Capitalogix

Comparing Chinese Provinces with Countries

China is still a toddler from an economic perspective.  No doubt, It is growing quickly.  What will happen as it matures?

photo of toddler from Sun article.

Here is an infographic from the Economist that shows which countries match the GDP, population and exports of Chinese provinces.

 

 

China is now the world’s second-biggest economy; but some of its provinces by themselves would rank fairly high in the global league.

This map shows the nearest equivalent country. For example, Guangdong's GDP (at market exchange rates) is almost as big as Indonesia's; the output of both Jiangsu and Shandong exceeds Switzerland’s.

They also produced an interactive country comparison to the US states.

Here Are Some Links That Caught My Eye This Week

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

• Goldman's Magnum Opus On The Economic Impact From Japan's Earthquake. (ZeroHedge)
• Emerging Markets: Will Fortune Favor the Brave? (FT)
• Hedge Fund Bets $40MM That Twitter Can Predict The Stock Market. (HuffPost & CNBC)
• A Funny Feeling About the Stock Market. (Of_Two_Minds)
• Money Rushes Into Social Start-Ups at Eye-Popping Valuations. (WSJ)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Does Moammar Gadhafi Really Use 40 Lipsticked Virgins as His Personal Guardians? (AOL)
• Organized Religion 'Will Be Driven Toward Extinction' in These 9 Countries. (CNN)
• Where Do Bad Moods Come From? (Wired)
• The Pace of Innovation: Why Internet Explorer Will Survive & Firefox Won't. (ZDNet)
• The iPad 2 Reviews Are In -- Read The Best Parts Here (BusinessInsider & NYTimes)
• More Posts with Lighter Ideas and Fun Links.

Gallon to Gallon - Are Gas Prices Really That High?

Have you noticed gas prices lately? 

As we appraoch $4 per gallon, it's enough to create a different form of March Madness.

 

Gallon to Gallon - Are Gas Prices Really That High?

In response to Sarah Palin's complaints about gas prices, here is a look at other things priced per gallon.

 

That puts things in a different perspective; doesn't it?

Related Articles

• Analysts: gas may soar to $5 per gallon soon (abclocal.go.com)
• Why Gas Prices Rise Quickly but Fall Slowly (dailyfinance.com)
• Good, Better, Best: 3 Free iPhone Apps for Finding Cheap Gas (mashable.com)

Capitalogix Commentary 03/26/11 - The Volatility of Volatility

 Another strong week for the markets.

The Wall Street Journal summed it up nicely.

The "risk on/risk off" trade has come roaring back.

Across financial markets, trading patterns more commonly seen in 2010 are returning. Stocks and the dollar are consistently moving in opposite directions, as are stocks and Treasury securities.

It is a trading pattern that was common for much of 2010 as investors swung in and out of markets en masse–buying "risk on" investments like stocks when they felt brave, and "risk off" assets such as Treasurys and the dollar when they wanted safety.

Markets could be at risk of knee-jerk moves for the foreseeable future, a result of the increasingly volatile nature of global markets, and liquidity being pumped into markets by the Federal Reserve.

Volatility’s Whipsaw: VIX Falls 40% After Jumping 46%.

The Volatility Index (or VIX) is regarded as the "Fear Index" by many. 

So, it is worth noting that the VIX has fallen 40% from its recent highs.  It is also worth noting that That the big move down was preceded by a three-day rise in the VIX of more than 46.

 

The Volatility of Volatility.

According to Barron's, since 1990, the VIX has only experienced a three-day decline of 25% or more that was preceded by a three-day rise of 25% or more eight times.

“During those eight periods, the average and median performance of the S&P 500 has been negative in the days and weeks following these big moves higher and then lower in the VIX”.

We are Seeing a Lot of Big Ups and Big Downs.

One of the bullish signs, recently, has been  the market's ability to snap back and continue its push higher despite recent events.  Yes, there have been big swings; but instead of 'Fear', order returns ... and the market is once again acting like it is relatively undaunted by concerns. 

Remember, how much markets move up and down is a different form of volatility.  You can measure it in many ways, for example, based on the Average True Range.  However, historically,  increasing volatility is not a positive sign for the markets (because it suggests indecision, and has often occurred near major market turning points).

We Are Still In a Bull Market.

If you are looking for another bullish sign, it isn't hard to find one in this market environment. 

Here is one:  Sectors are holding up, even when an individual stock tanks.  A recent example is what took place after Research In Motion (RIMM) released a bad earnings report.  The stock was absolutely annihilated. Yet, even thought the stock got slammed, the rest of the market did not. That's a sign we're in a bullish phase. In bear markets, the whole sector will be taken down if a stock reports badly.

These are the little subtle hints about where we are at the moment. It doesn't mean it'll be this way a week or two from now, but it is that way for the moment.

