Capitalogix

Being in One Conversation: A QuantumThink Example

I recently took a course called QuantumThink. It was interesting and different than many other courses I had taken.

It laid out a number of techniques and exercises that helped me distinguish when I was acting automatically (rather than consciously) and unnecessarily limiting my sense of opportunities, options, or even what was possible.  

Frankly, I was surprised by how many of my thoughts, beliefs, and decisions were the result of unconscious habits or predictable patterns of behavior.

An Example.  One exercise helped me recognize how fragile my focus had been. Imagine trying to listen to your favorite song. How long do you think you could truly do that without losing focus and having other thoughts intrude (without thinking about your to-do list or other songs that you like, or who you're going to meet with later in the day, etc.)?  For me, the answer was not that long.

More importantly, I recognized that when I'm not aware of my focus, it often wanders.  And I get distracted easily.  Soon I recognized that this happened to me while talking to my wife, while listening to a telephone call, even when ordering food at a restaurant. How can I lose focus on the waitress while I was ordering? Apparently, quite easily.

How About You?  When you're listening to someone talk to you, are you really listening to them - or are you checking e-mail, texting, browsing a website, watching TV, playing a game, or thinking about what you're going to say?  Be honest with yourself; how often are you fully present?  For me, the answer was not nearly enough.

Try listening to one song with your full attention and focus.  Now, imagine how different a conversation with someone important to you would be if you were consciously aware of your intent for them to experience being heard the whole time they were speaking to you. Maybe it is easier to imagine how different it would be for you if someone was fully present when you talked with them?

I suspect that this is an area where many people exhibit a similar weakness. I say that because discussing this with several friends and family members resulted in big changes in our interactions.

This was a small example, and there are lots more.  Even this single distinction can make a material change in your life, if you let it. So give it a try; and visit this website to learn more about QuantumThink.

Capitalogix Commentary on the Markets 11/28/08

Will Consumers Be Naughty or Nice This Holiday Season?  There was a lot of commentary on the start of holiday season sales this week.  The WSJ notes that bargain-hunters turned out in force for the "Black Friday" pre-dawn store openings and sales, but the annual frenzy was tempered by cautious buying amid the economic downturn. American consumers say they are less interested in consuming than at any other time in the past four decades. Still, the tone has been cautiously optimistic, so far, with the belief that more shopping is will shift online, even though online sales for the first three weeks of November are down 4% from last year.  In a related article, the NYTimes suggests that TV sales are becoming the litmus test for U.S. economy, and offers a glimpse of the broader tensions between cautious consumers and desperate retailers.

Still, the Market has gained 21% since its low made five trading days ago (when the S&P 500 hit a new low for this bear market and touched levels last seen in 1997).  Many attribute this week's rally to some significant Government actions, such as:

• a rescue of Citigroup,
• the unveiling of President-elect Obama's economic team, and
• an $800 billion plan of attack to un-freeze lending to consumers.

The Most Volatile Market Ever.

According to Bespoke, over the last 50 trading days, the average absolute daily percentage change of the S&P 500 has been 3.82%!  That means the S&P 500 is averaging a daily move of up or down nearly 4%.  This is definitely one of the craziest (yet most telling) statistics of the current bear market, and unfortunately, the majority of the daily moves have been down.  In the history of the S&P 500, there has never been a more volatile period.  The closest other period was in the early 1930s.  In contrast, back in February of last year, the 50-day average absolute change was just 0.33%.  Here is a chart that illustrates the spike in volatility.

What about Sentiment?  Well, the CBOE Volatility Index (VIX) has moved beneath its 50-day moving average for the first time in almost three months. Given the inverse relationship between the VIX and stocks, some read this as a bullish sign.

SentimenTrader's Smart-Dumb Money indicator.  The Markets may still have some room to downside.  Yet, in contrast to the bearish bets made by small traders, recent Commitments of Traders reports (and other indicators) show that large commercial hedgers (aka the "Smart Money") are quite bullish. 

Historically, a confidence spread this wide only happens once or twice a year.  Nonetheless, this is the fourth time we had such a sentiment spread this year.  In practice, the Confidence Indexes rarely get below 30% or above 70%.  Usually, they stay between 40% and 60%.  When they move outside of those bands, it's time to pay attention. The chart above shows that substantial bullish reversals often happen when this occurs.

What Does This Say About the Spirit of Our Times?  This may not be market commentary but it might show the zeitgeist of the business climate.  McDonald’s wants to patent how it makes a hot sandwich.  I guess that is the other side of the coin from when McDonald's got sued by someone who got burned when they spilled a 49-cent cup of coffee in their own lap.

Capitalogix Commentary on the Markets 11/21/08

The market is weak right now.  How do I know?  Aside from the near-audible moan of the world's collective unconscious, price going down is a pretty good primary indicator.  Kidding aside, other indicators are worth looking at here too.  One of them is the NYSE High-Low line. 

