The Deipnosophist

Where the science of investing becomes an art of living

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Location: Summerlin, Nevada, United States

A private investor for 20+ years, I manage private portfolios and write about investing. You can read my market musings on three different sites: 1) The Deipnosophist, dedicated to teaching the market's processes and mechanics; 2) Investment Poetry, a subscription site dedicated to real time investment recommendations; and 3) Seeking Alpha, a combination of the other two sites with a mix of reprints from this site and all-original content. See you here, there, or the other site!

31 July 2005

The Greatest Barrier to Trading Success

This two-months old but still fine article (despite its horrid syntax) re the investing process, limns how our human foibles and fallibilties color (i.e., worsen) the process...

"Tilson believes that investment success requires far more than intelligence, good analytical abilities, and propietary sources of information. Equally important is the ability to overcome the natural human tendencies to be extremely irrational when it comes to money. As Warren Buffett puts it, 'Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble [when] investing.'"

The Birth of Google

John Battelle and WIRED Magazine take a peek at THE BIRTH OF GOOGLE...

Whole Foods Markets

A Wal-Mart for the granola crowd

Jul 28th 2005
From The Economist print edition

John Mackey sees no limit to the appetite for natural foods

NO ONE admits to being more surprised by the runaway success of Whole Foods Market/WFMI than its boss. “In all my profound wisdom I decreed a maximum of 100 stores, and thought that would saturate the United States,” recalls John Mackey of the time when his company went public in 1992. That in itself was quite a milestone for a grocery retailer that he began in 1978 in a garage in Austin, Texas, when he was living in a vegetarian co-op. At first, hippies and college students were his main customers. But now, with over 170 stores feeding America's organic-food-addicted middle class, Whole Foods Market has become firmly established as the world's largest natural-foods chain.

Nor is there any sign of the firm's rapid growth coming to an end. Its sales rose by 23% to $3.9 billion in the latest financial year. Mr Mackey is now expanding the firm abroad, initially with a move to London. As for the success of this, a chastened Mr Mackey says, “we actually don't have the least bit of doubt”.

To understand the allure of Whole Foods Market, look no further than the new landmark store that it opened in Austin, Texas earlier this year. Occupying almost 80,000 square feet (7,300 square metres), it is one of the firm's largest, and features a vast array of treats, from organic enchiladas to an in-house meat smoker. There are sampling stations, cooking demonstrations and café tables galore. Employees, called “team members”, are as enthusiastic as the shoppers, and gladly explain company policy on, say, sustainable fishing (no Chilean sea bass, for instance, as it is seriously overfished). The firm is starting to label its own-brand foods to indicate any genetically modified ingredients.

Yet fancy food is just one part of the recipe. Whole Foods Market is also deeply committed to its “green mission”. “We see the environment as a stakeholder in the business,” says Mr Mackey who, no surprise, lives his brand. Trim and fit, he prowls the office in shorts and a handyman-style canvas shirt, and is very much the outdoors type. This summer he is hiking along part of the Pacific Crest Trail, which runs from Mexico to Canada.

The firm's environmentalism is decentralised: each store is encouraged to experiment, and implement what best suits its own circumstances. So, for example, the California stores use solar power, taking advantage of subsidies provided by the state government. In other locations, some use wind energy. Newer stores, such as one in Sarasota, Florida, are pioneering new types of “green building”, for instance, using recycled materials. Successes and failures are shared via the internet.

Yet Mr Mackey's organic idealism and greenery should not be confused with a lack of hard-nosed business acumen. He can quote Adam Smith with the best of them. He is often criticised for wiping out the small, local natural-food businesses that, not so long ago, were what the industry was all about. He is also opposed to trade unions. Whole Foods Market workers in Madison, Wisconsin, caused a stir three years ago when they voted to join a union, but the company persuaded them to back down. Currently his stores remain non-union. Mr Mackey says he dislikes the “adversarial nature” of labour unions—the “zero-sum mentality” whereby “if shareholders are winning, labour is losing”. The market, he says, is the “best check against exploitation, because people can vote with their feet.” Indeed, says Roy Bingham of Health Business Partners, an investment bank, Whole Foods Market benefits from the undying keenness to work for it of the “sandals brigade” of young idealists. The firm is regularly cited by Fortune as one of the top 100 places to work in America.

If there is something familiar about a giant, anti-union retailer crowding out small local businesses, Mr Mackey rejects any comparison with Wal-Mart—well aware of the battering that the world's biggest retailer has taken because of its relentless growth. “It's like comparing a Hyundai car to a Lexus,” he says. “Wal-Mart's focus is on getting the cheapest stuff in; we're focused on getting the best stuff.” That said, Wal-Mart is starting to offer organic and natural foods as it pursues wealthier customers. This may spell trouble some day for Whole Foods Market. For all its growth, the company is still dwarfed by Wal-Mart, which had revenues last year of $285 billion.

Also unusually for the organic-food industry, but in common with Wal-Mart, Whole Foods Market has grown partly by acquisition, buying chains such as Fresh Fields, Bread & Circus and, in London, Fresh & Wild. More acquisitions may follow abroad. Although there is now little left to buy in America, Mr Mackey still sees opportunity to grow there. Whole Foods Market currently has a presence in only 39 of the country's top 50 metropolitan markets. “None of those markets has reached saturation, plus the whole market is continuing to rapidly expand,” he says. As for Europe, Mr Mackey wants to open a big Whole Foods Market store in London, but has yet to find the right site. If London does well, then he would move aggressively into continental Europe.

Now in your basement

Always looking for new opportunities, Mr Mackey is now trying to combine organic food with the other craze gripping America's middle class: real estate. The idea is to build Whole Food Market stores into apartment-building basements. “In urban areas like New York or London, land is so expensive that it really helps to make our stores more affordable if we can get multi-use developments on top of us,” says Mr Mackey. “And housing is perfect because it doesn't compete with us and in fact gives us customers” who enjoy direct access by elevator to the store.

So, is there anything that could cause Whole Foods Market to choke? “You know, I'm not a worrier,” says Mr Mackey. Barring some freak event such as food terrorism, Whole Foods Market seems set for more success. Mr Mackey certainly seems relaxed about the future. When trekking through the wilderness, he does not even bother to carry a mobile phone.

Copyright © 2005 The Economist Newspaper and The Economist Group. All rights reserved

29 July 2005

A Reader Writes

Reader, Ali, writes..

"Thanks for sharing some of what you know with those who wish to learn from you. I've just begun investing independently and plan on benefiting from the knowledge of those wise in the ways of the market.

"One of the benefits peculiar to your site is the frequency at which i come seeking clear 'do this, do that' guidance on google and the like only to leave kenning that it ain't as simple as that.

"Comments, I don't know how to understand much about DNMIF, much less how to judge whether I ought to buy it. Lack of financial details about it on msn, morningstar and others doesn't help an amateur like me. Question--Would you please help us understand better why you say about DNMIF what you do?"

To which I reply...

Great comments, excellent question; thank you! (Oh, you also wanted 'answers'...? ;-)

Hmm, re: specific buy & sell tactics -- it rarely is as easy as all that, as you noted. After all, when you buy or sell, another investor is selling or purchasing. What is it they see that you do not? (And vice-versa, of course.) The typical 'answer' of course is differing time frames between investors -- which however is not the sole answer.

I believe the true answer lies within each of us; our objectives, risk tolerance, and time frame are as unique as we each are as people. If, for example, I were to say, "Buy Google/GOOG!" with the going price today at ~$300, and the shares first decline to $270, and then trade sideways for weeks or months before making a move toward $400, or $500, then you would conclude the shallow price decline and lengthy sideways trading pattern are perhaps painful to you but not noticeable to me because this company, for me, is an investment. And that todays high price will seem low when compared to its future higher price.

