Capitalogix

Theory and Practice - Sometimes nothing works and no one knows why

I love the moment of discovery, when something unimaginable springs into being.

 

Sometimes frustration or seeming failure is the catalyst for something better.

 

With that in mind, I saw something that made me smile.  Here it is.

 

Theory is when you know everything, but nothing works.

Practice is when everything works, but no one knows why.

Sometimes, however, theory and practice are combined ... that's when nothing works and no one knows why.

 

Here is a Dilbert comic that pokes fun at how hard it is to stay tech savvy these days.

 

 

Facebook Pokes the Public Market - Here are some stats worth glancing at ...

The third largest IPO in history created a whole new network of billionaires.

Facebook's IPO valued the company at about $104 billion, slightly more than Amazon.com, and well above well-known corporations such as Disney, McDonald's and Kraft.

For now, the public value of Facebook puts it at number 23 on the list of biggest U.S. companies, ranked by market capitalization.

 

Here are some other stats about Facebook - from The Daily.

 

 

Related articles

• Facebook Is Worth More Than McDonald's and 4 Other Giant Brands (mashable.com)
• The Price Is Right: Facebook Closes Near Opening Price (allthingsd.com)
• A Day After Facebook's IPO, Mark Zuckerberg Marries! (FB) (businessinsider.com)

Here Are Some Fun Links for Your Weekend Reading

  

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

Lighter Links:

• 8 Angel Investors That Entrepreneurs Should Avoid. (Fortune)
• The NSA Is Building the Country's Biggest Spy Center (Watch What You Say). (Wired)
• CISPA: A Guide to the 'Big Brother' Cyber Security Bill. (The Week)
• The Fiction to Reality Timeline. (AT&T)
• On Tiger Moms. Reconsidering Amy Chua's parenting advice. (ThePointMag)

 

Trading Links:

• Putin Skips G-8 Meet to Signal Displeasure with the U.S. (Bloomberg)
• Nouriel Roubini Says "Get Ready for the Spanish Bailout". (EconoMonitor)
• A Facebook Founder Renounced His U.S. Citizenship. Clever Tax Planning? (Bits)
• Why AT&T and Verizon Are Rooting for Windows Phones. (Bits)
• U.S. Economy Currents. Does the 25% decline in the wholesale price of milk warn of economic slowdown? (SeekingAlpha)

Are You Planning On Getting In On the Facebook IPO?

With Facebook's IPO set to happen soon, I was thinking about some of the other big tech IPOs. 

The first few weeks of trading may not be a good estimate of how successful a company will be over time.  The charts below, from a Mashable post showing how nine tech giants did after going public, highlight that point.

First, here is a normalized index chart showing the initial 15 days of trading for each company.

 

 

Second, here is a chart showing growth to date.  This chart illustrates how much a $100 investment, at the IPO price, would be worth today.

 

 

Some of those returns are surprising, aren't they?

Related articles

• Facebook's IPO Is A 'Bit Slow' And 'Investors Don't Like Some Of What They're Seeing' (businessinsider.com)
• Barron's Goes Negative on Facebook (ritholtz.com)

Some Interesting Links for Your Weekend Reading

Another school year is ending.  That means it is graduation time.

Likewise, it also means we have a group of summer interns starting, and I wanted to convey a sense what's to come.

The L.A. Times reports that, in this economy, only half of college grads are working full time ... with less pay and deep debt.

 

 

Nonetheless, I believe that cream always rises to the top and that we have a bigger future than our past.

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

Lighter Links:

• This Is How Asteroid Mining Will Work. The new Manifest Destiny? (Gizmodo)
• How Does NASA Build Teams? (ExpertAccess)
• Top 13 Infographics that Mock Infographics. (SaveDelete)
• Design Thinking. Iterate prototypes through failure cycles as fast as possible. (FastcoD)
• Window seat to North Korea - YouTube. Here is an interesting vantage point to peer into the reclusive state. (Youtube)

 

Trading Links:

• Buffett Buys the Farm ... Adds Chicken Eviscerator to Berkshire Portfolio. (Bloomberg)
• Hulbert Explains Why a Major Market Correction Is Unlikely. (SmartMoney)
• Watchdog Report: TARP Will Not Turn a Profit for Taxpayers. (NewsObserver)
• Go Ahead and Sneer, But Microsoft's Windows 8 Could be Huge. (Forbes)
• Canada announces that foreign workers can now be paid 15% less than Canadians. Do you agree with a two-tiered wage system? (TheStar)

Here Are Some Fun Links for Your Weekend Reading

Election years are interesting.

Many believe that the Presidential Election Cycle affects the stock market. 

Perhaps there is an easier explanation ...

 

 

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

 

Lighter Links:

• Rocks In Their Heads? Deep-Pockets Dreamers Pursue Asteroid Mining. (TheDaily)
• What Is Strategy? Choices made to maximize long-term value? (Strategy-Business)
• Are Superstitions Rational? Interesting. (WhyWeReason)
• A Profitable Exercise Merger – Combining Running with Walking. (HuffPost)
• Take a Moment to Watch This Rendition of “Flight of the Bumble-Bee”. Wow! (YouTube)

 

Trading Links:

• China Tells IPO Bankers to 'Like' Facebook. (CNBC)
• Stratfor's 2nd Quarter GeoPolitical Forecast. Lots of stuff to consider. (Stratfor)
• The Fed in 57 Words. (SmartMoney)
• Employers Likely to Step In If Obamacare Health Law Is Overturned. (Google)
• Does US Airways and American Need Each Other? What Are Merger Benefits? (WSJ)

Should You Sell in May and Go Away?

