Thoughts about the markets, automated trading algorithms, artificial intelligence, and lots of other stuff

  • Capitalogix Commentary 05/14/09

    Swine Flu Symptoms

    The Swine Flu made headlines again.  Apparently, no one cares that the the U.N.'s World Health Organization officially declared the outbreak to be a "pandemic" this week.  If you don't know what to look for,  this picture illustrates some symptoms.

    If the Markets' continued rally is taken as evidence, then it also appears that people don't care about the threats weighing down the economy.  The Major U.S. Index Averages are holding above their 200-Day declining moving averages and overhead resistance.  Also, Bespoke notes that eighty-four percent of the stocks in the S&P 500 are trading above their 50-day moving averages.  With that said, momentum is waning … three months into the rally. 

    Of course, the length and staying power of the rally says something about how crowds work, and why the majority of traders are often wrong at turning points in the market.  The following video makes the same point, a different way.  On the surface, it starts with a lone male, dancing at a music festival.  It is fascinating to watch what happens when other people feel the urge to get in on the fun. It takes about one-minute for people to start joining in.  By two-minutes, there's a crowd.  And by three, it's a mob.

    Here is the direct link to the video on YouTube.  This says something about human nature, doesn't it?

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

    Lighter Ideas and Fun Links that I Found Interesting This Week

    • The Top Twelve Funny Indicators That The Economy Is Bad. (Big Picture)
    • Why Microsoft Windows 7 XP Mode is a Major Advancement. (eWeek)
    • Making Fat Disappear with a Genetic Strategy from Bacteria. (Tech Review)
    • When Sleep Leaves You Tired: It's the Quality, Not Quantity. (WSJ)
    • When a 'Chosen' Tibetan Lama Says "No Thanks". (Time)
    • How Twitter Will Change the Way We Live. (Time)
    • More Posts with Lighter Ideas and Fun Links.

  • Capitalogix Commentary 05/14/09

    Swine Flu Symptoms

    The Swine Flu made headlines again.  Apparently, no one cares that the the U.N.'s World Health Organization officially declared the outbreak to be a "pandemic" this week.  If you don't know what to look for,  this picture illustrates some symptoms.

    If the Markets' continued rally is taken as evidence, then it also appears that people don't care about the threats weighing down the economy.  The Major U.S. Index Averages are holding above their 200-Day declining moving averages and overhead resistance.  Also, Bespoke notes that eighty-four percent of the stocks in the S&P 500 are trading above their 50-day moving averages.  With that said, momentum is waning … three months into the rally. 

    Of course, the length and staying power of the rally says something about how crowds work, and why the majority of traders are often wrong at turning points in the market.  The following video makes the same point, a different way.  On the surface, it starts with a lone male, dancing at a music festival.  It is fascinating to watch what happens when other people feel the urge to get in on the fun. It takes about one-minute for people to start joining in.  By two-minutes, there's a crowd.  And by three, it's a mob.

    Here is the direct link to the video on YouTube.  This says something about human nature, doesn't it?

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

    Lighter Ideas and Fun Links that I Found Interesting This Week

    • The Top Twelve Funny Indicators That The Economy Is Bad. (Big Picture)
    • Why Microsoft Windows 7 XP Mode is a Major Advancement. (eWeek)
    • Making Fat Disappear with a Genetic Strategy from Bacteria. (Tech Review)
    • When Sleep Leaves You Tired: It's the Quality, Not Quantity. (WSJ)
    • When a 'Chosen' Tibetan Lama Says "No Thanks". (Time)
    • How Twitter Will Change the Way We Live. (Time)
    • More Posts with Lighter Ideas and Fun Links.

  • Capitalogix Commentary 06/07/09

    Last week, as the Markets approached their 200-Day declining moving averages and overhead resistance, I said that a sustained break-out to the upside would be significant here. 

    Well, the Markets gapped higher last Monday, and held their ground.  From most logical and technical perspectives the action has seemed relatively healthy considering the circumstances … three months into the rally. 

    It is somewhat funny that unemployment continues to go up, but people focus on how the increase is slowing.  This seems to be happening on several fronts.

    Stantis-DecayingSlower-RGB

    Frankly, from a trading perspective, a bullish response to bad news is a bullish sign.  And I don't want to look a gift horse in the mouth, either.  This Market is quite well-behaved, and has acted as if "Bull-Rules" apply.  So, trade what the market gives you. Still, from another standpoint, I'd like to see a pull-back. 

    Money Shot: A Commentary On Investing.

    What is so funny about this video is that the people being interviewed don't know they are a satire of the investment market as a whole.  It is worth watching.  Hope you enjoy it.

