Capitalogix

This Video Made Me Smile

Watch a soldier being greeted by his dogs after returning home after 14 months in Iraq.  I suspect even cat people will be touched by this.

I learned something from the dogs, and the man.  Hope you enjoy it too.
 

Jump Point: How Network Culture is Revolutionizing Business

This is a compelling book.  The title refers to a change in the environment, so startling that we have no choice but to re-group and re-think the future.

When it happens, everything changes and the old trusted rules of the road to go out the window.

The book hype says: The Web 3.0 world of “pandemic economics” is a new economy that will function outside the traditional laws of commerce, free from today's impediments to business growth, and in a world where every person is connected to each other. Jump Point will help you to challenge old assumptions, re-think your business models, and take advantage of this fast-moving, unfettered, and fiercely competitive environment.

When Does It Happen?

The economic history of the world is punctuated by Jump Points. The tricky part has been identifying them at the right time.

Very often, we mistake the arrival of a stunning new invention for the Jump Point.  It is easy to get mesmerized by a new innovation, and to think the world has changed the day a new technology leaves the lab. But that is rarely, if ever, the case. That is not the Jump Point.

Instead, technology revolution is a fitful process. New technologies take time to be absorbed, diffused and adopted. We are a curious species; it is human nature to tinker, and experiment, test, and play. And most inventions improve with application, adoption, and time. Therefore, most Jump Points occur well after the enthusiasm settles and the parade has passed.

Real Jump Points most often arrive after we grow complacent about that invention, when the technology becomes routine and unremarkable, after the novelty has worn off and the technology has gone mainstream. It is then that rapid change finally happens.  Interesting.

Jump Point: How Network Culture is Revolutionizing Business

The Rules Are Changing

Goldman Sachs lost money trading only one day last quarter, and only two days the prior quarter.

Come on, how could that be? Their boss does say that banks "Do God's work."  I'm not sure that is a sufficient explanation.  When a firm's trading performance challenges not only all preconceptions of realistic trading, but also of statistical distributions, it's worth looking into.

Here's what ZeroHedge has to say about it.  Here is a chart that demonstrates Goldman's YTD trading track record: out of 194 trading days in 2009, the firm has made over $100 million on 116 occasions! This alone accounts for at least $11.6 billion in revenue (and is likely much more).

Yves Smith, at Naked Capitalism, adds: maybe I am just hopelessly out of touch, or perhaps more accurately, the Fed has created such a ridiculously favorable environment for banks and traders that if you are moderately competent, making money is like shooting fish in a barrel. But a winning streak this consistent looks like a rigged game. Is this just, ahem, “information advantages”? Greater ease in pushing markets around that have fewer players? Just a function of those monstrously wide bid-asked spreads? I’m curious for a sanity check from people closer to the action.

The party line comes in the Financial Times:

The performance – revealed on Wednesday in a regulatory filing – compares with two losing trading days in the previous quarter and confirms that the authorities’ drive to revive markets after the crisis is yielding huge windfalls for some banks.

Before the crisis, banks regularly recorded trading losses on several days in a quarter.

Goldman made more than $100m in profits on 36 of the 65 days in the three months to September and recorded more than $50m in profit on more than eight out of 10 trading days, the filing shows.

These figures were down from the second quarter, when Goldman reported record trading revenues and had 46 days with $100m-plus in profits. The smaller number of days with $100m-plus profits in the third quarter partly reflects the bank’s decision to rein in risk-taking in areas such as interest rates and equities.

There is a suggestion here that banks like Goldman might be taking advantage of the Fed and Treasury (although that might be by design, yet another hidden subsidy).

Let me know what you think about this.

Here is a how there stock is doing.

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View the full NYSE:GS chart at Wikinvest

Here is a link to a prior Goldman Sachs article worth checking-out.

Capitalogix Commentary 11/08/09

The best thing I can say about the market is that the current lack of sellers is giving investors a good long chance to take their bullish bets off the table.

Unemployment is above 10%, and at its highest level since 1983.  Here are a few economic signs.

What about the Market?

The chart below shows an upwards sloping trend channel on a chart of the S&P 500 Index.

