Capitalogix

Comparing U.S. States to Countries, Based on GDP and Population

The Economist put together an interesting graphic that shows which countries match the GDP and population of America's states?

You  probably know that California, on its own, would rank as one of the biggest economies of the world.  As a result of its recession, these days, it would rank eighth (falling between Italy and Brazil).

But how do other American states compare with other countries?

Taking the nearest equivalent country from 2009 data reveals some surprises. Who would have thought that, despite years of auto-industry hardship, the economy of Michigan is still the same size as Taiwan's?

 

By the way, this is similar to a map I first saw in 2007 at "StrangeMaps".  More on that here; and it gives you a chance to see how things have changed since then.

Related articles

• China: it is big and it is clever (ftalphaville.ft.com)
• California Consumes More Oil Than China: Fact Or Market Manipulation? (businessinsider.com)
• Brazil Is the New China (minyanville.com)
• Advanced Economies Losing Ground to Emerging Asia, Census Shows (businessweek.com)

Capitalogix Commentary 01/10/11 - A Look at the Bullish Case

Why are the markets going up?  Does it matter?  Clearly, there has been virtually no selling pressure; and it's been that way for months.

Jim Cramer said: "Really bad markets go down on the same news over and over again. Really good markets just keep going up on news that is well-known and is, well, hardly, news."  By that definition, we are in a good market.

 

Respect the Trend.

The primary trend is higher.  Higher highs and higher lows is the definition of an up-trend. Until price tells you otherwise, the key message is that Bulls control the market.

Imagine how frustrating it has been to be a Bear (because they simply haven't caught a break, and classic bear setups just aren't working). Will there come a time when Bears control the market again?  Of course there will.  Before that there will probably be a few nasty selling episodes. For now, though, all they know is that the market simply won't fall, no matter what the readings say, and no matter how overbought the daily index charts happen to get.

The Markets are a harsh teacher ... and the hard lesson to learn is to avoid front-running a move. Over the long-term, it is safer to respect the primary trend.

A Condensed Restatement of the Bullish Case.

One of the StockTwits columnists posted this excerpt from a post in Barron's written by Michael Santoli.

The reasons the bulls are bullish are also pretty universally agreed upon. The industrial economy has gathered some momentum, the emerging markets are surging, companies are flush, profits look set to rise decently again, the Federal Reserve is seeking new ways to penalize risk aversion, taxes won't go up and the market tends to do well in the year after a midterm election.

And we can add to the list the likelihood that another financial-engineering cycle is just getting into gear, so expect lots of equity-friendly refinancings by stretched companies, re-leveraging by cash-rich ones and buyouts hither and yon.

The thing is, it's all pretty much true. And because of that, and given that stock valuations are not excessive, it's tough to think a likely pullback or worse would signal some major top.

That pretty much says it ... Hope you have a great week.

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

• Birinyi's S&P 500 Prediction a Jaw-Dropper. (InvestmentNews)
• Byron Wien's Ten Surprises for 2011. (CreditWriteDowns)
• Wealth & Fitness Secret: Success is Often a Matter of Getting the Ratios Right. (Forbes)
• Machines Are Taking Over: Electronic Trading Creates a New Financial Landscape. (NYTimes)
• Goldman Invests in Facebook at $50 Billion Valuation. (Dealbook)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• The Selfish Secret to a Happy Marriage (TheWeek)
• Using Google to Tell Real Science from Fads. (BigThink)
• Amazon Reveals the Most Popular Products of 2010. (Mashable)
• Six Apple iOS Exercise & Dieting Apps Worth Checking-Out For The New Year. (TUAW)
• Read "What Matters Now" - a Great Way to Start the Year. (SethGodin)
• More Posts with Lighter Ideas and Fun Links.

Related articles

• I Can't Sell This Market Now, I'm Too Worried I Won't Be Able To Get Back In (businessinsider.com)
• How to Trade Gold, Stocks, and ETFs in 2011 (minyanville.com)
• Long Term Trend Lines (ritholtz.com)
• Markets in review (January 3 - 7, 2011) (investmentpostcards.com)
• AAII: Bullish Sentiment Hits 6 Year High (pragcap.com)

Hans Rosling - The Health and Wealth of Nations

The Joy of Stats is spreading.

You can watch a history of the modern world, in less than five minutes.

I'm surprised by how many people have sent links to this YouTube preview of The Joy of Stats. 

 

Somehow, with nothing more than animated bubble charts, Hans Rosling has become quite famous.

This four-minute clip shows Rosling presenting world development in the context of income versus lifespan. Rosling uses Gapminder, the software he and others had developed, to show multiply varying statistics as animations.