    The Daily Show With Jon Stewart M – Th 11p / 10c
    Money Shot
    thedailyshow.com
    Daily Show
    Full Episodes    		 Political Humor Economic Crisis

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

    • Jim Rogers 100% Long For The First Time Since '87. (Street Insider)
    • New Bull: Does Rare Coppock Curve Pattern Signal the Next Move? (CNBC)
    • Was 2008 an Outlier? Not as Much as You Might Think. (SeekingAlpha)
    • Is Microsoft Repeating GM's Mistakes? (Infoworld)
    • What Does Tivo's Patent Win Mean For Investors? (WSJ)
    • Banks Raising Billions to Repay Government. (DealBook)
    • Taleb's ‘Black Swan’ Hedge Fund Bets On Hyperinflation. (FinAlternatives)
    • More Posts Moving the Markets.

    Lighter Ideas and Fun Links that I Found Interesting This Week

    • Becoming a Savant: How To Unleash Your Brain's Inner Genius. (New Scientist)
    • Why Meetings Suck: The Four Quadrants of Communication. (Integral Life)
    • Will Google Wave Transform How You Communicate And Collaborate? (ZDNet)
    • It Just Got Easier to Port Virtual Apps into the Cloud. (Tech Review)
    • Microsoft Readies Incentives For You To Adopt Windows 7. (ZDNet)
    • Personalized Medicine Could Be The Next Big Thing. (Forbes)
    • How Casinos Find and Target Their Favorite Customers. (Wharton)
    • More Posts with Lighter Ideas and Fun Links.

    TXT

  • Software to Help You Manage Your Mind

    Visual Thinking, Idea Mapping or Mind-Mapping … whatever you call it, there are some terrific new tools available to help you think, plan and write better.

    I find I'm using it more often and for more things, like: note-taking, process maps, brainstorming and presentations.

    How Does It Work?

    Mind-Mapping is related to outlining. So you already know how to do it.  It is intuitive, and makes it
    easy to see thought structure and relationships. It also makes it easy to review and re-organize the framework that organizes your data. Here is an example showing what you can do with a tool like this.

    090607 Uses of MindMaps

    How Can You Use Mind-Mapping Software?

    I use this type of software like a virtual whiteboard.  It helps me organize a meeting or present a thought process. What used to be a form on a piece of paper, now becomes the dynamic center of collective focus.  For example, here is a map template from Mindjet's MindManager; it is used to evaluate an
    idea using SWOT analysis (which stands for: strength, weakness,
    opportunity, and threat).

    090607 SWOT

    The structure of the outline and actually
    helps control focus and trigger new ideas. And the software allow me to add detail and new items in any order.  The result is better understanding and often, new ideas and possibilities.

    Brainstorming.

    The computer age has made it a lot easier for me to collect data. Then what? Data is a raw material, but I often want to think better …
    rather than to just have more data. So, I use visual thinking tools to help me
    make sense of lots of ideas. It often helps me see relationships and
    move items around to places where they fit better, or trigger new
    thoughts.

    PostIt_Board 278p For brainstorming, the software is a lot like writing ideas on Post-It Notes and moving them around on a whiteboard.  I like being able to enter information the order
    that occurs to me, rather than having to understand the bigger picture.

    In fact, it's by placing all the seemingly random bits of information
    page and dragging them around into piles, that the bigger picture often
    reveals itself to me.

    To do that, I try to figure what relates the piles, and I create a label for that category. I then try to figure out how categories fit together, and ultimately come up with a better understanding of the thought framework. From there, it doesn't take much work to fill out weaker areas of the outline, adding an idea here, moving an idea from there.

    The Software Tools.

    Even if you tried a tool like this before, it is time for a fresh look.  These tools have evolved and are worth having and using.

    Mindjet's MindManager is the tool I use most often. The current version is stable and mature, with a nice feature set and the ability to export information into a variety of programs and formats. I especially like the new option to export a live branching version of the mind map in PDF format.

    090607 MindJet Example

    Mindjet offers a template gallery for you to download 70+ sample maps to use.

    Another tool I've been using more of lately is Tony Buzan's iMindMap.  Buzan is a well-known proponent of mind mapping and has created a visually appealing tool.

    090607 Creative Solutions Examples with iMindMap

    It's compelling, and I'm trying to use it more. They also have a nice collection of videos explaining the software and concepts behind mind-mapping that is worth exploring.

    Personally, though, for real work I find myself going back to Mindjet product.

    In addition, there's an open-source version called FreeMind. Here's the link to try that tool as well.

