Market Commentary

Does the Kindle 2 Make Sense?

The world is changing quickly. Just because you made money a certain way for a long time doesn't mean that this is how you'll continue to make money in the future. In fact the practical realities of time and technology suggest that this is not the case. In this environment, you have to adapt and re-invent yourself.

Creative Destruction in the Publishing Industry:

Think about what has happened to publishing in the past decade. I'm talking about: television, movies, and music … but also newspapers, magazines, and the book industry.

Personally, I read more than I ever did before; but I hardly ever go to a bookstore. I buy a lot less magazines than I used to; and I have to think hard to remember the last time I purchased a CD.

That doesn't mean people aren't making money in these areas. I suspect it just means that different people are making the money. The industry is changing. It's a new game, with new rules, and new opportunities.

How the Kindle Changes Amazon's Business Model:

I've had the new Kindle 2 for about two weeks; and I like a lot.
I'm impressed by the machine, but I'm more impressed with the business platform that Amazon is creating.

Yes, they're going to sell a lot of books on the Kindle. Amazon will build a base of brand-loyal Kindle users.

Plain and simple, though, the Kindle is going to change Amazon's business model.

Right now
bestsellers cost $9.99 (which I suspect is a loss leader because they still have to buy the book from a traditional publisher) and certainly
cannibalizes their business of selling paper books.

They are signaling that they expect to make money differently in the future. That is part of the reason I like Amazon's decision to invest so heavily in the Kindle platform. It's a subsidized campaign to bridge to a new business model.

You Will Have Access to New and Extended Forms of Content.

More avenues will open to profit in different ways. For example, I expect that Amazon will soon sell a paper copy of the book along with an
electronic version for premium price. And you'll also soon have the ability to unlock more features. That means that you'll be able to pay to consume what you
choose (whether that's a one-time viewing, a permanent license, the
right to print, share, or listen to the audio version or watch the
multimedia presentation version of the content).

They have an opportunity to re-define what you consider a "book" as well. And I predict that it won't be
long before you can buy a book that is electronically enhanced with expanded content. Here is how I envision that might work. For example, let's say you buy a book on
blogging. It might describe how to set up an account with TypePad or
WordPress. The enhanced version of the book, which you paid extra for,
could have links and setup wizards to do a lot of the heavy lifting for
you. Do you want to allow search engines to index your new posts?
Here's how to do it, and click this button to have us set it up for you.

Think
about how many areas would benefit from this marriage of content and
skills transfer what about a book on trading that helped you build the
pattern recognition or money management rules into your charting
software or trading platform?

Trojan Horse Strategy: This Will Turn the Publishing Industry Upside-Down.

I think the bigger opportunity is the Trojan horse that turns the publishing industry upside down.

Think about how hard it's been for a new author to get a book published. Even before that, they had to find an agent. If that happens and they withstand the countless rounds of rejection, then the publishing house decides if one and how the book is released and the artist gets perhaps a dollar per book.

In the near future, an author who understands social media and generating buzz published their book or pamphlet through Amazon's Kindle channel and keep the majority of the money. It's faster, frictionless, and more lucrative.

And Amazon can start to cut-out that pesky middle-man. Why deal with a publisher, when you can let the author believe they are the publisher? With this model, there is more margin for everyone (except the old-line publishers, who better be re-inventing themselves with a new value proposition).

It's Not Just About the Publishing Industry; They're Out To Change Your Industry Too.

As Amazon builds up the infrastructure to run their business,
they've decided that they're willing to sell their excess capacity to
you with a new product line of Amazon Web Services. It's on-demand technology capacity that is flexible, state-of-the-art and cost-effective.

Yes, there is still a need for humans. So it's no surprise that Amazon has a new line of business they call the Mechanical Turk. And it's a marketplace for humans to do the work you want to outsource. It leverages Amazon's marketplace catalog and is another example of how they're becoming vertically integrated and well-positioned for the future.

As a consumer, I like what I see; and it's only going to get better.

Bottom Line: Amazon's competitors and suppliers are going to have to adjust their business models.

But the real point wasn't just about Amazon's foresight or skill. It's a challenge and a a wake-up call-to-action for you to look at what you do, and what you need to do … and for you to figure-out
what your future company and the future you is going to focus on and do
to succeed. The environment is changing. It is time to adapt and re-invent yourself.

