Capitalogix

How Markets Performed in 2021

2020 was a roller coaster of volatility, and while 2021 was as well, most asset classes saw improvements as the world reopened. 

But it wasn't all smooth sailing.  There were significant supply chain struggles and rising inflation ... not to mention the rising cases of COVID. 

Regardless, markets are not the economy, and while there are numerous factors to think about, I've always found markets interesting. 

via visualcapitalist

2021 was a year of rampant speculation, in part because so many systematic traders underperformed.  For example, Renaissance reportedly saw ~15 billion in outflows last year (despite double-digit returns) as their clients likely moved towards more "exciting" opportunities. 

Of course, some of those "exciting" opportunities were cryptocurrency-related.  Moreover, chasing performance like that is often mean-reverting.  Yet, I've seen a massive increase in interest among various business groups in crypto, Web 3.0, and the Blockchain. 

Cryptocurrencies

While crypto generally performed well in 2021, 2022 has seen a drop that erased over $1 trillion in value. 

via visualcapitalist

The reality is that crypto markets matured a lot in 2021.  The thousands of coins are mostly a distraction, but there are many interesting coins from various sectors with interesting technology behind them.  There is increased infrastructure and decreased correlation between coins.  Unfortunately, not enough to keep this drop from affecting the whole space. 

So the question is, is this a "discount" for people to buy into the space, or a sign of future troubles?

It's no secret that I've always been a fan of Blockchain but cautious of cryptocurrencies. 

I think there is a lot of money to be made speculating in cryptocurrencies, but how much of that money being made is attributed to luck vs. skill?

Crypto's are interesting, in part, because they're a digital currency decentralized over a peer-to-peer network.

The more people are willing to accept it as a medium of exchange, the more valuable it becomes (and the more it becomes a stable store of value).

Supposedly, decentralization provides it safety from censorship and government interference - meaning it has value as an international currency and as a currency for black-market transactions.  But, in my opinion, that remains to be seen (and I consider it unlikely for most cryptocurrencies).

However, the worth of a Bitcoin isn't just based on sentiment (on one hand, there are desires to avoid fiat currency vagaries, government interventions, and scrutiny, while having a fair price discovery method, etc.  ... on the other hand, there are also the costs to mine a Bitcoin, transaction fees, etc. and crypto has recently been under fire for its huge environmental impact).

Compared to a reserve currency – whose worth is primarily influenced by trade value and other macroeconomic factors - watching crypto's volatility can be scary. 

That being said, as adoption increases and more businesses enable it, it's possible that it will continue to legitimize.  For the time being, I remain a long-term skeptic because there is too much working against it. 

Many of my initial complaints are centered on coins as currency.  I get that there are already many interesting uses of Blockchain that will also help to bring credibility to coins as a store of value. 

The question for me is, even if cryptocurrency is here to stay long-term (and avoids government control), which coins will it be?  Do they even exist today?

I'm positive there is money to be made related to the Blockchain, NFTs, and cryptocurrencies.  But, at this point, it's a speculators game, and I think the best way to capitalize on this trend sustainably is to sell picks and shovels for the gold rush, instead of trying to stumble upon gold. 

 

 

Betting On The Super Bowl

Trying to get rich quickly? Want to know if the markets going to be bull or bear this year?

Look no further than the "Super Bowl Indicator".

The theory is a Super Bowl win for a team from the AFC foretells a decline in the stock market and a win for the NFC means the stock market will rise in the coming year. 

There is one big caveat ... it counts the Pittsburgh Steelers as NFC because that's where they got their start. 

If you accept that caveat, it has been on the money 33 years out of 41 - an 80% success rate. Sounds good, right?

Come on ... you know better.

Here are some other "fun" stock market fallacies:

• January Indicator
• Aspirin Count Theory
• Hemline Indicator
• Sports Illustrated Swimsuit Indicator
• Men's Underwear Index
• Big Mac Index

Back to Reality

Rationally, we understand that football and the stock market have nothing in common.  And we probably intuitively understand that correlation ≠ causation. Yet, we crave order and look for signs that make markets seem a little bit more predictable.

The problem with randomness is that it can appear meaningful. 

Wall Street is, unfortunately, inundated with theories that attempt to predict the performance of the stock market and the economy. The only difference between this and other theories is that we openly recognize the ridiculousness of this indicator.