I always acknowledge the short term swings, which I utilize to better my entry and exit prices, and to discern risk and opportunity. The set-up in the equities market today reminds me of Mao Tse-Tung's comment; to paraphrase, each long term decline begins with a short term correction. One never knows -- and certainly I do not -- until we are well into the throes of the more serious and enduring market move, up or down. So I trade around the short- and intermediate-term trends. Moreover, I would never recommend buying or selling any security seemingly willy-nilly. (Although I admit for some investors it might sometimes seem that I do! ;-)

For example, I have repeatedly warned re potential coming market weakness. As I scan today's markets using inter-market analysis (previously described) I note warily the painful rise in the price of oil, precious metals, other commodities, and interest rates, etc. I also note the startling lack of volume in the critical areas. For how long, do you think, can equities ignore what occurs in the other markets? Nonetheless, I will hold my Google/GOOG investment throughout because any decline in the shares, deep or shallow, are predicated on market weakness; nothing has gone amiss at the company. From such thoughts are investments made.

Each of us for our own needs must determine market and security risk. This is why thare is no easy, one-size-fits-all answer to the question, "Buy, sell, or hold?" Anyone who tells you different is pulling your leg. (There are exceptions, of course; one being "terminal shorts".)

Re Denison Mines/DNMIF -- Your question is critical, and I fear my answer will prove insufficient. The story here is platinum, ain to the one word, plastics, in the movie, THE GRADUATE.) Cameco/CCJ is far and away the leader of this group, with Denison Mines a distant second. If I want to own this group, then I purchase its leaders, which I already have named, and then I find the best chart patterns -- both Cameco and Denison look very similar. Finally I begin my due diligence. IF, however, you do not have access to company financial details, then move on. Do not accept as gospel the comments of any investing 'guru', which includes me. When in doubt, do without.

There are so many winning stocks, groups, and sectors, do not limit your selection to just one. (Well, perhaps make an exception for Google/GOOG; long term, of course! ;-) For example, among the many recommendations made previously are:
Cheesecake Factory/CAKE


Station Casinos/STN
Whole Foods Markets/WFMI
(BTW, there also have been duds that stank up the joint, but I typically am not long those for any lengthy time.)

If you view the market from the bottom up, then upon discovering individual stock strength confirm that strength by its group and sector also showing leadership. With the exception of one specific singular opportunity, I typically am not a buy & hold investor, although I have been known to own some investments for upwards of months, even one or two years.

Which is why there is no one correct answer for what others characterize as black & white decisions for us all. Yes, we can make decisions black & white but applicable only to our individual needs. That is, we take responsibility for all [of] our actions through to completion. Alas, there is no one right answer for Google/GOOG. ("Sorry!") The one right answer for Denison Mines, however, could be, "Move on..."

Best wishes on your new career in investing!

The end of the world as we know it?

This book review (from last Saturday's edition of The GUARDIAN) is of an arguably important book. A link to its purchase information on Amazon can be found in the sidebar under "Currently Reading"...


Saturday July 23, 2005

The end of the world as we know it?
Martin Jacques

The Collapse of Globalism
by John Ralston Saul

(See Amazon link at left)

There have been countless books describing the rise of globalisation, but its decline, though hardly new, is much less familiar territory. This is the nub of John Ralston Saul's book. He dates the rise of globalisation from 1971 and argues that its central tenet is that "civilisation should be seen through economics, and economics alone". He depicts the rise of the ideology of free trade from the mid-19th century as a similarly mono-dimensional and economically fundamentalist phenomenon. There is much to commend his exposition of globalisation, or rather the ideology of globalisation, which he terms "globalism": it is informative, engaging and, above all, bitingly critical.

Saul sees the heyday of globalisation as the mid-90s. By this time, tariffs had fallen considerably, hundreds of trade agreements were in place, tax rates for the wealthy had fallen, global markets reigned supreme, and privatisation and deregulation were sweeping the world. Even the old communist citadel had succumbed. The year 1995, which Saul regards as the high point of globalisation, saw the establishment of the WTO, the body that would preside over the new global economic order. Yet, within five short years, the movement had begun to falter. The Asian financial crisis of 1997-98 underlined the inherent instability of the new system. To the consternation and fury of the international financial community, Malaysia imposed capital controls and was proved right in the process. In 1999, the WTO conference at Seattle was the occasion of huge demonstrations against globalisation. And a year earlier, the talks on the Multilateral Agreement on Investment (MAI) had fallen apart.

It is worth reminding ourselves what was at issue with the MAI. The key paragraph guaranteed that foreign investors would receive "treatment no less favourable than the treatment [a country] accords its own investors and their investments with respect to the establishment, acquisition, use, enjoyment and sale or other disposition of investments". This was globalisation with a swagger, an extraordinary example of neo-colonialism (as it - correctly - used to be called) in action: it also proved to be a case of hubristic imperial overreach. The developing world successfully resisted the proposal and it died a death.

Since then, the WTO process has been paralysed, the developing world has found new voice and confidence, personified by the ad hoc alliance between China, India, Brazil and South Africa. Meanwhile the conflict between Brazil and South Africa and the western drug companies - with their absurdly high prices and their insistence on intellectual property rights (which Saul quite rightly describes as an outrageous form of coupon-clipping) - has brought what were previously seen as rather esoteric issues to the attention of an increasingly outraged global public.

Saul believes globalisation is now in retreat. He is probably right. He likens the present era - or interregnum - to that of the 70s when the old Keynesian system was in growing disarray but the neo-liberal era that was to replace it was neither strong enough nor coherent enough to supplant it. As a consequence, he believes we are now living in something of a vacuum. He underestimates, however, just how much of the old system remains in place and the extent to which neo-liberal logic remains dominant.

Saul strangely fails to consider what might happen to the present global system. He rightly argues that it is presently characterised by stasis. But could it actually go into reverse, as happened to the last great era of globalisation between 1870 and 1914? The key is almost certainly the United States, which has been the prime architect of the present system. It is by no means impossible that at some point it might decide that globalisation is no longer sufficiently in its interests and, at the same time, too much in the interests of others, notably East Asia, which in this case is shorthand for China. We have already witnessed a markedly nationalistic turn in American foreign policy, and in principle there is no reason why this should not find expression in economic policy also. One of the weaknesses of the book, in fact, is the absence of any real discussion of the neo-conservative shift in US politics.

Nor does Saul give anything like sufficient importance to the rise of India and China. It is not that he is guilty - like so many western writers - of failing to give due consideration to the developing world; he understands the central significance of their emergence as independent countries, the importance of the nation-state, the pervasive legacy of colonialism, and the imperial ambitions of the developed world. But in looking to the future, one gets no sense of how the world is being - and will be - reshaped by the rise of China and India, what this might mean for the global order, and what its repercussions might be for western polities.

This is an eminently readable book. The brunt of his argument is surely right and the fact that the material is relatively familiar is no bad thing: after years of being forced to read text after text, speech after speech, article after article from the same neo-liberal globalisation hymn sheet, it is a breath of fresh air to read the unauthorised version. But as he turns his attention to the future, the book becomes shapeless and inchoate. Perhaps the reason is that this is essentially a work of commentary, albeit insightful, informative and entertaining. Saul may be broadly right about the last quarter-century, but it feels as if he is stumbling around in the dark when it comes to the next.

