Ideas

  • What I Love Best About the Kindle, Amazon Took From Vegas.

    Disruptive Technology:

    090306 Tivo Logo I
    remember the first time I used TiVo. I instantly knew it was a
    disruptive technology that would change how people watch TV. It's even
    better than I thought I was. That doesn't mean it was a great
    investment in the stock market; but it was a terrific investment in the
    household.

    And the ripples of this technology are still being felt
    whether you're using TiVo or some other digital video recorder.

    The Kindle is a Disruptive Technology Well-Placed In the Consumer Adoption Cycle:

    Using
    a Kindle reminds me of the first time I used TiVo. Only this might be
    different, because we're several generations of technology further
    along. And the world is ready for it.

    The
    Kindle 2 is ergonomic and reasonably fast. It is a great way to read. 
    It also has a built-in Internet connection, which means you have access
    to content virtually anywhere. And it just so happens that the content
    you want is the content Amazon sells.

    Chances are you already go to Amazon's website.  Because of
    economies of scale, not only do they have a bigger inventory, they have
    a bigger community of users who rate the books and write reviews of the
    books.

    A few years ago, Barnes & Noble and Borders tried to compete
    with Amazon online. As a user, I went to the competitors' site once or twice … but the
    first time Amazon had the book I was looking for and the other site didn't … or
    the first time that Amazon had reviews of a product and the other site didn't –
    well, that was all it took to stop going to those sites.

    And
    Amazon
    continues to extend that edge with bigger inventories, more product
    lines, and a truly mature delivery pipe. Their storefront and
    shopping cart has been used tens of millions of times is an important
    part of the value proposition.

    Psychologically Smart, Part 1: Amazon Banks on Funny Money:

    090306 casino chipsOnce you have a profile on
    Amazon, it doesn't feel like you're spending money. Casinos know the
    token is treated differently than cash.

    On the Kindle, Amazon makes it easy for you to
    buy with "one click" over their "Whispernet" always-on data network.
    So you don't hear or feel your money as it leaves your account. This is
    brilliant.

    Psychologically Smart, Part 2: Amazon Banks on Your Addiction to Instant Gratification:

    Even better, though, is how they handle samples.  It is already changing how I use Amazon. With the Kindle, I
    have instant gratification.

    I can find a book and download a sample in
    seconds. In many cases, the Kindle version is dramatically cheaper than
    the old paper version. So, I suspect that I'll be downloading samples
    of many books. And when I like the author's writing style or find a few
    ideas that I can use, I'm one click away from being able to read the
    rest of it (even if I'm in a meeting or stuck at the airport).

    Over
    time, I might find that I prefer certain books in paper format. On
    the other hand, I've been surprised by how likely I am to read a little
    of this and a little of that.

    And being able to have a whole bookshelf
    is a pretty cool competitive advantage too.

  • Capitalogix Commentary 03/20/09

    090320 Political Cartoon - The Debt Star
    As the recession deepens, the Federal Reserve announced a plan to revive the struggling economy. It will pump more than an
    extra $1 trillion into the mortgage market and longer-term Treasury
    securities.  Short-term, equity markets did push higher.

    The problem with desperate measures, though … they can end up stoking fear, not confidence.   In this case, the plan to buy-up bonds caused the decade's steepest one-day fall in the Dollar against the Euro as investors worried that the Fed's decision to print new money would lead to inflation.  

    One Man's Trash Is Another Man's Treasure:

    In business, I'm constantly facing a build or buy decision.  Namely, is it cheaper to develop something that does what I want, or can I simply buy something that does it already? 

    Well, that equation may soon produce a different result for many companies.  A key indicator is flashing.  Companies are starting to notice. What is it?

    For the 4th quarter of 2008, Argus Research notes the "Q" ratio declined its lowest level since the 4th quarter of 1991.  This implies that it is cheaper to buy a company than to build a replacement.  To me this is an early indicator that merger and acquisition activity is about to increase.  So, expect to see more deals like IBM's proposed acquisition of Sun.

    090320 Buy versus Build Signal

    Sector Rotation: Will Financials Take the Lead?