More people than you would hope, or guess,  attempt to forecast the market based on gut, ancient wisdom, and prayers.

While hope and prayer are good things ... they aren’t good trading strategies..

As goofy as it sounds, some of these "far-fetched" theories perform better than professional money managers with immense capital, research teams, and decades of experience.

I have a thought experiment I often ask people that come into my office. 

What percentage of active managers beat the S&P 500 any given year?

... Now, what percentage beat the S&P 500 over 15 years?

The answer is about 5% as of 2019 (and that's in a predominantly bull market), and I have to imagine it's only gotten worse in the past two years.  That's significantly worse than chance. That means something they're doing is hurting, not helping. 

via Gaping Void

There's simply too much information out there for us to digest, process, rank, and use appropriately.

Every second you spend looking at a market is a second wasted.

There are people beating the markets — not by using the Super Bowl Indicator ... they're doing it with more algorithms and better technology. 

There will never be less data or slower markets.

Onwards.

A Look At The Future Through Today's News

Inspiration comes from many places. 

I'm grateful for the many groups I'm in, and smart people I know, because they're shortcuts to insights that can be hard to find. 

One can also find inspiration through events, books, and more. 

But, while it's easy to discredit mainstream news sources ... there's plenty of insight to be gained just from keeping track of various news sources. You have to take them with a grain of salt, and find the articles that provide a different perspective too, but it's still a valuable exercise. 

It's part of the reason I share my weekly links and this newsletter. They give me a reason to continue to do research and stay on my toes. 

With that, here are some interesting articles I found recently on advancements in technology. 

• In VR, You Can Become Your Own Psychologist - There's a new VR psychology treatment where you play both patient and psychologist. It has promising results in leading to detachment from habitual ways of thinking about personal problems. This is on top of already interesting VR technology around meditation and psychedelics. 
• Synthetic tissue can repair hearts, muscles, and vocal cords - 3D-printed tissues have been growing in popularity recently. Also making progress is synthetic tissue made of a new biomaterial in the form of an injectable hydrogel. It's durable and porous, both important qualities in creating wound repair that can handle the movement and stress put on hearts and vocal cords. 
• AI Is Discovering Patterns In Pure Mathematics That Have Never Been Seen Before- Mathematicians using computers to discover patterns is not new, but now deep learning models are not only assisting in analysis but formulating conjectures and approaches for formerly unproven ideas. This is a promising indicator for many spaces including chemistry, metallurgy, and material sciences (on top of trading of course). 
• DARPA Funded Researchers Accidentally Create The World's First Warp Bubble - Warp drives have been part of science fiction for a long time - and science for a decent amount of time as well. Warp drives have been theoretically possible since 1994 but were deemed "impossible" due to their use of theoretical materials and massive amounts of energy. Now, there's tangible progress as a real (but very tiny) warp bubble was successfully modeled. This is very fledgling, but it's always exciting to see science fiction become reality. 
• Renewables 2021 by IEA - I remember when renewable energies were not only ineffective but very costly. Now, 95% of the new electricity capacity from 2021-2026 is expected to be from renewables. Now, IEA bases their estimates on historical data, so they over underestimate the adoption curves. I would take that number as conservative. Just remember that capacity is different than coverage. Several countries are making a lot of progress on renewables, and several are making none. 

Have you found any other articles you found interesting?

Always looking for more sources to read. 

Getting Ready For The New Year

I love planning for the new year – both personally and professionally. 

I've always been a big picture person - so I tend to think in 5, 10, 25-year increments ... but thinking about the coming year is helpful too.

I think about it a bit like using a map.  Even if you know your intended destination, you still have to start with 'where you are' in order to figure out the best way to get there.

There are seemingly infinite potential paths ... but motion in a direction isn't really "progress" if it doesn't take you towards your desired destination.

As we reach the final week of 2021, I thought I'd revisit how I set New Year's resolutions. 

 

 

To start with, resolutions only work if you actually "want" to make them happen. It's one thing to hope that something magically falls in your lap; it's another to want to put in the work. 

With that being said, here are some tips. 

• Focus on What You Want.
• Focus on Why You Want It.
• Focus on Ways You Might Get it.
• Focus on Evidence of Progress.

