Capitalogix

Americans' Top Financial Concern

It's no secret that the economy is slowing - with high inflation rates and rising interest rates. 

According to Mohamed El-Erian, from Queens College at Cambridge University, we're experiencing stagflation - which is when inflation is high but growth is slowing significantly. Theoretically, that leads to recession. 

via visualcapitalist

The Consumer Price Index has also grown by over 8% in the past year, so the American household is facing financial threats from many angles. 

Many feel that the Fed has responded disappointingly recently, and their response (or lack thereof) will be a major dictator of whether we enter a recession. 

I believe that emotions play a role too. When people are afraid, they spend less and hoard what they can to save themselves from an unknown future. They feel anticipatory grief.  And their fear, uncertainty, and doubt ripple through society and our lives. 

Personally, I've weathered my heaviest storms by sailing toward the future regardless of the threats. An abundance mindset is a powerful tool, and as more people feel confident it becomes a macroeconomic trend with real influence. 

I'd encourage you to think about what opportunities there are and will be. There are always seasons of change … Winter eventually comes – and goes. Nevertheless, winter can be a great opportunity to plan your next moves and build the infrastructure to sow more seeds in the coming spring. 

As well, unlike nature, you can personally have springtime while the majority are in winter. We're currently in an A.I. springtime - and I believe that will continue regardless of economic trends. 

Happy to talk about this … Let me know what you are thinking and feeling!

Here Are Some Links For Your Weekly Reading - July 2nd, 2022

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

Lighter Links:

• Musk Breaks 9-Day Silence on Twitter, Posts a Picture With the Pope. (Reuters)
• Your Internet Life Needs a Feeds Reboot Here's How to Do It. (TheVerge)
• Analysis of Compound Curse Words Used on Reddit. (FlowingData)
• The Track Record of Futurists Seems ... Fine. (Cold-takes)
• How Netflix Grew from DVD Service to a Hollywood Disruptor with Over 200 Million Subscribers That is Now Losing Customers. (Insider)

 

Trading Links:

• Here's How Long Bear Markets Last And How Stocks React When They End. (ComplianceX)
• Families May Be Offered Mortgages of 50 YEARS that They Can Then Pass to Their Children. (DailyMail)
• Amazon Delivers Some Bad News for the Economy. (TheStreet)
• Crypto's Domino Effect is Widening, Threatening More Pain. (Wall Street Journal)
• 'A Lot of People are Just Not Understanding What's Going On': A 30-Year Market Vet Lays Out 7 Reasons Why a Recession is Imminent And Says Stocks Will End the Sell-Off Down 60%. (Insider)

 

 

How Bad Were The Markets In The First Half Of 2022?

The S&P 500 has had its worst first half performance since 1970. 

via AXIOS

But, the S&P's performance isn't the only danger indicator. 

via Fortune

Stocks, bonds, crypto, and more, all saw rapid declines in the first half of 2022. 

It's hard to pin the blame on any one factor. Was it the result of the actions we took to stabilize the economy during the throes of Covid? Is it the runaway inflation, Russia, or the continuing supply-chain issues? 

It feels like everything that could go wrong – is going wrong. I mean, how often do stocks and bonds fall at the same time?

On a positive note, bear markets are often much shorter than bull markets.  Also keep in mind that while global growth is slowing, innovation isn't!

Don't forget, “Winter” for the economy or a particular industry doesn't have to be winter for you. 

Onwards! 

Companies With The Most Patents in 2021

Intellectual Property is an important asset class in exponential industries.

Why?  Because I.P. is both a property right (that increases the owner's tangible and intangible value) and a form of protection.

They say good fences make good neighbors.  But you are also more willing to work to build an asset if you know that your right to use and profit from it is protected.

As a result of that thinking, Capitalogix has numerous patents - and we're developing a patent strategy that goes far into the future.  So, it's a topic that's front of mind for me.

Consequently, this visualization of which companies got the most patents last year caught my eye.  In 2021, the U.S. granted over 327,000 patents.  Here is who got them.

 

Raul Amoros via VisualCapitalist

While IBM isn't the public-facing industry leader they once were, they've been topping the list for most patents for the past three decades.  Their patents this past year cover everything from climate change to energies, high-performance computing, and A.I.. 

What ideas and processes do you have that are worth patenting?  And, what processes are worth not patenting - to keep from prying eyes?

Food for thought ... Onwards!

Thoughtful Entrepreneur Podcast

Recently I had a chance to talk with Josh Elledge on his Thoughtful Entrepreneur podcast. We talked about AI's inevitable influence on trading as well as my experience as an entrepreneur. 

Despite mis-spelling Capital Logix ... it's Capitalogix ... the conversation we had is worth a listen. 

Check it out.  

Visualizing Oil Prices in Response to Economic Events

In the past, I've talked about where America gets its oil, and how data is more than just "the new oil". 

During the worst of the pandemic, oil prices dropped almost 40%. They've now risen 216% from that pandemic low. With gas prices skyrocketing, it's probably time to look at historical oil prices.

Visual Capitalist put together a simple infographic. 

via visualcapitalist

So why are prices so high? Unfortunately, large portions of the world's oil reserves are in regions prone to political conflict.

Currently, the Russia-Ukraine conflict is leading to supply uncertainty and rising prices.

Meanwhile, oil companies are bringing in record profits. 

Oil prices are a complicated topic because supply and demand aren't particularly responsive to price changes in the short term. Regardless of price, people need to drive. And, regardless of demand, it takes time and money to drill new oil wells. 