· Martin Jacques is a visiting professor at the International Centre for Chinese Studies, Aichi University, Japan.

27 July 2005

Lost... and found

Copied below is this comment made yesterday to a post from long ago. It is too insightful to be read by only two people (its author and me). I hope you reading it in turn inspires your comments or questions.

Sorry to have 'found' you, Michael, but I am glad I did. Please feel welcome to drop in at any time, and offer your comments or insights on any topic.

Occasionally, I do a Google search on Innerworth to see what articles subscribers have decided to re-post. Some people write in to asking me to reveal who writes most of the daily columns. I never reveal myself, but if someone finds this post, well fine. You've found my secret. So the column David posted is particularly meaningful to me. Sure, it's about trading on the surface, but it covers a deep philosophical issue I've been pondering: Each person has his or her own gifts, talents, and resources, and thus, only we can determine our own unique self-worth. Oftentimes, we spend our lives fruitlessly looking outward for worth and acceptance. Do I make enough money? Did I "make it" yet? Will I ever do better than my neighbor? But comparisons with others are ultimately useless. Sometimes we can feel a temporary sense of pride when we meet someone on the labyrinth of life and feel superior that we've done so much 'better'. Our shallow sense of superiority is usually short lived, however. We eventually figure out that we are making trivial comparisons in an attempt to feed our weak egos. Did we really do any "better"? Everyone is different. If a person were born in a ghetto, then earning a degree from a community college and working loyally at a middle class job is heroic and quite an accomplishment. On the other hand, being born into a family of privilege and being able to turn a $1 million loan from your grandfather into a $100 million hedge fund may be far less of an accomplishment. It's all relative. It depends on the context of a person's life. So it is a waste of time when you compare yourself to someone else and start thinking, "Why couldn't I have done as well?" You're just beating yourself up. You don't know what special talents or privileges that other person had to accomplish what he or she did. If you had a god's eye view of the situation, you might find that the other person you admire and exalt so dearly may be a complete failure upon careful examination and comparison to people of similar backgrounds, talents, and status. Ultimately, you'll never know whether you are better or worse off than someone else by any objective criteria. It's all merely subjective in the end, fixed in time and context. And if it is just arbitrary in the end, then why compare yourself to others, and more importantly, why even care?

Thanks for letting me post my comment, David. I never get to follow up on stuff I've written for Innerworth. (And by the way, Jack hasn't worked with us at Innerworth for a little while, but he made an important contribution and his efforts are still seen in the website today. So if you see Jack, tell him hello for me.)

Michael S. Shopshire, Ph.D.
Editor in chief

26 July 2005

Cell Phone Tower and Reception Mash Up

I have many hopes for this blog, one of which is to create a high and increasing level of involvement and interactivity between the readers and me. In that vein, I received today the email that follows...

Hi David,

After stumbling across your Google Mash Ups article, I was inspired to do one of my own. Mashing up the FCC’s database of registered towers, I combined it with cell phone user comments on carriers. With the uncertainty that comes with buying cell phones, I hope this tool clears up the mystery consumers have by allowing them to find the best coverage before they sign into a contract.

Thanks again.
Allen Tsai

Technology guru (and regular Deipnosophist reader), Harry Wilker says,

"The site is not very flashy but quite useful. (I discovered I've got a cell tower two blocks from my house. It's on the grounds of a nursing home. I'll have to check it out.) It's worth including [on your blog] for other readers."

I agree.

Volatility and non volatility

The odds are high the culmination of a move will itself be volatile, if the follow-through to a breakout occurs in a non-volatile, low volume manner. Typically, volatility begets non-volatility, and non-volatility begets volatility.

[click to enlarge]

In the instance of Dominos/DPZ, odds are good the rally into the $27-30 short term objective will end with a flourish, in volatility. This is due to the insufficient volatility (2) after the breakout (1), and would signal the moment to sell trading positions. (Only to re-enter upon the conclusion of the short term decline, measured against the ultimate price move.) More anon, if necessary.

25 July 2005

Mene, mene, tekel, upharsin

All journalists worth their salt know the timeless questions, summed up in the words: who, what, where, when, why, and how. These questions are so veritable that they are equally applicable to other professions, including investing. This blog repeatedly delves into the what, the when, and the how, so let us investigate the why...

Why did you purchase what you did? Why didn't you purchases what you should have? Why did you wait to purchase? Why did you wait to sell? Why do you own what you do? What will you do in the event of a sell-off? What will you do in the event of a rise?

During the early-morning chaos of 7 July, I counselled that the market would "reverse up from intra-day lows, rally for approximately the following two weeks, and then..." Well, this is precisely what has occurred; now the two weeks of rally also have expired. We now enter the "and then..." portion of the 'prediction' that so far has followed the script to the letter. As the timer runs out on the short term rally, so do the seasonal patterns conspire against the market's intermediate term direction.

If you typically do not know the reason you purchased and hold an investment, now would be a fine time to know. (No need to feel alone either, as most investors do not know; most simply purchase intra-day volatility.) I receive an increasing number of emails from readers who did purchase Google/GOOG, but waited until the price reached $300/share. At least the decision to purchase was made, no matter how late or high. Most investors, despite my hectoring, have been utterly unable to act at any price. Nonetheless, you should discern your rationale for owning the shares -- especially if the market and Google/GOOG decline in price, or face the consequences of selling at the intermediate term low when the pain of the decline finally becomes too great to bear.

So yes, know thyself. Because knowing all the technical and fundamental analysis gobbledygook is of no help when your emotion-based decisions cause you to buy and sell at horrid prices.

The handwriting is on the wall for a general market decline, or so it appears to me. Mene, mene, tekel, upharsin. Individual securities likely will suffer; some more than others, some less, but likely most. Yes, including Google/GOOG. (To be clear: this does not mean that I suddenly am a bear on Google/GOOG. Merely that I recognize that stocks oscillate within their continuum. A decline in Google/GOOG likely will be shallow in price and brief in time, and could itself suddenly abort due to an event such as being added to the SnP index...)

The market's rapidly changing dynamic does not mean it must decline -- or even should near term. In addition, I do not stipulate how low is low; similar to Google/GOOG, the correction could be shallow in price but lengthy in time rather than a deep price decline but little time. In fact, this blog entry should be read as a perception of risk and a call for portfolio management rather than a prediction. (I do not make predictions.) And, of course, there always are exceptions to a rocky period in the general market. Leaning into the probable headwind are Cameco/CCJ and Denison Mines/DNMIF, and of course Apple/AAPL, each beginning to emerge from a large intermediate term base.

Comments? Questions?


From The WEEK magazine…

Anthony Bourdain: NO RESERVATIONS

Bourdain, a veteran New York chef and author of the best-selling Kitchen Confidential, brings a refreshingly witty and irreverent sensibility to this new travel series, in which food becomes the key to understanding places and cultures. The first episode (tonight), Why the French Don’t Suck, takes him to Paris, where he visits the market neighborhood Les Halles, wanders the subterranean catacombs,, and investigates the mystique of absinthe. Bourdain makes an entertaining and insightful traveling companion, and the food looks delectable throughout, making this show best viewed on a full stomach!

Monday evenings on the Discovery Channel

(NB: Air times vary in different markets; the show airs at 7pm in my market)

20 July 2005

Black Maps

I cannot even begin to express how much I enjoy my current reading 'assignment', Black Maps; words fail me largely because I am only 1/3 complete. (I have read enough, however, to know that I will include this novel in the sidebar's list of comparatively unknown and yet highly recommended titles.) Its author, Peter Spiegelman, is no mere Wall Street drop out who sought something other, something different; he always wanted to write. This NY Times article helps explain...