The following chart shows this market breadth indicator.  It is calculated at the end of each day by taking the number of NYSE stocks making New 52-week Highs and subtracting the number of stocks making New 52-week Lows. What is important to notice is the shape of the line - up is strong (or bullish), down is weak (or bearish).  Sometimes a picture is worth a thousand words. 

You can view updated versions of this chart anytime on StockCharts.com at this link.

Advice For the Markets: Stop It!

So, what should the markets do next?  At this point, humor seems appropriate. I saw this clip of Bob Newhart from Mad TV, last week, and it made me laugh.

Sometimes laughter is the best medicine.

Weekly Commentary through November 15th, 2008

This was a big week for questions (and not so much for answers).  The Market is good at that.

For example, did we just witness another successful retest of recent market lows, or are we just at the bottom again? 

Are you surprised that GM's share price is at lows not seen since 1943?  If not, were you surprised they wanted in on the Bail-out too?  How surprised were you that the Bail-out isn't proceeding as planned?  Do you wonder whether Depression Economics is returning? 

Many people believe that the finance sector is an early indicator for the market in general. This was a tough week for finance sector stocks. Yet, many stocks in that sector made spike bottoms.  This is something I am watching.

Still, volatility remains high, and I take that as a sign of bear markets.  In the chart below, which shows the S&P 500 Index, the green line represents the index itself; and the red line shows the daily percent change in that Index, illustrating how volatility has increased recently.

(via Investment Postcards)

The Cloud Hanging Over the Markets:

People look for scapegoats During market troughs.  One of the first places they are looking now is the hedge fund industry.  What follows is a Wordle "word cloud" created from the text of the Congressional hearings held last week.

I loaded the text of the hearings to the site; so, Click this link to play with this Word Cloud.

Ultimately, the markets are having a tough time world-wide.  If you are standing in the rain, you are going to get wet.  Well, it rained a lot this year.  Take a look at this chart that shows the distribution of yearly returns in the US.  Hint: look at the bottom left of the graphic to find this year.

(hat-tip to Howard Lindzon)

With markets performing so poorly here, and world-wide, It is not surprising that the demand for gold is rising in China or Saudi Arabia.

Turn Talking Into Typing, Automatically

Dragon NaturallySpeaking 10 gets it right.  Finally speech recognition that is surprisingly accurate, even with little or no training.  Here is a 20-second video of me talking - and it typing.

I wrote about using dictation before.  This is different, because it gets smarter as you use it. There are easy ways to edit results, and the program learns from each correction.

For me, I know it works because I find myself using it to create drafts of many things.  And if it wasn't easier and more convenient than typing ... I wouldn't use it.  Instead, I often wait to create the draft at the computer with Dragon NaturallySpeaking.  The writing ends-up sounding more natural if the first draft was spoken.

This program has matured nicely.  Earlier versions were temperamental and took a long time to train.  This one worked out-of-the-box.  I use it with a simple usb microphone (not even the noise-canceling headset they include). It also works with my handheld Olympus voice recorder.

Give it a try.

Weekly Commentary through November 7th, 2008

Who (Or What) Really Controls the Markets? 

Watching the 500-point down day following Obama's election, it would be easy to attribute the move to a reaction to the vote.  However, virtually every market around the globe suffered the same fate.

When I first started trading I used to say things like, "I wonder what they're going to do in the morning?"  Or, "Wow, they are really trying to mess with people."  The point is that I anthropomorphized the market.  In other words, I made the Market seem like a person or a group of people with consciousness and intent.   

It's easy to imagine a secretive group controlling things behind the scenes.  Maybe it's a select committee from the top investment banks.  And of course, you've heard of the "Plunge Protection Team", who supposedly steps in from time-to-time, "pressing buttons" and causing markets to dance their dance.

As appealing as it is to believe that there's so much order and control underneath our markets, the fact that there's been so much correlation around the world, both to the downside and the upside, tells me that what is more likely in control is the fear and greed of the market's collective participants.

Why is There So Much Fear? 

Goldman Sachs forecast the deepest U.S. recession since the Reagan era after the unemployment rate climbed to the highest level in 14 years and payrolls tumbled for a 10th consecutive month. Ultimately, the economy has lost 1.2 million jobs since December, with over half of those losses in the last three months as the problems from the recession accelerate.

On a related note, according to the WSJ, Goldman Sachs is approaching the share price it went public close to a decade ago. 

While US equities market has been down recently, international markets had it worse. The fact that China just announced a 4 trillion Yuan ($586 billion) stimulus package -- equivalent to nearly one-fifth of 2007 GDP -- underlines how nervous Beijing is at the speed of its economic slowdown.

