Capitalogix

Here Are Some Links for Your Weekend Reading

Things are changing here in the United States. Whites’ deaths outnumbered births for first time.

 

 

Here are some of the posts that caught my eye. Hope you find something interesting.

 

Lighter Links:

• Why Would Hackers Target Your Little Company? (Harvard Business Review)
• How the NSA Might Snoop Personal Web Data Without the Provider’s Knowledge. (GigaOM)
• A Box with a Hidden Video Camera Documents Its Own Journey Through the Mail. (Popsci)
• The End of Sleep? Emerging tech could radically reduce our need to sleep. (Aeon)
• 10 Reasons Why So Many People Are Moving to Texas. Half of the 10 fastest-growing cities in the US are in Texas. Why? (BBC)

 

Trading Links:

• Following the Smart Money in Asia. (Forbes)
• Doing Business in China Safely. The Due Diligence Basics. (ChinaLawBlog)
• The Only 3 Indicators Of Chinese Monetary Policy That You Need To Watch. (BizInsider)
• What Will Happen To Markets When QE Ends? (FT)
• Is Thomson Reuters Giving Elite Traders and Unfair Advantage? (Benzinga)

Asia By the Numbers - A Growing Opportunity

A lot of smart traders are putting greater emphasis and focus on Asia. 

More Than Half Of The World's Population Lives Inside This Circle.

Take a look at this simple, but eye-opening, take on global population distribution.

There are more Muslims in the circle than outside of it. There are more Hindus in the circle than outside of it. There are more Buddhists in the circle than outside of it. Moreover, the circle pulls all of this off while being mostly water and including the most sparsely populated country on earth (Mongolia).

 

via valeriepieris on Reddit

 

OK, the 'circle' in this image is not actually a circle  (it is a Winkel Tripel projection, to be precise), but that's besides the point.

By 2050, the U.N. predicts that 3.3 billion people will live just in Asia’s cities.

Clearly, a lot of people in the circle ... Yet, the chart below highlights why traders expect and believe that more smart money will move there.

 

by Aberdeen.

 

Related articles

Coming to terms with the Asian century

What 500 Startups Sees In Southeast Asia: Insights From Dave McClure [VIDEO]

Global population to hit 11bn by 2100

Here Are Some Links for Your Weekend Reading

A Father's Day Gift Idea:  When words aren't enough ... Say it with bacon.

 

 

Here are some of the posts that caught my eye. Hope you find something interesting.

 

Lighter Links:

• How the NSA Uses Your Telephone Records. (The Week)
• Hacking Gets Its Own World Series. (Salon)
• IBM's Jeapordy-Winning Watson Re-Purposed as Customer Service Agent. (MIT Tech Review)
• Misery Vital to Mental Health. Negative emotions are good for long-term well-being. (Salon)
• The Exercise Equivalent of a Cheeseburger? Study concludes, "Excessive exercise significantly increases mortality." - WSJ (Wall Street Journal)

 

Trading Links:

• Risk Is Back. America's Big Banks Are Knee-Deep In Derivatives. (Forbes)
• What Can Traders Learn from Playing Poker? (BrooklynInvestor)
• CME Group Single Day Trading Volume Reaches All-Time High. (CMEGroup)
• High Frequency Trading Report from WFE. (DanCollinsReport)
• Why Economists Aren't Worried About a Stock Market Bubble. The stock market is smashing records. That's no reason to panic. (The Week)

Europe's Record Youth Unemployment: The Scariest Graph in the World Just Got Scarier

Europe's job market is a historic disaster.

The EU unemployment rate set a new all-time high of 12.2 percent. But it's the youth unemployment crisis that's truly terrifying. In Spain, unemployment surged past 56 percent, and Greece now leads the rich world with an astonishing 62.5 percent.
 

 

According to the Atlantic, youth unemployment is bad for all the obvious reasons , including the big loss to future productivity and earnings. But Europe's youth unemployment is strange, because we've never seen a generation *this educated* also be this unemployed. For example, nearly 40 percent of Spain's 20-and early-30-somethings are college educated.

