good now.  You are safe to jump back in the pool.  If there was still risk, he couldn't have said that in front of world leaders, right?

Is This the New Normal ... Or Just the Calm Before the Storm?

Here is a chart that shows how volatility has reduced recently.  Putting on my curmudgeon hat for a moment, I remember the old trader's adage that lack of volatility begets volatility.

That chart whispers "beware the calm before the storm" to me.  Others may see a return to normal.  What do you think?

A Look At the Markets.

The markets have given back close to 25% of their recent gains in the last four weeks. In many respects that was a healthy move. The news has been bad enough that I expected a bigger and steeper downswing.

Also, there's been a lot of talk about the potential of a head and shoulders top. But when you look at a composite of the five U.S. Equity Indices (shown in the bottom-half of the chart, below), we haven't broken the neckline, yet.

In addition, the 200-day moving average (red line) continues to provide support. If we don't have a sustained break beneath this level, the 200-day moving average will act as support.  Click the chart to see a full-size image.

With that said, sentiment is getting more bearish, and the move down has not created a spike in the VIX. So, again, there are clues that lead me to suspect that we might be witnessing the calm before the storm.  Earnings Season is starting; and a move down would trigger the head-and-shoulders topping pattern and the 200-day moving average would become overhead resistance.  And fear would increase ... you get the picture.

Sometimes, the right picture can be worth a thousand words.

So short-term, a bounce wouldn't surprise me. Nonetheless, a bigger correction still seems likely.

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

• Businessman Pays $2.1 million for Lunch with Buffet; Banks More (DigitalJournal)
• 11 Places With a Worse Economy Than Ours. (USNews)
• Currency Funds Crushed on Dearth of Market Trends. (Bloomberg)
• The Dollar's role in the global economy is Safe From the Yuan, for Now (WSJ)
• Ex-Goldman Sachs Employee Arrested Stealing Secret Trading Codes. (StreetInsider)
• Citadel Sues Firm Linked to Alleged Goldman Software Theft. (FinAlternatives)
• Mark Cuban on Business Models: Succeed with Free, Die by Free. (BlogMaverick)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Stephen Hawking: Humans Have Entered a New Stage of Evolution. (Daily Galaxy)
• China Embraces the 24-Hour News Cycle; Will They Soon Regret It? (Forbes)
• Amazon Patents Detail Kindle Advertising Model. (MediaPost)
• Twitter Not Happy With The Name Tweet In Third-Party Applications. (DigitalJournal)
• Emotional Robots: Will We Love Them Or Hate Them? (NewScientist)
• Coaching Tip - Applying the Art of Sprinting to Life. (GeniusCatalyst)
• Social Security Number Code Cracked, Study Claims. (Federal News)
• More Posts with Lighter Ideas and Fun Links.

Here's a Movie Worth Seeing

What do you do when your wife and kids are out of town, and you find yourself alone?

Besides catching-up on projects that I somehow avoided until now, I like to watch movies.

TiVo now links to Netflix, and provides an instant viewing option. Upon opening that folder on the DVR, I saw a bunch of things I normally wouldn't choose to watch on my own. One of them was a movie called Saint Ralph.  And I chose to watch it anyway.

My Dad had an "interesting" belief. He didn't watch scary or negative movies, because he felt that life was enough of a challenge on its own ... and it was better to find things that raised our spirits. Well, I inherited that from him.

Don't get me wrong, I still I love drama and thrillers. But in the absence of compelling circumstances, I tend to prefer positive stories.

So a plot about a down-on-his luck Catholic High School student whose father is dead and whose mother is in a coma, doesn't sound like my type of movie. 

But Saint Ralph was my type of movie.  It made me think and I enjoyed it.  The movie was lighter, funnier, and better than I expected.

On one level, it's a coming-of-age story about perseverance and faith through uncertain times. On another level, it's a well-written comedy about a quirky 14-year-old boy who gets it in his head that the only way to save his mother is through a miracle (and the miracle he thinks will save her ... is for him to win the Boston Marathon).

It is a movie that asks, if you're going to dream for something, why not dream for miracles?

Hope you enjoy it.

Here's a link to the trailer for Saint Ralph. 