The Case of the Writer Who Left Wall Street

RIDGEFIELD, Conn., July 19 - As a child living in Forest Hills, Queens, Peter Spiegelman invented a superhero whose stories he told in homemade comic books. Packed off to boarding schools as a teenager, he consumed vast helpings of crime fiction to while away the hours and fend off the boredom. Later, as an undergraduate at Vassar, he discovered 20th-century poets like T. S. Eliot and Wallace Stevens and composed somber poems that snared the college's top poetry prize.

But when it came time to make a living, Mr. Spiegelman did what many graduating seniors do. He 'sobered up and realized I had to pay the rent,' he said, and began a series of jobs that eventually led him to Wall Street.

He spent 19 years there, rising from a computer programmer to a vice president of J. P. Morgan and then junior partner of a company that sold software to big banks. Along the way, he met his wife, Alice Wang, a colleague at J. P. Morgan, and socked away millions when a British firm bought the software company for what Mr. Spiegelman said was a 'high eight-figure' sum.

The financial freedom that followed allowed him to enjoy the writer's life at long last and spend his time turning out crime novels, short stories and poems from his home in Ridgefield. It is a luxury he savors now that his writing is enjoying some commercial success.

'I always thought I'd like to give this a try,' said Mr. Spiegelman, a wiry 47-year-old who does most of his writing in his ground-floor study.

His first book, a detective novel called 'Black Maps,' was published in 2003 and earned a Shamus Award for best first novel from the Private Eye Writers of America. A sequel, 'Death's Little Helpers,'"had just been released. Knopf published both books and has Mr. Spiegelman under contract for two more novels as well.

In addition, a short story called "The Best Part," about a financier on the run, is to be included in an anthology published by Akashic.

Mr. Spiegelman's fiction has Wall Street and New York institutions as a common motif. The protagonist of the two crime novels, a private eye named John March, is at home barging into the offices of Brill Associates, an investigative firm that brings to mind the real-world Kroll Associates, and jumping into town cars to meet the cable television queen at BNN - think CNN - whose on-air sound bites can send stocks to the moon and back.

In his latest book, March grapples with the disappearance of a Wall Street stock analyst whose career crashes along with the technology sector he once championed. He finds a long list of people who might have wanted to wring the missing man's neck, including a well-heeled mistress and a secretive hedge-fund manager. To reinforce the point that the knives are out, the author borrowed the title "Death's Little Helpers" from a poem by Charles Simic.

Clad in a purple Oxford shirt, casual loafers and a plastic $34 watch, Mr. Spiegelman looked back the other day on the nearly two decades he spent catering to traders and investment bankers as a time when he "was, in a sense, under cover."

"There was always a part of me standing back and processing the dramatic potential of that," he said. "Getting to be a fly on the wall was great training for an aspiring crime novelist. Wall Street is a noirish place, between the big money, the big egos, the sweaty paranoia."

Mr. Spiegelman said that he was not exactly sure when he conjured up John March, but that he thought it was during his drives from Ridgefield to the software company's office in White Plains, N.Y. On those trips, he said, he even sketched out a first and last chapter of the first book. By 2001, he had cut all connection with the software company, and he spent the next year writing the middle chapters.

But figuring out how to get published took real detective work, as he put it, and he spent early 2002 looking for contacts who could tell him whether he had any business trying to make his living as a writer. "At that point, I did not even have the lingo and all the taxonomy down," he said. "Is this a detective novel? Is this a thriller? Is it hard-boiled? Is it soft-boiled?"

His search brought him to Susan A. Schwartz, an editorial consultant formerly at Doubleday, who was intrigued enough to introduce him to the woman who would become his literary agent, Denise Marcil. Within a month, as he was packing his family into the Chrysler minivan for a vacation, he got a call that Sonny Mehta wanted to meet.

Understanding that this could be her husband's big break, Ms. Wang remembers it as a "pinch me" moment. Mr. Spiegelman remembers it more like a "kick me" moment, because he did not recognize the name of the publishing legend who runs the Knopf Publishing Group of Random House Inc.

Ms. Marcil arranged the meeting, which took place the following week in Mr. Mehta's Park Avenue apartment. There, publisher and prospective author sipped wine and discussed books "and authors we love," Mr. Spiegelman said, adding that he agreed to do some rewriting and Mr. Mehta offered to edit the book personally.

"Black Maps" sold about 10,000 copies, Mr. Spiegelman said, not enough to make any best-seller lists. But Knopf has big plans for the new book, including an initial run of 20,000. Mr. Mehta said: "That's a good healthy printing for a writer who is still establishing himself and finding an audience. He's got his fans, and he's building, and we're confident he's going to grow into somebody whom we'll be publishing for quite a while."

Mr. Spiegelman's success is also having an impact on those around him. A former colleague at J. P. Morgan recently called to say she had taken early retirement, had received a master's degree in fine arts and was shopping a novel. Ms. Wang, too, has somehow found time between two young sons and her job on J. P. Morgan's fixed-income sales desk to write a novel, "CoolMama," which Ms. Marcil is circulating to editors for some polish. It concerns a chat room for working mothers and the sudden disappearance of one of its regulars.

"Who knew these banker types all had stories to tell?" Mr. Spiegelman said.

Google Moon!

"In honor of the first manned Moon landing, which took place on July 20, 1969, we’ve added some NASA imagery to the Google Maps interface to help you pay your own visit to our celestial neighbor. Happy lunar surfing."

(Link available in sidebar, alphabetically under "Google"...)

19 July 2005

The Veil of Ether

Okay, so I needed a break from watching my portfolio increase in value (like watching grass grow, albeit more quickly of late), so I decided to read some poetry I might find online. But did the first poem I read (link) have to be so damned good...? And what is worse (better ;-) is that the poem is translated, which means it is excellent in both languages! Kudos both to the poet and the translator!

The Veil of Ether
by Guy Goffette

It makes no difference that we know the sky is only
an illusion, like happiness when everything is going:
the little boats as time passes, the horizon
like a flexed bow or like

the hip of a woman in the arms of sleep,
everything, everything turns bitter at the least occasion:
the sight of a narrow room, of a row
of poplars under the window

-the same poplars, the same window,
form and content of an unbearable absence-
no difference, yes, that it's only a veil of ether
on our wounded eyes, it's still for the sky

that we bargain away space and all the colors."

—Translated by Marilyn Hacker

Time out of joint

The problem most investors suffer is the desire to have their analysis (or instinct, feelings, etc) ratified before buying or selling. This translates to questions as to whether Google/GOOG, for example, will run to $400+ on this earnings report. Never mind that I have recommended it for months prior to its IPO -- and still do -- the decision has been wrested from one of money management to that of prediction.

Technical analysis of stocks as final arbiter of your decision to buy or sell a stock -- leave alone as part of the decision-making process -- mostly is frowned upon, and arguably rightly so. One justifiable gripe re technical analysis is that once a stock is sold, the investor rarely gets back in at the appropriate moment -- although not always. For example, on 11 May -- the day the shares hit their low -- I said (here) that Apple/AAPL shares had bottomed, and limned my rationale as to why. This analysis was unpopular, mostly because the erstwhile bulls had allowed short term price direction to confuse their perception of long term trajectory. Successful investing is not a 'science' of predictions but the art of trading around the trend in the periodicities immediately inside and outside of your time frame.