The material is more or less the same as his TedTalks; but this time around, the motion chart isn't projected on a screen. The data is CGI'd into the air where Rosling can pluck and grasp at points as he highlights the significance of specific points in history.

Until you’ve seen Hans Rosling in action you can have no idea just how moving a bunch of blue bubbles moving down a screen can be.

The BBC writes that:

Despite its light and witty touch, the film nonetheless has a serious message – without statistics we are cast adrift on an ocean of confusion, but armed with stats we can take control of our lives, hold our rulers to account and see the world as it really is. What’s more, Hans concludes, we can now collect and analyse such huge quantities of data and at such speeds that scientific method itself seems to be changing.

"I kid you not, statistics is now the sexiest subject on the planet" says Hans Rosling, presenter of The Joy of Stats.

 

Related articles

• Gapminder (r-bloggers.com)
• Hans Rosling animates 200 years of human development (rs.resalliance.org)

Capitalogix Commentary 01/03/11 - Goodbye 2010

So long 2010.  Here is a quick recap of 2010 from JibJab.

 

Personalize funny videos and birthday eCards at JibJab!

 

Here is a Look Back at the "Year-That-Was" from a Market-Perspective.

Despite a shaky start, it was a strong year for the markets. Since July, the bears lacked conviction ... and the bulls pushed things higher.

 

 

The 20 Top Charts of 2010 from the Economist

What makes a popular chart? The theme running through the 20 most viewed daily charts published on the Economist's website in 2010 is hard to discern, with charts detailing everything from iPad prices to beer consumption. The most popular, by far, showed the ratio of the salary of a country’s leader to its GDP per person. (On this measure, India’s prime minister is especially poorly rewarded.)

The interactive graphic tree map, below, indicates the relative popularity of the top 20 charts. Such maps are handy for showing a large number of data values that would visually overcomplicate a pie chart. Coloring groups subsets within the data, as in this case, to create a heat map.

 

So, goodbye to 2010; I look forward to sharing 2011 with you.

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

• Doug Kass Offers 15 Surprises To Watch For In 2011. (BusinessInsider)
• Dr. No's "Yes" to Deficit Plan - Makes Waves. (WSJ)
• How Would You Choose to Cut the US Deficit? Interactive Graphic. (FT)
• China Raises Bank Reserves 3rd Time In a Month. (Reuters)
• 10 Reasons to be Cautious about Markets in 2011. (DavidRosenberg)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Great List of "Best-of-2010" Lists. (Fimoculous)
• The Year's Best Tech Products - from MIT's Technology Review. (TechReview)
• The 10th Annual Year in Ideas - Interactive Feature. (NYTimes)
• Finger Length May Predict Prostate Cancer.  Here is the Test. (Newser)
• Amazon Patenting the Return or Exchange of Presents Before You Receive Them. (Dvorak)
• More Posts with Lighter Ideas and Fun Links.

Related articles

• Top 5 Charts of the Week (pragcap.com)
• Stretched Earnings (classic.abnormalreturns.com)

A Humorous Look at How Bail-Outs Work - Life in an Irish Town

So this is how it's done ...

It is a slow day in a damp little Irish town. The rain is beating down, and the streets are deserted.

Times are tough. Everybody is in debt and everybody lives on credit.

On this particular day, a rich German tourist is driving through the town, stops at the local hotel and lays a €100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night.

The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher.

The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer.

The pig farmer takes the €100 note and heads off to pay his bill at the supplier of feed and fuel.

The guy at the Farmers' Co-op takes the €100 note and runs to pay his drinks bill at the pub.

The bar owner slips the money along to the local prostitute drinking at the bar, who has also been facing hard times and has had to offer him "services" on credit.

The hooker then rushes to the hotel and pays off her room bill to the hotel owner with the €100 note.

The hotel proprietor then places the €100 note back on the counter so the rich traveler will not suspect anything. At that moment, the traveler comes down the stairs, picks up the €100 note, states that the rooms are not satisfactory, pockets the money and leaves town.

No one produced anything. No one earned anything. However, the whole town is now out of debt and looking to the future with a lot more optimism.

And that, ladies and gentlemen, is how the bailout package works.

Related articles

• Why Ireland Is Like Texas (minyanville.com)
• Texas, Ireland and Ten Little Indians (investorsinsight.com)

Capitalogix Commentary 12/27/10 - Sentiment in Holiday Spirits

Market Commentary.