Here's a link to find it at Netflix.

The Flow of Planning

I was in Columbus Ohio last week for a series of meetings and strategic planning sessions.

I love getting away from the business in order to work on the business. That means stepping back from day-to-day issues, to look at the bigger picture. It also means getting back in-touch with goals and intent.

In a sense, the process acts like a compass, which sets the general direction for the journey.

In addition, preparing for a series of meetings, like this, is a lot like working on a business plan.

Personally, I've found that that one of the primary benefits of creating a business plan has almost nothing to do with the plan itself. Working on the plan, immersing yourself in the ideas and possibilities, and ultimately choosing what stays-in, versus what's filtered out ... there is magic in that.

Yes, the plan is important.  But it is the planning that takes you from thinking ... to feeling ... to knowing.  That's where the real benefit of business planning comes from.

A Good Sign.

Sometimes you hear a question and it takes the air out of an idea. Other times a question helps you make a new distinction or consider an alternate and better course of action.

At our planning sessions, last week, there was a lot of those pushing, pulling, probing, and deep thought ... yet it built momentum.  So, I felt like we were on the right track.

How to Tell You Are On the Right Track.

I tend to be analytical.  Yet, over time, I've come to believe that one of the best tools to measure whether you are on the right track is how you feel.

Have you ever gotten a phone call from someone, and when you saw or heard that it was from them, you wilted?  In contrast, have you ever become more animated and energized while interacting with someone else?  It is easy to recognize the difference. 

Each person has different thoughts, people, or situations that trigger these positive and negative states.

In sports, this positive state is often referred to as being "in-the-Zone".  It is also called "Flow".  It happens when someone is fully immersed in what they are doing, and has a feeling of energized focus or awareness, full involvement, and success in the process of their activity.

Being in Flow feels good. On some level, when you are in Flow, you know you're on the right track.

Capitalogix Commentary 07/05/09

Another grim report on unemployment casts doubt on the likelihood of a quick economic recovery. 

The unemployment rate edged up to 9.5 percent in June, to its highest level in 26 years. The bigger problem is that many analysts expect joblessness to get worse in the coming months.

A Different Perspective on the Job Market:

Here is a chart that caught my eye on Barry Ritholtz's blog.  It shows the increased competition for jobs.  There are now close to six unemployed people for each available position.

The point is that as fewer jobs become available, it will get harder for normal citizens to obtain them.  The cycle continues because loss of jobs means reduced spending ... which means tighter margins. 

So, this next chart doesn't surprise me.  It shows that in addition to an increase in unemployment, there was also a decrease in hours worked.  Simply counting the number of people who lost their jobs misses something important. Lots of people have lost part of their jobs through a variety of techniques like furloughs and thirty-hour work weeks.

Notice how consistent the decline in aggregate hours worked (purple line) has been over recent months. It is something to watch.

For a longer perspective, here is a chart comparing the monthly national unemployment rates since 1948.  Click the chart to see the interactive version on WSJ.com.

Market Chart:

How will all that play-out in the Markets?  So far, the markets have held-up nicely.  I've been seeing more negative divergences and selling on down days ... and less positive momentum and market breadth. But price is the primary indicator, and it has stayed above support.

Here is a daily chart of the Dow Jones Industrial Average Index.  I marked a head and shoulders pattern that many traders are watching.  Click the chart to see a full-size image.

Short-term, a bounce still wouldn't surprise me. Nonetheless, a bigger correction seems likely.

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

• Investors are Now Racing Toward Volatile Areas of the Market. (NYTimes)
• Another Indicator Predicts Economic Recovery is Near. What do you think? (MJPerry)
• A China Stock Bubble: IPO Mania Dangerous in Recession. (Time and Economist)
• Why China Hates the U.S. and What It Means for Your Portfolio. (Motley Fool)
• A Run on an Amish Bank Teaches the Risks of Modernity. (WSJ)
• The Fed's Delicate Balancing Act On the Complex & Slow Road to Recovery. (SmartMoney)
• How GE Reaped Bailout Dollars Even Though It Wasn't a Bank. (TDB)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Michael Jackson Insider on What Really Killed Him. (TDB)
• Monkey 'Stock Market' Prone to Fluctuations Too. (NewScientist)
• Calculating Consumer Happiness at Any Price. (NYTimes)
• A Glimpse at the Future: Domestic Robots With A Taste For Flesh. (NewScientist)
• Scientists Create First Electronic Quantum Processor. (PhysOrg)
• Tomato Pill's new form of Lycopene Beats Heart Disease. (BBC)
• Is an Ugly Baby Harder to Love? (Time)
• More Posts with Lighter Ideas and Fun Links.

