William Blake art from The Book of Urizen

 William Blake etching with watercolor & ink (Tate collection).

Lao Tzu on prediction

Those who have knowledge, don't predict. Those who predict, don't have knowledge. - Lao Tzu. $$Thu Dec 29 21:08:13 via webDavid Shvartsman
FinanceTrends

Friedrich Hayek on Keynes (1978 interview)

F.A. Hayek discusses John Maynard Keynes in this 1978 interview clip.

Mark Cuban: How to Get Rich + Success and Motivation

You may have seen me quote Mark Cuban on Twitter the other day. This is Cuban's take on entrepreneurship in America from his, "How to Get Rich" post: 

"...The nature of our country’s business infrastructure  is that it is destined to be boom and bust. Booms are when the smart people sell. Busts are when rich people started on their path to wealth." 

Kind of applies to trading and "investing" as well, doesn't it? The smart money and experienced traders are buying or preserving their capital and looking for signs of coming strength at the trough, following a panic or bust (bear market). 

The bit players in the crowd are mostly on the sidelines, waiting for things to get exciting before they plunge in. They are driven largely by emotions and their knowledge of the market landscape is, shall we say, less than that of the experienced speculators.

When the boom is in full gear and evident to all, savvy veterans are lightening their positions and selling into a liquid marketplace that will take the inventory (stocks, etc.) off their hands. 

Novices generally buy high and sell low, losing a great deal of their money in the process, while the expert traders buy at a reasonable, or high, price and sell higher. 

This applies to business deals as well, as Mark points out in his post. But you need to put in a lot of hard work and learn your business well before you can identify the right time to invest or start building your company. 

Whatever you have set out to do, there's no quick and easy path to excellence and success. If you want to learn more about what Mark Cuban went through to get to where he is today, read his post, "Success and Motivation". I suspect there are lessons here for all of us, whether you're an artist, a writer, a trader, or an entrepreneur. 

Related articles and posts: 

1. Mark Cuban interview: "Buy and hold is a crock" - Finance Trends.

2. Howard Lindzon interviews Mark Cuban (StockTwits TV) - Finance Trends.

Frederic Bastiat - The Law

"The law perverted! And the police powers of the state perverted along with it! 

The law, I say, not only turned from its proper purpose but made to follow an entirely contrary purpose! The law become the weapon of every kind of greed! Instead of checking crime, the law itself guilty of the evils it is supposed to punish!

If this is true, it is a serious fact, and moral duty requires me to call the attention of my fellow-citizens to it." - Frederic Bastiat, The Law (e-book, English translation).

Related articles and posts: 

1. Biography of Frederic Bastiat (1801-1850) - Mises.org.

2. The Law by Frederic Bastiat (audio book) - Free Audio. 

3. Works of Bastiat and web links - Bastiat.org.

Kyle Bass on sovereign debt crisis and gold

Hayman Capital's Kyle Bass discusses the world economy, gold, global credit growth, and debt problems in US, Japan, and Europe at the AmeriCatalyst 2011 conference. 

Here's the, "Black Swan of Cairo" piece (Nassim Taleb and M. Blyth) cited by Bass.

Hat tip: Olivier at Tischendorf Letter for highlighting this clip and the article.

And if you missed it, here's Kyle's interview on BBC Hardtalk, skillfully dodging TV sensationalism and speculator-scapegoating attacks to address the euro crisis, the developed world's sovereign debt troubles, and how he is managing risk in his portfolio and hedging against problems in Japan. 

Quoth Bass: "Capitalism without bankruptcy is like Christianity without hell". 

In other words, the Western world must atone for its past financial profligacy. Check it out.

Rewards for Failure

"The United States has lost its way".

Greg Simmons at ScopeLabs riffs on the rise and fall of nations and our bailout society in this excellent six minute YouTube video. 

Greg hipped me to this clip after I mentioned how I had enjoyed some of his Skype interviews with Matt Davio. From the moment I saw their first taped discussion, with Greg standing there in his Black Flag t-shirt, ready to talk trading and current events off the cuff, I knew I had found someone on my wavelength. 