    Sector rotation theory posits that Financials are a leading indicator of the economy.  Historically they start to perform well six to twelve months before the general market.  Perhaps one of the reasons is that they tend to generate big fees from M&A activity.  And M&A activity starts to get interesting while certain assets are still cheap.  Consequently, I'm watching the Financials and the level of deal activity.

    Last week I posted a chart highlighting the performance of the banking sector, noting that it hadn't been able to sustain a rally longer than a week for quite a while. Well, it looks like decision time.  Just a few weeks ago, Citi's stock price was under $1.  Saturday Night Live made a joke that it was the first major bank to make it onto McDonald's value menu.  Well, it has tripled since then. And the rally has taken prices in this sector to interesting levels.  The chart below shows that the rally has a series of heavy technical burdens to overcome.

    090320 XLF Sell Signal

    However, making it past this price area would go a long way towards convincing me that an intermediate term rally was starting. 

    One other potential negative, indicating a reversal back to the down-side (at least in the short-term), is that the Equity Put-to-Call ratio just hit its ten month low … and that is often a reliable sell-signal.

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

    • Fed to Buy $1 Trillion in Securities to Aid Economy. (NYTimes)
    • Geithner's New Plan to Revive U.S. Banks. (Bloomberg)
    • The Fed's Downside to Desperate Measures. (WSJ)
    • Looking to Learn From Prior Bear Markets. (Economist)
    • More Posts Moving the Markets. (My List)

    Lighter Ideas and Fun Links that I Found Interesting This Week

    • Bush Book Deal Worth $7 Million. (TDB)
    • Which of 14 Types of Twitter Personality are You? (Media Caffeine)
    • Why money messes with your mind – New Scientist. (NewScientist)
    • Old age begins at 27 – scientists claim after new research. (DailyMail UK)
    • More Posts with Lighter Ideas and Fun Links. (My List)

  • Capitalogix Commentary 03/20/09

    090320 Political Cartoon - The Debt Star
    As the recession deepens, the Federal Reserve announced a plan to revive the struggling economy. It will pump more than an
    extra $1 trillion into the mortgage market and longer-term Treasury
    securities.  Short-term, equity markets did push higher.

    The problem with desperate measures, though … they can end up stoking fear, not confidence.   In this case, the plan to buy-up bonds caused the decade's steepest one-day fall in the Dollar against the Euro as investors worried that the Fed's decision to print new money would lead to inflation.  

    One Man's Trash Is Another Man's Treasure:

    In business, I'm constantly facing a build or buy decision.  Namely, is it cheaper to develop something that does what I want, or can I simply buy something that does it already? 

    Well, that equation may soon produce a different result for many companies.  A key indicator is flashing.  Companies are starting to notice. What is it?

    For the 4th quarter of 2008, Argus Research notes the "Q" ratio declined its lowest level since the 4th quarter of 1991.  This implies that it is cheaper to buy a company than to build a replacement.  To me this is an early indicator that merger and acquisition activity is about to increase.  So, expect to see more deals like IBM's proposed acquisition of Sun.

    090320 Buy versus Build Signal

    Sector Rotation: Will Financials Take the Lead?

    Sector rotation theory posits that Financials are a leading indicator of the economy.  Historically they start to perform well six to twelve months before the general market.  Perhaps one of the reasons is that they tend to generate big fees from M&A activity.  And M&A activity starts to get interesting while certain assets are still cheap.  Consequently, I'm watching the Financials and the level of deal activity.

    Last week I posted a chart highlighting the performance of the banking sector, noting that it hadn't been able to sustain a rally longer than a week for quite a while. Well, it looks like decision time.  Just a few weeks ago, Citi's stock price was under $1.  Saturday Night Live made a joke that it was the first major bank to make it onto McDonald's value menu.  Well, it has tripled since then. And the rally has taken prices in this sector to interesting levels.  The chart below shows that the rally has a series of heavy technical burdens to overcome.

    090320 XLF Sell Signal

    However, making it past this price area would go a long way towards convincing me that an intermediate term rally was starting. 