Related articles

• A warning signal from the Bund/Treasury spread (ftalphaville.ft.com)
• Who's the Sucker When Treasury Winds Down Its Mortgage Backed Securities? (minyanville.com)
• Are You Ready for a 60% Surge in Volatility? (pragcap.com)
• VIX Heads for Biggest Seven-Day Decline as Global Stocks Rally (businessweek.com)

Are You Inspired By the Purpose and Actions of Japanese Workers?

Imagine what was going on in the minds of the initial 50 Japanese workers who stayed behind (while everyone else was evacuated ) to try and fix things at the nuclear reactor after the earthquake ...

• Were they going to die, or become disabled from the exposure?
• How much radiation is safe? 
• What would happen if they didn't choose to go?

Why would anyone choose to put themselves at that much risk?

Archimedes said "Give me a lever long enough and a fulcrum on which to place it, and I shall move the world." 

In this case, the lever was the fate of world, or at least their little corner of the world.  Their actions might save and change millions of lives. 

They had a purpose.  And once you have a big enough "Why" ... the "Hows" seem to take care of themselves.

You don't have to wait to be a 'hero'.

On a related note, here is a TED video worth watching.

It is called: "Life Lessons From a Volunteer Firefighter".

 

Small Acts matter.  Don't wait.

Related Info:

• Live Stream Showing What's Happening at the Reactor.
• Will They Use Robots to Clean-Up the Plant Damage?
• How Will the Earthquake and Nuclear Plant Damage Affect the Economy?
• Even Japanese Mafia Yakuza Groups Are Helping With Relief Efforts.

Capitalogix Commentary 03/21/11 - So, Do You Buy or Do You Sell?

For the first time in a long time, the S&P 500 Index experienced a small corrective phase.  The Index fell 7% from its high, set on February 28th. 

Considering the state of global unrest, the pull-back was reasonably small and orderly. So, is the selling over?  David Stendahl, one of the authors of Dynamic Trading Indicators, sent me this chart signaling a potential short term bullish pivot low.

Below is daily chart of the Index and a short term momentum indicator that focuses on mean reversion (David calls it a "Value Chart").  In general, Value Charts respond to extreme movement away from recent norms and signals when the market is likely to reverse course. 

There is a short term bullish divergence between price action and the Value Chart indicator. I've marked the last three signals, and you can see that they preceded bullish moves.

The weekly chart, however, shows that the S&P 500 is sitting on support with a number of technical indicators poised to turn to the downside.  So, if you are expecting another test lower, there is your cue for caution.

I'm curious whether the market will trigger buyers looking for a bargain, or whether another push lower will result in some real selling?

Is Lumber Sending a Bullish Signal About the Broader Market?

If you are looking for a potentially bullish early indicator, then Lumber may be sending you a signal.  It is back near its recent highs.  If it can break through to the upside, traders may take that as a good sign of market strength. 

Why do traders consider lumber an early indicator for the broader market?  Since lumber is a primary raw material in the early stages of new construction, the logic is that lumber purchases signal new construction.

What Can Copper Tell Us?

Like Lumber, traders also look to Copper as another early indicator of new construction because it commonly used in things like wires and pipes.  In addition, the Copper/Gold Ratio is an interesting composite measure of economic activity.  The chart below shows weakness and a negative divergence of the Copper/Gold Ratio (in comparison to the S&P 500 Index) since last October.  Most recently, this ratio has been falling steeply again.  We will see if that is an early indicator of broader market weakness?

A similar flattening of trading range occurred in the Financial Sector as well.

What Does the Financial Sector Tell Us?

Financials often lead rallies higher.  The logic is that banks make more money when they are lending, doing deals, and helping companies go public.  In 2011, investors have been hesitant to buy into further gains in this sector.  However, price just put in a volume reversal. 

In bull markets, this is where the buying comes in.  So, let's see how this sector responds.  A move down from here would hurt the bullish case.

Lots of Speculation about Japan.

When disaster stikes a first world country with a first world economy, there is little doubt about re-building.  It will happen.  The question investors are asking is how they can profit from it?

Someone called me last week and said "I feel terrible for the people and the tragedy, but I also expect to hear that Hank Paulson ends up making billions of dollars on it next year."

That is the mindset of someone looking to put money back to good use.  There is still a lot of money sitting on the sidelines.  Where will it go to work?

Do you see a rush to invest it in the U.S. equity markets (as we face the end of QE2)?  Do you see a rush back into Gold and Silver? 

It could be we are about to see an opportunistic shift.  It is worth watching where money flows.