1. Notice that the early part of the up-trend stayed above the channel's mid-line (indicated by the blue solid line); and
2. Notice the second half of the up-move stayed above the bottom portion of the channel (indicated by the green solid line) until recently;
3. Also notice that the market is recently rebounded to test the underside of this line. I highlighted that portion with an orange circle. This chart pattern is often called "kiss and say goodbye" because a failure to jump back above the lower trendline, back into the upward sloping channel, is often a sign seen at market tops.

On the other hand, jumping back into the upward sloping channel would be a bullish sign.

Bob Prechter Calls a Major Top Using the Elliott Wave Pattern.

If you are looking for Top-Calls, then Bob Prechter is not shy.  He says: "Stocks are topping out, commodities are topping out and the dollar is making a bottom". 

Prechter is a high profile market commentator who uses Elliott Wave as a framework for understanding the market.  So, I thought this might be an interesting time to re-visit this technique.

The premise is that the market doesn't affect sentiment.  Rather, it is the other way around;  collective sentiment affects the market.  And that while markets change, human nature doesn't ... consequently, predictable patterns play out over and over again. Prechter calls this "Socionomics".

While I now look at Elliott Wave more as a way of understanding what the market has done (rather than a great predictor of what it will do next), I do believe it is helpful in getting a sense of the next likely swing. 

Here is a chart that shows the basic sequence and an example of the sentiment causing the move.

The next chart shows that a similar sequence often happens in both directions.

All this reminded me that I have a piece of software called the Advanced GET, which uses a pretty clever algorithm for identifying some of the simpler Gann and Elliott Wave trading patterns. So I dusted-it-off, fired-it-up, and started playing around.

Looking at a weekly chart of the Russell 2000 Index, it's very easy to envision a five wave sequence as follows.

Note that the wave five target is beneath the recent bear market lows. And that the wave four pullback takes us back to the top of the downwards sloping trendline ... and seems to have pretty clean Elliott Wave size, slope, and timing.

Again, I don't trade the Elliott Wave. Yet it fascinates me, and is something that I do pay attention to as a framework.  Add to all this that the daily chart of many US equity indices are stalled at their 50-day moving averages and kissing the bottom of their recently broken up-trendlines, and I'm certainly going to be wary of a pull-back here.

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

• Does Economics Violate the Laws of Physics? (ScientificAmerican)
• Fed Tests Tool For Reeling-In Money From Economy. (Yahoo Finance)
• Time for Companies to Justify Big Gains. (WSJ)
• How We Got Here: Bush Advisor Analyzes the Financial Sector Meltdown. (WP Carey)
• Smaller, Faster, Cheaper - The Enterprise Is Changing. (Forbes)
• Is the Dollar Losing Its Status as the World's Reserve Currency? (WSJ)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Apple is the Outlier in this Recession. (Forbes)
• The Mortal Sins Of Chart Design, and How to Fix Them. (BusinessInsider)
• Will Airports Screen for Body Signals Instead of Bombs? (CNN)
• Can Men Breastfeed? Apparently, They Can. (MentalFloss)
• Why Some Sleep Better Than Others (Forbes)
• Are You Asleep? Exploring The Mind's Twilight Zone. (NewScientist)
• More Posts with Lighter Ideas and Fun Links.

Microsoft's Surprising Windows 7 Promotion

Microsoft released Windows 7 last week.

Being an early adopter, I found this exciting, challenging, and frustrating all in the same week.

Speaking of Windows 7, I saw an interesting ad where Microsoft was promoting the launch in Japan through a cross-promotion with Burger King. Here's the ad.

Who knew that the best way to promote a new operating system and your expected user experience was with seven congealing meat patties and the smell of onions? 

Maybe Apple took out that ad?

This is almost as funny as their Songsmith ads.

Key Points from Jim Collins' "How the Mighty Fall - And Why Some Companies Never Give In"

Two business thought leaders that I highly recommend are Verne Harnish and Jim Collins. 

They both wrote books I love.  Verne' "Rockefeller Habits" is terrific.  And Jim's "Good to Great" and "Built to Last" are both classics.

