Capitalogix

Here Are Some Links for Your Weekend Reading

Having just come back from the Jersey Shore, where Cheesteak sandwiches seemingly grow like grass ...

 

 

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

 

Lighter Links:

• Integrate Data into Products, or Get Left Behind. (Harvard Business Review)
• Confessions of an Ex-Mormon. (TheNewRepublic)
• How To Win an Olympic Event. Great Interactive Graphic series. (NYTimes)
• How To Win Marathons? Hint. It doesn’t involve fancy footwear. (TheGlobalMail)
• The Strongest Man in the World. A new era of strength competitions tests the limits of the human body. (TheNewYorker)

 

Trading Links:

• Was the Financial Crisis a Male Syndrome? (Businessweek)
• Why I Rarely Short Anymore. (UpsideTrader)
• Amazon ‘Robo-Pricing’ Sparks Fears. (FT)
• Is the Postal Service About to Default on Its Bills? (Wall Street Journal)
• The Scam Wall Street Learned From the Mafia. How America's biggest banks took part in a nationwide bid-rigging conspiracy. (RollingStone)

Here Are Some Interesting Links to Read This Weekend

Sometimes, seemingly simple tasks are harder than they should be. Thought this was an interesting graphic. Go ahead, count the black dots.

 

 

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

 

Lighter Links:

• How Hard Are You Willing to Push Yourself? (Harvard Business Review)
• What Makes Bad Writing? Hard to define, but we know it when we see it. (WSJ)
• Why Today’s Tablets Don’t Really Matter. (Economist)
• CyberCriminals Sniff-Out Vulnerable Firms - Video. (Wall Street Journal)
• Why Surveillance Cameras Could Make Us Better People. (TheAtlantic)

 

Trading Links:

• 'You Didn't Build That ...' More on Obama’s burst of ideological rhetoric. (WSJ)
• Three Central Banks Act to Stimulate More Borrowing. (NYTimes)
• The Incredible Shrinking American Government. 169K Jobs Gone in a Year (Atlantic)
• 10 Signs of Economic Trouble That China’s Official Data Won’t Tell. (AlsoSprach)
• What If Speed Traders Competed on Price? (Businessweek)

The S&P 500 Index is Entering a Seasonally Weak Period

The S&P 500 Index is entering a seasonally weak period.  The chart below shows the predicted turning points based on the past five years of historical data. 

 

 

History does not typically repeat itself, exactly; but it often rhymes.  So, it makes sense to keep seasonal tendencies in mind.  With that said, some things potentially different this year include that this is an election year and world governments are coordinating central bank stimulus actions.

However, the chart below should serve as a reminder that there a lot other markets worth trading too.  For starters, Soybeans are up 45.25% so far this year.

The chart shows the top-ten performing markets, ranked by yearly performance, for the past few years.   The data is color coded based on sector. The first column posts the current year's open performance followed by six columns of closed yearly market performance.

 

 
Note how much diversification there has been in the top-ten throughout the years.  Click the chart to see an expanded version of this data (showing 40 global futures markets).

That is the funny thing about markets ... something is always working.  The trick is finding it while it's working.

Related articles

• S&P 500 Index at Inflection Points (ritholtz.com)
• S&P 500 Index: Summer Is a Time for Patience and Endurance (minyanville.com)
• S&P 500 Index: Put Your Seatbelts On, It's About To Get Bumpy (INDEXSP:.INX, SPY) (etfdailynews.com)

Here is a Comparison of Global Markets' Performance So Far This Year

The world has faced tough conditions so far this year ... and yet somehow the major indices have held-up reasonably well.

In addition, the up-coming election will impact markets.  Clearly, the Democrats would love to see a rally.  In contrast, I've heard Republican CEOs admit that they are consciously casting doubt on the economy.

Despite the onslaught of scary news stories and political maneuverings, the S&P 500 managed to gain approximately 7% in the first half of this year. Pretty impressive considering ...

So, how does that compare to other markets around the world? Here is an interactive chart to answer that question.

 

 

In the first half of the year, Germany's DAX and India's BSE Sensex did quite well. Meanwhile, France's CAC and London's FTSE were relatively flat ... while Canada, Brazil, and Spain haven't kept up.

According to Business Insider, Venezuela had the biggest percentage gain (115%) while Cyprus had the biggest loss (-52%). Not surprisingly, smaller European nations clutter the bottom of the list.