    One other potential negative, indicating a reversal back to the down-side (at least in the short-term), is that the Equity Put-to-Call ratio just hit its ten month low … and that is often a reliable sell-signal.

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

    • Fed to Buy $1 Trillion in Securities to Aid Economy. (NYTimes)
    • Geithner's New Plan to Revive U.S. Banks. (Bloomberg)
    • The Fed's Downside to Desperate Measures. (WSJ)
    • Looking to Learn From Prior Bear Markets. (Economist)
    • More Posts Moving the Markets. (My List)

    Lighter Ideas and Fun Links that I Found Interesting This Week

    • Bush Book Deal Worth $7 Million. (TDB)
    • Which of 14 Types of Twitter Personality are You? (Media Caffeine)
    • Why money messes with your mind – New Scientist. (NewScientist)
    • Old age begins at 27 – scientists claim after new research. (DailyMail UK)
    • More Posts with Lighter Ideas and Fun Links. (My List)

  • Tough Times Call For Hope And Inspiration

    The Red Ribbon is a fun video worth watching.  It is a reminder that Hope, Inspiration and Passion are important catalysts to moving forward, regardless of what you do for a living.

    I hope you like it.

    Here is the direct link on YouTube.

  • Tough Times Call For Hope And Inspiration

    The Red Ribbon is a fun video worth watching.  It is a reminder that Hope, Inspiration and Passion are important catalysts to moving forward, regardless of what you do for a living.

    I hope you like it.

    Here is the direct link on YouTube.

  • Capitalogix Commentary 3/13/09

    Cartoon Economic Rubik Cube
    It's a puzzle.  Is this yet another bear-market bounce, or the start of something more meaningful? It was just the second gain in 10 weeks; but the 12% rise from 12-year lows was enough to start the debate.

    The usually bearish, and quite well-respected, Doug Kass suggested that we might be seeing a "generational low" here.  Personally, I'm skeptical.  But when Doug Kass and Warren Buffet agree, I'm going to try and see what they see.

    Also note that tech is leading, and the financials are doing reasonably well, right now, too.  For a sustained rally, that is as it should be.  Nonetheless, the proof will be in the follow-through.

    With that in mind, here is a chart of the Banking Index from Bill Luby's VIX and More.  It shows that we've had one-week rallies several times since August.  A bigger move might be an important sign?

    090313 BKX One-Week Rallies

    Also note that the major US Equity Indices are rallying into the overhead resistance created by the November lows. And that is where we start the week.

    There's a joke amongst traders: The Trading Gods allow you to buy the low-tick then sell the high-tick … once. After that, you're free to do the opposite as often as you want.

    Note that there is a kernel of truth in most good humor … and if you haven't seen Jim Cramer on the Daily Show, it's worth watching.

    Here are a Few of the Business Posts Moving the Markets that I Found Interesting This Week:

    • Global Stimulus Coordinated Effort Shot Down. (The Daily Beast)
    • China’s Leader Says He Is ‘Worried’ Over U.S. Treasuries. (NYTimes)
    • Outsmarting Wall Street? How Quants Tried to Model The Physics of Money. (NYTimes)
    • AIG Paying $165 Million in Bonuses After Federal Bailout. (NYTimes)

    And, Here are a Few More Lighter Ideas and Fun Links:

    • What does one TRILLION dollars look like? (PageTutor)
    • The Unsaid Reason VCs May Not Back You: Resource Efficiency (Mark Peter Davis)
    • Time Management in the Age of Social Media. (BusinessWeek)
    • Twitter Has A Big Month, Grows To Over 8 Million U.S. Users (SocialTimes)

  • Capitalogix Commentary 3/13/09

    Cartoon Economic Rubik Cube
    It's a puzzle.  Is this yet another bear-market bounce, or the start of something more meaningful? It was just the second gain in 10 weeks; but the 12% rise from 12-year lows was enough to start the debate.

    The usually bearish, and quite well-respected, Doug Kass suggested that we might be seeing a "generational low" here.  Personally, I'm skeptical.  But when Doug Kass and Warren Buffet agree, I'm going to try and see what they see.