Recently, I heard Jim Collins talk about his new book, "How the Mighty Fall - And Why Some Companies Never Give In". It's a quick read makes a lot of sense.

Before I talk about the book, here are three things he said that caught my attention. Even out of context they are worth repeating:

1. It's better to be interested, than to be interesting.
2. Don't worry about survival or success; instead, wrestle with how to be useful.
3. Great leaders don't always know the answers ... they are, however, great at knowing great questions.

The Point of the Book: Keep-Up the Disciplines that Make You Great.

One of the key points was to be terrified of your success. Not because success is bad, in-and-of-itself. Rather, because success often takes you away from the disciplines of building greatness.

The difference between good and great is often a culture of discipline and a focus on having the right people filling the key seats in the company.

It is One Thing to Have the Right People On the Bus ... How Well Are Your "Key Seats" Filled?

How many "Key Seats" are there in your company? Perhaps more importantly, ask yourself what percent of these Key Seats do you have empirical proof, and confidence, that the right people are already in-place, doing the right job? Then, ask yourself whether the percentage is increasing, decreasing, or holding steady? 

If this is important to your company ... what are you going to do about it?  And how often are you going to focus on this?

Most Companies Measure and Manage the Wrong Things.

Another point he stressed was that what gets measured, gets managed. However, one of the disciplines of greatness is to get beyond measuring what's easy, to define what needs measurement and management. Recognizing the key performance indicators in the key measures of success go a long way towards moving in the right direction, together, as a company.

Agree to A Committed Action.

He reminds that great companies are not without disagreement. Instead, they use it as a catalyst to see issues from different perspectives, to get tough conversations out into the open, and then commit to a course of action. Not everyone has to agree with the course of action; yet, everyone should have clarity about what they are agreeing to and what course of action will be.

"How the Mighty Fall - And Why Some Companies Never Give In"?

One of the main points of his new book is the downturns are predictable and to some extent, inevitable; however, it doesn't have to be fatal. In fact, it can be the catalyst to the next round of growth on the path to greatness.

He asks the question: "Why do truly great companies limit growth and set absolute minimum standards, which must be exceeded?" Here is a high-level view of the answer. 

• It ultimately comes down to rigorous strategic thinking.
• It means knowing what you do, and doing it well.
• It means having an important stretch goal, and pursuing it in a disciplined manner. 
• And it means doing all this with the right people, doing the right jobs, and great management.

Bottom Line: Stay disciplined ... and keep the Main Thing, the main thing.

Capitalogix Commentary 11/01/09

Last week it started to feel like the markets were breaking-down.   Most of the major US equity indices broke down through their 50-day moving averages and also below their up-trend lines. Likewise, the Dow is back under 10,000 again.

The chart, below, shows that we are that an important support and resistance level that goes back to November of last year. In addition, we're back to price levels from late July. That means that we've had three months of rally, good news, and talks of "green shoots", with no real price advancement and a decrease of momentum.

From a technical analysis standpoint, this would be a good place to reverse and rally. However, longer-term charts and the sheer size of the recent rally suggests that we might have a little more market correction to go before the decline reverses.

A Rising VIX Often Means Falling Prices.

The CBOE Volatility Index  (better known as the "VIX") is a measure of the implied volatility of S&P 500 Index options, with very low numbers indicating extreme bullishness and very high numbers severe bearishness. It is also referred to as the “fear gauge” of US stock markets and is used as a contrary indicator as it moves inversely to equity prices. So a rising VIX often means falling prices.  As shown below, the VIX spiked to its highest level since early July.

I'm watching the VIX for clues about the direction of the next big move. If fear subsides quickly, then the rally will likely continue.  On the other hand, volatility will increase if the markets remain jumpy.

What's GDP Got to Do with It?

Going back to last week, Bears started jumping in on estimates that GPD would fall from 3.0% to 2.7%. Then GDP came in at 3.5%, and suddenly there were a bunch of headlines and news reports that the Recession was over.  As a result, the market blasts 2% higher in one day. My guess, that was more a result of massive short-covering, rather than actual bullish buying behavior.

