Capitalogix

Here a Few Links for Weekend Reading

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

• ETFs to Top 2nd $ Trillion in 3 Years; it took 18 years to get the 1st. (STM)
• Market Confidence, Tricks and Placebos. (PsyFiTec)
• Is Apple On Target For Its First $100 Billion Revenue Year? (Forbes)
• McDonald's to hire 50,000 workers, starting April 19th. (Money)
• Data Guru Warns of Future 'Bots Hacking the Markets. (Barrons)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• 6 Questions to Uncover Intellectual Capital in Your Business. (HighSpot)
• How China and Others Are Altering Web Traffic. (TechReview)
• OMG! Oxford English Dictionary Adds LOL to its Pages. (Wired)
• The World's Biggest Family? 39 wives, 94 children and 33 grandchildren. (DailyMail)
• Time to Get Rid of $1 Bills? Ditching Paper Money Could Save Billions. (TheWeek)
• More Posts with Lighter Ideas and Fun Links.

Are Cracks Starting to Show in the Rally's Foundation?

Newsweek had a great cover:  "Apocalypse Now". Think about it, Tsunamis, Earthquakes, Nuclear Melt-Downs, Revolutions, Governments on the Verge of Shutting-Down ...

And, yet, despite a cavalcade of horrors ... the markets have held up well.

Is This as Good as it Gets?

Barron's notes:

Having snagged its best first quarter since 1998, the U.S. stock market began April on a hopeful, if hesitant, note, encouraged by evidence that our economy is improving, but a little fearful that this may be as good as it gets.

On Friday, the Dow Jones Industrial Average nudged briefly above its recent February peak to reach its highest level in nearly three years, effectively brushing aside recent concerns such as high oil prices, flailing European banks and disruptions in the wake of Japan's disaster that had so alarmed investors mere weeks earlier.

Are Cracks Starting to Show in the Rally's Foundation?

Bloomberg posted a chart showing the bull market move put in by the S&P 500 Index.  Note, however, the dwindling volume of shares traded, especially since prices rebounded off lows earlier this year.

 

Barry Ritholz notes "Fed induced rallies tend to be liquidity, not conviction driven. Thus, the anemic volume".

Breadth is Starting to Show Signs of Fatigue as Well. 

The following chart shows the percent of stocks trading above their 50-Day Moving Averages.

 

 
In strong markets, this indicator goes up as price rises.  However, as the market rally loses momentum, this indicator starts tracing-out lower highs.

So what do you do?  With the charts shown above and QE2 is supposedly ending in June ... price is still the primary indicator.  Until sellers show up with conviction, the liquidity rally is likely to continue.

Cartoon Shows How GE's Logo Reflects Its Corporate Values

GE has been in the news recently because of its clever use of tax loopholes.

 

Clever.

Related articles

• General Electric Pays No Taxes Again (bigthink.com)
• Five Ways GE Plays The Tax Game (businessinsider.com)
• Setting the Record Straight on GE's Taxes (fool.com)

With Business Confidence High and a Teflon Market, What's The Fed's Next Move?

The Dow Jones Industrial Average kicked off a new quarter by touching the highest point since the summer of 2008.

A strengthening job market has private payrolls and business confidence surging ... and layoffs waning. 

Large corporations, which have been sitting on record troves of cash, could be poised to start hiring again. Fifty-two percent of top CEOs said they plan to increase hiring the next six months, according to the Business Roundtable's first-quarter survey. That's up from 45% in the fourth quarter and the highest in the survey's eight-year history. 

Results like this imply that corporations are more optimistic and likely to expand.

Does That Mean the Fed Has Met Its Mandate?

* St. Louis Fed President James Bullard said “the economy is looking pretty good” and that the Fed should “see if we want to decide to finish the program or to stop a little bit short.”

Bullard added that “it may be reasonable to send a signal to markets that we’re going to start withdrawing our stimulus, and I’d start by pulling up a little bit short on the QE2 program … We can’t be as accommodative as we are today for too long, we’ll create a lot of inflation if we do that.”

* Dallas Fed President Richard Fisher went even further, telling a European audience that “We’ve done enough” and “we’re at risk of doing too much.” Fisher even went so far as to say the Fed’s dual mandate of controlling inflation and boosting employment should be changed. He wants the Fed to have no responsibility for employment, and to focus solely on inflation.