This clip is a must-see, plain truth indictment of our societal decline. Will America wake up from its national brain-coma in time to right itself? Watch and learn, friends...watch and learn.

Steve Jobs interview from 1990, recently surfaced

Watch An Interview With Steve Jobs on PBS. See more from NOVA.

Steve Jobs talks about the future of computing in a rare 50 minute TV interview aired on PBS. 

When asked how computers have changed civilization, Steve begins by noting how humans were able to leapfrog the more efficient locomotion of other animal species by using tools, or technology. 

Offering the example of how a human on a bicycle could easily surpass the locomotive advantage of the most efficient animal, a condor, Jobs concludes: 

"We humans are tool-builders. And we can fashion tools that amplify these inherent abilities that we have to spectacular magnitudes. So for me, a computer has always been a bicycle of the mind: something that takes us far beyond our inherent abilities. I think we're just at the early stages of this tool."

You can see by the re-do of his 1st interview response that Steve was always "on message" and rehearsing and delivering the exact points he wanted to make when selling his vision of how we use technology and Apple products. 

It also highlights the fact that modern TV interviews are often actually rehearsed, taped, and edited performances, rather than the more spontaneous give-and-take than the finished product tries to convey.. Steve could see this, and he crafted his message to the medium, whether he was out on his own at NeXT or selling to a larger consumer market for Apple. 

Enjoy the discussion and insights, and see our related posts for more on Steve Jobs.

Related articles and posts. 

1. Interview: Steve Jobs and Bill Gates at D5 conference - Finance Trends.

2. In Charts: Apple (AAPL) vs. Microsoft (MSFT) - Finance Trends.

Inner Voice of Trading: a lesson on ego and risk

Michael Martin was kind enough to recently send over a review copy (via the FT Press) of his new book, The Inner Voice of Trading. 

I've started reading through the book and have highlighted an important lesson on risk mgmt., ego, and the emotions we feel as humans who trade. 

Here are a few thoughts from chapter 2 of Michael's book, paraphrased or direct quotes, that address some of these issues: 

• Most traders drawn to risk management focus on the external "how to" aspect of trading, vs. the inner aspect of emotions and psychology. This is where trouble begins.

• Our American education system has ingrained in us the need for accuracy and regurgitation of info. We become conditioned to this accuracy model and the rewards of rote learning. The longer we remain in this reward model, the more it colors everything we do in life. 

• In the school model, one's self-esteem is tied to being right. Avoiding mistakes, especially public mistakes becomes paramount. But in trading, one can be wrong in most choices and experience regular "outlier" events in the course of trading the markets. Traders must somehow learn that they will miss out or be incorrect regularly and still have a shot at great success. 

• Traders need to have a survival plan. Know when you will get out of a trade before you get in.

• If you don't take the small loss today, your capital and trading career may not survive tomorrow.

• The most successful traders surrender their egos to not knowing the frequency or magnitude of any trend. They quiet their mind and follow their inner voice.

• Most of the world can't keep their losses small. Professional traders and investors who've been around for decades are usually those who play the best defense. 

I'll try to review the book in full after I've finished reading it. Till then, check out Michael's book along with this interview on The Inner Voice of Trading, and visit Martin Kronicle for more on trading from Michael and his interview guests.

When you have no move, do nothing...

"...You have no move, Mr. Thompson. You do nothing.". 

Reflecting on Nucky Thompson's compromised position in the most recent episode of Boardwalk Empire, Arnold Rothstein (played by Michael Stuhlbarg) tells the embattled Atlantic City treasurer/gangster to simply wait and plan for a time when there is a move to be made. 

Rothstein elaborates:  

"I've made my living, Mr. Thompson, in large part as a gambler. Some days I make 20 bets. Some days I make none.

...There are weeks, sometimes months in fact, when I make no bets at all because there simply is no play. So I wait, plan, marshal my resources and when I finally see an opportunity and there is a bet to make, I bet it all.".