It's worth noting that the GDP number was annualized. Real GDP growth for the quarter was 0.87%.

So far, the Stimulus spending/ Bailouts have cost the US more than WWI, WWII, and the New Deal combined… and we get GDP growth of 0.87% for Q3?    That's not a sign of a strong economy.

Longer Term: How Does This Compare to Other Bear Market Rallies?

Here is an interesting inflation-adjusted comparison of three Mega-Bear Markets. It aligns the current S&P 500 from the top of the Tech Bubble in March 2000, the Dow in of 1929, and the Nikkei 225 from its 1989 bubble high.

Something to keep in mind ... while history doesn't always repeat itself ... it often rhymes. If so, the next big move is down.

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

• 2010 Economic Forecast: Don't Hold Your Breath for Fast Growth. (WP Carey)
• U.K. GDP Numbers Worse Than Most Thought - Down about 5% this Year. (WSJ)
• Bank Failures Hit 106 Year-to-Date -  Most Since 1992. (MarketWatch)
• Will Retailers Top Last Year's Holiday Sales? (WSJ)
• The Good, Bad & Exaggerated in Michael Moore's New Film 'Capitalism'. (Wharton)
• Venture Firms Making Bets On Forex Start-Ups. (WSJ)
• Ten Odd Economic Indicators: From Hot Waitresses to Men’s Underwear. (Time)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Ten Things Every Good Business Plan Must Have (Forbes)
• Google, Microsoft Intensify Search Rivalry with Music. (WSJ)
• E Pluribus Tunum: How Not to Price Online Music. (Economist)
• Online TV Leader Hulu Won't Remain Free, Official Says. (WSJ)
• Why We Lie to Our Spouses? (WSJ)
• White House's Fox News Boycott Prompts Network Revolt (HuffingtonPost)
• Secrets of the Centenarians - Life Begins at 100. (NewScientist)
• More Posts with Lighter Ideas and Fun Links.

RoboForm: the Best Password Manager and Form-Filler

Here's something that I use many times, every day, and still think is a terrific piece of software.

Besides completely automating password entry and form-filling, RoboForm it allows you to: 

• Manage your passwords and log-in automatically. 
• Fill long registration and checkout forms with one click. 
• Encrypt your passwords to achieve complete security. 
• Generate random passwords to maximize password strength. 
• Back-up and synchronize passwords between computers. 
• Fight Phishing and defeat Keyloggers.

This tool will save you time and help keep you safe on an increasingly dangerous web. Here is a screenshot of the toolbar it installs in your browser.

 

There is no need to remember passwords anymore ... and even better, it keeps track of web addresses too (like bank and credit-card sites or any site you need to enter your member credentials). Type a few letters into the RoboForm search bar, click the website it suggests, then it takes you to the appropriate address and fills in the log-in credentials, automatically. It's fast, safe, and easy.

Lots of Ways to Use It.

RoboForm has a version that runs from a USB stick (so you can take it with you anywhere and use it without installing anything on someone else's computer). There are also versions for various smart-phones, including the iPhone. In addition, it links to their tremendous file synchronization tool, which is also worth taking a look at.

RoboForm was named PC Magazine Editor's Choice, and CNET Download.com's Software of the Year.

I've used this software for many years, and watched it get better and smarter. The author never tried to charge an upgrade fee, and continues to add new features and more intelligent algorithms to fill-out web forms as they continue to evolve.

All-in-all, this is a high-quality utility worth having on your computer. Hope that helps.

Capitalogix Commentary 10/25/09

Traders are starting to sell into strength.  That is something to watch.

This Heat Map, from FinViz, shows that last Friday was a tough day in the markets.  Most everything was red.  However, Amazon was up almost 27%.  And Microsoft had a pretty good day too.  Realize that the averages would have been even weaker without those outlier performances.

 

But big up-moves on big down days are another sign of volatility, confusion and disagreement.  These are simply things I've learned to notice. 

Price is still the primary indicator.  So keep an eye on the trend-line of your choice.

Items In the Rear-View Mirror May Only Be Half as Big as They Seemed.