Thus, while some investors write to moan about Abercrombie & Fitch/ANF or Coach/COH during their recent pullbacks, I was buying; all while trading around the primary trend. In other words, these unlucky investors waited and waited, and then waited some more, finally buying these stocks and others on the apex of their short term trends, sometimes even at all time highs... only to watch aghast while the shares immediately pulled back. Why did you wait to purchase, for example, Google/GOOG ("a singular opportunity") until it crossed $300? (Of course, not each person who visits this site has been familiar with my investing- and investment-related comments for the past months and years.) Only you have the answer to that question; an answer that would allow you to invest successfully within the limits of your fallibility and foibles, your (our) nature as a human.

A quick update of a select few...
Apple/AAPL: The decline ended on 11 May, and the base is very near complete. What price signal do you seek before you finally purchase, $60? Perhaps an obvious up trend?
Abercrombie & Fitch/ANF: Should soon 'take out' its former high ($74.10) on its way to much higher prices.
Cameco/CCJ: I mentioned CCJ when it was under $40; now it pushes the breakout from an obvious intermediate term base. What do you need to convince you to purchase? Perhaps new all time highs, or an obvious up trend?
Dominos Pizza/DPZ: Trades beautifully, despite the disbelief and the desire to find what is wrong with either the breakout or the burgeoning trend.
Google/GOOG: Earnings reported at 130pm pdt this Thursday. See post below for the link to the company's webcast of the conference call.
Urban Outfitters/URBN: Despite the imbecilic comments of one Wall Street commentator last week to sell, URBN achieves today a new all time high on the way to even higher highs.
(There are many others, but they await another blog entry.)

Successful investing is a matter of finding your limitations, and then working with or around them. It is not the ability (even if only perceived as such by the user) to recognize Fibonacci retracement levels, or trend lines, or anything other. Gosh, I can only chuckle at those brainiacs on Silicon Investor who discerned a head & shoulders top in the chart action of Google/GOOG... $130 points lower than it is today!

Oh, the meaning of the title, you wonder? Shakespeare (who else?) said it originally, but I have felt it of late. The power to my house and that of six or eight neighbors went out Sunday evening. Ordinarily, this would not be a big deal, but the weather here has been pushing 120°. With no air conditioning and no power to the computer (until finally restored), my desire to write a lengthier version of this post wilted in the heat. And try sleeping in a house that is 90° inside and nothing stirs, or outside when it is 100° -- at midnight! Anyway, my days and nights became discombobulated, out of joint. I wonder how Shakespeare knew almost 400 years ago this would occur...?

Johnson & Johnson/JNJ

Johnson & Johnson/JNJ reported this morning its Q2 (June) earnings of $0.93 per share, excluding items, $0.02 better than the Reuters Estimates consensus of $0.91; revenues rose 11.1% year/year to $12.76 bln vs the $12.62 bln consensus.

And the following analysis is from Dorsey Wright Analytics (published yesterday evening):

The Right Prescription for Your Portfolio: Johnson & Johnson/JNJ
In yesterday’s report, we discussed how some sectors have gotten a bit ahead of themselves, having recorded notable rallies over the past couple of months. More specifically, we had referred to how the Building and Oil, among others, had moved into overbought territory. This was evidenced by not only their member stocks’ ten-week trading bands, but weekly momentum readings (having been positive for numerous weeks), and their sector bullish percent readings (both BPBUIL and BPOIL are in the 81% area). This tends to suggest that these aforementioned groups may be ready for a “breather” of sorts.

That said, now is the time to look elsewhere for fresh ideas, to groups with better field position that aren’t as overbought. In other words, to groups that are showing signs of rotating into a full-blown growing season. Above we discuss one such sector that is worthy of your attention – Internet. Others that are showing promise include Biotech, Semiconductors, Electronics, to name a few.

Along these lines, we wanted to bring to your attention a name known to all – Johnson & Johnson [JNJ], the venerable Drug/Healthcare icon. This stock is, strictly speaking, a member of our Drug sector, although it obviously has ties to the Healthcare (Medical Products) sector. With respect to the Drug group, it is a sector whose bullish percent is in Bull Alert status at 50%, so the field position is still reasonable. The sector is still unfavored, yet both the PT and RSX charts for DRUG’s is close to reversing up into X’s. So we have been witnessing some subtle behind-the-scenes improvement.

JNJ has been the stalwart of the Drug sector for the past couple of years. While Merck and Pfizer were getting seriously injured (moving to new lows), JNJ was getting well-healed. In fact, JNJ hit a new all-time high of 69 in April after breaking out of a multi-year base. But as the market paused, so did JNJ. The stock pulled back from a straight spike up to 69, to the 64 area. This pullback in JNJ brought the stock back into an oversold condition, after having been overbought on its ten-week trading band.

In looking at the chart below, you can see how JNJ is now oversold. But what you can also clearly see is that JNJ is in the midst of a shakeout pattern on its .50 per box chart. As we have mentioned in the past, it can be helpful to lower the box size down when you have a situation such as JNJ that shows a straight spike up. By lowering the box size to .50, you get a much more informative technical picture of JNJ. With the shakeout pattern, the level to watch for is the first three box reversal back up; in the case of JNJ that would be at 65.50, as the chart points out. This would be the “buy” level for new positions. One of the attractive characteristics of such a pattern is that it typically provides for a palatable stop loss point – a break of the low during the shakeout (in the case of JNJ, that would currently be 63.50).

But besides the oversold condition of JNJ and its potential “Shakeout” pattern, there are other factors that are compelling about this stock. Most significantly is the fact that JNJ is a 5 for 5’er, meaning the stock is trading in an overall uptrend with excellent relative strength (both near term and longer term). That alone makes it worth consideration. But then when you look at JNJ compared to all other large cap pharma stocks, on a relative strength matrix basis, JNJ comes out on top, exhibiting the best long term RS. {This comparison used PFE, MRK, ABT, NVS, SGP, LLY, GSK, and WYE.}

Secondly, JNJ has had negative weekly momentum for 19 weeks! Yep, 19 weeks – since March 11th. Needless to say, this is well beyond the average stay of 6 to 8 weeks. And this momentum reading is getting less and less negative, and literally is on the verge of turning back to positive. Such a change would be another sign that the pause in JNJ was done.

So when you add it all up, JNJ (which has a dividend yield of roughly 2%) is shaping up again. Therefore, as you look for new ideas in this market, JNJ is one to consider on the reversal up to 65.50. It may be just the right medicine for your portfolio.

17 July 2005

Google's War on Hierarchy, and the Death of Hierarchical Folders

This article does an excellent job of explaining the method behind (some of) Google's seeming madness. Yes, Virginia, there is a rhyme and a reason.

earnings report conference call and webcast occurs this Thursday, 21 July at 1:30pm pdt. It can be viewed

16 July 2005

Barry Eisler

I read many, many books, so from time to time I like to indulge my reading pleasure with some mind candy.

Barry Eisler is four novels into his delightful series re the half-American, half-Japanese, CIA-trained assassin, John Rain. These novels really do not qualify as mind candy because Barry takes care to make them both topical and insightful. But I read each new book voraciously; from my perspective, Barry cannot write them quickly enough! I believe you will find them equally addictive. (I suggest reading them in the order they were written and published. I rank as personal favorites the first two; your rankings might differ.)

View the complete John Rain series at In addition, a link to Barry's home page can be found under "Friends" in the sidebar. (NB: Barry is currently traveling the country in support of his new novel. He soon might be at a bookstore near you!) And if you would like to discover more about Barry's success, read the articles found here and here.

BTW, a friend shared an HTML coding trick, so from this moment on, all new links in the sidebar will appear in blue for its first few days.