Below, I'll take you through an example of each of the four steps.

Moving Towards a Solution, Rather Than Suffering From the Problem.

Before I got back into my health, my first instinct was to think, "I need to lose weight."  Knowing that "you're fat" isn't helpful … my head quickly translates that to something a tad more positive, yet generic, like: "I choose to be healthy and vital, and to live a healthy lifestyle."

Blah, blah … They are just words.  What I needed was something specific, measurable, and actionable.  How about: "I will lose 15 pounds and stop eating after dinner."  OK, but that isn't inspiring, and there isn't much for me to do. I can do better than that.

Figure-Out a Big Enough WHY, Rather Than Worrying about the HOW's.

This post isn't about health and fitness; it is about the mindset and techniques you can use to set empowering goals and plans in any situation.

So, while I could list many ways to lose weight (and I might even remember to do some of them), leveraging a driving force creates momentum.  In other words, the first step in "Doing" is knowing WHY you want something.

I really do want to be healthy, fit, and vital (it sure beats the alternatives), and I want to have the energy and confidence to live and enjoy my life fully.  The world is my playground, and I want to take advantage of more opportunities to play with family and friends.  However, to do those things, I must find better ways to live a healthy lifestyle.

The WHYs are just as important for business goals too.

Focus on Potential Solutions, Rather than Problems or Challenges.

Obstacles Exist. The bad news: I don't eat fish, and I don't like vegetables (unless French Fries are vegetables).  My joints aren't close to healthy from years of violent contact sports. I rarely get 7 hours of sleep, and who'd have thunk it, but being a CEO of a startup is stressful.  The good news: is none of those things matter; and even if they did, it just would mean that I have a lot of room for progress.

It is natural to focus on obstacles. But most obstacles are surmountable - with a big enough WHY, even I'll start to eat vegetables. Instead of dwelling on the limitations, use them as a reminder to focus on potential solutions instead. They are beacons, pointing the way.

How do you do it?  To focus on solutions, you can make two action-based lists: one is of things To-Do ... and another is of things Not-To-Do.

Here are some of the sample To-Do Items:

• I will drink more water than coffee.
• I will stretch, or do basic calisthenics, on days that I do not go to the gym.
• I will make a healthy shake as a meal replacement rather than a snack of min-meal.
• I will focus on relaxation and meditation as much as I focus on strength & physical exercises.

Here is the actionable list of Not-To-Do Items.

• I will not buy new bigger pants or wear stretchy pants because of an expanding waistline.
• I will not eat snacks out of their container – and will portion out what I want first.
• I will not compare my current level of fitness to what I used to be able to do. Instead, I will focus on my actions and improvement.

Create Healthier Habits.

It is easy to follow a routine.  So, here's another tip ... make your routine better.  Here are some examples of things you could do to make being healthier happen with less effort.

• Pre-sort your vitamins into daily doses, and keep them by the coffee machine.
• Buy healthy snacks, like fruit, raw nuts, or organic energy bars (instead of chips).
• Enjoy listening to music or listening to a book/podcast during your "exercise time." Dedicating time to something doesn't mean you can't be multitasking.
• Park at the end of the parking lot, so you get to walk.
• Meet with friends at the gym or a hiking spot rather than a bar or restaurant.

You get the idea.  Get in the habit of looking for ways to create better habits.  What habits could you alter slightly to make a big difference?  Which things can you automate or outsource?

For two books about the subject, I recommend Tiny Habits by B.J. Fogg and Willpower Doesn't Work by Benjamin Hardy. 

Focus on Your Progress.

In this case, it really is about the journey.  Instead of keeping track of how far you have to go ... notice how far you've come. Utilize an internal locus of control. It is about creating energy, momentum, and a sense of possibility.  You may have a big, hairy, audacious goal in mind.  That's fine, as long as you realize that reaching each milestone along the way is still an accomplishment.

• Find shoes that don't hurt your feet.
• Pick a gym or a personal trainer that you enjoy.
• Run more than two laps without stopping.

It doesn't matter what they are ... they all count, as long as you know that you are moving in the right direction.

