Capitalogix

Capitalogix Weekly Commentary - December 26th, 2008

This week I will keep the commentary light, just like the trading volume has been.  Also, I put together a list of posts that I found interesting. 

Quantitative Easing:  Now that the Fed has effectively cut the target lending rate to zero, it only has one more weapon in its arsenal - Quantitative Easing. Here is an easily understood video explaining this.

Quantitative easing from Marketplace on Vimeo.

Here are a few of the posts I found interesting this week:

• For stores, a very un-merry Christmas. (CNN)
• Amazon had a happy holiday season. (BizJournals.com) and TechCrunch)
• Turn-about is fair play; Russian Professor Predicts End of USA (WSJ)
• Oil jumps above $39 as Israel-Gaza conflict widens. (Marketplace)
• Out With the Old, because Creative Destruction made it obsolete. (Lindzon)

And, a little bit extra:

• Is this the next hot item?  Burger King Cologne Sold-Out. (Reuters)
• Are computer operating systems becoming extinct? (InfoWorld)
• Do you still read books?  Electronic Book Readers are getting more popular. (NYTimes)
• This is Shaquille O'Neal; This is the Real Shaquille O'Neal on Twitter.  (NYTimes and Twitter)
• Will Cow Flatulence Be Taxed to Combat Global Warming? (TheWeek)
• Bronx Mowgli Wentz, a name for a rock star or senator? (Fox)

Luck is Pretty Good Too

Luck is underrated. Here is a fun video montage where the hand of fate wasn't so fickle.

Here is a direct link to the YouTube video.

What you focus on determines your life.  It has been said many times, in many ways.

It is easy to focus on what is wrong, what is missing, or what you want to change.  On the other hand, it probably serves us better to feel confident, grateful and loved.  So as we begin 2009, think of how many things went right, how much opportunity is in front of you ... and how even "terrible things" serve to put you back on the right track or start on a better path.

Best wishes for a happy, healthy and prosperous New Year.

Photology - A New Way To Find What You're Looking For

Overwhelmed by too many photos?  Too busy to sort and tag them?  Try this.

Photology helps you navigate the flood of digital photos on your computer by finding photos using simple and intuitive filters like faces, sky, color, location, and time of day ... automatically.

Can't find the photo of you in that pink silk jacket from the 4th of July party on the beach a few years ago? No problem, even with seemingly endless folders of random photos.  You know the expression, "finding a needle in a haystack," right? Thanks to Photology, haystacks of photos will get a lot smaller, making it much easier to find the "needle" you're looking for – even if that needle is an a pink jacket.

How do you do it?  Well, like this.

First stop questioning why you own a pink silk jacket.  Then start remembering what you can.  It was a few years ago (probably 2006).  The photo was of faces.  It was outside.  You were wearing pink.  And It was sunset. 

You can also combine, mix, and match any or all of these tidbits from your memory to find your photo.  It is fast, fun, and very easy to use.

Try it yourself with this online demo.  After the demo launches, try the filter options on the left.

I paid this software - and it was worth it.  Now it is free; an even better value proposition.  I'm still going to use Photoshop Elements for the heavier lifting ... Still, Photology has its place in the toolbox.

So click here to download the software.

Happy Holiday Season Wishes

I put together a short photo album and holiday card.  I hope you'll click this to watch.

Make a Smilebox photobook

Best wishes for a happy holiday season and a terrific 2009.

This Holiday Season ... Beware of the Doghouse

A funny reminder of what not to do this holiday season.

When I asked what she wanted for a holiday present, my wife asked me to buy her an Apron.  Really.  She also wants a saw to cut wood, and a steam cleaner for the carpets.

I might have been born at night. But it wasn't last night.

Yes my wife claims to want certain things ... But I've been trained better than to buy them as gifts.  I give them to her the day before ... "just because". 

Here's why.

Direct link to YouTube video.  Also, here is their website.

Extra: Click Here for "Things You Don't Say to Your Wife" video.

Capitalogix Commentary on the Markets 12/19/08

The Federal Reserve decided to drop their target Fed Funds rate to an all-time record of 0.00% to 0.25%.

This chart, from Bill Luby's Vix and More,  highlights the daily effective federal funds rate, which is a volume-weighted average of rates on trades arranged by major brokers.  It puts things in perspective, doesn't it?

Not surprisingly, last Friday’s effective Fed Funds rate of 0.11% is a record low.  In contrast, the record high of 22.36% dates back to July 22, 1981. The average Fed Funds rate since 1954 is 5.62%.

People Are Less Scared.

Something else going down is the VIX, which is now down more than 50% from its highs.  The VIX looks out 30 days into the future and captures “event volatility” associated with events that are expected to occur in the next 30 days. These include Fed meetings, important economic data releases (employment report, consumer prices, retail sales, durable goods orders, GDP, etc.), earnings from bellwether stocks, even hurricanes, geopolitical crises and other events which can expect to cast a shadow over the course of the next 30 days.

As shown above, the VIX recently broke below its November lows and is currently resting just above 40.

The VIX typically goes up when the market goes down, but even on days when the market has declined this week, the VIX has gone down as well.  That means investors are feeling a lot less fear.

What about the Government, though?  If they are so confident, why continue to print money?

What's a Few Trillion Among Friends?

Since the economic-stimulus package in February, the government has offered more than a dozen multibillion-dollar rescue packages for a variety of industries endangered by the financial chaos and the recession. The magnitude of even one of these mega-bailouts is hard enough to grasp. The following Slate visualization attempts to put the magnitude of these rescue packages in perspective.

Here are a few other items that caught my eye this week.