Related articles

• Ray Dalio of Bridgewater: Global Economy is Weakest Since 2009 (valuewalk.com)
• Asian Stocks Fall as Bernanke Warns on Economy (abcnews.go.com)
• Watch How Germany Ate Everyone Else's Lunch After The Euro Was Created (businessinsider.com)

Some Links for Your Weekend Reading

China won the first Olympic gold ... by manufacturing uniforms.

 

 

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

 

Lighter Links:

• Patent Trawler Aims to Predict Next Hot Technologies. (NewScientist)
• The 10 Things Economics Can Tell Us About Happiness. (TheAtlantic)
• In Age of Twitter, NBC Rewrites Olympic Playbook. (Wall Street Journal)
• Salt, We Misjudged You. We Only Think We Know the Truth About Salt. (NYTimes)
• 'Sterilization Team' Cleans Away Madonna's DNA. Here's a diva demand you probably haven't heard before … (Newser)

 

Trading Links:

• Top 100 Respected Companies, Ranked By Investors. Apple is No. 1 (LATimes)
• Frenemies: Small Retailers Forced to Compete with Amazon on Amazon. (WSJ)
• Investors Cast Doubt on End-of-World Hedge Strategies. (Reuters)
• The Choice in 2012: Social Darwinism or a Decent Society? (RobertReich)
• Wealth Funds Step Up Their Activities. Sovereign wealth funds are becoming more active. They made investments worth 42 percent more in 2011 than in 2010. (FT)

Socrates' Triple Filter Test and the Modern World

Small distinctions separate wise men from fools.  Perhaps one of them has to do with what the wise man deems important.

 

Socrates' Triple Filter.

In ancient Greece, Socrates was reputed to hold knowledge in high esteem.  One day an acquaintance met the great philosopher and said, "Do you know what I just heard about your friend?"

"Hold on a minute," Socrates replied. "Before telling me anything, I'd like you to pass a little test. It's called the Triple Filter Test."

"Triple filter?"

"That's right," Socrates continued.  "Before you talk to me about my friend, it might be a good idea to take a moment and filter what you're going to say. That's why I call it the triple filter test.

The first filter is Truth.  Have you made absolutely sure that what you are about to tell me is true?"

"No," the man said, "Actually I just heard about it and..."

"All right," said Socrates. "So you don't really know if it's true or not. Now let's try the second filter, the filter of Goodness.  Is what you are about to tell me about my friend something good?"

"No, on the contrary..."

"So," Socrates continued, "You want to tell me something bad about him, but you're not certain it's true.  You may still pass the test though, because there's one filter left.  The third filter is Usefulness.  Is what you want to tell me about my friend going to be useful to me?"

"No, not really."

"Well," concluded Socrates, "If what you want to tell me is neither true, nor good, nor even useful ... then why tell it to me at all?"

 

How Does That Apply to Me or Trading?

  The concept of Socrates' Triple Filter applies to trading as well.

As a technical trader, rather than looking at fundamental data and scouring the news daily, I focus on developing dynamic and adaptive systems and processes to look at the universe of trading algorithms to identify which are in-phase and likely to perform well in the current market environment.

One of the arguments in favor of technical analysis is that fundamental data, news, and sentiment are already built-in to the chart.

 

Filter Out What Isn't Good For You.

In contrast, there are too many ways that the media (meaning the techniques, graphics, music, etc.), the people reporting it, and even the news itself, appeals to the fear and greed of human nature.

This is the main reason that I don't watch CNBC during the trading day.  Even though I like it on several levels ... I don't think it helps me.  So I filter it and get the news in other ways.

Likewise, I don't watch TV news anymore either. It seems like story after story is about terrible things. For example during a recent visit with my mother, I listened to her watch the news.  There was a constant stream of "oh no," or "oh my," and "that's terrible". You don't even have to watch the news to know what it says.

 
Focus On What You Want.

Instead, I get the news I need a different way that is more efficient and productive for me. I subscribe to certain things via e-mail, and other things via RSS feeds.  Then I supplement those with a series of search services that alert me to items that match the criteria I set. An example would be Google Alerts.  Two other nice alert services are from the Financial Times and the New York Times.  Recently I've also been using two great iPad apps - one is called Flipboard, the other is called Zite.

Check them out.  It will save you a lot of time and effort.

Personally, I care about the source of my news. It helps me identify and account for potential bias. So using subscriptions, feed readers, and alert services help here too.

Another reason I like these tools is that I can use different filters for different purposes.

 

What's The Purpose Of News For You?