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

• Buffett Cleans Up On His Derivatives Bet. (Fortune)
• Why the Definition of Probability Matters? (von Mises)
• Reforms Needed to Nurture Capital Markets as Credit Demand Grows. (FT)
• The High Priest of S&P 500 Statistics. (WSJ)
• How to Invest in Japan's Re-Building and Resilience. (Barron's)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• How Great Entrepreneurs Think. (INC)
• Dealing With Information Overload by Supplying Less to Reveal More. (TechReview)
• Great Ideas From The Innovators Summit (TDB)
• The Gorilla that Walks Like a Man. (TheWeek)
• The Universe Is Even Stranger Than You Realize ... Video. (Gizmodo)
• More Posts with Lighter Ideas and Fun Links.

Related articles

• Market Bottom or Fake-Out Rally? (slopeofhope.com)
• Someone called the cops to the Fed's party (humblestudentofthemarkets.blogspot.com)

Capitalogix Commentary 03/14/11 - Are Traders as Scared as They Should Be?

Last week had massive earthquakes, a nuclear reactor melt-down, and Mid-East turmoil spiking gas prices higher.  So, investors should be scared ... right?

 

 

Japan is one of the world's largest economies; so, imagine what you'd think if an event like that occurred here.  Think of the lost productivity, business closings, insurance liability, global supply-chain issues, etc.  Still, reports are that the effects won't be as bad as they could have been.

As a trader, I'm watching the response to the news (rather than simply responding to news itself).

So far, there hasn't been much fear.

Perhaps Investors Aren't as Scared as They Should Be?

The VIX is regarded as the "Fear Index" by many.  Consequently, you might expect it to be screaming "Fear" after the decent-size market drop in the context of recent world events.

Instead of a "Day of Rage", we have seen raging tranquility and a market acting like it is relatively undaunted by concerns.

So, let's look at a VIX Futures contract chart to see what the VIX is saying ...

With the growing sense that the market is overdue for a correction, some investors may be losing confidence that the market's rally will continue.  Nonetheless, there hasn't been much selling pressure.  In fact, the markets have shown remarkable resiliency and ability to attract buyers.

Here is a daily chart of the S&P 500 Index.

Viewed another way, this is where Bulls will likely try to defend the up-trend.  Will the market attract buyers ... or will risk start to weigh more than its potential reward?

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

• QE3: Will The End Of QE2 Ruin The Party For U.S. Stocks?  (Forbes)
• What's the Point of the Financial Crisis Report?  (Atlantic)
• High-Frequency Traders Transacting Blocks of Shares Away From Exchanges. (Bloomberg)
• It's the Inequality, Stupid: Eight Charts Worth a Glance.  (MotherJones)
• Did 'Financial Terrorism' by Outside Forces Cause The Economic Crash?  (TheWeek)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• How Steve Jobs Gets Things Done? (NetworkedBlogs)
• Meet the Microworkers: Online Workers Paid by the Task. (BusinessWeek)
• Spousonomics: Can Economics Teach Us Anything About Relationships? (Slate)
• Top 10 Mistakes In Behavior Change. (DerekFranklin)
• Video of a Dog Performing Surprisingly Useful Tricks. (YouTube)
• More Posts with Lighter Ideas and Fun Links.

Related articles

• Can you trust the Vix? (ftalphaville.ft.com)
• I'm hedging my stocks by going long volatility (investmentpostcards.com)

Picture of a Person Not Waiting In Line To Get a New iPad

The lines to get the new iPad were long.  Seemingly, everyone wanted one.

Well, not everyone ...

He probably isn't trying to steal Wi-Fi either.

Something to Think About.

Apple stock is at about $350 per share right now. If you had invested in Apple instead of buying that Apple PowerBook G3 250 in 1997, you'd have stock valued at $330,563. 

To see other comparisons like this, read "What If I Bought Apple Stock Instead"?

Related articles

• The Question of the Week; Should You Buy the iPad 2? (lifehack.org)
• First Impressions From An iPad 2 Owner: Should You Wait? [PICS] (mashable.com)
• Apple Offers Video Guided Tours of iPad 2 (mashable.com)

Humor: Generate Your Own Malcolm Gladwell Best-Seller Title

Looking for a new book to read?

Gladwell is usually a good choice.  He wrote Blink, The Tipping Point, Outliers, and What the Dog Saw. 

Somehow his books (and their titles) capture the imagination and a spot on bookshelves.

I showed this to some friends and they thought it sounded interesting. What do you think?

Now, you can generate your own New Gladwell Best Seller.  Try it out.  Yes, the 25 alternatives are fake ... but they're funny.

 

New York Has Its Mojo Back

I spent a few days last week in Manhattan meeting with lawyers and accountants.

 

On one hand, that doesn’t sound like a lot of fun.  On the other hand, it was terrific.   

 

New York has its Mojo back.

 

 

It could have been that there was so much energy, activity, and a sense of bigger things to come ... 

 

Or, it could have been this massive slice of bacon they serve at Peter Luger's.

 

Related articles

• Sam Sifton Bans Toddlers From Peter Luger (observer.com)
• Peter Luger and Other Steakhouses - Mr. Critic (nytimes.com)