Leaving aside the near-certainty of fixed bets and the part about "betting it all", doesn't this sound like the strategy of a good speculator? When there is no clear move to be made, you must simply wait and do nothing until the real move (the true opportunity) presents itself. 

Then, having protected your capital and your wits, you may step in and seize the opportunity.

Facebook's Mark Zuckerberg interview w/ Charlie Rose

Charlie Rose interviews Facebook's Mark Zuckerberg and COO Sheryl Sandberg in an hour-long discussion on the future of the social web and the impact of social media. 

Interesting chat and here's one noteworthy comment from Mark on the need for engineers in our new economy: "My #1 piece of advice [for young students & job seekers] is you should learn how to program".

Also, some discussion of American entrepreneurship, risk-taking, and innovation. 

Check it out.

Rakesh Jhunjhunwala interview: Wizards of Dalal Street

On CNBC India, Rakesh Jhunjhunwala is feted in the same way Warren Buffett is here in the USA. 

He is known as one of the great bulls of the Indian markets, and while his success has coincided with the recent decades' secular uptrend in Indian shares, Rakesh is also an adept trader who has made money selling short. He cites Buffett and Marc Faber as two of the greatest influences on his trading and his understanding of markets.

CNBC-TV 18 profiles the Indian share trader and investor in this biography special, Wizards of Dalal Street. Rakesh tells Ramesh Damani the story of how he got his start in the share markets and how he searches for attractive investments today. 

Here are a few excerpts from the discussion, in which Jhunjhunwala talks about his childhood interest in the workings of share market and shares a few lessons on speculation:

CNBC:  "But you're a bureaucrat's son. I mean, weren't you compelled into [that area]?"

Rakesh: "I was a bureaucrat's son, but fortunately I had a very democratic father. And also we had a business background...my father was an intelligent man and he encouraged me to do whatever I had an interest in."

On speculation and reality: 

CNBC: "Does speculation teach you to be realistic, because you are betting on leveraged money?" 

Rakesh: "I think so, because speculation requires and teaches you to accept reality as it is, rather than reality as you would like to have it."

An important point on risk taking and concentration: 

CNBC: "But is one of Rakesh Jhunjhunwala's tenets is when he finds an idea to bet big?" 

Rakesh: "Big is relative, Ramesh. But when I find an idea whose prospects are very good...you have to be conscience of one thing - the great investment opportunities are very rare. So when you get them, seize them. And seize them in a manner that if you're right, it makes some difference to your balance sheet."



Check out the full interview here. Much great wisdom and insights within.

If you're enjoying these posts and would like to see more, please subscribe to our free RSS updates and follow Finance Trends in real-time on Twitter and StockTwits. You can also check out our related posts below for more market wisdom and trading insights.  

Related articles and posts: 

1. Rakesh Jhunjhunwala interview on FT.com - Finance Trends.

2. FY 2012 has been the worst trading year of my life: Jhunjhunwala - Moneycontrol. 

3. Rakesh interview CNBC-TV 18 transcript: Momentum and risk - Moneycontrol.

Black markets: a global $10 trillion economy

Excellent article from Foreign Policy entitled, "The Shadow Superpower", which examines the world's $10 trillion underground economy.

"You probably have never heard of System D.

Neither had I until I started visiting street markets and unlicensed bazaars around the globe.System D is a slang phrase pirated from French-speaking Africa and the Caribbean. The French have a word that they often use to describe particularly effective and motivated people. They call them débrouillards.

To say a man is a débrouillard is to tell people how resourceful and ingenious he is. The former French colonies have sculpted this word to their own social and economic reality. They say that inventive, self-starting, entrepreneurial merchants who are doing business on their own, without registering or being regulated by the bureaucracy and, for the most part, without paying taxes, are part of "l'economie de la débrouillardise."

Or, sweetened for street use, "Systeme D." This essentially translates as the ingenuity economy, the economy of improvisation and self-reliance, the do-it-yourself, or DIY, economy..."

