Capitalogix

Capitalogix Commentary 01/30/09

In Davos, they are holding the World Economic Forum.  The tone is a little different this year.

Putin warned about the first truly global economic crisis, which he says is continuing to develop at an unprecedented pace.

Soros said “Central banks have lost control,” and basically predicted a new economic world order and the end of the Dollar as the world's default currency.

So far at the Forum, the U.S. has played the role of the wounded giant.

Meanwhile, at home, the WSJ says there have been more than 70,000 layoffs this week alone, something President Obama called "a continuing disaster for America's working families." He urged passage of his $900 Billion stimulus bill and issued Executive Orders to increase the clout of unions.

Reports show the U.S. economy shrank about 5% last fall — the worst contraction since 1982. Because businesses failed to cut production fast enough after the financial crisis hit in October, they're now stuck holding vast inventories of unsold goods. In order to correct, they've begun aggressively closing factories and shedding workers.  The Washington Post says the economy is sinking under the weight of this excess inventory, and that the data suggests the worst is yet to come.

This story is playing-itself-out in different forms across the globe.  For example, I got an e-mail from a trader showing ships stacked-up in the Port of Singapore.  This picture was taken a few weeks ago. Apparently these are empty ships, waiting for cargo.  Since the docks are full of other empty ships, the result is a near complete slow down.

Question: Does that illustrate the state of the commercial world in the Far East?  Or, perhaps, could it simply be the result of Chinese New Year celebrations? I guess time will tell.

Charts That Caught My Eye This Week:

The January decline was steep, but U.S. Markets held above their late November lows. Most surged over their 50-Day Moving Averages, only to sink back downwards.

With Equity Indices suffering and Bond prices falling as well, is there anything performing well?  Recently, Investors have turned to gold as a safe haven. It looks like gold just broke above and successfully re-tested its trendline.  On a closing basis, Friday was the highest gold close in six months.

 

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

• Why Obama unloaded on Wall St execs, as JFK once unloaded on steel barons. (NYTimes)
• UK article spotlighting 25 people at the heart of the economic crisis (Guardian)
• Apple awarded key patent on things that makes the iPhone, the iPhone. (AppleInsider)
• Elliott Wave Theory's explanation of "irrational herding" during uncertain times. (Prechter)
• Americans display venturesomeness, even in grim economic stretches. (NYTimes)
• Steve Jobs a music visionary, or just visionary? Judge for yourself. Interesting article. (CNet)

And, a little bit extra:

• An attempt to make the ThinkPad sexy. I'll admit, they caught my eye. (Lenovo)
• Watch the Ads From the Super Bowl Online (Hulu)
• Add "Obama-cized Poster Effects" to your photos. Interactive and flexible. (Obamicon.Me)
• Malwarebytes fixed a Trojan for me that apps I paid for couldn't remove. Nice. (Download)
• Big Brother's Watching: Swiss Police Spy Marijuana Field With Google Earth (ABC News)
• Printing the NYT Costs Twice as Much as Sending Every Subscriber a Free Kindle (Silicon Insider)

Capitalogix Commentary 01/23/09

Last week I said that it didn't matter whether we were in a depression or a recession. My basic rationale was that if you don't have a cure, then recognizing the disease provides little benefit. The second rationale was that much of the commentary I read talks about our troubles is if they're happening in a vacuum, when in fact, the whole world is suffering from similar financial challenges and instabilities. What that implies is that independent actions (or events that happen here in America) will have less long-term effect than hoped.

In medicine, I suspect that doctors would prefer to cure a disease rather than treat symptoms. On the other hand, until the disease is cured, treating symptoms can often make the patient feel a lot better. While governments around the globe look for a cure, investors will feel a lot better if they figure out a way to make money in this economy, rather than the one they hope for.

It amuses me when I hear that "markets went down today on concern that "XYZ" did ABC". No one really knows why markets go up or down. Sometimes markets respond favorably to news, but other times they don't. Ultimately markets go up when more people buy than sell. Conversely markets go down when there are more people intent on selling, than buying.

So when people insist on creating certainty around what caused markets to move in one direction or the other, I suspect this is a symptom that relates back to a tendency shared by many humans. We are naturally afraid of the dark. It's comforting to believe that there's enough light to see what's going on and to make sense of what's happening around us. It doesn't even really matter that we truly believe it, as long as it's believable and it makes us feel better.