    Also note that tech is leading, and the financials are doing reasonably well, right now, too.  For a sustained rally, that is as it should be.  Nonetheless, the proof will be in the follow-through.

    With that in mind, here is a chart of the Banking Index from Bill Luby's VIX and More.  It shows that we've had one-week rallies several times since August.  A bigger move might be an important sign?

    090313 BKX One-Week Rallies

    Also note that the major US Equity Indices are rallying into the overhead resistance created by the November lows. And that is where we start the week.

    There's a joke amongst traders: The Trading Gods allow you to buy the low-tick then sell the high-tick … once. After that, you're free to do the opposite as often as you want.

    Note that there is a kernel of truth in most good humor … and if you haven't seen Jim Cramer on the Daily Show, it's worth watching.

    Here are a Few of the Business Posts Moving the Markets that I Found Interesting This Week:

    • Global Stimulus Coordinated Effort Shot Down. (The Daily Beast)
    • China’s Leader Says He Is ‘Worried’ Over U.S. Treasuries. (NYTimes)
    • Outsmarting Wall Street? How Quants Tried to Model The Physics of Money. (NYTimes)
    • AIG Paying $165 Million in Bonuses After Federal Bailout. (NYTimes)

    And, Here are a Few More Lighter Ideas and Fun Links:

    • What does one TRILLION dollars look like? (PageTutor)
    • The Unsaid Reason VCs May Not Back You: Resource Efficiency (Mark Peter Davis)
    • Time Management in the Age of Social Media. (BusinessWeek)
    • Twitter Has A Big Month, Grows To Over 8 Million U.S. Users (SocialTimes)

  • Predictably Irrational: The Hidden Forces That Shape Our Decisions

    090313 Predictably Irrational Book Cover I finally got around to reading this book, and it was worth it.  This
    review has links to videos and related material to help you get more
    from the book.  Bottom-line: It was fun and easy-to-read … with short
    chapters and memorable stories that make practical points.

    Magic, Markets and the Mind … A Little Back-Story.

    Magic fascinated me when I was younger. I loved learning new and cool illusions. There's something satisfying about seeing behind the curtain, and understanding how it works.

    Now, as an adult, I'm struck with how similar that is to my fascination with understanding stock markets and trading techniques.  Of course, increased skill in this area is potentially rewarding financially. But there also is  something intellectually pleasing about believing you can see and understand what's really happening in the markets.

    Taking that a bit further, it's not surprising that people spend so much time and money trying to understand how the mind works. Our brains didn't come with a user's manual; though sometimes it would be useful to have one to help understand why something is happening or
    how to get a different result.

    Some aspects of my mind that truly amaze me, while other parts of my mind confound me. Have you ever asked yourself: How can someone so smart be so dumb, at the same time?  I suspect that most people have.

    Obviously that is why there are whole industries that help shine a light into that darkness. Whether it's through personality or temperament testing, learning to use NLP, or finding some other way for us to optimize our performance or understanding … people want insights and answers.

    That is why I'm happy to review the book Predictably Irrational. It was interesting and fun; and it provides some insights worth having.  Think of it as a few of the missing chapters from our Owner's Manual.

    Predictably Irrational: The Hidden Forces That Shape Our Decisions.

    When it comes to making decisions in our lives, we think were in
    control. We think we're making smart, rational choices. But are we?

    In a series of illuminating, often surprising experiments, Professor Dan Ariely refutes the common assumption that we behave in rational ways.

    His book, Predictably Irrational: The Hidden Forces That Shape
    Our Decisions    , contains an interesting mix of psychology and economics, he calls "behavioral
    economics".   The main point of the book is that while irrational behavior is a
    part of human nature, people tend to behave irrationally in a predictable fashion.

    Consequently, Ariely suggests that we would be better off if we designed systems to compensate for our limitations.  With that in mind, this
    book can change the way you interact with the world, one decision at a
    time.

    Why Smart People Do Dumb Things:

    Blending
    everyday experience with research, he explains how
    expectations, emotions, social norms, and other invisible, seemingly
    illogical forces skew our reasoning abilities.