  • Software to Help You Manage Your Mind

    Visual Thinking, Idea Mapping or Mind-Mapping … whatever you call it, there are some terrific new tools available to help you think, plan and write better.

    I find I'm using it more often and for more things, like: note-taking, process maps, brainstorming and presentations.

    How Does It Work?

    Mind-Mapping is related to outlining. So you already know how to do it.  It is intuitive, and makes it
    easy to see thought structure and relationships. It also makes it easy to review and re-organize the framework that organizes your data. Here is an example showing what you can do with a tool like this.

    090607 Uses of MindMaps

    How Can You Use Mind-Mapping Software?

    I use this type of software like a virtual whiteboard.  It helps me organize a meeting or present a thought process. What used to be a form on a piece of paper, now becomes the dynamic center of collective focus.  For example, here is a map template from Mindjet's MindManager; it is used to evaluate an
    idea using SWOT analysis (which stands for: strength, weakness,
    opportunity, and threat).

    090607 SWOT

    The structure of the outline and actually
    helps control focus and trigger new ideas. And the software allow me to add detail and new items in any order.  The result is better understanding and often, new ideas and possibilities.

    Brainstorming.

    The computer age has made it a lot easier for me to collect data. Then what? Data is a raw material, but I often want to think better …
    rather than to just have more data. So, I use visual thinking tools to help me
    make sense of lots of ideas. It often helps me see relationships and
    move items around to places where they fit better, or trigger new
    thoughts.

    PostIt_Board 278p For brainstorming, the software is a lot like writing ideas on Post-It Notes and moving them around on a whiteboard.  I like being able to enter information the order
    that occurs to me, rather than having to understand the bigger picture.

    In fact, it's by placing all the seemingly random bits of information
    page and dragging them around into piles, that the bigger picture often
    reveals itself to me.

    To do that, I try to figure what relates the piles, and I create a label for that category. I then try to figure out how categories fit together, and ultimately come up with a better understanding of the thought framework. From there, it doesn't take much work to fill out weaker areas of the outline, adding an idea here, moving an idea from there.

    The Software Tools.

    Even if you tried a tool like this before, it is time for a fresh look.  These tools have evolved and are worth having and using.

    Mindjet's MindManager is the tool I use most often. The current version is stable and mature, with a nice feature set and the ability to export information into a variety of programs and formats. I especially like the new option to export a live branching version of the mind map in PDF format.

    090607 MindJet Example

    Mindjet offers a template gallery for you to download 70+ sample maps to use.

    Another tool I've been using more of lately is Tony Buzan's iMindMap.  Buzan is a well-known proponent of mind mapping and has created a visually appealing tool.

    090607 Creative Solutions Examples with iMindMap

    It's compelling, and I'm trying to use it more. They also have a nice collection of videos explaining the software and concepts behind mind-mapping that is worth exploring.

    Personally, though, for real work I find myself going back to Mindjet product.

    In addition, there's an open-source version called FreeMind. Here's the link to try that tool as well.

  • Capitalogix Commentary 05/31/09

    A Different Form of Rescue for G.M., Through Bankruptcy.Auto Industry Natural Selection

    President Obama will push General Motors into bankruptcy protection on Monday, making a risky economic and political bet that by nationalizing the onetime icon of American capitalism, he can save the company as a much smaller automaker that is competitive.

    Still, The Market's Rally Persists.

    The Markets continue to hold-up well three months into the rally.  From my standpoint, I'd like to see a pull-back.  However, the action has seemed relatively healthy considering the circumstances. 

    The chart below shows a daily view of the S&P 500 since its March lows.  I marked the obvious Bull and Bear cases for your review.  A sustained break-out to the upside would be significant here.

    090531 SP500 Consolidation

    I don't normally post intra-day charts; however, Friday was interesting.  We spent the day bouncing within a tight range … then somebody started buying.  I hear people reference the "Boys" or the "Plunge Protection Team", or explain the push as "End-of-Month Window Dressing" or "Short-Covering."  Here is an hourly chart showing Wednesday, Thursday, and Friday.

    090531 SP500 Consolidation Spike

    From my perspective, all it means was there was a lack of sellers.  Let's see if they come back in June.

    What Goes Up, Must Come Down:  Or Does It?

    The rally did not just happen here in America.  This chart, from Bespoke, shows how far the fast growing developing countries have come this year. 

    BRIC Country Equity Index Performance YTD 2009

    When I see charts like this, one part of me thinks, "look how far they've come"; and another part of me thinks, "look how far they are likely to fall."