So Where Are We?  We are in an alternate universe. We have a wildly popular African-American President and the Cardinals in the Super Bowl. Remember Seinfeld? Castanza would be a Billionaire.

The market had another terrible week, including the worst inauguration day decline in history; but the White House has a new blog, so apparently everything is okay.

The VIX seems to be saying the same thing.  According to Bespoke, one difference between the current decline and the declines in October and November is that the VIX has not spiked nearly as much.  Many think of the VIX as an indication of fear in the market, and whether it's good or bad, there seems to be more complacency during the most recent downturn.  This chart shows the VIX volatility index along with the S&P 500. 

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

• Obama's Inauguration Speech. (Transcript, Visualizations, & Commentary)
• No soft landing for Asian airlines. (WSJ)
• Despite Crisis, Jim Rogers is Still a China Bull. (Reuters)
• Are riots in Iceland, Latvia and Bulgaria are a sign of things to come? (Times UK)
• If Google can't make it work, newspaper advertising must really be dying. (SJ Mercury)
• Be Nice to Those Who Lend You Money.  Another great Fallows piece. (The Atlantic)
• Thought Provoking Article discussing Business Cycles and Creative Destruction. (Guardian)

And, a little bit extra:

• The cure for retail doldrums ... Obama has an action figure with "Presidential Accessories".
• Timely article called "Reading the Energies of the Time". (Quantum Think)
• W's Greatest Hits:  Love him or hate him, these 25 BUSHisms will make you smile. (Slate)
• Open Source Democracy: The technology that helped elect Obama (AFP & .GOV)
• Pictures of Obama's Inauguration from Space;  see a different perspective. (TechBoost)
• Super squeaky safe sex. Funny condom ads with balloon animals and bloopers. (Durex)
• Free video and worksheet from Tony Robbins about the Power of Momentum. (Nice tool)

Hope Is Only The First Step.

It doesn't matter whether you liked or supported Obama during the campaign. Something changed, and the effects will be felt around the world.

That isn't a political statement.  It is a call for action and an alert to the opportunities and possibilities ahead.

Watching the Inauguration I knew, deep in my body, that I was watching (and a part of) something historic.

Just because the change hasn't yet flowed through to something you're looking at, doesn't mean that the change hasn't already occurred.  So, simply looking around, you might not notice that anything changed (for example, the market continued to go down on Inauguration day). Make no mistake, though, things Changed.

Hope Is Only The First Step.

In business (and certainly in trading) hope is not a great strategy; so it's ironic that it's what we need most right now.

Hope creates confidence, and confidence breeds action. 

Sitting around waiting for governments to fix what's wrong is a recipe for disaster.  Gandhi said "Be the change you seek in the world." It's never been more true than now.

This is not the time to wait for others to fix everything and clean up the mess.  This is a time for action.  This is a time to be open to possibility.

I'm excited!  Periods like this are ripe with opportunity. And it brings to mind something my father told me a long time ago.  The difference between good and great is infinitesimal.  People who are good take advantage of opportunity, while people who are great create opportunity.

Resonant Chamber

This Animusic video is mesmerizing.  The animation is better than what you find in many video games and adds something to the music, which is pretty good in-and-of itself. 

The video was not animated by humans.  Instead, the studio that created this video invented an animation engine that analyzes the notes in a piece of music and the engine's algorithms animate from there.

Fascinating; check-it-out for yourself.

Here is a direct link to the video on YouTube.  Animusic has their own YouTube Channel.

Data Visualization of President Obama's Inauguration Speech

Here are two interactive ways to look at and understand what was said.

Go to Wordle's site to make one yourself.  You can choose colors and layouts to get the look you want.

Also, here is a Word Tree from IBM's Many Eyes site.  I like this type of tool because you can interact with the data.  Type in any word you see in the Word Cloud above.  This will show you every instance of that word, in context.

Also, here is an embedded link to a version you can interact with yourself.  I suggest you start with words frequently used in the speech like: Nation, People, Today, New and Must.  You can also try phrases like "We Will".

The Word Tree tool is interesting and useful. Also, I can see how it will work in a business setting with business plans, proposals, marketing material, etc.  This is very cool; and it is easy to build a word tree on your own data at Many Eyes.  Have Fun. 