Screen Capture Software Worth Snagging

I'm so glad I found Snagit.  It is one of the un-sung heroes that I use all the time but don't think about because it is so reliable and stable that I forget how good it is.

What Can You Do With Snagit? 

Capture anything you see on the screen. Edit and combine those captures. Add text, arrows, or highlights to make the image better.  Then share them through your favorite applications. Organize and find them again later.

I end-up using it several times a day.  It is my default image editor.  I use it to create or edit the graphics for the blog, presentations and e-mails.  I use it to capture and annotate certain financial transactions ... and to get or give tech support. Bottom-Line: the more you use Snagit, the more ways you'll find to use it. 

Here is a two-minute video that will give you a quick overview of some of the things Snagit can do for you.

Techsmith makes several other cool tools too.  I'm not affiliated with them, other than as a satisfied client.  Just thought it was worth sharing.  Hope it helps you too. 

Click here to go to the product page for Snagit.

Click here to download a trial.

Capitalogix Commentary 06/28/09

Rolling Stone is not where I typically read insightful Market commentary.  Nonetheless, Matt Taibbi wrote a piece for them you should read.  The article is called "The Great American Bubble Machine", and it details Goldman Sachs' role in engineering every major market manipulation since the Great Depression.  Take a look.

Also, here is a link to the text of the article.

Other Asset Classes.

This chart caught my eye.  It shows the top-ten residential real-estate markets, and let's just say none of them are around here.  Click the picture to go to Reiden's site for more data.

 

I guess Goldman Sachs isn't the only one who can create Bubbles. 

Also, I'm hearing a lot more rumblings from experienced traders about buying a little gold.  Richard Russell, of Dow Theory fame, says: “The way the world is going, ‘gold will be the last man standing’. Gold will be wanted because unlike everything else, gold can not go bankrupt. Gold has no debt against it, gold is not the product of some nation’s central bank. Gold is pure intrinsic wealth. It needs no nation to guarantee it. Gold is outside the paper system.”

Confidence In the U.S. Equity Markets.

The VIX closed at 25.93 today, down more than 16% from Monday’s close of 31.17 to the lowest closing level since September 12, 2008 – the last trading day before the Lehman Brothers bankruptcy was announced.  A rise in volatility from these levels would likely be bearish.

Bespoke notes that the Michigan Confidence joins the growing number of indicators that are now at or better than Pre-Lehman levels.  It is currently at its highest level since January 2008.  This month's reading is also the fourth consecutive month-over-month increase in confidence.  

Market Metaphor?

This NYC hotel claims that one of its rooms is not only a tourist attraction, but is “art”. Art that starts to smell bad in warm weather.

Room Covered In Melted Cheese

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

• Why Isn't The Stimulus Stimulating? Seems Like Speed Will Matter. (Forbes)
• World Economy Tracking or Doing Worse than the Great Depression. (VoxEU)
• Morgan Stanley Topples Goldman as M&A Leader this Year. (NYPost)
• List of Banks with the Biggest Profits and Losses Last Year. (Economist)
• Tech Sector Strength May Be Weaker than Claimed. (Barrons)
• Why Computers Can't - Yet - Consistently Beat the Market. (Forbes)
• Michael Jakson's Debt, Private Equity & His Hedge Fund Backer. (FinAlternatives)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• What Is Your Favorite Michael Jackson Song? Interactive Retrospective. (NYTimes)
• Windows 7 at Half Price: Why is Microsoft Offering Discounts? (InformationWeek)
• New Defense Industry Niche: Researchers Developing Tiny Flying Spies. (Forbes)
• New Book on the Secret History of the National Security Agency. (USNews)
• Super-Intelligence: When Will Computers Be Smarter Than Us? (Forbes)
• Google Voice: Smarter Phone Calls for Your Smart Phones. (NewScientist)
• Can You Get Fit in Six Minutes a Week? The Research is Promising. (NYTimes)
• More Posts with Lighter Ideas and Fun Links.