March 8, 2009
Capitalogix Commentary 02/27/09
This drawing made me smile, even though the market continued down.

Sentiment is bearish; not surprising since we're at market lows not seen in 12 years. You know it's bad out there. But to put it in perspective, Bespoke presents some sobering stats in "Ugly Stock Stats From an Ugly Bear."

Adding to the market's concerns, here is a chart showing that Goldman Sachs slashed their S&P 500 Earnings Forecast. They are expecting a peak-to-trough decline of 56% (behind only the Great Depression and WW1).

And here is a chart showing the deterioration of major bank market caps since 2007. The Blue Bubbles show market value in Q2-07, while the Green Bubbles show recent values.

(hat tip to Phil's Stock World)

Regardless of the data, the real question is whether it will get better or worse from here?

Here is a positive sign. Smart Money is starting to get more bullish (while retail investors continue to get more bearish). We are not yet at the levels that often signify rallies, but we are closer.

As we get closer to intermediate-term lows, I pay more attention to Sentiment measures. So I'll be keeping an eye on Trader's Narrative because they have lots of good content.

I added a feature to the website this week. A place where I link to the news that catches my eye. I'll continue to post the best links here, and I'll have a bunch more for you on the blog.

Here are a Few of the Business Posts I Found Interesting This Week:
- VC's Top-Ten Reasons Start-Ups Fail. (Tim Draper)
- What Warren Buffet Told His Shareholders? (CNBC)
- PDF of Buffet's Berkshire Hathaway 2008 Annual Letter to Investors. (BH)
- The Smart Growth Manifesto – It's Time to Reboot Capitalism. (Harvard Business)
And, Here are a Few More Lighter Ideas and Fun Links:
- A Nice Collection of Ancient Greek Wisdom and Quotes. (MSU)
- Nation Instinctively Forms Breadline – Gallows Humor. (The Onion)
- India Patenting Yoga Move to Protect Them from Western Pirates. (Neatorama)
- A Site for Amazon Kindle Users. (Kindle Nation)
March 1, 2009
Capitalogix Commentary 02/27/09
This drawing made me smile, even though the market continued down.

Sentiment is bearish; not surprising since we're at market lows not seen in 12 years. You know it's bad out there. But to put it in perspective, Bespoke presents some sobering stats in "Ugly Stock Stats From an Ugly Bear."

Adding to the market's concerns, here is a chart showing that Goldman Sachs slashed their S&P 500 Earnings Forecast. They are expecting a peak-to-trough decline of 56% (behind only the Great Depression and WW1).

And here is a chart showing the deterioration of major bank market caps since 2007. The Blue Bubbles show market value in Q2-07, while the Green Bubbles show recent values.

(hat tip to Phil's Stock World)

Regardless of the data, the real question is whether it will get better or worse from here?

Here is a positive sign. Smart Money is starting to get more bullish (while retail investors continue to get more bearish). We are not yet at the levels that often signify rallies, but we are closer.

As we get closer to intermediate-term lows, I pay more attention to Sentiment measures. So I'll be keeping an eye on Trader's Narrative because they have lots of good content.

I added a feature to the website this week. A place where I link to the news that catches my eye. I'll continue to post the best links here, and I'll have a bunch more for you on the blog.

Here are a Few of the Business Posts I Found Interesting This Week:
- VC's Top-Ten Reasons Start-Ups Fail. (Tim Draper)
- What Warren Buffet Told His Shareholders? (CNBC)
- PDF of Buffet's Berkshire Hathaway 2008 Annual Letter to Investors. (BH)
- The Smart Growth Manifesto – It's Time to Reboot Capitalism. (Harvard Business)
And, Here are a Few More Lighter Ideas and Fun Links:
- A Nice Collection of Ancient Greek Wisdom and Quotes. (MSU)
- Nation Instinctively Forms Breadline – Gallows Humor. (The Onion)
- India Patenting Yoga Move to Protect Them from Western Pirates. (Neatorama)
- A Site for Amazon Kindle Users. (Kindle Nation)
March 1, 2009
Capitalogix Commentary 02/20/09
When America voted for Hope and Change – I don't think they expected to be hoping for a dollar and settling for two dimes, a nickel and a penny.