Other Links:

• Word Clouds of Inaugurations Compared (Bush, Clinton, Reagan, Lincoln). (Read Write Web)
• Hand-Drawn Mindmap of Obama's Speech. (Agerbeck)
• Photosynth Image of Inauguration site. (Mashable)
• Another Inauguration site panorama with incredible detail. (Gigapan)
• Pictures of Obama's Inauguration from Space; puts things in a different perspective. (GeoEye)

Capitalogix Commentary 01/16/09

Are we in a Recession or Depression?  From my standpoint, I don't think it matters much.  Naming the disease doesn't fix it if you still don't know the cure.  Regardless of what you call it, we're still faced with the symptoms: the credit collapse, carnage in the financial sector, higher prices but less money to spend, and rising unemployment. 

The kicker is this has been happening worldwide.  Yet, most commentary I read treats this like the cause and effect happen here.  If you look around, though, there haven't been many safe havens. And I suspect that we have less to do with the start or end of this mess than we give ourselves credit or blame for.

It Is Not What Happens, But What You Do.  You see it repeated through history ... Times like these are the catalyst to great wealth for some, and the poor-house for others.  If someone were looking back on this time from 10 or 15 years in the future, this is probably early in the new cycle.  This is a good time to figure-out what you believe will work going forward. 

The party isn't over.  It is just a new dance, with a different rhythm and a faster pace.  So, maybe it is time to be nimble and to learn some new steps?

A Look at the Markets:  A few weeks ago, 80% of stocks in the S&P 500 were trading above their 50-day moving averages.  With the declines we've seen since then, that percentage has moved down to 40%.  Financials have led those declines

This chart shows 2009 performance, by sector.  So far most sectors are doing well.  The exception has been Financials, which look a bit oversold.

Nonetheless, with the S&P 500 approaching its November lows, it's comforting to see 40% of stocks still trading above their 50-day moving averages.  At the prior lows, the number got down nearly to zero.  The fact that the overall declines have been limited to a smaller area of the market is a positive for those hoping that the lows will hold.

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

• Is so much bad news good news for you? A Bullish forecast. (Dash of Insight)
• Bank of America gets another $20 Billion from the Fed (Federal Reserve)
• Yahoo has a new CEO, how did Wall Street react? (TechCrunch)
• Sony looks set to lose $1.1 Billion in Fiscal 2008 for first loss in 14 years. (Gizmodo)
• Circuit City Pulls the Plug.  They are liquidating and closing over 500 stores. (Huffington Post)
• Disney seeing some positive signs? (Jim Hill)
• Great Visualization showing GM's woes, the least of which is lack of cash. (WallStats)
• Twitter's New Status as an Investment Tool. (MSN Money Central)

And, a little bit extra:

• Size Does Matter: Finger length may reveal your financial acumen. (New Scientist & Telegraph)
• Your inner voice never lies. But does it know what it is talking about? (Psychology Today)
• Schools get futuristic face scanners to identify students and strangers. (Telegraph)
• In retrospect, this was a huge marketing boner. Funny. (YouTube)
• MS’s new Songsmith product adds music to any vocal track. "Epic Fail". (Blog & Gizmodo)
• The taxman cometh? IRS urged to tax virtual worlds, economies. (Ars Technica)
• Surprise, surprise ... research shows Facebook still mostly for the young. (MIT Tech Review)

Hope, As Something to Hope For

It doesn't matter if you've read "The Audacity of Hope."  Tuesday, change will come.

I'm pretty sure that President Obama will not have these lines in his Inauguration Speech.

"Most of all, I want to thank the Republicans for making this historic occasion possible. Of course, I must also thank you, President Bush, for years of angering the American people. Without your efforts, none of this would have been possible. You have shown the world that  "change" is not only something we can believe in again, but something we demand."

What Obama won't say on Tuesday ... is being said with cartoons or gadgets like this Obama Inauguration Speech Generator.
Click the image below to make your own.

I found it at Mashable, and enjoyed remembering playing MadLibs as a little kid.

Also, Esquire had an interesting piece that generated two links on this topic.

• Just the facts. Click here to see a time-line showing major event milestones of the last 8 years.
  Worth looking-at.  I forgot some, and wish I forgot others.
• Also, click here for an article that reflects on the past 8-years, and asks how we handled them.

Three Simple Questions To Help Make This Your Best Year Ever

We are preparing for our yearly audit. On one hand, this is a task that is hard to like. It reeks of administrivia; and it seems like the best that happens is that nothing happens.