    Not only do we make
    astonishingly simple mistakes every day, we make these same types
    of mistakes, repeatedly.

    • We consistently overpay, underestimate, and
      procrastinate.
    • We fail to understand the profound effects of our
      emotions on what we want. And
    • We overvalue what we already own.

    Yet
    these misguided behaviors are neither random nor senseless. They are
    systematic and predictable – thus, making us predictably irrational.

    Here is a brief video that explains more about how you can use behavioral economics to combat the Predictably Irrational.



    Here is the direct link     to Dan's speech to Google at the @Google Talks Series.

    The Book Illustrates Some of the Ways We Exercise Bad Judgment in the Economics of Life.

    There are a lot of interesting tidbits in this book.  For example, the book explains why cautious people make poor decisions when excited, or why
    you enjoy the more expensive option over its cheaper counterpart.

    One study in the book shows that Cheap is Good; But Free Seems Better. When asked if they’d like a 15-cent Lindt truffle or a one-cent Hershey’s Kiss, 73% of people buy the truffle. However, simply drop a penny off the price of each – so … a 14 cent truffle or a free Hershey’s Kiss – and only 31% choose the Lindt. Is eating the chocolate you don’t really want worth saving a penny? Probably not; but it is human nature.

    According to Ariely, we should re-examine and re-cast our understanding of economics to reflect the systematic (and unsurprising) irrationality of human nature. Ariely argues that greater understanding of previously ignored or misunderstood forces (emotions, relativity, and social norms) that influence our economic behavior brings a variety of opportunities to better predict individual motivation and consumer choice, as well as economic and educational policies.

    Other Links:

    Links to Other Speeches:

    By the way, there is a whole @Google Talks Series. It is worth exploring.  I especially like the Authors section.

  • Predictably Irrational: The Hidden Forces That Shape Our Decisions

    090313 Predictably Irrational Book Cover I finally got around to reading this book, and it was worth it.  This
    review has links to videos and related material to help you get more
    from the book.  Bottom-line: It was fun and easy-to-read … with short
    chapters and memorable stories that make practical points.

    Magic, Markets and the Mind … A Little Back-Story.

    Magic fascinated me when I was younger. I loved learning new and cool illusions. There's something satisfying about seeing behind the curtain, and understanding how it works.

    Now, as an adult, I'm struck with how similar that is to my fascination with understanding stock markets and trading techniques.  Of course, increased skill in this area is potentially rewarding financially. But there also is  something intellectually pleasing about believing you can see and understand what's really happening in the markets.

    Taking that a bit further, it's not surprising that people spend so much time and money trying to understand how the mind works. Our brains didn't come with a user's manual; though sometimes it would be useful to have one to help understand why something is happening or
    how to get a different result.

    Some aspects of my mind that truly amaze me, while other parts of my mind confound me. Have you ever asked yourself: How can someone so smart be so dumb, at the same time?  I suspect that most people have.

    Obviously that is why there are whole industries that help shine a light into that darkness. Whether it's through personality or temperament testing, learning to use NLP, or finding some other way for us to optimize our performance or understanding … people want insights and answers.

    That is why I'm happy to review the book Predictably Irrational. It was interesting and fun; and it provides some insights worth having.  Think of it as a few of the missing chapters from our Owner's Manual.

    Predictably Irrational: The Hidden Forces That Shape Our Decisions.

    When it comes to making decisions in our lives, we think were in
    control. We think we're making smart, rational choices. But are we?

    In a series of illuminating, often surprising experiments, Professor Dan Ariely refutes the common assumption that we behave in rational ways.

    His book, Predictably Irrational: The Hidden Forces That Shape
    Our Decisions    , contains an interesting mix of psychology and economics, he calls "behavioral
    economics".   The main point of the book is that while irrational behavior is a
    part of human nature, people tend to behave irrationally in a predictable fashion.

    Consequently, Ariely suggests that we would be better off if we designed systems to compensate for our limitations.  With that in mind, this
    book can change the way you interact with the world, one decision at a
    time.