14 July 2005


Re the markets and "A Reminder" (my post from yesterday):
Oil has traded the past week kindasorta heavy, and this morning especially so, as if it wants to decline. I do not know (yet) how low is low, but I do recognize that should this perception become reality, equities, in general, could not only stabilize but head higher, in spite of the objective measures that continue to look ragged. (Consider each tick and moment individually; intra-day reversals from big gaps are a common occurrence. Keep in mind, however, the half-life of any trend and its reversal.)

Re Apple/AAPL comes this précis from Briefing:
"The analyst community is positive on Apple following better than expected results but somewhat unexpectedly conservative guidance. Most firms expect the co to beat the guidance despite management's fears of Intel/Mac combo causing buyers to hold-off until the launch...
JP Morgan notes that conservative guidance has become the norm. However, Apple has exceeded guidance by an average of 58% over the past three quarters. In addition, they believe Apple's print last night lays to rest bearish speculation surrounding iPod that has dragged on the stock in recent weeks. Concerns over excess iPod inventory and iTunes market share losses to subscription models have proved overblown. Expects the shares to gain their momentum and reits Overweight...
UBS notes the shares are trading at EV/sales of slightly more than 2x, which is higher than Apple's pre-bubble multiple but in-line with many of its peers. Given Apple has shown iPod sales are still on track, they believe these results could provide a relief despite the conservative guidance...
Morgan Stanley is more cautious, as they think the $0.32 guidance reflects the possibility that new product announcements may not carry the same "bang" as typical. Time will tell - but for now, the firm is taking rev ests down to reflect this risk. EPS forecasts remain the same given operating leverage in the model.

In pre-opening activity, Apple/AAPL shares last traded at $40.50, +$2.15. If this activity holds and trades higher in the regular session through to the close -- and I believe it will -- then the past 5 months translates as a massive base. (Recall the breakout levels of $39, $40, $41, and $43.) It would not be a surprise to see the shares trading at new all time highs within several weeks.

Re Google/GOOG is this note (also from Briefing):

"Lehman raises its target on GOOG to $350 from $275 and raises its 2005-06 ests, as they expect GOOG to post strong Q2 numbers on the heels of continued secular growth in search, international expansion, and further gains in monetization. Firm raises its EBITDA margins for Q2 and the outer years, as GOOG simply cannot spend money fast enough given the extremely high incremental margins associated with the core search business; the company's technological focus and lean approach to new projects provide distinct advantages in terms of costs and efficiency."

The last trade for Google/GOOG shares in pre-opening activity was $305.50, +$6.50 To the consternation of the bears, new all time highs are within sight. (BTW, if you would like a pdf copy of the Lehman research report, please email your request. Alas, I cannot upload it.)

13 July 2005

A reminder

The market arguably nears the end of its leash:
1) Intermarket relationships worsen (e.g., US$ and other currency cross rates, rising interest rates and commodity prices, etc);
2) Objective measures of the markets' performance become increasingly ragged;
3) Volume on the price rally has been wretched;
4) Time runs out. (It nears the end of the ~2 weeks of upside I granted ;-) approximately... well, 2 weeks ago)

This "reminder" is not an endorsement to sell everything, or even anything, at this specific moment. I could be wrong, which would be neither the first nor the last time, and winners will continue to occur, even in such an environment. (Consider Cameco/CCJ, mentioned in a previous post.) Nonetheless, look to your portfolio holdings. Manage the detail, manage the risk. As I noted yesterday in the comments, Dominos/DPZ presents at 8:45am pdt (at a CSFB conference); this presentation could help the shares leave behind its short term base. Apple/AAPL -- whose shares could not squeeze any more into a chart based inflection point; rarely a good sign -- reports quarterly earnings after the close today. Breakouts occur at $39, $40, $41, and $43; breakdowns at $35 and $33. Google/GOOG, which reports in eight days (Thursday, 21 July; I will provide anon the link for the conference call) has, for the nonce, lost all upwards momentum, as it builds what I expect to be a base. This recent action is both understandable and expected after its huge move during May 2005 -- and should not continue for too much longer.

If you have questions re other stocks, please ask them here, as a comment to this post. The market opens soon, so I must hop. (-- Harvey)

11 July 2005

A base atop a larger base

Opportunity becomes apparent as you toggle between periodicities; apparent in one, not so apparent in the other. Consider these two charts of Dominos Pizza/DPZ. The first chart is the weekly basis, the second chart, the daily basis. Note that, whereas...

*the cup & handle pattern (#1) is readily apparent in the weekly basis chart, it is less so in the daily basis. (In fact, the pattern fails to abide strictly to the rules for either time basis, although the weekly basis is close.)
*the ascending triangle (#2), so obvious basis the daily is less so basis the weekly. T
he ascending triangle setup is powerfully bullish, and counts to ~$27-30 after the breakout.

So many different moments set up as moments to buy:
1) The breakout with explosive volume on 10 May from the cup & handle;
2) The retracement toward the breakout level and the 50 day sma on 7 June;
3) The upcoming breakout from the ascending triangle at ~$23.

The stock is being pressured upwards in price:
* note the buyers' impatience, as their purchases are ever higher;
* note the sellers' patience, as their sales remain mostly at the ~$23 high
* the rising 50 day sma, now well into the short term base;
* this particular pattern quickly runs out of time.

I expect a large move in either direction will occur soon. I believe that move will be up -- in fact, I have purchased shares in anticipation of the breakout. Watch for a move above $23, especially a gap over that hurdle.

10 July 2005

Google "mash-ups"

Google spies ad gold with Maps
By Peter Howe
The Age - July 11, 2005

Google isn't one to take its eye off a lucrative advertising opportunity when it spies one - especially when that opportunity has global implications. And that's exactly what the online information search giant sees in its satellite mapping browser, Google Maps.

Google launched the feature in February, letting web surfers pull up maps and satellite images of virtually any neighbourhood in America. Unlike services from and Yahoo that are limited to presenting information authorised by the portal - such as locations of pizza shops or bank machines - Google Maps let people plug in their own data.

Users quickly rolled out what became dubbed 'Google mash-ups,' using lists of apartments for rent and petrol prices to create services that let web users instantly generate maps of the closest cheap gas or pricey apartments.

As of last week, Google went from tolerating these services to actively promoting them. Hoping to unleash a wave of digital map-making creativity Google began publicising the full version of the so-called application program interface for Google Maps that hackers had already begun figuring out to build their own services.

It's a move that suggests Google is thinking there are lucrative new advertising opportunities.

'We certainly can't think of all the innovative things we can do with maps,' says Bret Taylor, product manager for Google Maps. 'There's already sort of an ad hoc community out there using Maps, and this really formalises it.'

Among other things, publicising the programming interface will help websites that have built services on Google Maps keep them operating smoothly. In the United Kingdom, for example, a site called used Google Maps to offer a service that can show the locations of all current traffic jams and accidents around London.

And it's not only Americans or Brits who can see what's going on. Google quietly extended its map feature to Australia about a month ago, and this could be a potential competitor to existing Australian map services provided by the likes of UBD and Sensis.

Besides conventional maps and satellite images, Google recently began making available - through a site called Google Earth - enhanced versions of what it calls three-dimensional maps. This feature correlates map grids with city skylines and topographical contours.

If these mash-ups interest you, you will find in the bulleted listings under Google (in the sidebar) those mashups that I believe [the] most interesting.

For example, Live Concerts is an excellent mash-up that displays locations of live concerts. It shows all active tours in North America plotted on the map, and listed down the sidebar. Then display all cities where that group or artist is touring, or view all concerts by month, day or year.