On the other hand, this is a great opportunity for us to review aspects of our business that rarely get primary focus. It reminds me of putting together a business plan. The actual plan isn't nearly as important as the thought and effort that went into creating it.

So, as we start the new year, I challenge you to look at some aspects of your business or life that you know need a little bit more of your focus. To borrow from the Strategic Coach (which is one of my favorite sources), you can start by asking yourself three questions.

1. What do I want to do more of?
2. What do I want to do less of?
3. What do I want to start doing?

Be honest with yourself, and recognize that there's a difference between data-driven tactics, things that emotionally charge you, and the things you just know are true.

You have a clean slate and open field, realize you can fill it with anything. Choose wisely.

Capitalogix Commentary 01/09/09

This was the first full week of trading in 2009.  While the markets pulled-back a bit, most defended their technically-important 50-day moving averages.

Two Steps Forward, One Step Back:  This week started with 80% of the S&P 500 stocks sitting above their 50-day moving averages.  That is stat-geek-speak for "there has been a significant rally off the November bottom." Moreover, people are feeling good about the market's progress. Investors Intelligence readings show people are more bullish now than they were during the rally off the July low.

Regardless of my analysis or opinions, we rely on mechanical trading models to determine our market posture. Still, I follow the markets closely, and the market's consistently negative bias surprised me this past week.  That might be good though.  We worked-off a lot of the overbought condition and put things in place for a more natural Obama Inauguration Rally.

How Bad Was 2008?  The chart on the right is from The Economist, and shows the distribution of US Stock Market Returns Since 1825.  One of the things it shows is that 2008 was the second-worst year of performance.

So as awful as 2008's performance was, historically, remember that it ended with a 20% rally off the bottom to end the year. 

The real question is whether you think the rally will last?  Is it a Bear-Market Rally sucker play, or a real opportunity to put some capital back to work?

I predict big changes are coming (not hard to do with the economy where it is and a new President about to take office).  So, here are some data to help point the way.

Here are a Few of the Posts I Found Interesting This Week:

• Cover your eyes, then check-out these 2008 Year-End Returns for World Markets.(Bespoke)
• US Unemployment Back to 1945 Levels; 2.6MM Jobs Lost in 2008. (Citywire)
• Oxymoron? A relatively sane Elliott Wave market prediction for 2009. (Yelnick)
• Bear Rally or Bull Market?  Are too many people too bullish too quickly? (Hulbert)
• The Fed is Flooding the Markets with Cash. (Clusterstock)
• WSJ's "The End of Wall Street" video series (Click to Watch)
• The End of the Financial World As We Know It? (NYTimes Part 1 & Part 2)
• Ironic that Satyam (which means Truth) didn't outsource Fraud, they did it themselves. (FT)

And, a little bit extra:

• Putting tongues firmly in cheeks, Porn Industry seeks $5BB Federal Bailout. (CNN)
• Obama Fighting for his Blackberry.  This may be a fight he loses. (TechDirt)
• Why do Investment Swindles continue to work? (WSJ)
• Can Risk Be Adequately Quantified? (Naked Capitalism)
• This year China's Internet users will surpass the entire population of the U.S. (Kedrosky)
• The Bull and Bear Cases for Hedge Funds. (Bull: Seeking Alpha and Bear: Yahoo Finance)
• Balanced Commentary on the Middle East's Hundred Year War (Economist)
• Funny list of "Stuff White People Like" - and I do like most of it. (Blog)

WSJ's "End of Wall Street" Videos

Explains how easy money led to the collapse of Wall Street's biggest firms.

Chapter One: What Happened? In the first of this three-part series, Journal reporters explain how the housing bubble inflated and burst, and why easy money led to the collapse of Wall Street’s biggest financial institutions.

Direct link for Chapter One.

Chapter Two: Why Did it Happen? What was going through the minds of CEOs, corporate boards, fund managers and mortgage lenders as they created hard-to-understand derivatives Warren Buffett once called ‘weapons of financial mass destruction’.

Direct link for Chapter Two.

Chapter Three: What Happens Next? This final chapter of the crisis on Wall Street tells the story of the $700-billion bailout, as seen through a reporter’s eyes, and looks at what’s ahead for the global economy.

Direct link for Chapter Three.