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

    • Sell In May? Not This Time … as the Rally Continued. (Seeking Alpha)
    • Many Hedge Funds Caught Short by the Rally, Still Have Not Fully Bought-In. (WSJ)
    • Will Money Flow Back Into The Markets, Or Will The Sidelines Stay Crowded? (WSJ)
    • Economists Disagree Whether A Sustainable Recovery Has Begun. (Market Oracle)
    • Hulbert's Contrarian Take On Consumer Confidence. (MarketWatch)
    • Tivo Posts Loss As Its Growth Slows. (NYTimes)
    • Dell Warns PC Market Hasn't Hit Bottom; Suffers 63% Drop In Quarterly Profit. (WSJ)
    • More Posts Moving the Markets.

    Lighter Ideas and Fun Links that I Found Interesting This Week

    • Susan Boyle's Final Performance on the "Britain's Got Talent" Final. (YouTube)
    • The Science of Voodoo – How Mind Attacks Body. (New
      Scientist      )

    • Shark Tank: New Reality Show Where Entrepreneurs Pitch To VCs. (WSJ Blogs)
    • Is Cloud-Computing a Myth or a Worthy Goal? (Forbes)
    • New Form of Warfare? Mysterious Computer Virus Strikes FBI. (ZDNet)
    • Thought Provoking Article about Author-Strategist, Jim Collins. (NYTimes)
    • How IBM Plans To Win Jeopardy! With
      Natural-Language Processing. (Tech Review)
    • More Posts with Lighter Ideas and Fun Links.

  • Capitalogix Commentary 05/31/09

    A Different Form of Rescue for G.M., Through Bankruptcy.Auto Industry Natural Selection

    President Obama will push General Motors into bankruptcy protection on Monday, making a risky economic and political bet that by nationalizing the onetime icon of American capitalism, he can save the company as a much smaller automaker that is competitive.

    Still, The Market's Rally Persists.

    The Markets continue to hold-up well three months into the rally.  From my standpoint, I'd like to see a pull-back.  However, the action has seemed relatively healthy considering the circumstances. 

    The chart below shows a daily view of the S&P 500 since its March lows.  I marked the obvious Bull and Bear cases for your review.  A sustained break-out to the upside would be significant here.

    090531 SP500 Consolidation

    I don't normally post intra-day charts; however, Friday was interesting.  We spent the day bouncing within a tight range … then somebody started buying.  I hear people reference the "Boys" or the "Plunge Protection Team", or explain the push as "End-of-Month Window Dressing" or "Short-Covering."  Here is an hourly chart showing Wednesday, Thursday, and Friday.

    090531 SP500 Consolidation Spike

    From my perspective, all it means was there was a lack of sellers.  Let's see if they come back in June.

    What Goes Up, Must Come Down:  Or Does It?

    The rally did not just happen here in America.  This chart, from Bespoke, shows how far the fast growing developing countries have come this year. 

    BRIC Country Equity Index Performance YTD 2009

    When I see charts like this, one part of me thinks, "look how far they've come"; and another part of me thinks, "look how far they are likely to fall."

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

    • Sell In May? Not This Time … as the Rally Continued. (Seeking Alpha)
    • Many Hedge Funds Caught Short by the Rally, Still Have Not Fully Bought-In. (WSJ)
    • Will Money Flow Back Into The Markets, Or Will The Sidelines Stay Crowded? (WSJ)
    • Economists Disagree Whether A Sustainable Recovery Has Begun. (Market Oracle)
    • Hulbert's Contrarian Take On Consumer Confidence. (MarketWatch)
    • Tivo Posts Loss As Its Growth Slows. (NYTimes)
    • Dell Warns PC Market Hasn't Hit Bottom; Suffers 63% Drop In Quarterly Profit. (WSJ)
    • More Posts Moving the Markets.

    Lighter Ideas and Fun Links that I Found Interesting This Week

    • Susan Boyle's Final Performance on the "Britain's Got Talent" Final. (YouTube)
    • The Science of Voodoo – How Mind Attacks Body. (New
      Scientist      )

    • Shark Tank: New Reality Show Where Entrepreneurs Pitch To VCs. (WSJ Blogs)
    • Is Cloud-Computing a Myth or a Worthy Goal? (Forbes)
    • New Form of Warfare? Mysterious Computer Virus Strikes FBI. (ZDNet)
    • Thought Provoking Article about Author-Strategist, Jim Collins. (NYTimes)
    • How IBM Plans To Win Jeopardy! With
      Natural-Language Processing. (Tech Review)
    • More Posts with Lighter Ideas and Fun Links.

  • Seth Godin: Why Tribes, Not Money Or Factories, Will Change The World

    Terrific video from the TED series.