Why the attraction to this unlicensed, improvised economy? Because that's where the jobs are, and where flexibility exists for entrepreneurs and traders/merchants to come in and do their thing without burdensome costs of regulation, licensing, and taxation (i.e., red tape). 

"...It used to be that System D was small -- a handful of market women selling a handful of shriveled carrots to earn a handful of pennies. It was the economy of desperation. But as trade has expanded and globalized, System D has scaled up too.

Today, System D is the economy of aspiration. It is where the jobs are. In 2009, the Organisation for Economic Co-operation and Development (OECD), a think tank sponsored by the governments of 30 of the most powerful capitalist countries and dedicated to promoting free-market institutions, concluded that half the workers of the world -- close to 1.8 billion people -- were working in System D: off the books, in jobs that were neither registered nor regulated, getting paid in cash, and, most often, avoiding income taxes. "

This is a trend I've talked about a bit on Twitter, but haven't covered here on the blog. Be sure to check out the full piece. It's well worth your time, and these trends will likely take hold here in the USA for similar reasons.

Around the world in 8 charts

The charts tell the tale of the October rally. 

Since our last update on the global correction in stocks, shares have bottomed (at least in the short-term) and embarked on a powerful new rally. 

As noted in real-time on Twitter and StockTwits, the 1,250-1,260 levels were an important technical (and psychological?) level for the S&P 500 and US shares. The market busted through those levels this week amid a backdrop of hectic news concerning Europe's debt crisis. 

Here you'll find newly updated charts, from the SPX to the AWCI (MSCI World ETF), the Dow Industrials and Transports, the Nasdaq, the EEM (Emerging Markets ETF), the VIX, and TLT (long-bond ETF). 

This is still a very news-driven (some would say intervention-driven) market. Therefore, I want to either watch (or ignore) the action from the sidelines or keep a very tight reign on positions and risk. We'll see if the global share markets can continue higher on a stream of bad news, a sign of a potential bullish uptrend in the making.

Keep up with Finance Trends in real-time on Twitter and StockTwits. You can follow our RSS feed (full posts, always free) to catch all our posts.

Sotheby's vs. emerging markets

Performance comparison of "$BID indicator", Sotheby's vs. the $EEM (MSCI Emerging Markets) going back to 2003. You can see the close correlation throughout in this weekly chart. 

Check out a larger image of the same chart here. 

You can also see a 3 year performance view of Sotheby's vs. $ACWI (MSCI World stocks ETF) here on Chart.ly. 

As you'll see, the correlation between $BID and $ACWI is not as close, and Sotheby's easily outperformed the global shares ETF over this recent 3 year period.

5 predictions from 'Trader Vic' Sperandeo

Victor Sperandeo makes 5 "Frightening Market Predictions", as well as a few policy prescriptions for the USA in this Real Clear Markets piece. Here's a taste: 

"...1. The U.S. is going into recession.

This is being entirely caused by the woefully misguided fiscal policies of the Obama administration.

Their anti-business, socialist agenda is killing the "Golden Goose" (i.e. Capitalism). Raising the costs for small and big business via tax hikes, Obamacare, and massive regulation is in effect causing a capital "strike" by entrepreneurs. As a result, GDP is going to decline..." 

Recession is not the only thing on Trader Vic's mind. Head on over for a few thoughts on gold, the future of the EU, hyperinflation, and the global bubble in debt. 

Plus, a few key changes that may help the US fix its problems and change our course for the future (only wish Victor had some more time and space to really flesh these out). Check it out. 

Jeffrey Gundlach interview: deflation risk

Noted bond fund manager and DoubleLine founder, Jeffrey Gundlach speaks with FT.com about the economy, deflation risks, and his views on Treasury bonds. 

Some highlights from this interview:

• DoubleLine notes that the market has been affected by shifts in sentiment relating to potential inflationary outcomes vs. deflationary outcomes. Gundlach seeks to take advantage of pendulum shifts in sentiment by positioning his portfolio more into government bonds when everyone is focused on inflation, bucking the prevailing sentiment trends. 