The S&P 500 Index has had quite a run.  On Wednesday, Bespoke noted that it has been up 14 out of 16 days.  Since 1990, the S&P has only been up 14 out of 16 trading days two other times -- once in September 1995 and once in May 1990.

So, You Might Guess That Bullish Sentiment is High.

Well, it is probably higher than you realize.  We haven't seen readings like this in a long time.  The American Association of Individual Investors poll had the highest percentage of bulls (63) since October 2004, and the lowest percentage of bears (16) since October 2005.

 

Moreover, lots of other sentiment measures are showing similar readings. 

Carl Swenlin, from DecisionPoint, reminds that while high levels of bullish sentiment among advisors, investors, and money managers usually occur at market tops, market tops do not always occur when sentiment is very bullish. Sometimes people respond to the obvious and correctly align their market posture with the price trend. In situations like this we have to wonder whether or not they are wrong.

In other words, an excess of bullish sentiment is a caution sign and should cause concern because such sentiment peaks are often followed by price corrections, if not bull market tops.  However, that doesn't mean it is safe to use sentiment as a timing tool. Perhaps sentiment is better used as a simple indicator to help paint a picture of the market environment. So far we have no indication from our trend-following models that there are major problems ahead.

Another Measure Brims With Confidence.

Here is a slightly different take on perceived risk.  The Barron’s Confidence Index is a confidence indicator calculated by dividing the average yield on high-grade bonds by the average yield on intermediate-grade bonds. The discrepancy between the yields is indicative of investor confidence. For example, a rising ratio indicates investors are demanding a lower premium in yield for increased risk  and thus are showing confidence in the economy. 

As shown below, there has been a solid improvement in the ratio since its all-time low in December 2008.  This indicates that bond investors have grown significantly more confident, opting for more speculative bonds over high-grade bonds. The ratio is back at levels last seen in October 2007, before the financial crisis.

Presidential Cycle Points to a Bullish 2011.

Here is another piece of data pointing upwards.  Historically, the third year for a president produces a good return for investors. Investment strategists Liz Ann Sonders and Sam Stovall say why 2011 will be no different.

 

Bottom-Line:  The economy and stock market end the year stronger than expected.  Happy New Year!

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

• Forecasters Predict a Strong Recovery in 2011. (NYTimes)
• The Black Swans of 2011 - From Saxo Bank. (PragCap)
• Meredith Whitney Says 50-100 U.S. Cities Might Go Bust in 2011. (BusinessInsider)
• Amazon Sold 8MM Kindles in 2010 - Is There a Natural Limit? (Ritholtz)
• Forbes List of the World's Billionaires - and the New Richest Man. (Forbes)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• A Look Back at the Biggest Controversies of 2010 (TheWeek)
• Holiday Spoof: Mariah Carey's "All I Want for Christmas Is … Jews". (Ritholtz)
• "Think and Grow Rich" Download. Great Reading for the New Year. (Entrepreneur)
• The FCC Splits the Internet in Two: Fast or Slow Are Your Choices. (TDB)
• Trick Play Used to Win the TX High School Football State Championship. (BizInsider)
• More Posts with Lighter Ideas and Fun Links.

Related articles

• Is the Extreme Bullishness Cause for Concern? (pragcap.com)
• Despite Headlines, Investor Sentiment Remains In Extreme Bullishness Territory (businessinsider.com)

Uncle Jay Sings the News - Year-End Summary Song

I look forward to this each year.  Watch as Uncle Jay sings his year-end summary of the news.

Uncle Jay has a website he says "helps small minds understand big news".  Happy New Year.

Capitalogix Commentary 12/20/10 - Price Stays High as Breadth Weakens

The Markets are up, so all is well.  Meanwhile, Obama Claus is suited-up and ready to continue delivering the debt. Consider it our gift to future generations ...

Market Commentary

The S&P 500 Index remains at the top of its trading range and is making new highs for the year. 

 

Watch For Weakness as Breadth Weakens.

Notice the negative divergence, marked by the red arrow.  While the S&P 500 Index surged higher, less than 80% of the stocks in the index are trading above their 50-day moving averages.  This means that not all stocks have been participating in the current rally, which is a potential warning sign of impending weakness.

 

Looking For a Positive Sign? 

Lumber is surging.  Moreover, the Homebuilders SPDR and the Home Construction iShares  both are showing strength. This may show an increase in demand and often implies more construction.

 

Seems like good news to me.  Jim Cramer recently advised: "It is never too late to change. Things are good, not bad. Don't play irony. Don't be too skeptical. Be opportunistic."  What do you think?

The Year-End Bespoke Roundtable.