    Seth Godin argues the Internet has ended mass marketing and revived a human social unit from the distant past: tribes. Founded on shared ideas and values, tribes give ordinary people the power to lead and make big change. He urges us to do so.

    Direct link to the Seth Godin's Tribe Talk at TED.

    I'm seeing more examples of Tribes. For example, Facebook and Twitter have become an important part of my day and business process.  I am pleasantly surprised by how many people have offered ideas, opinions and insights that make a difference and move things forward.

    Everything old is new again.  Welcome to the tribe.

  • Seth Godin: Why Tribes, Not Money Or Factories, Will Change The World

    Terrific video from the TED series.

    Seth Godin argues the Internet has ended mass marketing and revived a human social unit from the distant past: tribes. Founded on shared ideas and values, tribes give ordinary people the power to lead and make big change. He urges us to do so.

    Direct link to the Seth Godin's Tribe Talk at TED.

    I'm seeing more examples of Tribes. For example, Facebook and Twitter have become an important part of my day and business process.  I am pleasantly surprised by how many people have offered ideas, opinions and insights that make a difference and move things forward.

    Everything old is new again.  Welcome to the tribe.

  • Capitalogix Commentary 05/24/09

    090523 Magician A good magician misdirects your focus with clever patter, distracting gestures and a pretty assistant.  Why does that remind me about the current state of market perception and the economy? 

    Perhaps in part because of the rosy picture the recent rally paints, while few notice the plunge in S&P 500 earnings.  That means the great bargain you think you are buying isn't such a bargain.

    Stocks Are Expensive Again.

    The chart below, from Chart of the Day, illustrates how this plunge in earnings has impacted the current valuation of the stock market as measured by the price to earnings ratio (PE ratio).

    Generally speaking, when the PE ratio is high, stocks are considered to be expensive. When the PE ratio is low, stocks are considered to be inexpensive. From 1936 into the late 1980s, the PE ratio tended to peak in the low 20s (red line) and trough somewhere around seven (green line). The price investors were willing to pay for a dollar of earnings increased during the dot-com boom (late 1990s) and the dot-com bust (early 2000s).

    As a result of the current plunge in earnings and the recent 2.5 month stock market rally, the PE ratio has spiked to the low 120s – a record high.

    090523 Stocks High PE Ratio

    Click here for a different perspective on this chart. 

    Precious Metals Are Performing Well.

    At the same time, there is another trend worth watching.  Money is moving to gold.

    090522 Gold is Hot Banks and Retail Are Not

    The chart displays the relative performance of several market sectors over the past few weeks.  The chart below shows the same data, but compared to Gold as the baseline.  It highlights how dramatically the other markets have under-performed recently.

    090522 Gold Performing Better

    The recent financial crisis has clearly re-ignited investor interest in precious metals.  Many believe that gold and silver are good bets during tough times – and a hedge against inflation.  So it doesn't surprise me that I'm hearing more investors using Warehouse Depositary Receipts to actually take delivery of the asset rather than just speculating.

    What To Expect.

    A short-term bounce wouldn't surprise me here.  The markets have held-up fairly well after the big rally.  So another test higher makes sense.  However, based on the weakening internals, the intermediate-term outlook is looking more bearish to me.

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

    • Will the Fed's Medicine have Inflationary Side-Effects? (WSJ)
    • Treasury's Next Phase Of Bank Rescue: Buying Toxic Assets. (Dealbook NYTimes)
    • Two Tech IPOs This Week: Is The Dry Spell Over? (NYTimes)
    • Financiers In China Are Getting Leery Of Dollars & Are Accumulating Gold. (Forbes)
    • Russians Offers to Invest $200 Million in Facebook at $10 Billion valuation. (WSJ)
    • Despite Russia's Struggling Economy, Its Market Surges. (NYTimes)
    • Is A Low VIX Good? Not In My Experience. Who's Afraid Of the Bear? (Money)
    • More Posts Moving the Markets.

    Lighter Ideas and Fun Links that I Found Interesting This Week

    • How Well Can You Live In India On $2 Per Day? (Slate)
    • Verne Harnish Insights & Best Practices for Growing Leaders and Companies. (Blog)
    • In Praise of Dullness: the CEO Traits That Most Help Them Thrive. (NYTimes)
    • When Will Computer Intelligence Surpass Our Own? (NYTimes)
    • IBM Unveils Software to Find Trends in Vast Data Sets. (NYTimes)
    • Kindle Books Now Account for 35% of Sales When Available. (Business Insider)
    • Why Predictions Based On Search Were Wrong About 'Idol' Winner. (MediaPost)
    • More Posts with Lighter Ideas and Fun Links.