The Hows and Whys of Firewalking

I recently went to a Tony Robbins seminar in Toronto. One of the highlights of the event was the Firewalk, which is a barefoot walk across red-hot embers.

Learning the technique is not really that hard (it is basically walking at a normal pace, while not hesitating or tripping).  The hard part is doing that knowing that there are burning embers under your feet.

It is breath-taking on several levels.  The firewalk is cool in-and-of-itself; isn't it?  So, it doesn't have to mean anything beyond doing it.  Yet, there are some great opportunities to make it more impactful by leveraging what you make the experience mean.

For example you can use the experience as a powerful memory, triggering feelings of being able to do anything you commit to ... or breaking through what used to be your limits.  Or the firewalk can be taken as a metaphor for life ... and being able to put yourself into a resourceful state, and choosing to take the right action regardless of what's happening externally or in your mind.

What Goes Through Your Mind?

I was scared the first time I walked on fire. Even though I knew it would do it, when I got to the front of the line, looked down, saw the burning embers, and smelled the smoke ... my mind wanted to scream "NO"!!  I had a whole lifetime of conditioning that touching hot things was dangerous, and certainly walking barefoot across hot coals made little sense to my logical mind, and even less sense to that primal instinct part of the mind that's there to protect me.

That's why many of the techniques used in the seminars revolve around getting into a peak state, and filling your head with phrases that you repeat again, and again, and again. If you're saying "yes", "yes", "yes" ... There's no room for your brain to say "no".

Is It State of Mind ... Or Science?

I'm not going to pretend I understand the science of why it's possible to walk barefoot for 30 or 40 feet across burning coals, without injuring yourself. But you don't have to be a scientist to guess that hesitating in the middle might have painful consequences.  This video is well done and explains a lot.

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It is Better the Second Time Around.

I've done the firewalk many times now, and still enjoy it. It's really interesting to watch the faces of people doing it for the first time. Some express abject terror, others pump themselves up into a manic state, while still others follow the crowd with a glazed look on their face.

This time, I tried something different than what I've done before. Instead of working myself into a peak state and charging across the coals triumphantly, I wanted to do it from a place of calm resolve. To me this is a different type of peak state.

In some ways it's about being more present to the situation and my own capabilities. Since I had done this before, being afraid would be somewhat irrational (however emotions do not have to be logical). I didn't want to numb myself to the experience by focusing internally, or by jacking-myself-up into a warrior state; instead I wanted to enjoy the sights, sounds, and smells of what was happening -- and how cool it was to do this from a purposeful intent.

A Little Bit of Mastery Goes a Long Way.

As a trader, the winning, losing, and the uncertainty and certainly trigger fear, greed, and doubt. Learning to master these states, and keeping a clear head, leads to a much longer career.

It's funny, because I wasn't sure that going through this exercise again would have the same impact. It did, just for different reasons than I have before. I highly recommend it. Feel free to contact me if you have questions or comments.  I'd love to hear about your experiences.

You Can Still Change The World

Here is a quick video about Inspiration and Entrepreneurship.

It begins with the question, “Do you remember when you were a kid…And you thought you could do anything?” and then proceeds to tell the viewer that the hope possessed as children is renewable as an adult, and as an entrepreneur. It is well-done, fun, and only takes about two minutes. So, seize the day ... and watch the video.

Direct link to video on YouTube.

Read more about the video in this WSJ article.

Capitalogix Commentary 06/21/09

Time flies when you are having fun.  We're almost halfway through the year, and the markets have rallied now for three-plus months. That sounds positive ... So why are so many people focused on the  Federal Reserve's two-day meeting that ends Wednesday?  My guess is that many investors will be watching for any changes in the long-term economic outlook.

So we are at a Tipping Point, once again.  There is cash on the sidelines waiting for a sign that it's safe to get back in the game; and there are investors who are looking to protect their rally profits, or are afraid of the next leg down.