 

At the end of each year, the big financial media outlets typically conduct roundtables to get outlooks from key players in the financial markets.  The Bespoke Roundtable asks twelve of the most popular financial blogs/websites the same 34 questions regarding their 2011 outlooks and their take on 2010.  There are many insightful tidbits worth thinking about.

 

The consensus view is that the S&P 500 will be up in 2011, bonds will be down, oil will be up, the dollar will be up, US home prices will be up, and China's stock market will be up.  Interestingly, the consensus view was the exact same as it was last year for all asset classes except for gold.  Less participants think gold will go down in 2011 than they did in 2010.  Here is the link to the full post.

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

• Is Worldwide Corruption on the Rise? (Time)
• Americans' Wealth Grows, Lifting Hopes For Economy. (AP)
• When Will China Overtake America as the World's Biggest Economy? (Economist)
• Currency: The Year of 'Printing Money'. (BizWeek)
• What Was the Biggest Market Event of 2010? (InvestorPlace)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• NASA Discovers New Arsenic-Based Lifeforms. (Newser)
• Apple Prepares New Camera-Toting iPads for Q1 Release. (Reuters)
• Hidden Code Found in the Mona Lisa May Reveal Her True Identity. (Newser)
• A Million Free Google Books in ePub - for Kindle too (KindleWorld)
• Adult Picky Eaters May Actually Have a Disorder. (MSNBC)
• More Posts with Lighter Ideas and Fun Links.

Related articles

• Technical Talk: S&P 500 has bullish bias, but breadth deteriorating (investmentpostcards.com)
• Cumulative Breadth Not Keeping Up With Indexes (tradersnarrative.com)

Remember the Good Old Days of Reagonomics (Funny)

This made me smile.

Ah, the good old days.  "We told them the wealth would 'trickle down'."

Now, watch video titled “Obama Kicks Door” spoofing the President’s reaction after extending the Bush Tax-Cuts.  While Jay Leno’s Tonight Show obviously faked the video, they probably nailed the President’s reaction to the compromise.  Here it is.

 

via RightPundits.com.

Related articles

• The Early Evidence: Quantitative Easing Does More Harm Than Good (pragcap.com)
• Inside Job: The Gravy Train started here (thestar.com)

Capitalogix Commentary 11/29/10 - Have You Ever Seen a Leprechaun Beg?

The markets are showing remarkable resilience in the face of bad news and global unrest. This coming week will be another test, because of the uncertainty surrounding what's happening in Ireland, the fallout from insider trading investigations, and a somewhat oversold market.

Why should insider trading affect the market? Because institutional investors are going to try and get out of any fund they're worried about meeting part of that investigation. The result will be massive redemptions and a lot of selling.  It is certainly something to watch.

Let's Look at World Markets.

 

It has been a tough two weeks for global markets.  Most major indices are down; and, yet, that is not so bad considering the news about sovereign debt, war, and global cooperation.

 

Who Is Bailing Out Ireland?

Expect the questions about who will bail out Ireland to weigh on the markets.  Here is a graphic that explains the situation (click on it for a bigger version).

 

What About the Euro?

According to the Financial Times, BlackRock's founder Larry Fink, founder of BlackRock, the world’s largest money manager, believes that the euro will fall sharply as a result of the escalating eurozone crisis and turmoil in financial markets.

In an interview with the Financial Times, Fink predicts that the single currency, battered this week by the fear that the fall-out from Ireland’s debt problems will spread to other countries including Portugal and Spain, will fall to $1.20 against the dollar, a slide of nearly 10 per cent.

What Level of Holiday Sales Will Santa Bring?

Another driver worth watching will be how the market responds to holiday sales.  Black Friday is one thing; the issue is whether consumers will spend real money throughout the season.

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

• Do We Really Need Wall Street? (TheWeek)
• What, If Anything, Is the Future of Coal? (GreenBiz)
• Saudi Prince Alwaleed Invests $500 Million in GM. (WSJ)
• SAP Must Pay Oracle $1.3 Billion Over Unit’s Downloads. (Bloomberg)
• Fed Lowers Economic Expectations for 2011. (WashingtonPost)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Are Amazon & Netflix Making Too Many Decisions For Us? (Forbes)
• The Correlation Between Money & Happiness. (Economist)
• Some Stats About the Ritualized Turkey Massacre. (Ritholtz)
• Apple Sells 2 Million Beatles Songs, 450,000 Albums in One Week. (iDygest)
• Is North Korea Moving Another 'Red Line'? (Stratfor)
• More Posts with Lighter Ideas and Fun Links.