Market Hits New Crisis Low:

It has been ugly. One sign that the Markets are having trouble is that Gold touched $1,000 for first time in a year.

Another sign the markets are having trouble? The Dow Jones Industrial Average now has lost
nearly half its value, breaking to a new six-year low.

On one hand this seems to confirm people's fears that stock
declines aren't over, and dashes
hope for a quick market recovery. On the other hand, things don't bounce till they hit bottom.

Will dry powder ignite the stock market? One bullish argument rests on the
piles of cash sitting in bank accounts and money-market funds earning
next to no interest. As deal-maker's fingers get itchy and companies
get more desperate for cash, many expect a flurry of deals.

This Week's Chart:

Unlike the Dow, the S&P 500 has not made new lows. It did, however, just break a clear trend-line.

Most major US equity indices have been in a "Triangle" consolidation pattern (like the one shown in the chart above).

You can think of the Triangle as a well-contested battle between the bulls and the
bears. Neither side has given-up much ground, yet. Soon, though, one
side will have had enough and the market will surge again. If it is a move up, then we get the relief rally people were looking for. Even if you get a minor move down in the short-term, it can be constructive. Here is why.

The bear-swing down, from October through November, had a lot of
momentum. The consolidation worked-off a lot of that. Consequently,
another move down would result in many positive divergences – and would
likely be strong support for the next rally.

That doesn't mean the Bear Market would be over. But an intermediate term rally would not surprise me here. Especially as an OOPs trade.

Here Are A Few Of The Business Posts I Found Interesting This Week:
- Can This Be True? Federal Obligations Exceed GDP of Entire Planet. (WorldNet)
- Pledge of $275 Billion to Cut Mortgage Payments & curb foreclosures. (Bloomberg)
- Soros Sees No Bottom For World Financial Collapse, And Volcker Agrees. (Reuters)
- Economists' Droopy Outlook for the US. (WSJ & Bloomberg)
- Harvard Prof’s Plan for Saving the Financial System. (Creative Capital)
- Is Starbucks a Leading Indicator of the Economy? (Inquirer)
- Be Leery of Dow Theory – Does It Still Mean What It Used To? (Barrons)
And, A Little Bit Extra:
- Nature Versus Nurture: The Dynamics of Success. (TraderFeed)
- Clever E-Cards For Many Occasions – Very Funny Stuff. (Someecards.com)
- The Biology of Dating: Why Him, Why Her? (Time)
- Psychologists' Worry: Medication May Erase Bad Memories. (MSNBC)
- "Deliciously Gross" Heart-Attack Inducing Food. (This Is Why You're Fat)
- Vintage Tobacco Ads; Apparently They'd Do Anything To Sell You Cigarettes. (Click)
February 22, 2009
Capitalogix Commentary 02/20/09
When America voted for Hope and Change – I don't think they expected to be hoping for a dollar and settling for two dimes, a nickel and a penny.

Market Hits New Crisis Low:

It has been ugly. One sign that the Markets are having trouble is that Gold touched $1,000 for first time in a year.

Another sign the markets are having trouble? The Dow Jones Industrial Average now has lost
nearly half its value, breaking to a new six-year low.

On one hand this seems to confirm people's fears that stock
declines aren't over, and dashes
hope for a quick market recovery. On the other hand, things don't bounce till they hit bottom.

Will dry powder ignite the stock market? One bullish argument rests on the
piles of cash sitting in bank accounts and money-market funds earning
next to no interest. As deal-maker's fingers get itchy and companies
get more desperate for cash, many expect a flurry of deals.

This Week's Chart:

Unlike the Dow, the S&P 500 has not made new lows. It did, however, just break a clear trend-line.

Most major US equity indices have been in a "Triangle" consolidation pattern (like the one shown in the chart above).

You can think of the Triangle as a well-contested battle between the bulls and the
bears. Neither side has given-up much ground, yet. Soon, though, one
side will have had enough and the market will surge again. If it is a move up, then we get the relief rally people were looking for. Even if you get a minor move down in the short-term, it can be constructive. Here is why.