* Fed Chair Ben Bernanke has the potential to be even more market moving this month, at the April 26-27 Federal Open Market Committee meeting. Not only will this be the first meeting after these more hawkish remarks, but it will also be the first time the Fed holds a post-meeting press conference.

Yes, you read that right … Rather than hide behind prepackaged statements, Ben Bernanke will stand in front of the microphone and explain the Fed’s actions. He’s going to do that several times a year going forward — with this year’s briefings scheduled for April 27, June 22, and November 2.

If Bernanke shows any shift in policy, we could see some real market fireworks.  Just something to watch for.

Related articles

• Fed's Bullard: No consensus on cutting short QE2 (reuters.com)
• Why the U.S. dollar goes up - or down (theglobeandmail.com)
• Discord At The Fed Has Bernanke Out On A Limb (businessinsider.com)
• Investors look to Fed minutes for clues (theglobeandmail.com)

Here Are Some Links That Caught My Eye This Week

Some weekend reading.

 

First, you may have seen that Butler will be making another trip to the NCAA Championship game. 

 

Well, the Onion has it covered.  Here is a link to their article: "Butler Bulldogs Inspire Thousands Of Tall, Goony-Looking Midwestern Dorks".

 

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

• Goldman Sachs Partners Selling Shares - What Does it Mean? (Dealbook)
• Wal-Mart CEO Bill Simon Expects Inflation. (USAToday)
• Gartner: Tablet Trend to Boost IT Spending by Billions. (AllThingsDigital)
• Meg Whitman joins VC Firm Kleiner Perkins. (Reuters)
• Top 10 Dying Industries - Real Time Economics. (WSJ)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Paul Allen Slams Bill Gates in Memoir: When $13BB Isn't Enough. (MW & VF)
• First-Person Account of Southwest's Plane Landing After Roof Blew Off. (Insider)
• Clearest Picture of Japan’s Crisis Comes from 1000s of Miles Away. (NYTimes)
• Great Visualization of the Imperial History of the Middle East. (Forbes)
• Lost City of Atlantis, Swamped by Tsunami, Found by Researchers? (Reuters)
• More Posts with Lighter Ideas and Fun Links.

Comparing Chinese Provinces with Countries

China is still a toddler from an economic perspective.  No doubt, It is growing quickly.  What will happen as it matures?

photo of toddler from Sun article.

Here is an infographic from the Economist that shows which countries match the GDP, population and exports of Chinese provinces.

 

 

China is now the world’s second-biggest economy; but some of its provinces by themselves would rank fairly high in the global league.

This map shows the nearest equivalent country. For example, Guangdong's GDP (at market exchange rates) is almost as big as Indonesia's; the output of both Jiangsu and Shandong exceeds Switzerland’s.

They also produced an interactive country comparison to the US states.

Here Are Some Links That Caught My Eye This Week

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

• Goldman's Magnum Opus On The Economic Impact From Japan's Earthquake. (ZeroHedge)
• Emerging Markets: Will Fortune Favor the Brave? (FT)
• Hedge Fund Bets $40MM That Twitter Can Predict The Stock Market. (HuffPost & CNBC)
• A Funny Feeling About the Stock Market. (Of_Two_Minds)
• Money Rushes Into Social Start-Ups at Eye-Popping Valuations. (WSJ)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Does Moammar Gadhafi Really Use 40 Lipsticked Virgins as His Personal Guardians? (AOL)
• Organized Religion 'Will Be Driven Toward Extinction' in These 9 Countries. (CNN)
• Where Do Bad Moods Come From? (Wired)
• The Pace of Innovation: Why Internet Explorer Will Survive & Firefox Won't. (ZDNet)
• The iPad 2 Reviews Are In -- Read The Best Parts Here (BusinessInsider & NYTimes)
• More Posts with Lighter Ideas and Fun Links.

Gallon to Gallon - Are Gas Prices Really That High?

Have you noticed gas prices lately? 

As we appraoch $4 per gallon, it's enough to create a different form of March Madness.

 

Gallon to Gallon - Are Gas Prices Really That High?

In response to Sarah Palin's complaints about gas prices, here is a look at other things priced per gallon.

 

That puts things in a different perspective; doesn't it?