What you choose to look at ... matters.

Not everything that can be counted counts, and not everything that counts can be counted.

    ~ Albert Einstein

A close look at trading in May shows a pretty clear negative bias. Here is a 10-minute bar chart of what's happened since May 1st on the S&P 500 Index.

 

 

Is that a warning sign or a buying opportunity?

'Sell in May" is a pretty well known trading concept. Here is a brief explanation from Carl Swenlin of DecisionPoint.

 

May 1 marked the beginning of a 6-month period of unfavorable seasonality. Research published by Yale Hirsch in the Trader's Almanac shows that the market year is 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.

... 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.

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.

Here is a Dow Jones Industrial Average chart illustrating that phenomenon.

 

 

Historically, the seasonality expected by 'Sell in May' has provided a trading edge.

However, scale and perspective do matter.  For example, here is a weekly chart of the S&P 500 Index. From this perspective, the markets are arguably in an up-trend - and sitting on top of a pretty strong support.

 

 

While the MACD is testing a move beneath the zero line, price is the primary indicator ... and is in a reasonably defensible buying area.

If the bulls hope to push things higher, this is where you would expect buying to occur. 

We'll see.

Related articles

• A Seasonal Quandary (pragcap.com)
• Sell In May And Go Away...Except In Election Years (ritholtz.com)
• Commodities Can Help With 'Sell In May' (wallstreetpit.com)

Sector Rotation Shows Defensive Posture - Even Though Earnings Are Strong

One of the ways to measure the mood of the stock market is to see what sector rotations are taking place beneath the surface.

This chart shows that sector rotations over the past month reflect a market mood that is turning more defensive.

 

John Murphy explains:

 

The four sector lines are plotted "relative" to the S&P 500 which is the flat black line. In other words, the four sector lines are relative strength ratios that measure their performance "relative" to the S&P 500.

The blue line shows the Technology SPDR (XLK) leading the market higher since the beginning of the year. Technology leadership is a good thing for the market. The XLK:SPX ratio has started to drop during April, however, which shows short-term loss of that leadership. In fact, technology was this week's weakest sector.

The other three lines show the relative performance of the three defensive sectors which are consumer staples (pink line), healthcare (green line), and utilities (red line).

Those three sectors underperformed the S&P 500 since December as the market rallied. Notice, however, that those three relative strength ratios have turned up over the last month. In fact, utilities, healthcare, and staples were this week's three strongest sectors.

That's normally a sign that investors are turning more defensive and are protecting themselves from a possible market correction.

 

Meanwhile, Q1 Earnings Season got off to a good start as companies continue to surprise with strong revenue and earnings.

 

via Bespoke.

 

Related articles

• What Stock Sectors Are Telling Me (upsidetrader.com)
• The Lead-Lag Report: Correction Already Over? (minyanville.com)

Some Links for Your Weekend Reading

Ignore the man behind the curtain ...

 

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

 

Lighter Links:

• The Verdict on Business Huddles. (BossBlog)
• 20 of the Best Entrepreneur’s Thoughts in 140 Characters or Less. (Addicted2Success)
• Crappy Idea?  Company Will Print Your Twitter Feed On Toilet Paper. (Geekologie)
• Disney’s Lion King Becomes Broadway’s All-Time Top Earner. (TheDaily)
• How Ignorance Fuels Science and the Evolution of Knowledge. We judge the value of science by the ignorance it defines. (BrainPickings)

 

Trading Links:

• The Most Important Economic Questions for Investors. (Dash)
• The Pendulum Has Swung: Tech Start-Ups are Hot ... (42floors)
• HFT Slows Down in U.S. Ahead of Exchange Action. (FT)
• Global Signals Bode Poorly for Stocks. (Barrons)
• George Soros: Euro Crisis Is Now ‘More Lethal’. Famed hedge fund manager warns of more pain to come. (AdvisorOne)

LivingSocial Is Growing-Up and Focusing on Big Goals and a Bigger Future

I visited my son in Washington DC this week.

 

 

   
He works for company called LivingSocial, which is a fast-growing and innovative tech startup. If it doesn't immediately ring a bell ... they compete with Groupon in the daily deals space.

As an entrepreneur, it was interesting to get a sense of the scope (they do a lot more than daily deals), scale (5,000 employess in just three years), and pace of the company like this.

LivingSocial raised enough money (at a $6 billion valuation) that, even though they lost over $500 million on operations last year, they are on pace for their targets - including an initial public offering in the near future.

As I watched the swarms of people huddling, white-boarding, and doing what they do ... It occured to me that what once seemed like chaos is re-organizing at a higher level of order. Teams are relying more on project management; key performance indicators are well known and well tracked; and they are moving to a matrix organization management to get things done.

All-in-all, it was impressive.  Moreover, they are keeping the "prize" in plain sight.  Here's a picture of Ben and me in front of a LivingSocial motivational mural titled "Intergalactic Winning".

 

It's next to a world map that shows the markets in which they've gone live, and it's a reminder that cool things happen when you focus relentlessly on big goals and an even bigger future.

Related articles

• Tim O'Shaughnessy Explains Why LivingSocial Lost $558 Million Last Year (businessinsider.com)
• LivingSocial CEO: Lumping Us With Groupon Is Like Lumping eBay With Amazon - TechCrunch (techcrunch.com)
• What's next for LivingSocial (tech.fortune.cnn.com)