We Need To Talk About Kevin

As those of you who regularly read the sidebar know, I just completed reading the novel, WE NEED TO TALK ABOUT KEVIN, by Lionel Shriver.

I will not bore you with the details of why or how I like this novel; I will admit, however, that after reading a novel as excellent this one reminds me why I suffer reading so much dross to find the gloss. This specific novel astounded, dazzled, and stupefied me by its qualities as a story exceedingly well told, with powerful writing and profound insights. In fact, at a mere 400 pages, I should have completed reading it within one to two days, three at [the] most. And yet the book is a marvel: I was slowed down by the sheer glory of the writer's talent -- each sentence is particulary well crafted, and packs an exceedingly powerful punch. Simply magisterial.

And as such, it qualifies easily as a recommendation for all readers. The Amazon link can be found under recommended books in the sidebar.

08 July 2005

Now is a good moment...

... to begin scanning for negative divergences.

At 10:10 am pdt, the markets have pushed to the day's highs -- and resistance. So I begin my search for divergences with intermarket analysis -- what occurs in the currencies (in particular, cross rates)? the bonds (specifically, the US Treasuries)? metals (gold, silver, etc)? Oil?

Then I study the intra-day action, starting with the 1 minute charts (and expanding periodicities from there) for everything I hold (remember, I buy only the market leaders), and those stocks I have yet to purchase but consider. Then I seek "tension on the tape" as my erstwhile but long gone friend, Ed Hart, once taught me.

If everything appears 'kosher', I continue to hold -- perhaps even seeking new purchase opportunities. If things begin to appear amiss, I take appropriate action.

Because I favor using the weekly basis charts for my investment purchases, trading of this type is best done around a core holding. Thus, even if I am wrong, I am right, and if I am right, I am not too wrong. If you ken my meaning!


This 'chop' (non-directional direction) the markets have had to endure since turning the calendar page to 2005 creates opportunity for the experienced investor.

For example, I mentioned yesterday morning before the markets opened that they likely would rally strongly off the intra-day lows. (That is precisely what occurred.) Having that vision, the onus then was upon me to develop a strategy that could profit from such a scenario. That strategy was to seek positive divergences -- stocks whose intra-day lows yesterday were higher than in previous days and weeks. This led me to purchase (when at their intra-day lows) several stocks, including:
Apple/AAPL -- (a breakout above $40 signals an end to this base),

Amedisys/AMED -- (more anon re this opportunity),
Abercrombie & Fitch/ANF -- (continues to set new all time highs),
Coach/COH -- (see comments re ANF)
Dominos' Pizza/DPZ -- (such a sweet setup!),
Kyphon/KYPH -- (more anon),
PF Changs/PFCB -- (discussed previously)
Toll Brothers/TOL -- (some homebuilders notched new all time highs yesterday; fortunately I bought Tol, and others, at the day's lows),
Whole Foods/WFMI -- (purchased the breakout Wednesday. What a long term winner!)

Here's the rub: now that everyone quickly forgets the terror of yesterday and again is bullish, this small intra-day rally could run out of steam sometime today or soon thereafter as it hits a ceiling of resistance above yesterday's close. Assuming this particular vision too is correct, then I will watch for negative divergences as indications to take profits.

The need for fluidity is one criteria of successful investing. (Being drop dead gorgeous is another, wouldn't you know! ;-)

Fluidity in motion

07 July 2005

International markets

Information remains sketchy (including the number of deaths, the extent of damage, and who perpetrated this act) but in case you did not already know, the city of London, England is under 'attack' from a sequence of bomb blasts that has affected bus stations and the Underground (the 'Tube'), which is now completely closed.

Although no one yet knows the identity or nature of the culprits, the international markets not only have determined the culprits but have acted on that perception, as global markets suffer major wallops. The US markets are indicated to open down hundreds of points. An exogenous event of this type has the potential to exacerbate an already weak market. There exists the possibility, however, that US markets could rebound from intra-day lows. Consider the action appropriate for your portfolio, while keeping in mind your objectives, tolerance for risk, and time frame.

Best wishes to all.

Rush-hour attack on London

Jul 7th 2005
From The Economist Global Agenda

Bombs have exploded across central London, at several points on the metro system and on at least one bus, as Britain hosts the Group of Eight summit in Scotland. Details are unclear but it looks disturbingly like a repeat of 2004’s horrific Madrid train bombings

THERE have been plenty of warnings that London might be the target of a big terror attack—and indeed, from the second world war Blitz to the IRA bombing campaign of the 1970s-1990s, Londoners have long been used to living with the risk of attack. But no amount of preparedness could reduce the shock of the chain of explosions—apparently caused by bombs—that hit the British capital’s transport system during the morning rush on Thursday July 7th.

So far all that seems certain is that there were explosions, all around 9am local time, at several metro stations and on board at least one, possibly more, buses in the city centre. The home secretary (interior minister), Charles Clarke, said there had been “terrible casualties” in the attacks—but it is too early to say how many have been killed or injured.

Mr Clarke told the House of Commons that so far four explosions had been confirmed: one in a tunnel between Aldgate East and Liverpool Street metro stations; one in a tunnel between Russell Square and King's Cross stations; one in a metro train at Edgware Road station; and the fourth on a bus in Woburn Place. Several other parts of central London were also cordoned off. The entire metro system was suspended, as were bus services in the city centre, while overground rail services were being stopped short of the capital. All hospitals in London were put on high alert. The public were urged not to try to travel into central London at all for the time being.

The explosions came as Tony Blair, the British prime minister, was hosting the summit of Group of Eight leaders at Gleneagles in Scotland—and the day after London was chosen to host the 2012 Olympic games. Coincidence? Or were the attacks timed to send a message to Mr Blair and the other leaders of the world’s main powers? Mr Blair came out of his meetings to confirm that the London explosions did appear to be a “series of terrorist attacks” and that the G8 leaders had affirmed that they “share our complete resolution to defeat this terrorism”. Security was stepped up on public-transport systems in Washington, DC and other G8 capitals as news of the London attacks reached them.

The attack on London bears disturbing similarities to the series of bombs set off on commuter trains in Madrid in March 2004, killing almost 200 people and injuring around 1,500. The seven suspected Islamist bombers, mainly Moroccans, blew themselves up in a confrontation with the police soon after. Speaking to Sky television, London’s police chief, Sir Ian Blair, said he feared the explosions in the city did bear signs of a “concerted attack”. Sir Ian said he knew of no advance warning being given of the attacks.

It may be some time before it becomes clear—if it ever does—who was responsible for the bombings. Suspicions are bound to fall on al-Qaeda or its militant Islamist sympathisers. It is not impossible that some anti-capitalist or anti-globalisation group caused the explosions, timing them to coincide with the G8 meeting, but a high level of organisation would be required to make the devices and set them off in such an apparently co-ordinated manner. The IRA has been on ceasefire since 1997 and seems unlikely to have been involved; nor is it likely that one of its splinter groups was responsible. In the immediate wake of the Madrid bombs, Spain’s then conservative government was swept out of power in an election, amid public anger at how it had tried to plant the blame, wrongly, on ETA, the Basque separatist group. Given this precedent, Mr Blair and his government are likely to be highly cautious about attributing responsibility for the London bombs until there is clear evidence.

Earlier this year, Mr Blair’s government struggled to push through Parliament a terrorism law containing strong powers for the state to impose “control orders” restraining the liberties of terror suspects, even in the absence of sufficient evidence to bring charges. This followed a ruling by the Law Lords, Britain’s most senior court, striking down a measure in an earlier terrorism bill that had allowed the government to detain suspects indefinitely.