Summary

The point of this exercise was not really to focus on fitness. These techniques and goal-setting tools work in any situation. The principles are:

1. First, figure out what you want and why it is important to you. Only focus on the few things that are actually important to you. 
2. Second, find something you can do, right now, which moves you in the right direction.
3. Third, notice which things create (rather than take) energy. Spend your time on those, and automate or create routines to take care of the rest.
4. Fourth, plan forward, but measure backward. Set milestones so that you can recognize and celebrate your progress.

In my business, this translates to having a mission and vision - it's what we want, why it's important to us, and a basic strategy to get there. Then we create yearly "Big 3" goals that move us toward that long-term vision. Then, the team creates SMARTs (goals that are specific, measurable, attainable, relevant, and timely) and KPIs (key performance indicators) so they know where to spend their time, and what milestones tell them they're on the right track.

It isn't magic, but it works.

Hope this helped.

Visualizing Global GDP in 2021

There are numerous ways to look at or measure the global economy (including trade blocs, big industry movers, or debt). Another way to get a global overview is to compare GDP.

When trading was slower and more deeply tied to an investor mindset, economics played a more significant role in fundamental analysis. As the holding period (or "time in trade") shrinks, there is less focus on predicting markets over the long term ... and more on determining which techniques are making money now.

Even though markets are not the same as the economy, on a macro scale, many believe that it is possible to create value by understanding and the global economy better.  

With that, take a look at the $94 trillion world economy, divided by region. 

 

via visualcapitalist 

Some thoughts: 

• Global GDP was $87 trillion in 2019 and $84 trillion in 2020. So, while COVID did negatively impact GDP initially, it has rebounded and risen again as if 2020 hadn't interrupted the trend. 
• Since 2018, China has been slowly gaining ground on the U.S.'s lead 
• Global GDP isn't zero-sum, so countries doing better doesn't necessarily mean other countries are doing worse 
• The top four countries - U.S., China, Japan, and Germany - make up over half of the world's GDP. 
• Based on GDP growth, Libya, Guyana, Macao, the Maldives, and Ireland have the world's fastest-growing economies. 

To put these numbers in perspective, the world economy was approximately $3 trillion in 1970, and GDP is estimated to double again by 2050. 

Crazy stuff.

How'd These 2021 Predictions Fair?

I write about the future of technology often. 

But, sometimes, it's fun to see what others have to say as well.

Every year Visual Capitalist puts together a list of their predictions for the coming year. As we reach the final two weeks of 2021, I figure it's worth taking a look!

Here was their "bingo card" for 2021.

via visualcapitalist

Honestly, that was a pretty good set of predictions.  While some of this list didn't pan out, much of it did. We're seeing a growing exodus from major cities (where people lived to pursue opportunities previously available only in such places), movies are recovering, and hybrid work models are all the rage. 

Could they have predicted how much of an issue COVID would pose throughout the year? Probably not. 

As we near the end of 2021, there's a lot of uncertainty in the air.

Global markets have the jitters - and we don't see the increased volatility changing anytime soon. 

What's going to happen as a result of the continuing pandemic, inflation, interest rates, the ongoing supply chain issues, and the growing anxiety and unrest brewing underneath the surface of the new normal? In January, we'll get to see VC's predictions. Before that, what do you expect to happen in 2022?

Here Are Some Links For Your Weekly Reading - December 19th, 2021

 

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

Lighter Links:

• The Tech Revolution Has Reached Warp Speed: What Lies In Store For 2022. (VanityFair)
• NFL Postpones Three Games Due To COVID-19 Outbreak. (NBC Sports)
• The NFL Pivots To Less Covid Testing, Not More, To Thwart Disruptions. (WSJ)
• Seoul the First City to Enter the Metaverse. (ThisCityKnows)
• For the First Time In History, a Spacecraft Has 'Touched' the Sun. (ScienceAlert)

 

Trading Links:

• What Will Work Look Like In 2022? Glassdoor Makes Four Predictions. (Protocol)
• Is Bigger Better? Global Debt Reaches a Record $226 Trillion. (EurasiaReview)
• Core Inflation Shoots to Highest Level Since 1992.(Statista)
• The Regional Breakdown of Stock Market Sectors Over Time. (VisualCapitalist)
• Bruce Springsteen Sells Music Catalog to Sony for $500 Million. (The Wrap)

Greatest Strength or Greatest Weakness

I often talk about "unique abilities"... Those skills that define you and also bring you energy and joy. 

