Ideas

Capitalogix Commentary 05/31/09
A Different Form of Rescue for G.M., Through Bankruptcy.

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.

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.

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.

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.
May 31, 2009
Capitalogix Commentary 05/31/09
A Different Form of Rescue for G.M., Through Bankruptcy.

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.

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.

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.

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.
May 31, 2009
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.

May 29, 2009
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.

May 29, 2009
Capitalogix Commentary 05/24/09
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.

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.

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.

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.
May 24, 2009
Capitalogix Commentary 05/24/09
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.

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.

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.

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.
May 24, 2009
Capitalogix Commentary 05/17/09
As expected, the Markets have hit some resistance and are losing momentum.

It will be interesting to see whether people view this as an investment opportunity … or the beginning of the next leg down.

The "new rally" offensive sectors are now under-performing. In particular, Consumer Discretionary and Technology sectors are showing weakness. In contrast, the defensive sectors are outperforming … with Healthcare, Utilities, and Consumer Staples showing relative strength. Energy
is also outperforming the broader market.

Even though this change is
relatively new, it does show a change in risk appetite. Investors and
traders are turning more cautious on the market overall.

Here is a chart showing where the NYSE finds itself.

Are Small Investors Paying Attention?

Marty Chenard's StockTiming site often highlights interesting trading ideas and statistics. The chart below is from his site, and shows how large investors and small investors reacted differently to market conditions earlier this week.

The chart shows the volume of Advancing and/or Declining shares for the New York Stock
Exchange, the NASDAQ, the American Stock Exchange, and the Over The
Counter Bulletin Board. (OTC stocks are generally unlisted stocks
which trade on the Over the Counter Bulletin Board (OTCBB) or on the
pink sheets.)

It is easy to see that larger investors were taking profits … while smaller investors were still buying.

That would be significant if it continues.

Business Posts Moving the Markets that I Found Interesting This Week:
- Why Economists Failed To Predict The Financial Crisis. (Wharton)
- Insider Selling: Disney Finance Chief's $1.9 Million Sale. (Barrons)
- Green Shoots Or False Hope About Economic Recovery? (FT)
- Stock-Market Sages Say Worst Is To Come. (TheStreet.com)
- How The Govt Made Economic Problems To Justify Its Solutions. (Forbes)
- Banks Pass Stress Test – Regulators Fail Ethics Test. (Hussman)
- Why Did Cash-Rich Microsoft Sell Its First Bonds? (WSJ)
- More Posts Moving the Markets.
Lighter Ideas and Fun Links that I Found Interesting This Week
- Is Google Insurmountable? (WSJ Blogs)
- The Rebirth Of News: Papers Are Folding as News Flourishes On The Internet. (Economist)
- Asking A Machine To Spot Threats Human Eyes Miss. (Technology Review)
- A New Type Of War Game At West Point; Training For Cyber Foes. (NYT)
- The CIO's Dilemma: How Long Can You Do More With Less? (Forbes)
- Creative Minds – The Links Between Mental Illness And Creativity (Independent Uk)
- Vitamins Found To Curb Exercise Benefits: Are Antioxidants the Problem? (NYT)
- More Posts with Lighter Ideas and Fun Links.
May 17, 2009
Capitalogix Commentary 05/17/09
As expected, the Markets have hit some resistance and are losing momentum.

It will be interesting to see whether people view this as an investment opportunity … or the beginning of the next leg down.

The "new rally" offensive sectors are now under-performing. In particular, Consumer Discretionary and Technology sectors are showing weakness. In contrast, the defensive sectors are outperforming … with Healthcare, Utilities, and Consumer Staples showing relative strength. Energy
is also outperforming the broader market.

Even though this change is
relatively new, it does show a change in risk appetite. Investors and
traders are turning more cautious on the market overall.

Here is a chart showing where the NYSE finds itself.

Are Small Investors Paying Attention?

Marty Chenard's StockTiming site often highlights interesting trading ideas and statistics. The chart below is from his site, and shows how large investors and small investors reacted differently to market conditions earlier this week.

The chart shows the volume of Advancing and/or Declining shares for the New York Stock
Exchange, the NASDAQ, the American Stock Exchange, and the Over The
Counter Bulletin Board. (OTC stocks are generally unlisted stocks
which trade on the Over the Counter Bulletin Board (OTCBB) or on the
pink sheets.)

It is easy to see that larger investors were taking profits … while smaller investors were still buying.

That would be significant if it continues.

Business Posts Moving the Markets that I Found Interesting This Week:
- Why Economists Failed To Predict The Financial Crisis. (Wharton)
- Insider Selling: Disney Finance Chief's $1.9 Million Sale. (Barrons)
- Green Shoots Or False Hope About Economic Recovery? (FT)
- Stock-Market Sages Say Worst Is To Come. (TheStreet.com)
- How The Govt Made Economic Problems To Justify Its Solutions. (Forbes)
- Banks Pass Stress Test – Regulators Fail Ethics Test. (Hussman)
- Why Did Cash-Rich Microsoft Sell Its First Bonds? (WSJ)
- More Posts Moving the Markets.
Lighter Ideas and Fun Links that I Found Interesting This Week
- Is Google Insurmountable? (WSJ Blogs)
- The Rebirth Of News: Papers Are Folding as News Flourishes On The Internet. (Economist)
- Asking A Machine To Spot Threats Human Eyes Miss. (Technology Review)
- A New Type Of War Game At West Point; Training For Cyber Foes. (NYT)
- The CIO's Dilemma: How Long Can You Do More With Less? (Forbes)
- Creative Minds – The Links Between Mental Illness And Creativity (Independent Uk)
- Vitamins Found To Curb Exercise Benefits: Are Antioxidants the Problem? (NYT)
- More Posts with Lighter Ideas and Fun Links.
May 17, 2009
Wolfram’s Alpha Knowledge Engine
I use Google without thinking. It is a habit or a reflex. That is about to change; at least for some types of information.

They call it a "Computational Knowledge Engine" – but my tests tell me it does a lot more than what that means to me. For example, here is a comparison of Accenture and IBM.

Here is a link to a brief demo. Take a look … I bet you shake your head and smile. Progress is a beautiful thing.

It does a lot more than calculate how many days you've been alive, amortize a mortgage, or tell you the flying time from Dallas to Paris. Apparently the folks at Wolfram have a sense of humor too. Here are some example searches that demonstrate that:
Here is a summary of some more of the hidden tidbits from Mashable.

Strangely, it doesn't know what a "computational knowledge engine" is … I guess that makes it more human. It is easier to know lots of stuff than to be self-aware.
May 16, 2009
Wolfram’s Alpha Knowledge Engine
I use Google without thinking. It is a habit or a reflex. That is about to change; at least for some types of information.

They call it a "Computational Knowledge Engine" – but my tests tell me it does a lot more than what that means to me. For example, here is a comparison of Accenture and IBM.

Here is a link to a brief demo. Take a look … I bet you shake your head and smile. Progress is a beautiful thing.

It does a lot more than calculate how many days you've been alive, amortize a mortgage, or tell you the flying time from Dallas to Paris. Apparently the folks at Wolfram have a sense of humor too. Here are some example searches that demonstrate that:
Here is a summary of some more of the hidden tidbits from Mashable.

Strangely, it doesn't know what a "computational knowledge engine" is … I guess that makes it more human. It is easier to know lots of stuff than to be self-aware.
May 16, 2009