While Britain’s security services have strong anti-terror powers and London has among the world’s best contingency plans for coping with such serious incidents, its transport system, like any other big city’s, is highly vulnerable. It is almost impossible to prevent determined bombers bringing explosive devices on to trains and buses, and no amount of planning or security measures will eliminate such a risk entirely. Londoners understand this and they—and the security services—have known that it was only a matter of time before something terrible like this happened.

06 July 2005

Two phenomenal programs

Brad Hill clues us in on this phenomenal use of Google Earth...

"This is the real deal — a terrific application of Google Earth that enlivens its potential and illuminates one path into the future of local search.

Prudential Preferred Properties has created a network plug-in for Google Earth that identifies real estate listings in and around Chicago, giving the user flexible search and browse tools that are automatically updated. Here is the announcement and instructions; you need a free copy of Google Earth, which every high-speed household should be running anyway.

"Once plugged in, the network location is added to My Places, ready for perusal at any time. Google Earth swings you over Chicago and a giant swarm of listings appears. Drill down in My Places to eliminate categories of listing and thin out the swarm. Clicking any single listing reveals a property description. Clicking More Info opens Google Earth’s built-in browser to display the listing pasge from the Prudential site. Now you’re suddenly looking at the actual house and neighborhood in the upper pane, and photos with descriptions in the lower pane.

"This is real estate for today! I have been using Google Earth in this fashion, but forced to bounce between a browser showing listings and Google showing satellite imagery. Every real estate company in the U.S. should follow Prudential’s lead and integrate their listings into Google Earth. So should, the multiple listing portal, but I’m not holding my breath for that."
Despite my lack of interest in Chicago-area real estate, I can state emphatically that this 'plug-in' for Google Earth is phenomenal.

If you have yet to download the Google Earth program, but want to view something equally original, check out this site...
Google Maps Transparencies allows you to view together the satellite and street views of Google Maps. Much like a magnifying glass, the map view acts as a magnifier as you drag over the satellite view to show you the streets in an overlay fashion. Simply wow!

03 July 2005

How I Make Decisions

FORTUNE Magazine recently published this survey. I find many of the essays to serve as excellent primers for many disparate items, including investing. Such as the brief essay that follows...

Trading Derivatives

Simon Yates
Managing Director, Equity Derivatives,
Credit Suisse First Boston—New York City

When you see a trader panic, you can be pretty sure that for the next few hours, he's going to lose money. All the base instincts in your brain—what I call "caveman brain," the sort of fight-or-flight feeling of emotion that is designed to stop you from being eaten by a sabertooth tiger — takes over your decision-making. You start trading scared, taking smaller positions on good ideas and cutting profits too quickly.

I supervise about 23 people, and we can trade $1 billion a day. My goal is to make money 52% of the time. I can make the right call half the time by flipping a coin; a good trader does a little better. Successful traders don't spend much time regretting decisions or going back over things. If a decision turned out to be wrong, so what? Move on. So when you have to make a quick decision and you know that there's a good chance it will be wrong—the worst thing you can possibly do is sit there and panic and hope. You have to be decisive—go on and do it. When I see somebody go into panic mode, I tell them, "Get off the desk. Go for a workout, or go sit in the park for an hour."

The first thing I look for when hiring traders is emotional robustness. And you can get some very, very smart people, the classic Harvard MB person who has been top of his class the whole way through, but they haven't had the emotional experience of failure. They come into this trading job, and they have this view, "Okay, I'm going to work very hard, I'm going to do all the research, and then I'm going to succeed." It's fascinating watching them the first time that doesn't happen. There's this sort of "How can this be?" look on their face. That's when many of them get out of the business.

If people in a bar ask me what I do, I say it's a bit like stock trading but with more math. In some ways it's like being a police officer: There's a lot of time when nothing is going on, and then suddenly you've got to be really fast.

You can't wait until you have absolute confirmation. You're looking to get enough information to think that you probably have detected something, and based on that, you make your trades.

Interviewed by Barney Gimbel

01 July 2005

Risk in Google/GOOG

Google/GOOG shares have potential, possible, and arguably probable price risk of a decline to ~$225. (This price rises with the passage of time.) Despite such a decline, devastating as might seem at first glance, Google/GOOG shares should remain within their bullish, long term continuum. (I will provide a chart IF a decline of this magnitude seems imminent.) This comment is not a prediction, but an assessment of risk. Invest accordingly.

The Homebuilders

The homebuilders, as a group, have been one of the market's upside leaders the past 3-4 years. The clues now mount that a significant reversal was made 2 weeks ago today (17 June). Based solely on my perception of the individual charts, I believe many, if not all, of these stocks are in for drubbings of 30-50% from the respective high trade of each. The leaders of the group would decline ~30%, the laggards by 50% or more.

This directional price expectation is not a Fibonacci retracement. I base it on:
1) The relationship of price to the moving averages;
2) The relationship of the moving averages to themselves, null of price;

3) The appearance of the high trade 2 weeks ago has the hallmarks of a critical reversal...
4) Having achieved maximum rate of change
5) The appearance (pattern and set-up) of the basis weekly charts
6) The top that is finally built will suggest the depth of the coming decline.

I intend hese comments as education, but they also are actionable. Such powerful momentum as this group has enjoyed will require some time to convert the true believers. Thus, each stock could levitate for weeks yet before the carnage begins. Of course, the recent action could prove to be a short term base (although it doesn't look like it), in which case I reserve the right to acknowledge the error of my ways, and go long.

The ECONOMIST re: Google

What a lot of wheatgrass

Jun 30th 2005 SAN FRANCISCO From The Economist print edition

Psst, there is news about Google, but don't tell

IT IS hard to know whether to be impressed, suspicious or amused. This week shares in Google, the world's most popular search engine, rose above $300 each, having defied most predictions by more than tripling in the ten months since the firm made its stockmarket debut at $85 a share. Now valued at more than $80 billion, Google has left in the dust the other three internet Wunderkinder—Yahoo!, eBay and Amazon—and even passed media stalwarts such as Time Warner. How does Google do it?

At least in part by shrewdly manufacturing a winning mystique. No outsider today can prove definitively that Google is not an office park full of geniuses who could at any moment announce, simultaneously, world peace and a cure for the common cold. That is because no outsider today can say anything definitive about Google at all. This is intentional. Google makes itself totally opaque by camouflaging itself with lots of what journalists call “colour”.

Thus, at a recent “factory tour”, the press learned that Google's engineers, in an average month, consume 2,300 lbs (1,043 kg) of chicken, 1,600 lbs of coffee beans, 500 lbs of pasta, and 112 lbs of wheatgrass. They also heard about the sock collections of certain executives. At an event for equity analysts in February, Google did roll out the “CFO”, but he was the chief food officer (ie, chef), Charlie Ayers, who talked about his grilled pork tenderloin. The chief financial officer was there somewhere, but did not actually give a presentation.

Add to this a (slightly more relevant) steady drip of product announcements—typically through the grapevine and still in beta (ie, the test stage). This week, it was “Google Earth”, a bit of software that can be downloaded for free and that allows users to fly around a three-dimensional globe through well-rendered valleys and streets. A day earlier, Google hinted at a new media player for internet browsers that will allow users to search certain types of video. The week before, Google confirmed that it plans an online payment service. And so forth.

Combine such evidence of frenzied activity with mysterious secretiveness, and the imagination is liberated. A Google web browser? A Google operating system? All the world's information? World domination? Buy, clearly.

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