The bear-swing down, from October through November, had a lot of
momentum. The consolidation worked-off a lot of that. Consequently,
another move down would result in many positive divergences – and would
likely be strong support for the next rally.

That doesn't mean the Bear Market would be over. But an intermediate term rally would not surprise me here. Especially as an OOPs trade.

Here Are A Few Of The Business Posts I Found Interesting This Week:
- Can This Be True? Federal Obligations Exceed GDP of Entire Planet. (WorldNet)
- Pledge of $275 Billion to Cut Mortgage Payments & curb foreclosures. (Bloomberg)
- Soros Sees No Bottom For World Financial Collapse, And Volcker Agrees. (Reuters)
- Economists' Droopy Outlook for the US. (WSJ & Bloomberg)
- Harvard Prof’s Plan for Saving the Financial System. (Creative Capital)
- Is Starbucks a Leading Indicator of the Economy? (Inquirer)
- Be Leery of Dow Theory – Does It Still Mean What It Used To? (Barrons)
And, A Little Bit Extra:
- Nature Versus Nurture: The Dynamics of Success. (TraderFeed)
- Clever E-Cards For Many Occasions – Very Funny Stuff. (Someecards.com)
- The Biology of Dating: Why Him, Why Her? (Time)
- Psychologists' Worry: Medication May Erase Bad Memories. (MSNBC)
- "Deliciously Gross" Heart-Attack Inducing Food. (This Is Why You're Fat)
- Vintage Tobacco Ads; Apparently They'd Do Anything To Sell You Cigarettes. (Click)
February 22, 2009
Things Aren’t Always What They Appear To Be

This series of photographs is interesting to me because it so clearly gives us the wrong impression. Deep down you know that your mind created a story about what it means; and, yet, you know it didn't happen.

Obviously I picked this series of photos to illustrate a point. Just because we perceive something, doesn't mean it's true.

That point is even more true during emotionally trying times, when we're looking for confirmation of our worst fears. In this market environment, it's not hard to find data to scare you.

We don't just make things up, though, we also notice things and infer meaning from them. I suppose there was an evolutionary benefit to our ancestors who were able to infer danger before it ate them. Nowadays, it's probably better if we temper those instincts a little.

Why Do We See Patterns In Random Data?

The human mind is especially good at finding patterns in data.

Often, I believe that I see a pattern in random data. OK, I understand that I don't really see patterns in random data; but to me it seems to me like there are patterns in the random data.

This happens because we don't look at data neutrally. That means when the human eye scans a chart, not all data points get equal weight. Instead we tend to focus on outstanding cases, and we tend to form our opinions on the basis of these special cases.

In other words, it is human nature to pick up the stunning successes (or failures) of the method and to overlook the more common performances.

So, for example, when I am investigating a new pattern, I see many instances where that pattern works. And that is precisely the reason that we use a computer; because it will find every instance of the pattern and confirm how often it truly works, and whether it provides a reliable edge.

I suspect that the desire to find patterns is the same element of human nature that leads people to become superstitious, read their horoscope, or go to a fortuneteller. It is also the reason so many authors and speakers sell access to their chart patterns that supposedly work. The successes are much more startling than the failures. So the successes stand out.

The Last Time I Felt This Bearish:

Here is a picture of my S&P chart analysis from August 2003.

I was painfully bearish, and wrong. Yes there was a giant downtrend, and many of the technical trading chart patterns that I knew indicated that the market was likely to plunge yet again. But it didn't.

That points out a very interesting aspect of trading; every trade happens because of a disagreement. The buyer thinks prices likely to go up. The seller thinks it's likely go down. If that wasn't true, neither one would take their side of the trade.

The point is that it's important to see each trade from both sides of the fence. In order to remove some bias, learn to visualize the trade from the other perspective. Then you can re-evaluate and decide if you still want to take that trade.

The OOPs Trade: When a well-known pattern fails, the response is often dynamic. In fact there's a name for this, it's called an "OOPs Trade". This often happens with obvious, high profile, situations like a "Head-and-Shoulders" pattern, the break of long-standing Trend-Line, violation of a clear Price Channel, crossing the 200-Day Moving Average, at big Round Numbers (like Dow 10,000), or even at key Support and Resistance Levels (like these recent lows). The violent reversal happens when the crowd realizes that it was wrong and has to get out of the trade. This is very similar to a short squeeze; and the move is often violent and prolonged.

