Capitalogix

What Shoulder Surgery Reminded Me About Technology

History is littered with tales of once-rare resources made plentiful by innovation. The reason is pretty straightforward ... scarcity is often contextual.

Imagine a giant orange tree packed with fruit. If you pluck all the oranges from the lower branches, you are effectively out of accessible fruit.

From that limited perspective, oranges are now scarce. But once someone invents a piece of technology called a ladder, the problem is solved.

 

Shoulder Surgery Isn't What It Used to Be.

 

 

I had shoulder surgery on Wednesday to remove some calcium deposits and bone spurs, and to clean out or fix some soft tissue damage.

 

Needless to say, I wasn't looking forward to it.  And not just to the needles and knives, I was dreading the rehab.

 

Turns out, shoulder surgery isn't what it used to be.  

 

Here is a picture from inside my shoulder (unlike years ago, they didn't have to rip me open to to gain access for the picture or the repair).

 

 

Less damage, less time, less drugs, less recovery.

Bottom-Line: I went in early, and was out before lunch.  Moreover, I was able to work and go to a reception the day after the surgery ... and go to the gym this weekend. 

Whether it is minimally invasive surgical instruments, or linking big data and elastic computing ... Technology is a resource-liberating mechanism. 

Whether it is minimally invasive surgical instruments, or linking big data and elastic computing ... Technology is a resource-liberating mechanism. It can make the 'once scarce' the 'now abundant' (or 'readily accessible') ... and a lot less painful.

Pretty Cool!

Don't Get So Comfortable Having Fun That You Forget About Risk Control

I spent part of the week in Miami.  While there, I had a great time talking about deals, opportunities, and how so many hedge fund pros are setting-up shop there.

 

 

Opportunity can be distracting.

Let's play a guessing game.  Who has two thumbs and forgot to wear sunscreen?

 

 

Meanwhile, the Markets have held up well.  The Dow Jones Industrial Average is trading near its highs.

 

 

However, the Russell 2000 Index is showing that traders are taking a risk-off approach to the smaller cap issues.

 

 

Investors have clearly had a preference for larger-cap stocks over smaller-cap ones for the past two months.

This type of Small-Cap negative divergence has been market-negative historically.  

Put that with the "Sell in May and Go Away" theory ... and what you have is another caution light (and a potential early indicator to watch for when the small caps start to out-perform the big caps again).

Here Are Some Links to Start Your Weekend

Do you believe that our Democracy was bought and sold a long time ago?

 

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

 

Lighter Links:

• Why You Should Hustle Every Day. (TheNextweb)
• Discovering Two Screens Aren’t Better Than One. (NYTimes)
• You Could Read An Entire Harry Potter Book In Under 90 Minutes With This App. (HuffPost)
• 35 Expensive Things for Your Dream House. (Distractify)
• Military's 'Iron Man' Suit May Be Ready to Test This Summer. (LiveScience)

 

Trading Links:

• Remember Lotus Notes? It's Still a Billion-Dollar IBM Business. (WSJ)
• What Will Robots Do to Property Values? (Freakonomics)
• Can Emerging Market Bonds Help Us Predict the Next Bear Market? (FinancialSense)
• How Do You Rein In High Speed Trading? (Points and Figures)
• Welcome to the Odd World of Alternative Currencies. Believe it or not, they're coming. (Futures)

Should You Sell in May and Go Away? Seasonality Suggests That's Not Such a Bad Idea

Is it safe to get back in the Market?

 

According to popular trading rules, May 1st marks 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.

 

Here is a recent chart showing the returns, for the past 20 years, of this Halloween through April bullish seasonality idea.

 

 

 

Superficially, it seems to work.

 

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.

 

Assume that bull and bear market pressures tend to override seasonal tendencies. 

 

In addition, it's also pretty safe to assume that there are no guarantees in trading.  That means that every year is different and presents its own challenges.

 

As we approach May, traders get wary.  That doesn't mean they sell.  Instead, they acknowledge that, historically,  a volatile, sideways-moving market is likely ... and they prepare accordingly.

 

Nonetheless, price is your primary indicator and it makes sense to follow the primary trend.

 

Related articles

Favorable 6 Month Seasonality Period Begins

Should You Sell in May and Go Away?

Jeffrey Hirsch Reveals Stock Trader's Almanac's View

Here Are Some Links to Start Your Week

 

 

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

 

Lighter Links:

• Scientists Debunk the Myth that 10,000 Hours of Practice Makes You an Expert. (Neatorama)
• This Coach Improved Every Tiny Thing by 1 Percent and Here’s What Happened. (JamesClear)
• Do Abstract Ideas Deserve Patents? (NYTimes)
• Why Dogs Spin Before They Poop? [video]. Science (Lifehack)
• Belle Curve: Statistics show the average woman has average looks; the average man doesn’t. (WSJ)

 

Trading Links:

• Bitcoin Itself May Live or Die, But Cryptocurrencies Will Live On. (MIT Tech Review)
• Singapore Aims to Become Southeast Asia's Silicon Valley. (Wall Street Journal)
• Meanwhile, China Quietly Takes Over Zimbabwe. (ZeroHedge)
• George Soros and the Human Uncertainty Principle. (ValueWalk)
• How Rich Are WhatsApp Employees Now? 'Early' WhatsApp Employees Made $160 Million Each (BusinessInsider)

What Level of Market Correction Is Normal Historically? [Chart]

There's always some pain to endure.