• As unattractive as Treasury yields appear to be from a historical standpoint, investment managers should own bonds "even today" as a hedge.

• "I used to be an inflationist several years ago". Gundlach understands the printing-money-to-cover-entitlements view, but feels that this pro-inflation scenario is unlikely to happen without a crisis. Gundlach feels you will first see economic weakness and a societal trend towards reigning in deficit spending. Hence, deflationary arguments are at the forefront.

• Tremendous income polarization in the United States. This has often led to societal unrest. Hard times for working class vs. plush times for multinational corporations will lead to calls for increased corporate taxes. Expect lower PEs for stocks in that environment.

Catch the full take at the link above.

Picture of a global market correction

Call it a downtrend, call it a cyclical downturn, or a bear market. No matter how you slice it, stocks are in a definite slump worldwide. 

Here's a daily chart of the iShares MSCI All-Country World Index ETF, AWCI. 

The pattern of lower highs and lower lows since May 2011 is clearly evident in this ETF tracking some of the world's leading shares. This shows a bear trend, or at the very least, a months long correction in global shares. 

Proceed with caution, folks.

Hugh Hendry on the importance of social mood & failure

"I'd say 80% of my activity is engaged in the interpretation of social mood." - Hugh Hendry. 

That quote taken from this September 2010 BBC Hardtalk interview with Hugh Hendry. 

When asked about the need for regulatory control of financial markets and curtailing of risk, Hugh replies, "The best form of regulation is, 'If you mess things up, you fail.'".  

Hat tip: Kevin Kaiser at Hedgeye.

Precious metals take a hit as dollar moves higher

Gold and silver have really taken it on the chin this week, with gold down 5% Friday and silver down a whopping 15% in today's trading (as of 4pm Chicago time). 

For the week, Finviz shows gold and silver down 8.7% and 23.6%, respectively (see performance chart below). 

The sell-offs in the futures markets have, of course, impacted the share prices of metals ETFs, GLD and SLV similarly.

The leading gold and silver mining indices, XAU and HUI, also took a dive over the last few days. 

Meanwhile, the US dollar index continued its climb this week. Having bottomed near 72.70 in early May, and following its consolidation around the 73.50 mark in August, the index (which measures the US dollar against a basket of other paper currencies) is up strongly in September. 

 

So were there any technical price signals or sentiment changes that hinted at these latest shifts in the dollar and in the precious metals market?

Sounding prescient on the gold trade is Phil Pearlman, discussing his decision to sell gold in this August 24th interview on CNBC (looking sharp, buddy). 



We'll continue watching gold, silver, and the dollar in the weeks ahead. Keep up with our real-time updates on Twitter and stay tuned to the blog feed for more.

Long bonds flying on Operation Twist - $ZB_F $TLT

Earlier this afternoon on Twitter, I noted that the long bond ETF, TLT was up over 10% (then quoted near $114.60) since S&P downgraded the USA's debt rating to AA+ on August 5, 2011.

Well, it looks like we'll have to update those stats already, thanks to the pop in 30 year bonds (ZB_F) and in TLT on news of Operation Twist, the Fed's telegraphed scheme to sell $400bn of short maturity bonds and reinvest in longer (6 to 30 year) bonds by June 2012. 

Here's how the market reacted to that news. Note the flagpole move up in TLT and the 30 year Treasury futures, ZB_F on the intraday charts. 

 Above: 5 minute chart of the 30 year Treasury futures, via Finviz.com.

Here's an intraday chart of TLT, courtesy of freestockcharts.com.

The updated daily chart of the TLT, marking the August 5th closing price to today's action on the Twist announcement. Chart via freestockchats.com.

So in the space of 20 minutes, we had to recalculate that 6 week return figure (post S&P debt downgrade): the long bond ETF TLT is now up 13% since its close on August 5th, based on an intraday price of $117.70

What a difference a day makes...

New: Finance Trends mobile reader view

Finance Trends mobile readers: you can now easily access our new mobile view on your iPad, iPhone, Berry, or Android device (courtesy of Blogger). 