The markets are oversold here, lots of people know that we just made new lows, and we have been bombarded with bad news recently. So, I'm not predicting that the market will reverse here. I am just suggesting that it is possible. OOPs.

February 22, 2009
Things Aren’t Always What They Appear To Be

This series of photographs is interesting to me because it so clearly gives us the wrong impression. Deep down you know that your mind created a story about what it means; and, yet, you know it didn't happen.

Obviously I picked this series of photos to illustrate a point. Just because we perceive something, doesn't mean it's true.

That point is even more true during emotionally trying times, when we're looking for confirmation of our worst fears. In this market environment, it's not hard to find data to scare you.

We don't just make things up, though, we also notice things and infer meaning from them. I suppose there was an evolutionary benefit to our ancestors who were able to infer danger before it ate them. Nowadays, it's probably better if we temper those instincts a little.

Why Do We See Patterns In Random Data?

The human mind is especially good at finding patterns in data.

Often, I believe that I see a pattern in random data. OK, I understand that I don't really see patterns in random data; but to me it seems to me like there are patterns in the random data.

This happens because we don't look at data neutrally. That means when the human eye scans a chart, not all data points get equal weight. Instead we tend to focus on outstanding cases, and we tend to form our opinions on the basis of these special cases.

In other words, it is human nature to pick up the stunning successes (or failures) of the method and to overlook the more common performances.

So, for example, when I am investigating a new pattern, I see many instances where that pattern works. And that is precisely the reason that we use a computer; because it will find every instance of the pattern and confirm how often it truly works, and whether it provides a reliable edge.

I suspect that the desire to find patterns is the same element of human nature that leads people to become superstitious, read their horoscope, or go to a fortuneteller. It is also the reason so many authors and speakers sell access to their chart patterns that supposedly work. The successes are much more startling than the failures. So the successes stand out.

The Last Time I Felt This Bearish:

Here is a picture of my S&P chart analysis from August 2003.

I was painfully bearish, and wrong. Yes there was a giant downtrend, and many of the technical trading chart patterns that I knew indicated that the market was likely to plunge yet again. But it didn't.

That points out a very interesting aspect of trading; every trade happens because of a disagreement. The buyer thinks prices likely to go up. The seller thinks it's likely go down. If that wasn't true, neither one would take their side of the trade.

The point is that it's important to see each trade from both sides of the fence. In order to remove some bias, learn to visualize the trade from the other perspective. Then you can re-evaluate and decide if you still want to take that trade.

The OOPs Trade: When a well-known pattern fails, the response is often dynamic. In fact there's a name for this, it's called an "OOPs Trade". This often happens with obvious, high profile, situations like a "Head-and-Shoulders" pattern, the break of long-standing Trend-Line, violation of a clear Price Channel, crossing the 200-Day Moving Average, at big Round Numbers (like Dow 10,000), or even at key Support and Resistance Levels (like these recent lows). The violent reversal happens when the crowd realizes that it was wrong and has to get out of the trade. This is very similar to a short squeeze; and the move is often violent and prolonged.

The markets are oversold here, lots of people know that we just made new lows, and we have been bombarded with bad news recently. So, I'm not predicting that the market will reverse here. I am just suggesting that it is possible. OOPs.

February 22, 2009
Best Practices For These Uncertain Times
I spent part of the week in Chicago, and had had the privilege of spending some quality time discussing the current situation with a group of experienced traders and industry professionals. A couple of things struck me immediately.
- First, even these pros were rattled by the state of the economy and the prospect of recovery taking longer than expected or wanted.
- Second, even for those in the room who had well-crafted theories about why they were expecting an intermediate-term rally, it didn't take much discussion for them to admit the same sense of uncertainty that others have expressed.
- Finally, and most importantly, once the obligatory fear, uncertainty, and doubt talk was on the table – the conversation quickly turned to the best ways to make money in this environment.
Are Times Uncertain – Or Is It You?