This chart shows S&P 500 intra-year declines compared with calendar year returns. The bars represent year-end returns since 1980, while the purple dots mark each year's market low.

Buy and Hold investors must stomach significant drawdowns to get their returns — even in 'good' years.

 

via JP Morgan Funds.

 

Basically, you have to understand that 10-15% pull-backs are normal (perhaps even healthy) for the market.

According to Business Insider, here are market correction averages and their historic frequency. Since 1900, we've seen:

• 5% market corrections: 3x per year.
• 10% market corrections: Once per year.
• 20% market corrections: Once every 3.5 years..

Interesting.

Here Are Some Links to Start Your Week

Trading pros may not think things are different.  However, the public is reacting to suggestions that Wall Streets may be rigged against them.

 

In this cartoon, Darkow draws the Carnival Midway Game of Wall Street, "Spill the Milk" ... which disguises the super-fast high-frequency stock trading center for insiders only.

The Carny beckons to the 'Little Guy': "Step right up, friend... It's a game of skill. Trust Me!".

This kind of public sentiment often triggers regulatory scrutiny ... which, in turn, triggers new games of 'skill'.

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

 

Lighter Links:

• The Science of Making Your Story Memorable - Scott Adams. (Dilbert)
• 45 People Share the Best Piece Of Advice They’ve Ever Heard. (Thought Catalog)
• The Best April Fools’ Pranks of 2014. (TechCrunch)
• Meet The Seven People Who Hold The Keys To Worldwide Internet Security. (The Guardian)
• Chicago Police Department Believes It Can See The Future, Starts Warning Citizens About Crimes They Might Commit. (TechDirt)

 

Trading Links:

• Will Last Year's Winners Be This Year's Losers? (BlackRock)
• Goldman Sachs Chief: The Responsible Way to Rein in Super-Fast Trading. (WSJ)
• Themis Trading Response To Goldman Sachs Market Structure Op-ed. (ThemisTrading)
• Technical Analysis Practice: Contrast between Individuals and Professionals. (DragonflyCap)
• Scott Adams Blog: Robot Geniuses are Coming. (Dilbert)

Weekly Market Winners and Losers Performance Comparison

Even during a week like this one, there is always something working ... if you look in the right places.

The chart shows the top-and-bottom performing markets, ranked by weekly performance.

The data is color coded based on sector. The first column shows last week's performance, followed by six columns of the most recent weekly market performances.

 

Click this link to view weekly, monthly, quarterly, and yearly views of this data.

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

Here Are Some Links to Start Your Week

Just got back from a quick trip to New York City.  While there, I got interviewed at the Market Technicians Association annual meeting.
 

 
For what it is worth, the prevailing sentiment there was quite bullish (though most were expecting a pull-back, or correction, soon).

On a side note, I took advantage of the proximity to the Carnegie Deli.
 

 
I only ate half, but didn't want to waste any ... so I had it wrapped, and took it home.

Long story short, even if it doesn't smell bad, you shouldn't eat corned beef that was left unrefrigerated for more than a day.

I lost seven pounds yesterday! 

I'd be an idiot savant if I were good at something enough to be a savant.

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

 

Lighter Links:

• 'Impossible' Is Outdated - Here's Why. (Forbes)
• The Dawn of the Age of Artificial Intelligence. (The Atlantic)
• A Day Later, Caffeine Stimulates Memory. (Futurity)
• Japan's Booming Sex Niche ... Elder Porn -. (TIME)
• The Big Bang of Older TV Viewers. Now that the median TV viewer is 54, networks are reworking lineups and rethinking ad strategies. (LATimes)

 

Trading Links:

• A Group of Investors is Buying a Stake in the Next Generation of Geniuses. (BusinessInsider)
• All Time Top 10 Hedge Fund Managers | The Big Picture. (Ritholtz)
• 5 Ways China’s Slowdown Will Ripple Across Globe. (AsianCorrespondent)
• What Happens When The Whole World Is Wired? (FastCo)
• The Future of Jobs. Tech innovation has increased long-run employment. Can things change? The Economist (Economist)

Is the U.S. Stock Market Rigged?

Did you see the 60 Minutes report on Michael Lewis' new book, "Flash Boys," that reveals some of the ways that high speed traders work the stock market to their advantage.

 

 

Here is an excerpt from the intro.

 

Steve Kroft: What’s the headline here?

Michael Lewis: The Stock Market is rigged. The United States stock market, the most iconic market in global capitalism is rigged.

Steve Kroft: By whom?

Michael Lewis: By a combination of these stock exchanges, the big Wall Street banks and high-frequency traders.

Steve Kroft: Who are the victims?

Michael Lewis: Everybody who has an investment in the stock market.

 

The 60 Minutes piece has a interesting explanation of what is happening.

For an even better one, click to watch this Michael Lewis interview on Bloomberg, where he defends his claim that the market is rigged.

 

 

via Bloomberg Television's “Market Makers.”

 

Let me know if you want to talk about high frequency trading or what is likely to happen as a result of press coverage like this and the ensuing regulatory scrutiny.

 

We live in interesting times.

 

Related articles

Michael Lewis Explains How HFTs "Screw" Investors Every Day.

Big Picture - More Videos: On how the U.S. stock market is rigged?

Wall Street Pit: On How 'Rigged' The Stock Market Really Is