    Why Smart People Do Dumb Things:

    Blending
    everyday experience with research, he explains how
    expectations, emotions, social norms, and other invisible, seemingly
    illogical forces skew our reasoning abilities.

    Not only do we make
    astonishingly simple mistakes every day, we make these same types
    of mistakes, repeatedly.

    • We consistently overpay, underestimate, and
      procrastinate.
    • We fail to understand the profound effects of our
      emotions on what we want. And
    • We overvalue what we already own.

    Yet
    these misguided behaviors are neither random nor senseless. They are
    systematic and predictable – thus, making us predictably irrational.

    Here is a brief video that explains more about how you can use behavioral economics to combat the Predictably Irrational.



    Here is the direct link     to Dan's speech to Google at the @Google Talks Series.

    The Book Illustrates Some of the Ways We Exercise Bad Judgment in the Economics of Life.

    There are a lot of interesting tidbits in this book.  For example, the book explains why cautious people make poor decisions when excited, or why
    you enjoy the more expensive option over its cheaper counterpart.

    One study in the book shows that Cheap is Good; But Free Seems Better. When asked if they’d like a 15-cent Lindt truffle or a one-cent Hershey’s Kiss, 73% of people buy the truffle. However, simply drop a penny off the price of each – so … a 14 cent truffle or a free Hershey’s Kiss – and only 31% choose the Lindt. Is eating the chocolate you don’t really want worth saving a penny? Probably not; but it is human nature.

    According to Ariely, we should re-examine and re-cast our understanding of economics to reflect the systematic (and unsurprising) irrationality of human nature. Ariely argues that greater understanding of previously ignored or misunderstood forces (emotions, relativity, and social norms) that influence our economic behavior brings a variety of opportunities to better predict individual motivation and consumer choice, as well as economic and educational policies.

    Other Links:

    Links to Other Speeches:

    By the way, there is a whole @Google Talks Series. It is worth exploring.  I especially like the Authors section.

  • Capitalogix Commentary 03/06/09

    Cartoon Why This Depression is Worse than 1930

    You've probably heard the joke about the difference between a recession and a depression.  It's a recession when your neighbor loses their job; and it's a depression when you lose yours. 

    Here is a cartoon that pokes fun at something similar.

    The 1929 crash got off to a much faster start, but we have now more or less caught up.  That isn't as funny because of how true it is becoming.

    Bespoke had an interesting tidbit, only 5% of stocks in the S&P 500 are still trading above their 50-day moving averages.  Three sectors — financials, industrials, and utilities — have zero stocks trading above their 50-days.  Technology has the highest percentage of stocks above their 50-days at just 12%.

    Because of the unrelenting selling, many believe that stocks are ripe for a bounce. Supporting that are several reasonably reliable indicators.  The first is that Smart Money
    is continuing to get more bullish (while retail investors continue to get
    more bearish).  We are getting close to levels that often signify
    rallies.  Similarly the American Association of Individual Investors (AAII) reported the highest level of bearishness (over 70%) since they started measuring in 1987. This is often construed as a contrarian indicator, since the highest levels of bearishness often occur at market bottoms.  So at least now you can feel good that people feel bad.

    Sometimes the truth in humor tells the story better than other methods.  Here is a clip from Jon Stewart's Daily Show.  In it, he does what he does to CNBC.  It's pretty funny.


    Here are a Few of the Business Posts Moving the Markets that I Found Interesting This Week    :

    • GE Shares Fall to 18-Year Lows. (WSJ)
    • Unemployment Rate surges to 8.1% – Worst since 1983. (Guardian)
    • Gates foundation sells-off $100 million of Buffett shares. (CNet)
    • Sentiment Overview for the Week. (Trader's Narrative)

    And, Here are a Few More Lighter Ideas and Fun Links:

    • How to Be an Angel Investor. (Paul Graham)
    • Brief book summary of Jim Collins' "Good to Great". Interesting. (Brevity Brief)
    • Is web-design becoming more blog-like because of Search? (Forbes)
    • Silly service translates and dumbs-down what you say. (Untelligencer)