I also went to a Strategic Coach quarterly planning session this week. Not surprisingly, the topic was primarily about best practices during uncertain times. Dan Sullivan recounted that many of his clients expected a tough year, but still expected a recovery to follow that. Then, he posed these questions.
- How long will this turmoil last?
- What if the recovery doesn't come as quickly or as fully as you hope or expect?
- What if things stay like this?
- Who do I have to become for this to be okay?
Good questions, and it made me think:

Mastery isn't measured by the number of bad things you eliminate …
but by the number of times you eliminate calling them bad.

Many of our biggest innovations or course corrections took place after a seemingly disastrous occurrence or bad thing happened. That's why lots of psychologists and self-help gurus encourage people to focus on the hidden gift that many of these experiences provide.

Examining several instances from my past, I came up with this list of the seven steps I use to transform almost any situation.

Seven Best Practices for Uncertain Times.
1. Accept Reality: We are where we are. Focus on being complete with what happened before this; and think about this as a new beginning with an even bigger future.
2. Do Something Positive: Take action and build momentum and confidence. Big wins are great. Yet, in scary times, even small items are worth noting and building upon.
3. Take Care of Yourself: Increase your physical activity, meditation and massage. This is the time to eat and sleep well. Many studies show decision-making suffers when you're stressed. Taking care of yourself goes a long way to making a lot of other things better.
4. Communicate More: The natural tendency is to hide or to recuperate in private. Instead, be open and receptive to help and ideas from friends, partners, or wherever it comes from.
5. Creative Destruction: The old game and the old ways of thinking are over. Shift energies to what is working.
6. Increase Your Options: It often takes a different level of thinking to solve a problem than the level of thinking that got you into the problem. So, be open to new opportunities and new possibilities.
7. Choose a Bigger Future: Instead of resigning yourself to playing small and doing with less, recognize that the clearing creates the space for something even better. Choose what you want, plan it and stick to your process.
They say everything happens for a reason. The secret is that you get to choose the reason, what it means to you, and what you're going to about it. Choose well, and someday you could look back on this time as one of the best things that ever happened to you.
February 15, 2009
Best Practices For These Uncertain Times
I spent part of the week in Chicago, and had had the privilege of spending some quality time discussing the current situation with a group of experienced traders and industry professionals. A couple of things struck me immediately.
- First, even these pros were rattled by the state of the economy and the prospect of recovery taking longer than expected or wanted.
- Second, even for those in the room who had well-crafted theories about why they were expecting an intermediate-term rally, it didn't take much discussion for them to admit the same sense of uncertainty that others have expressed.
- Finally, and most importantly, once the obligatory fear, uncertainty, and doubt talk was on the table – the conversation quickly turned to the best ways to make money in this environment.
Are Times Uncertain – Or Is It You?

I also went to a Strategic Coach quarterly planning session this week. Not surprisingly, the topic was primarily about best practices during uncertain times. Dan Sullivan recounted that many of his clients expected a tough year, but still expected a recovery to follow that. Then, he posed these questions.
- How long will this turmoil last?
- What if the recovery doesn't come as quickly or as fully as you hope or expect?
- What if things stay like this?
- Who do I have to become for this to be okay?
Good questions, and it made me think:

Mastery isn't measured by the number of bad things you eliminate …
but by the number of times you eliminate calling them bad.

Many of our biggest innovations or course corrections took place after a seemingly disastrous occurrence or bad thing happened. That's why lots of psychologists and self-help gurus encourage people to focus on the hidden gift that many of these experiences provide.

Examining several instances from my past, I came up with this list of the seven steps I use to transform almost any situation.

Seven Best Practices for Uncertain Times.
1. Accept Reality: We are where we are. Focus on being complete with what happened before this; and think about this as a new beginning with an even bigger future.
2. Do Something Positive: Take action and build momentum and confidence. Big wins are great. Yet, in scary times, even small items are worth noting and building upon.
3. Take Care of Yourself: Increase your physical activity, meditation and massage. This is the time to eat and sleep well. Many studies show decision-making suffers when you're stressed. Taking care of yourself goes a long way to making a lot of other things better.
4. Communicate More: The natural tendency is to hide or to recuperate in private. Instead, be open and receptive to help and ideas from friends, partners, or wherever it comes from.
5. Creative Destruction: The old game and the old ways of thinking are over. Shift energies to what is working.
6. Increase Your Options: It often takes a different level of thinking to solve a problem than the level of thinking that got you into the problem. So, be open to new opportunities and new possibilities.
7. Choose a Bigger Future: Instead of resigning yourself to playing small and doing with less, recognize that the clearing creates the space for something even better. Choose what you want, plan it and stick to your process.
They say everything happens for a reason. The secret is that you get to choose the reason, what it means to you, and what you're going to about it. Choose well, and someday you could look back on this time as one of the best things that ever happened to you.
February 15, 2009
Capitalogix Commentary 02/06/09
Humor usually has its base in truth.