Playing 'Smart' Doesn't Mean You Are Cheating

When did playing 'smart' start to mean that you were a cheater?

Recently, Apple got grilled for its low-tax strategy. While not every business can, or does, copy that approach ... many do.

Here is a look at what S.&P. 500 companies paid in corporate income taxes — federal, state, local and foreign — from 2007 to 2012, according to S&P Capital IQ.

 

Click here to read the NYTimes article this infographic came from.

At its core, our democratic process and legal system were designed to take care of issues like these over time.

Likewise, our free market system will adjust to level the playing field.   There is game theory in government.  If you make things too difficult, the smart players find a different game to play.

Meanwhile, other countries certainly are incented to find a way to make to entice big players to play on their turf ... and creating a tax haven is one way to do it.

Going back to Apple, on one hand I'm sure the government wishes they had paid more taxes, but on the other hand I'm sure they are glad that Apple didn't move away and take their tax dollars with them. 

As you have probably surmised, this happens on many levels and in many places.

In trading, for example, statistical arbitrage was once an easy way to make money (if you knew how to do it). The reason was that relatively few people knew how to do it, so there was limited competition (and fairly easy winnings). Then, as the success of the early winners signaled others into the game, it got harder to win.  People started programming computers to find mis-priced assets and the discrepancies filled themselves in moments.  As you might guess, many traders who have tried statistical arbitrage have moved on to other things.

Identifying inefficiencies (or loopholes) in a system is potentially good for everyone involved. It benefits the person who identifies the inefficiency, because they get paid. Yet, it is also good for the system because it identifies weaknesses or areas that need additional attention, oversight, or regulation.  And it provides a feedback loop allowing the parties to course-correct and play smarter.  Over time, this often results in real progress.

Related articles

Seven Fun Facts About Corporate Taxes

The Biggest Takeaways From Apple's Tax Grilling

We Need a Tariff, Not a Corporate Income Tax

What Tim Cook should say: Tax me more, Apple not at all

Are You More Worried that China or the U.S. Wants to Monitor You?

Are you more worried that China is cyber-snooping on us ... or that the American government admitted doing it too?

When I travel on business in a foreign country, I assume that my computer use is monitored. Likewise, many organizations are now prohibiting production laptops, iPads, or other personal electronic devices from traveling to certain countries. Instead, the users given a clean travel device and instructions on certain types of communications and activities to simply forgo until they're back in the country.

But here we are safe ... right?

 

 

Many years ago, my father told me he assumed that people could see what he did and hear what he said. With that in mind, he told me, it wasn't hard to act accordingly.

These days, it is hard for me to imagine someone being genuinely surprised to learn that nation-states monitor telephone conversations, email, or Internet usage.

Nonetheless, it is somewhat surprising that digital privacy hasn't been more a higher profile ("real") social issue in our society.

On some level, people are becoming desensitized to 'sharing' ... For example, look how much personal information people freely give out every day via social media sites like Facebook, Instagram, and other social media sites.

The rules of engagement will get more clear as we start to hash out the laws and protections here in America, and the conventions and accords that will at least superficially guide global behavior.

What do you think?

Some Thoughts on the 'Hindenburg Omen' Pattern Predicting Market Instability

Tracking the Hindenburg Omen: How Much Danger Is There?

Warnings were heard from many corners of the financial blogosphere that the Hindenburg Omen triggered.

What is it?  It is a fairly obscure technical analysis pattern, which supposedly gives an early warning of unstable market conditions (and even potentially stock market crashes).

While the calculation is based on five factors, the primary conditions indicate that there is a big disagreement about market conditions.

For example, two of the conditions are that a substantial number of stocks have to be at yearly highs, while a substantial number of stocks have to be at new annual lows.  Ultimately, it is hard for those two conditions to be met in a short period of time, unless there's uncertainty in the market.  Moreover, after a rally, uncertainty is often a precursor to a decline.

In addition, technically (in order for the pattern to be complete), a second sighting of the five elements must occur within 36 days. Logically, lingering uncertainty is a momentum killer.  Well, in this case we have it; the pattern flashed in mid-April and it happend again on the last day of May.