Related Articles

• Analysts: gas may soar to $5 per gallon soon (abclocal.go.com)
• Why Gas Prices Rise Quickly but Fall Slowly (dailyfinance.com)
• Good, Better, Best: 3 Free iPhone Apps for Finding Cheap Gas (mashable.com)

Capitalogix Commentary 03/26/11 - The Volatility of Volatility

 Another strong week for the markets.

The Wall Street Journal summed it up nicely.

The "risk on/risk off" trade has come roaring back.

Across financial markets, trading patterns more commonly seen in 2010 are returning. Stocks and the dollar are consistently moving in opposite directions, as are stocks and Treasury securities.

It is a trading pattern that was common for much of 2010 as investors swung in and out of markets en masse–buying "risk on" investments like stocks when they felt brave, and "risk off" assets such as Treasurys and the dollar when they wanted safety.

Markets could be at risk of knee-jerk moves for the foreseeable future, a result of the increasingly volatile nature of global markets, and liquidity being pumped into markets by the Federal Reserve.

Volatility’s Whipsaw: VIX Falls 40% After Jumping 46%.

The Volatility Index (or VIX) is regarded as the "Fear Index" by many. 

So, it is worth noting that the VIX has fallen 40% from its recent highs.  It is also worth noting that That the big move down was preceded by a three-day rise in the VIX of more than 46.

 

The Volatility of Volatility.

According to Barron's, since 1990, the VIX has only experienced a three-day decline of 25% or more that was preceded by a three-day rise of 25% or more eight times.

“During those eight periods, the average and median performance of the S&P 500 has been negative in the days and weeks following these big moves higher and then lower in the VIX”.

We are Seeing a Lot of Big Ups and Big Downs.

One of the bullish signs, recently, has been  the market's ability to snap back and continue its push higher despite recent events.  Yes, there have been big swings; but instead of 'Fear', order returns ... and the market is once again acting like it is relatively undaunted by concerns. 

Remember, how much markets move up and down is a different form of volatility.  You can measure it in many ways, for example, based on the Average True Range.  However, historically,  increasing volatility is not a positive sign for the markets (because it suggests indecision, and has often occurred near major market turning points).

We Are Still In a Bull Market.

If you are looking for another bullish sign, it isn't hard to find one in this market environment. 

Here is one:  Sectors are holding up, even when an individual stock tanks.  A recent example is what took place after Research In Motion (RIMM) released a bad earnings report.  The stock was absolutely annihilated. Yet, even thought the stock got slammed, the rest of the market did not. That's a sign we're in a bullish phase. In bear markets, the whole sector will be taken down if a stock reports badly.

These are the little subtle hints about where we are at the moment. It doesn't mean it'll be this way a week or two from now, but it is that way for the moment.

Related articles

• A warning signal from the Bund/Treasury spread (ftalphaville.ft.com)
• Who's the Sucker When Treasury Winds Down Its Mortgage Backed Securities? (minyanville.com)
• Are You Ready for a 60% Surge in Volatility? (pragcap.com)
• VIX Heads for Biggest Seven-Day Decline as Global Stocks Rally (businessweek.com)

Are You Inspired By the Purpose and Actions of Japanese Workers?

Imagine what was going on in the minds of the initial 50 Japanese workers who stayed behind (while everyone else was evacuated ) to try and fix things at the nuclear reactor after the earthquake ...

• Were they going to die, or become disabled from the exposure?
• How much radiation is safe? 
• What would happen if they didn't choose to go?

Why would anyone choose to put themselves at that much risk?

Archimedes said "Give me a lever long enough and a fulcrum on which to place it, and I shall move the world." 

In this case, the lever was the fate of world, or at least their little corner of the world.  Their actions might save and change millions of lives. 

They had a purpose.  And once you have a big enough "Why" ... the "Hows" seem to take care of themselves.

You don't have to wait to be a 'hero'.

On a related note, here is a TED video worth watching.

It is called: "Life Lessons From a Volunteer Firefighter".

 

Small Acts matter.  Don't wait.

Related Info:

• Live Stream Showing What's Happening at the Reactor.
• Will They Use Robots to Clean-Up the Plant Damage?
• How Will the Earthquake and Nuclear Plant Damage Affect the Economy?
• Even Japanese Mafia Yakuza Groups Are Helping With Relief Efforts.