And in Japan, the Nikkei hit a 26-year low a week ago (click to view chart). Forget about the lost decade, in Japan it has been the lost quarter century.

The Nikkei has lost more than 20% of its value in the last month and is down by more than 40% for the year, capped by a 9.6% one-day loss a week ago. That put it lower than it was back in October 1982. 

Yes, they have yo-yos in Japan too.  The Nikkei rallied 33% in 6 days this week, only to tank again.  As you can see, it is a small world.

"Now" Widget

I saw this and spent some time watching the items change. 

It's got lots of tickers and content that change as you watch.  You just weren't aware that you would enjoy knowing how many emails are being sent or spam emails being received.  There are also recent news updates from The New York Times, CNN, Newsvine, top Google searches of the day, and lots more.

Here are some tidbits from the background audio patter.

• "Welcome to Now," the computer says.
• "How about a big bowl of Now?"
• "Please keep your hands inside the moment."
• "Your hair has grown 5 millionths of centimeter in the last second."
• "It is Now in all timezones."

Very clever and well-done.

Below is a limited version.  The link to the complete version is below. 

Click to play with the full widget.  Here is a screenshot of it - and, yes, that is me in the middle.

Seemingly Endless Elections

The election is finally over.

Did you take the Red Pill or the Blue Pill?  No, not that blue pill.

Regardless, it seemed to take forever.  Didn't it?

Here is a political cartoon that sums it up well.

from Boston Globe.

Also, here is a skit from Saturday Night Live.  This provides an interesting commentary on how elections are changing.  John McCain appears live, the weekend before election day, and participates in what I took to be gallows humor.  Was it a Maverick move?

Here is a link to a description of the jokes. (CSMonitor Blog)

Since I indulging in a little election humor, here is one more that made me smile.

from USAToday

Weekly Commentary through October 31st, 2008

October was the worst month for the S&P 500 since October 1987.  The current bear market, which made its most recent low this past Monday, is now the fourth longest decline in the S&P 500 without a 20% rally (on a closing basis). Besides the 1973/1974 bear market, the only other times this has occurred was during the 1929-era Depression.

But that doesn't tell the whole story. It was a month that witnessed the second worst week ever, as well as one of the best.  It had two days where the S&P 500 was up more than 10%; along with one of the market's worst ten days ever too.  To sum it all up, "Volatility" was the word of the month.

In terms of daily moves, the S&P 500 had only three trading days in October where the one-day change was less than 1%. Looking back over the last 50 trading days, the average daily change in the S&P 500 has been a move of 3%.   Unfortunately for the bulls, most of those moves were down. Historically, the only period where the average daily move in the S&P 500 has been higher was during the Depression.

The volatility affected traders significantly.  If you summed the intra-day zig-zags, the daily range has been much higher. This put many trading models into unseen territory.

Barry Ritholtz put together a list showing just how bad October was.  I enjoyed it, and think it is worth the click; here is a link to that post on the Big Picture.

Staying Informed and Up-To-Date

 Last week I went to visit my son, Ben, at a Duke University parents weekend. This April, I will return for my 25th reunion. A lot has changed since I was in college.

One of the biggest changes I noticed was how much information the Internet puts at each person's fingertips, regardless of where they are on campus. Doing research no longer means a trip to the library. And books, magazines or newspapers are a distant second-place to online research and news items.

Staying informed is a big part of my business as well. I used to receive several newspapers daily; and my morning routine started by scanning them cover-to-cover and clipping items that might be of interest to me are someone I knew. I rarely read a newspaper anymore, except when I'm on airplanes.

Now, my daily routine uses news-feed readers and web sites to access a wide variety online content. This is a great way to sort, sift, filter, and act on relevant information.

So, this week, I want to share some of the news sites that I find useful.

News Aggregators:

These are sites that combine news from many sources and create an updated mash up of information it gives me a quick view into what's happening each day.

The Basics: There are no surprises here; still Google News and Yahoo! News are so good that I have to list them anyway.

Next Generation: Some of the newer aggregation sites are quite clever.  Here are a few that I really enjoy:

• NewsCred: Easily personalized to pick sources and rank by credibility.
• Topix: Comprehensive and well categorized. Has a nice look and feel. Uses RSS well.
• Newser: Nice summaries and related links. Uses pictures well, too.
• Daylife: an example of an intelligent content service platform (read: little human editing).
• Newsvine: well done; with social-sourced news flagging.
• Regator: Specialty is organizing and finding blog posts.
• Slate: A little different than the others; more editorial content.

Slate has a number of interesting features.  Today's Papers summarizes current newspaper coverage.  Another summarizes current magazine stories.  And a third, called Today's Business Press, does just what you'd expect. 

All three are quick to read and well done.

Also worth checking: Digg, Technorati, and Techmeme.