Here's what individual posts look like in our mobile site view: 

Right now we're leaving the mobile view as an option, rather than a default, for our mobile visitors. 

If you're a mobile reader and you'd like to see this mobile view as the default view during your visits, please leave us some feedback. For now, I'll work on providing a mobile link icon near the top right portion of our sidebar column. Thanks!

Bruce Kovner retires: a Market Wizard's career

Bruce Kovner is stepping down as chairman and CEO of Caxton Associates, the hedge fund he founded in 1983. 

Bloomberg has the details on the transition that will see CIO Andrew Law take over at Caxton: 

"...“After 34 years in the trading business and more than 28 years leading Caxton, the time has come to hand the leadership of the company to a new generation,” Kovner, 66, wrote in the letter. “I do so knowing that I will miss the adrenalin rush of confronting markets every day but also confident that new leadership will carry on the traditions, style and substance of Caxton’s successful history.”...

...Kovner is attempting a rare handover of power in the $2 trillion hedge-fund industry, where some of the most successful managers, including Stanley Druckenmiller and George Soros, chose to transform their firms into family offices rather than put another trader in charge. A family office usually oversees money for a wealthy individual and their relatives." 

And a note on Kovner's successor Law, who offers up some interesting comments on lessons learned from Bruce Kovner and similarities in their trading styles:

"...Law’s trading style has always been similar to Kovner’s, he said in an interview in his office on Park Avenue in Manhattan. Yet the older man drove home some important lessons.

“I’ve learned to listen to the markets more,” said Law, meaning that he pays close attention to how markets move relative to one another, and how they react to events. He depends on these observations, rather than what he calls “abstract fundamental preconceptions,” to forecast future price movements.

Law also embraces Kovner’s practice of cutting risk when he doesn’t understand what’s going on in markets, something that Law did in May and June of this year. “Bruce has done this many times in his career,” he said."

Kovner is a true trading legend whose trading career really took off once he joined Commodities Corporation in late 1976. On his performance as a hedge fund manager, Financial Times sums up his 28 years thusly: "An investment of $1,000 in Caxton made when the firm began trading in 1983 would today be worth $168,000.".  

Kovner sat down for a rare interview with Jack Schwager in 1989. The resulting chapter on "Bruce Kovner - The World Trader" can be found on page 31 of this Market Wizards ebook. Check it out.

Schwager, Jack D. - Market Wizards 1989

Related articles and posts: 

1.  Bruce Kovner interview with AR magazine - Absolute Return.

Banknotes as wallpaper: Weimar Republic, 1923

When Money Dies: Banknotes (Marks) as wallpaper. Weimar Republic, 1923.

*Photo via Wikipedia (Deutsches Bundesarchiv), Hyperinflation in the Weimar Republic. 

Related posts: 

1. FT interviews Adam Fergusson: When Money Dies - Finance Trends.

2. Dying of Money: Financial Sense Newshour special on inflation - Finance Trends.

Traders and brokers at the Curb market, 1916

Traders and brokers signaling to offices at the Curb market, New York City, 1916. The Curb market moved indoors in 1921 and, in 1953, became the AMEX. 

Photo via Library of Congress.

In charts: Apple (AAPL) vs. Microsoft (MSFT)

Here's a look at some charts shared recently on Chart.ly and StockTwits. Think of it as a quick follow up to our Steve Jobs and Bill Gates post from last Friday, looking back on 30 years of technology innovation.

The long view of Apple: monthly chart of AAPL stock price dating back to 1984. That's shortly after the Mac was introduced (click to enlarge chart).

The following chart shows a comparison of Apple and Microsoft's share performance from 1986 (the year MSFT went public) to 2011. 

On this timeframe, MSFT trounces AAPL from the early 1990s on to the dot.com bubble peak. 

Still, Apple shares gain momentum in the 2000s, finishing the 25 year period with a more than 15,000% gain. Microsoft achieved a 25,000% gain in its stock price for the same period (down from its 1999 peak near the 50,000% mark). 