 

 

While this pattern has correctly predicted every big stock market swoon of the past two decades, including the October 2008 decline (that set the global economic recession into motion), not every Hindenburg Omen has been followed by a crash. Resorting to a geometry analogy: All rectangles are squares, but not all squares are rectangles.

Personally, I don't make trade decisions based solely on indicators like this. Nonetheless, it has a pretty good track record, seems to be based on reasonable theories, and might be useful as just another data point urging caution.

Here Are Some Links for Your Weekend Reading

You probably heard that Apple avoided $9.2 Billion in U.S. Taxes with its recent debt deal.  Here is one way to try and fix that ...

 

 

Here are some of the posts that caught my eye. Hope you find something interesting.

 

Lighter Links:

• The Wisdom of Psychopaths? What can you learn from someone without a conscience? (SciAm)
• How Many Friends Can You Realistically Have? The Dunbar Number answers. (Businessweek)
• Nate Silver: What Big Data Can't Predict. (Fortune Tech)
• United States Postal Service Is Losing $25 Million A Day. (HuffingtonPost)
• Where Mail With Illegible Addresses Goes to Be Read. Once at 55 centers, one of two remaining centers will close. (NYTimes)

 

Trading Links:

• Bill Gates is Back to Being the World's Richest Person. Remain calm and carry on ... (SeattlePI)
• World’s Richest Hedge Fund Managers & Traders. (Forbes)
• A New Era for Do-It-Yourself Investing. (Wall Street Journal)
• SEC Plans Tighter Oversight of Computer Trading. (CBS News)
• Startup Valuations Remain Strong, But 'Down Rounds' Increase to 28% of all VC Deals. (Geekwire)

The Rally Continues, Even Though Smart Money Expected a Short-Term Top

Traders are often confronted by mixed signals. 

Personally, when I have to choose between something straightforward or something complex - simple is better.

For example, when large "Smart Money" traders show their directional bias, it often pays to follow in their tracks.

Another technique would be to bet against the smaller retail "Dumb Money" traders (because, historically, they are often wrong at major turning points.

However, if I have to decide between following "Smart Money" or doing the opposite of what "Dumb Money" does ... then in the absence of other information, following Smart Money wins because it is more straightforward and simpler.

Here is an example.

Smart Money - Dumb Money Confidence Index.

The chart, below, compares the bets made by small traders (a.k.a. the "Dumb Money"), to those of large commercial hedgers (a.k.a. the "Smart Money").

In practice, Confidence Index readings rarely get below 30% or above 70% (they usually stay between 40% and 60%). When they move outside of those bands, it's time to pay attention.

Even more noteworthy is when there is a wide confidence spread with bullish bets by the Dumb Money and bearish bets by the Smart Money. This type of sentiment spread only happens a few times a year. We often get substantial bullish reversals when that happens.

So, early last week, I took notice of this chart from SentimentTrader. The confidence spread it shows was pretty close to extreme levels.

 

Conventional trading wisdom says that Crowds are usually wrong at turning-points.  That doesn't mean they are wrong all the time (yet, as discussed, it makes sense to notice when the Smart Money clearly disagrees). So, after such a strong rally, this is the kind of data that causes me to pay closer attention.

The Markets had been selling-off a litte.  Would this be  a trend-break or a buying opportunity?  Would Smart Money start actively making Bearish bets?

As the next chart shows, two days was all it took to get back to the status quo.

 

 

That is why trend following works.  Price is the primary indicator, and until it breaks down, dips will be met with buying.

Infographic: Is Your State's Highest-Paid Employee A Coach? (Probably)

Sports are Big Business.

You may have heard that the highest-paid employee in each state is usually the football coach at the largest state school. Don't believe everything you read ... Sometimes it is the basketball coach.

 

Deadspin via Flowing Data.

Remember, though, the bulk of this coaching money—especially at the big football schools—is paid out of the revenue that the teams generate (not your tax dollars).

It is not limited to big State schools.  I went to Duke, which is a small liberal arts college.  Their basketball coach, Mike Krzyzewski (better known as 'Coach K'), took home about $10MM.  Good work if you can get it.