Perhaps that is why this cartoon caught my eye; it pokes at a sore spot.

It has been weeks since many people figured things changed. Not much seems better, yet, does it?

Emotions are not logical. So even though I might consciously understand that we are going through a long process, I want instant gratification. It is human nature. And that explains a lot about the market in-and-of-itself.

I once heard that a Recession is when your neighbor loses his job, and a Depression is when you lose yours. With unemployment spiking, a lot more people are feeling "depressed".

Market Commentary: The good news is that the lows held, and it looks like there's decent support at these levels. It is worth noting that we saw a strong rally anticipating the Senate's Stimulus Plan.

Déjà vu, though; didn't we see this pattern before? Last October the markets rallied off the lows in anticipation of the bailout deal, only to move down again once it passed. It will be interesting to see what happens to the market when the Stimulus Plan actually passes. Will confidence spur a further rally, or will speculators have to switch back to bear-mode?

In a bear market, it's common to see large rallies. So, it wouldn't surprise me to see a rally off these lows. However, it would surprise me if we didn't actually make new lows. Here is a chart comparing the market action from the 1929 crash to what's happening currently.

The January Barometer Predicts a Down Year: I talked about this a few weeks ago; research published by Yale Hirsch in the "Stock Trader's Almanac" suggests that market performance during the month of January often predicts market performance for the entire year. This January Barometer has worked especially well in odd years (the first year of a new Congress), with only two misses in 69 years. While the January barometer has a good record of prediction, StockCharts.com still puts it in the "for what it's worth" column because, while it is interesting to note, it might simply be coincidental.

It is hard to imagine 2009 being a positive year. As I talk to business owners, I sense a weariness and fear. The economy is catching up with them, directly or indirectly. An interesting side effect is that some of the more successful entrepreneurs I talk with are starting to get excited about the new opportunities in front of them. In contrast, several expressed feeling a little guilty and sad about their success in the face of what's happening around them. This is what happens during periods like this. Old models fall away and new leadership emerges.

Here Are A Few Of The Posts I Found Interesting This Week:
- Was All The Doom And Gloom At Davos A Contrary Indicator Of Better Times Ahead? (Slate)
- Obama's Wall Street Initiative: Getting beyond slapping the hand that feeds you. (Daily Beast)
- Doesn't Everything Use Flash Memory? SanDisk reports $1.8BB loss amid demand slump. (CNet)
- More tech troubles, Motorola Q4 loss of $3.6BB with sales falling 26%. (CNet)
- Are Morgan Stanley and Goldman Sachs showing new leadership? Price says "Yes". (Bespoke)
- Is Stronger Medicine Needed To Fix The Banking Crisis? (Barrons)
- Facebook growing 7X faster than LinkedIn, but that's not the whole story. (Silicon Alley Insider)
- Necessity is the Mother of Invention. A new class of start-up ventures (BusinessWeek).
And, A Little Bit Extra:
- Jennifer Hudson lip-synced the National Anthem at the Super Bowl. (ABC)
- Interactive Data Visualization of Twitter Chatter During the Super Bowl. (NYTimes)
- Crowd Behavior Explained; the herding instinct is chemical. (New Scientist)
- Mating Season Is Over for the Alpha Males of Banking. Wallet-size matters. (Bloomberg)
- Professor Uses Math to Decode What Makes The Beatles Music Special. (WSJ)
- Teleportation Is Now Real – Just Don't Try It at Home Yet. (Time)
- Verne Harnish Rockefeller Habits one-page strategic planning tool. (Classic & New Version)
February 8, 2009