As a result, you can see mismatches, like today, where uncertainty has raised prices, but oil companies are doing tremendously well. 

The question now becomes ... where does it end? Does it take a resolution to the current conflict? Or, will prices reach a ceiling and fall back down based on other factors?

Don't Touch That Dial

History may not repeat itself exactly ... but it often rhymes. News stories, however, seem to replicate.

There is nothing wrong with your television. Do not attempt to adjust the picture. We are now controlling the transmission. We control the horizontal and the vertical. We can deluge you with a thousand channels or expand one single image to crystal clarity and beyond. We can shape your vision to anything our imagination can conceive. - The Outer Limits (1963)

 

via YouTube

It almost feels like an episode of Black Mirror, watching these stations quote the same pre-determined diatribe on fake news and its danger to our democracy.

The very message they are purportedly supporting, in the video above, directly contradicts their actions. 

Most people realize this happens to some degree, but it seems different when presented like this.

I believe I am reasonably aware and somewhat immune from propaganda. That probably isn't as true as I'd like to believe.

Meanwhile, Sinclar Broadcast Group owns nearly 200 stations in 80 different markets and wants to buy more. That is a powerful platform to deliver mass messages and influence the zeitgeist of its audience.

It used to be true that winners wrote history (think empires, wars, etc.). Now, the one that delivers the most broadcast narratives shapes the emotional and seemingly logical responses to what we perceive to be happening around us.

The result impacts elections, financial markets, buying choices, and countless other areas of our life. 

We see and hear it every day about politics, wars, economic issues, and many other things we don't focus on enough to notice.

As A.I., Bots, and social media grow, our ability to discern truth from 'truthiness' weakens. Especially with the growth of deepfakes. 

What do you think about this?

A Brief Look At Bear Markets

Main Street and Wall Street are often at odds.  Terms like "retail" and "professional" or "smart money" and "dumb money" highlight the difference in perspective and access to tools, processes, and even information.  

The biggest disparities happen at turning points.  Today, many companies are posting record profits, but markets are volatile, gas is expensive, and inflation is high.  So, we're getting some mixed signals.

It may be too soon to say we're in a recession, but we are experiencing a downturn. 

Here is a comparison of recent market corrections showing each decline's intensity and duration.

 

via Reddit (Dow Jones Market Data & the WSJ)

While this chart is a week or two old, it shows some interesting data.  While there are a few shorter drops, most were longer and deeper than where we currently are. 

Thus, we could have further to go ... but it could also be a sign that we're responding better to market issues than in the past. 

via Cascade Financial Strategies

The blue areas represent past bull market durations and returns (total and annualized).  The red areas represent past bear markets.

 

Note: this chart is from 2018 - Nonetheless, it is a good reminder of the bigger picture.

I remain optimistic about the future state of our economy.  That doesn't mean there won't be pain.  Still, I believe that technology continues to increase the size of our potential pie and the capabilities we can leverage as a catalyst to recovery. 

 

As a bonus, if you want to see a flashback to the Great Recession, here are two pieces of my market commentary from the time.  It's interesting to look back and see how my writing has changed. 

• Market Commentary 02/06/09
• Market Commentary 05/01/09

How are you feeling about the markets and our economy?

Origin Story: Warren Buffet

Warren Buffett is a legend for many reasons.  Foremost among them might be that he's one of the few investors who clearly has an edge ... and has for a long time. 

From 1976 to 2017, his Sharpe ratio (excess return relative to risk) was approximately double the overall market.  He even did well in 2021.  Berkshire Hathaway now has almost a trillion in assets (up from $700 billion in 2019) – and is still performing well. 

While many people consider Buffett to be an investor, I also consider him to be an entrepreneur.

At the age of six, he started selling gum door to door.  Obviously, selling gum wasn't the key to his path to riches.  So, how did he make his first million?  Here's a video that explains it.

 

via Coolnimation

He made his first million at age 30 (in 1960).  For context, a million dollars in 1960 would be worth about $8.5 million today.

Buffet has always been honest about his bread-and-butter "trick" ...  he buys quality companies at a discount and holds on to them.

It is fascinating to recognize how much the world has changed – and yet how much it has stayed the same.

For extra viewing: Warren Buffett, Charlie Munger, and Bill Gates recently did a full 2-hour interview with CNBC.  You can watch it here.

Top 10 Most Overhyped Technologies (From 2008)

Just because something is overhyped, doesn’t mean it’s bad. Gartner's hype cycle is a great example of this. Every technology goes through inflated expectations and a trough of disillusionment, regardless of whether they're a success or failure. Sometimes a fad is more than a fad. 

Humans are pretty bad at exponential thinking. We're not bad at recognizing periods of inflection, but we're very bad at recognizing the winners and losers of these regime changes. 

 

 

There are countless examples. Here's a funny one from Maximum PC Magazine in 2008. It shows that hype isn't always a sign of mistaken excess.  This list purported to show things that were getting too much attention in 2008.  Instead of being a list of has-beens and failures, many of these things rightfully deserved the attention.

 

It's been 14 years since this came out. How did the predictions hold up?

Facebook has become Meta, and is one of the big five. The iPhone has sold more than 2.2 billion phones, and accounts for more than half of Apple's total revenue. And the list keeps going. Multiple GPU video cards, HD, 64-bit computing, and downloading movies from the internet ...

It's hard to believe how poorly this image aged. 

The trend is your friend while it continues. Just because something is overhyped - doesn't mean you shouldn't be excited about it. 

Onwards!