Why isn't the world beating a path to our markets, driving-up prices and volume?  Perhaps because they don't see our market the same way we do. 

This next chart caught my eye because it shows our 20% rally (since May) is less than a 10% rally, when it is measured in Euros instead of Dollars.

 

A similar phenomena is playing-out with Gold too.

Venture Capital Charts are Eye-Opening ... But Not Wallet-Opening.

The third quarter was rough for VCs, with 17 firms raising just $1.6 billion. That's the fewest number of firms to raise money in 15 years; and it's the smallest amount of money raised since Q1 2003, says the National Venture Capital Association.

How tough was it?  Venture Capital funding fell 42% through the third quarter compared with last year, and had an 81% drop quarter-to-quarter from a year ago.

 

The more I think about this, the less it worries me.  There is a lot of money sitting on the sidelines, and I believe that we just aren't in the stage of the cycle where late-majority money flows to speculative investments.  There is a similar situation going on in the M&A cycle too.

When the longer-term economic recovery gets moving, so will the money.

The Jobs Flu.

The real virus affecting the economy is unemployment. 

For example, Sun says it is about to cut 3,000 jobs.  Frankly, I hear chatter from a number of companies planning to reduce headcount in meaningful and painful ways.  Bottom Line: Without a clear path to more sales, the pressure to make numbers is driving further reductions.

It seems several things are thinning the workforce.

President Obama declared swine flu a national emergency.  Officials described the move as similar to a declaration ahead of a hurricane making landfall; though perhaps it was more a "call to action," like how they hand out Nobel Peace Prizes.

 

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

• What Happens When the Fed's Buying Binge Ends? (WSJ)
• McKinsey Says Global Capital Markets Entering a New Era (McKinsey)
• Sharp Drop in Start-Ups Bodes Ill for Jobs & Growth Outlook. (WSJ)
• Bank of America Lost $1 Billion in Q3, & It's Now Testing Support. (NYTimes)
• Great Chart of Google's Long Road Back To $500 (BusinessInsider)
• Nokia Slaps Apple with Lawsuit about Wireless Patents. (Forbes)
• Some Reasons Not to Care about Dow 10K. (CuriousCapitalist)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• A $1 Million Research Bargain for Netflix, & Maybe a Model for Others. (NYTimes)
• Forbes Lists the 50 Most Influential Management Gurus. (Forbes)
• Does Social Media Mark the End of the Email Era? (WSJ)
• 54% of CIOs Forbid Use of Social Networks at Their Companies. (WallSt&Tech)
• Gout: The Missing Chapter from Good Calories, Bad Calories. (Ferriss)
• Study - Touch Money And You Feel Less Pain. (CreditCards)
• Disney Offers Refunds on Baby Einstein. (TDB)
• More Posts with Lighter Ideas and Fun Links.

New Version 4 of Shift Happens Video

Last week I wrote that my son (and his generation) won't communicate the way we do.

For example, he used 9,827 text messages and 564 MB of data on his phone this month.

I'm not going to pretend that I understand how I would use that many messages ... But I'm beginning to understand that he does.

A decade ago, I couldn't have conceived the way we use trading technology today.  The scope and scale of what's possible would have seemed like an improbable science fiction plot.

And that is the point.  Some things seem like nonsense (or magic), until they become science and way things are done.

New Version 4 of Shift Happens Video

Fascinating presentation of facts, stats, and insights about how technology (like the internet) has been changing the world. Some of the tech that we take for granted is now at an inflection point because of the sheer mass of late-adopters.

It is worth watching and thinking about ... as someone living in these changing times ... and in terms of how these changing times shift the game and create a whole new set of opportunities.

While similar to the post on how Social Media is changing everything ... this presentation focuses on the bigger picture and has a more general business tone. 

I like the new design and the added content; yet, found the music a bit distracting.

We are moving forward more quickly than ever.  What you thought you knew about the economy, technology, innovation, and the world are probably out-of-date. I can't wait to see what comes next.

• Here is a link to a transcription of the presentation.
• Here is a link to the author's blog.
• Here is a link to the Shift Happens Project.