My purpose changes what I'm looking for and the amount of attention I pay to different types of information. Am I reading or watching the news for entertainment, to learn something new, or to find something relevant and actionable?

Getting back to Socrates' three filters and the business of trading, I ask might: is it important, does it affect our edge, or can I use it as a catalyst for innovation?

Amusing and Educational Video Explaining the Higgs Boson

You don't need to be a geek to understand this fun video that offers a simple explanation of the Higgs Boson.  But, after watching, you'll know enough to sound like one ...

 

The Higgs Boson Explained from PHD Comics on Vimeo.

 

 

Related articles

• Cartoon Explains Higgs Boson [VIDEO] (mashable.com)

Here Are Some Links for Your Weekend Reading

Here is a graphic that explains how what matters changes over time.  Do you agree?

via I Love Charts.

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

 

Lighter Links:

• 6 Questions for the Man Who Invented the iPod. (Inc.)
• What is Big Data? - An Introduction to the Big Data Landscape. (O'Reilly)
• Cheetahs Attack Woman as Husband Snaps Photos.  Surprised? (Video)
• In Libya, the Captors Have Become the Captive. Strange to imagine. (NYTimes)
• The Gruesome History of Eating Corpses as Medicine. (Smithsonian)

 

Trading Links:

• Heads I Win, Tails You Lose. Hedge funder bets on colossal failure. (TheDaily)
• Europeans Ambivalent to the Euro, Survey Finds. (Time)
• Gold Bar Demand in China Surged 51% to 213.9 Tons In 2011. (ZeroHedge)
• Robert Shiller's Mission to Redeem Finance. (Chronicle)
• Dallas Fed Proposes Ending "Too Big To Fail", Urges Removal of Failed CEOs, Breakup of Banks. (GlobalEconomicAnalysis)

Six-Month Seasonality Still Unfavorable

Is it safe to get back in the Market?

According to popular trading rules, May 1st marked the beginning of a 6-month period of unfavorable seasonality. This is often referred to as "Sell-In-May-and-Go-Away".

Research published by Yale Hirsch in the Trader's Almanac shows that the market year is often broken into two six-month seasonality periods.

• From May 1 through October 31 seasonality is unfavorable, and the market most often finishes lower than it was at the beginning of the period.
• The period from November 1 through April 30 is seasonally favorable, and the market most often finishes the period higher. (See Sy Harding's book, Riding the Bear, for an indepth discussion of this subject.)

While the statistical average results for these two periods are quite compelling, trying to ride the market in real-time in hopes of capturing these results is not always as easy as it sounds.

 

Below is the one-year chart that that shows the most recent two six-month periods. It begins on May 1, 2011 and ends on April 30, 2012.

 

 

via Carl Swenlin

 

The left half of the chart shows the unfavorable May through October period and the right half shows the favorable November through April period. The green line marks the beginning of the favorable period, the red line marks the beginning of the unfavorable period.

 

As you can see, the last two seasonality periods turned in textbook performance, with the unfavorable period closing lower, and the favorable period closing higher. However, every year is different and presents its own challenges ... and there is no guarantee that any given period will conform to the average.

 

In addition, Swenlin asserts that bull and bear market pressures override seasonal tendencies more often than not. 

 

With the election coming, we'll see whether things look better moving into the end of October.

 

Related articles

• Should You Sell in May and Go Away? (capitalogix.typepad.com)
• The Mother of All Bull Markets? (pragcap.com)
• A Brand New Study Just Identified The Best Two Months For Gold Prices (GLD) (businessinsider.com)
• Good Time in the Election Cycle (crossingwallstreet.com)

Understanding Cyberspace Is Key To Defending Against Digital Attacks

Government and business leaders in the United States and around the world are rushing to build better defenses -- and to prepare for the coming battles in the digital universe.

To succeed, they must understand one of the most complex, man-made environments on Earth: Cyberspace

 

 

 

More at WP

It is naïve to ignore the risks of cyber-attacks.  For someone to find something valuable, they just have to get lucky once; to stay safe, we have to be vigilant and good all the time.

Related articles

• Cyber-warfare gets big Pentagon push (sfgate.com)
• U.S. Lacks Adequate Defense Against Cyber Attacks, Experts Warn (huffingtonpost.com)
• Confirmed: US and Israel created Stuxnet, lost control of it (arstechnica.com)
• With Plan X, Pentagon seeks to spread U.S. military might to cyberspace (vaticproject.blogspot.com)