• Is it a Bail-Out or Smart Economics? (Dash of Insight)
• Sy Harding Argues that Government Responses Will Limit Recession. (Financial Sense)
• Money flow up sharply as S&P holds 50-day Moving Average. (Fallond)
• Biggest 6-Day Decline Ever for the Dollar. (Bespoke)

Can A Beautiful Mind Create a Beautiful Face?

A team of scientists recently developed software that, using a carefully tested and proven understanding of facial proportion, greatly improves the attractiveness of your face without damaging your defining features or whether people will recognize that the picture is of you.

Ever seen a picture of yourself that was a little too good? You’re still you, just a tiny bit better than the real-life you. That’s what this software supposedly does. 

The inventor says this technology could become a product or web service where people upload their photographs and have them enhanced or beautified by the software. 

So, if there was an “optimize portrait” button on Facebook, would a lot of people use it? Probably.

Here is a short video.

Here is a direct link to the video.

Related Articles:

• Examples of Digital Beautification.
• Reuters Article.
• Is Face Improvement Ethical?
• Researchers Promise to Make a More Attractive You.

Capitalogix Commentary on the Markets 12/12/08

Last Monday the news of the day seemed to be that the U.S. markets rallied because Obama committed to spend money on infrastructure.  I saw the same story on Bloomberg, CNBC, CNN, and pretty much everywhere I looked.  On the other hand, a quick check of the indices told me that most markets around the globe also were up between 4 and 10% that day.  Does that mean that Russia, Italy, and the Asian markets all rallied because Obama said that he was going to spend money on the U.S., or is it possible that some other catalyst caused markets to raise?

The point is that the news gives many a false sense of certainty.  There is an old trading adage: It isn't the news that matters ... What matters is the reaction to the news.  And recently I sense that people are getting tired of the choppiness and are starting to buy again, even on bad news.

Bad News?  How about headline-making scandals?   First, the Governor of Illinois tried to sell his influence, and even the Senate seat vacated by President-Elect Obama. Second, Bernie Madoff, a former Chairman of NASDAQ, was arrested and charged with fraud in a $50 billion 'Ponzi-scheme' swindle of investors.  Third, we had the whole auto industry bail-out question.

Still, markets went up, and somehow fear is subsiding.  Will we see a Santa Claus Rally?  From my perspective, a downside correction and successful re-test would be more constructive here.  So would better volume and less volatility.  But beggars can't be choosers; and we've had a 20% rally off the lows.

Nature or Nurture: 

After watching the Government bail-out financial companies, the auto industry seems to have learned a trick, or two. To me, this video represents a very real part of our economic ecosystem.  The swan has been conditioned to pull the rope to request a handout.  When nothing happens, the swan keeps ringing the bell ... and is ultimately rewarded.  Question: is the swan trained, or did the swans train their handlers?

The direct link to the video is here. 

Also, here are a few other posts that caught my eye this week:

• Henry Blodget on Why Wall Street Always Blows It (The Atlantic).
• Are You Buying Now That Blood Is In the Streets?  Some Scary Predictions (Fortune).
• Human Interest Twist to the Recent Financial Crisis in "Profiles in Panic" (Vanity Fair).

"Stand By Me" Music Video from the Playing for Change: Peace Through Music Project

I saw this and thought it was worth sharing.  It is a video of different musicians, around the globe, combining their talents to create a worthwhile version of of the classic "Stand By Me". 

Here is the direct link to the video.

"Playing for Change: Peace Through Music" isn't really a documentary as much as a global concert film, recorded on the streets of New Orleans, Barcelona, South Africa, Tibet and elsewhere.  The filmmakers (Mark Johnson and Jonathan Walls) traveled across the globe, finding musicians to record versions of "Stand By Me" and Bob Marley's "One World" by themselves, and without any of the individual musicians ever having met each other. The finished project combines these performances to create an a "music video" of these artists playing together on these inspirational songs, as well as playing their own music.

The purpose of the project is to help impoverished people in the areas visited, and to show how music brings people together regardless of their cultural differences.  Find out more at Playing For Change.

Capitalogix Commentary on the Markets 12/05/08

There was good and bad news in the market this week. The bad news was that the economy continued to suffer (for example, the worst job loss numbers in decades), and the good news was that the market went up anyway. In contrast to recent reactions, that's very good news. 

Something about the tempo of the market may have changed this week too. There were still a few big fast moves, however there were also longer periods of more natural trading.

I'm not saying that the bear market is over. It will probably take a lot more than this to have a meaningful long-term bottom. Nonetheless, we may have a nice intermediate term support area in place, and the possibility for a decent rally from here.

The Migration to Automated Trading:

For many years I was a discretionary trader.  That means I decided what to buy and what to sell using the tools I thought gave me the best edge for that trade.  Over time I relied more on technical analysis.  And, now, my trading is done by automated systems. 

The use of so many different algorithms provides an interesting perspective on the rhythm of market.

For years, market charts reflected the collective fear and greed of market participants.  Likewise, the patterns from one generation are not much different than the patterns from a different generation of traders; not because the world hadn't changed, but because human nature hadn't changed.

People still traded with people.  When prices got too high, a certain percentage of people decided to sell.  When prices started to go down, some people got fearful - and as prices continued to go down, other people got greedy and decide to buy.  In other words, human nature is human nature; and while the magnitude of the moves may change a little, the basic pattern, the shapes and the slopes probably have remained relatively consistent for millennia.

The Markets Are Changing:

Now, however, something different is beginning to happen.  A greater percentage of the daily trading volume results from computer trading and automated models.  Consequently, more trades are happening outside the influence of fear and greed.  This means that the shapes and the basic nature of trading patterns are bound to change.

It is early in this cycle.  Think about the Internet in the early 1990s.  Looking back, it all makes sense.  Yet in 1995, did you imagine this (how radically research, media, information delivery, media, and commerce would change)?  The game is changing.  Investing will never be the same again.