But, often, our greatest strengths also can be our greatest weaknesses (especially when you overuse them). I shot a brief video on the subject (under three minutes). Check it out. 

 

When we get good at something, it's easy to focus on that thing myopically. It makes sense. You develop a habit because you often get rewarded for doing it.  Consequently, it makes sense to focus on your strengths and leverage your unique abilities.

On the other hand, no technique works all the time.  Further, the "recipe" that got you here isn't necessarily the recipe for next.

With that said, you shouldn't neglect opportunities to find other ways to win or to seek improvement around you by intentionally growing the collection of unique abilities at your disposal.  One way to do that is to add 'Who's to your team whose unique abilities are the 'How's you need.   

Recognizing which new capabilities you need can be the job description for a person or the "spec and scope" of a technology solution.  In either case, it frees you to focus on setting your sights higher and doing more of what matters and adds the most value. 

A-To-Z of The Internet Minute in 2021

As I get older, time seems to move faster ... but it's also true that as I get older, more is accomplished every minute. 

Technology is a powerful force function. In fact, the amount of data in the digital universe effectively doubles every two years. 

Every couple of years, I revisit a chart about how much data is generated every minute on the internet.  

In reverse chronological order, here's 2018, 2015, and 2011. 

Here's an excerpt from 2015 for some perspective: 

Compared to 2008 here is what's happened with social networks:

• The number of people online has more than doubled from 1.4 billion to over 3 billion (2021 #: 5.2 billion) 
• Facebook has gone from 80 million users to more than 1.4 billion (2021 #: 2.89 billion
• Twitter had 2 million accounts and now it is 300 million and counting. (2021 #: 206 million ACTIVE users after a big bot deletion)
• The number of smartphones was 250 million in 2008 and today there are more than 2 billion. That is an 800% increase! (2021 #: 6.37 billion)

Today this is what happens every minute on the web.

• 4 million search queries on Google
• Facebook users share 2.46 million pieces of content
• Email users send 204 million messages

Throughout its (pretty short) history, the internet has been arguably the most important battlefield for relevancy and innovation. 

So, what does the internet look like in 2021?

DOMO via visualcapitalist 

Looking at the list, we see new editions like Clubhouse and Strava. Partially due to the quarantine, you're still seeing an increase in digital cash transfers with tools like Venmo, an increase in e-commerce shops like Shopify, and an increase in (you guessed it) collaboration tools like Zoom or Microsoft Teams. 

Just to pick out some of the key figures in the chart this year. 

• Amazon users spend $283,000
• 6M people shop online
• TikTok users watch 167M videos
• and, Zoom hosts 856 minutes of webinars. 

Before 2020, I already thought that big tech had a massive influence on our lives. Yet, somehow this past year has pushed their impact even higher. 

One other thing this chart also helps put into perspective is the rapid rate of adoption. As you look at different year's charts, you can see how quickly apps have become part of the cultural zeitgeist. 

How do you think these numbers will grow or change in 2022? 

Here Are Some Links For Your Weekly Reading - December 5th, 2021

 

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

Lighter Links:

• Why Can't Baby Boomers and Millennials Just Get Along? (Freakonomics)
• Woman Reportedly Breastfed Cat On Delta Airlines Flight. (FoxBusiness)
• Hawaii Under Blizzard Warning as 12 Inches of Snow and Winds Up to 100 Mph Expected. (USAToday)
• Philip Morris Wants to Sell You Inhalers for Your Asthma. (Quartz)
• Which Fitness Tracker is Best For You? Comparing Apple Watch vs. Fitbit vs. Oura vs. Garmin vs. Whoop. (Wall Street Journal)

 

Trading Links:

• The Billionaire Boyz Club is Selling Record Numbers of Stocks Right Now. (InputMag)
• Microsoft Drops a Bombshell About Teams That Tanked Zoom. (SeekingAlpha)
• How Elon Musk Sold 10 Million Tesla Shares and Increased His Tesla Holdings. (CNN)
• Steve Cohen-Backed Start-Up Bets On 24-Hour Trading So Investors Can React Instantly to Tweets. (CNBC)
• US Treasury Secretary Yellen Says She's Undecided Whether the Fed Should Issue Digital Currency. (News)