This daily chart of the Dow Jones Industrial Average Index highlights what bulls and bears see.  We'll soon know which is more committed.

From my perspective, I understand why discretionary traders might want to try to buy this pull-back.  There is a clear Risk-Reward; and it's easy to set your stop.  However, experience warns me to be wary of set-ups like this where market breadth is weakening.  My wife doesn't like charts that have too many marks on them ... she says they are confusing.  So I tried to find a different image that conveys what this chart may be whispering to the little bird.

Finally, I was reading Paul Kedrosky's blog when I ran across this chart showing the price of crude oil from 1861 through 2208.  It comes from BP.  It provides an interesting perspective.

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

• This Recession Tracks the Great Depression, Can We Avert the Worst? (FT)
• Charts of the Recession In Historical Context. (Investment Postcards)
• The Importance of "Being Right" vs Making Money.  (Dash of Insight)
• Economic Recovery: Are Happy Days Here Again? (Wharton)
• The Myth of the Rational Market. (Slate)
• MF Global Preps Managed Futures Offerings. (FinAlternatives)
• Key Ideas from Forbes CEO Conference. (Forbes)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Microsoft Readies Free PC Security Software. (Technology Review)
• Ten Commandments from Entrepreneurial 'Evangelist' Guy Kawasaki. (Wharton)
• Plan To Teach Military Robots the Rules of War and Let Them Loose. (NewScientist)
• Amazon Acquires Two iPhone App Software Makers. (WSJ)
• Google Searches for Ways to Keep Big Ideas at Home. (WSJ)
• New Research Shows That Fat Can Be Good For You. (Ode Magazine)
• MoneyB-ball 2.0 - Quantifying Basketball’s Intangibles. (NYTimes)
• More Posts with Lighter Ideas and Fun Links.

A Look Back at the Future

My father used to warn me that whatever I made fun of him about, would happen to me too.  This seemed unlikely since he was overweight, while I was the athletic picture of health ... and he was "technology-challenged" (to put it nicely), while I was the poster-child for early adopters.

The practical realities of age and time have once again proven him right.  So I'll use this Father's Day message to remind my kids the same message.

The world changes quickly.

I remember when I was one of the youngest and most tech-savvy people in the room during business meetings.  Somehow, now, my kids seem to think I'm like 30 minutes away from needing them to set the VCR so it doesn't flash 12:00 AM all day.

Don't get me wrong, most of my friends still think that I know a lot about technology. And what we do at work may not be rocket science, but it's pretty close. We use neural networks, fuzzy logic, and lots of cool technology ... and, yes, I still love gadgets. 

Technology has always been my friend, and it still is. I love finding a new piece of software that makes me more efficient, more effective or simply makes life a little bit easier. Same with gadgets ... I've waited in my share of lines to be among the first for plenty of stupid products. Apparently, however, I'm a little over the hill - and in danger of losing my "early adopter" pin.

Is The Bigger Picture Better ... Or Perhaps I Can't Read The Fine Print?

It is true, lots of the technology heavy-lifting is done by others at this point. That is progress.  As my father said, not worrying about all the little details helped him see the bigger picture and focus on what was possible.

My father never used a computer in business. He did buy one later in life, but I think it was only to shut me up - so I'd stop telling him that he needed one. On the other hand, I wish my mother never got one. She actually makes me feel sorry for tech support workers around the globe.  If I wasn't worried about how soon my sons say the same about me, I'd joke that if the military could figure-out what she does -- and weaponize it -- we could crash enemy computers at will.

So it is funny when one of my sons asks me to move away from the computer so he can fix something or make something work a lot easier than to tell me how to do it.  It is the circle of life.

A Little Extra Proof of My Age.

I was in a meeting this week with some people (and my 20-year-old son). We were looking at a picture that appeared to have been altered, and I said "that sure looks like it's been Facebooked to me." I'm pretty sure my son still hasn't stopped laughing. Yes, I meant "Photoshopped", and I do know the difference ... yet it only added to the growing proof he gathers.

At least I'm good for something, even if sometimes it's just a laugh.  Still, it's only a matter of time until his kids think that he is behind the times.  And that will be a sure sign of progress too.

Happy Fathers' Day.