Finally, we see the same two stocks measured from 1997, the year of Steve Jobs' return to the company he co-founded. The second act of Jobs at Apple was a wildly successful period for the company and its shares, as you can see from the chart below. 

While MSFT's share price barely managed to keep its head above water in the post-dot.com bubble period, AAPL went on to slay the competition and innovated its way to a 7,000% return over 14 years. 

For more on what both companies and their famous founders have accomplished over the last 30-odd years, check out our related posts below.

Related posts: 

1. Interview: Steve Jobs and Bill Gates discuss careers, tech - Finance Trends.

2. MSFT and AAPL: a tale of two tickers - Finance Trends.

Interview: Steve Jobs and Bill Gates at D5

So this week's resignation announcement from Steve Jobs has many of us looking back through the archives, compiling old interviews and articles, and summarizing the accomplishments of Apple and its iconic co-founder. 

It's prompted me to look back not only at what Steve and Apple have done in the past 30-plus years, but what the tech industry as a whole has created in that time. We're all familiar with the stories of famous rivalries and stolen (or "borrowed"/cheaply purchased) technologies in the PC and software industries. It hasn't always been pretty.

It's quite interesting then, to find two of the tech industry's most famous sparring partners (and sometimes, business venture partners), Steve Jobs and Bill Gates, sharing a stage and chatting about their careers in this D5 (All Things Digital, 2007) conference panel interview. 



The panel discussion begins when the two great entrepreneurs are asked to describe the other's impact on technology and our daily lives. Quite an interesting opportunity to hear these two gentlemen speak. This is something our grandkids will probably watch someday. 

Enjoy the video, and check our related links section for more.

Related articles and posts: 

1. Steve Jobs resignation: reactions from Wozniak, et al. - Bloomberg via YouTube.

2. How Steve Jobs Made Business Cool Again - Bloomberg. 

3. Discussion with Steve Jobs & John Lasseter - Charlie Rose. 

4. The ultimate Steve Jobs resignation linkfest - Abnormal Returns.

J.J. Butler - Successful Stock Speculation (Scribd)

New to the Scribd trading books collection, John James Butler's, Successful Stock Speculation (1922). 

I was introduced to this short handbook on investing and speculation through Michael Bigger, who created an appended version of Butler's book with his own summary notes called, In Praise of Speculation. 

I'm just starting Butler's book, but I find his introductory notes quite useful in clearly defining the meaning and purpose of that now mistreated term (and misunderstood activity), "speculation". 

Butler defines the act of speculating as follows: 

"To speculate is to theorize about something that is uncertain. We can speculate about anything that is uncertain, but we use the word "speculation" in this book with particular reference to the buying and selling of stocks and bonds for the purpose of making a profit. 

When people buy stocks and bonds for the income they get from them and the amount of that income is fixed, they are said to invest and not to speculate. In nearly all investments there is also an element of speculation, because the market price of investments is subject to change. "Investment" also conveys the idea of holding for some time whatever you have purchased, while speculation conveys the idea of selling for a quick profit rather than holding for income.

To the minds of most people, the word "speculation" conveys the thought of risk, and many people think it means great risk. The dictionary gives for one of the meanings of speculation, "a risky investment for large profit," but speculation need not necessarily be risky at all. The author of this book once used the expression, "stock speculating with safety," and he was severely criticized by a certain financial magazine. Evidently the editor of that magazine thought that "speculating" and "safety" were contradictory terms, but the expression is perfectly correct. Stock speculating with safety is possible. " 

Enjoy the book and its classic insights.Successful Stock Speculation, By J. J. Butler The Project Gutenberg eBook

Mark Cuban interview: "Buy and hold is a crock"

Entrepreneur and Dallas Mavericks owner, Mark Cuban recently chatted with Alan Murray at the Wall St. Journal about investing, entrepreneurship, job creation and innovation, patent trolls, and the NBA. 

Mark kicks things off on a frank and "controversial" note by stating up front his belief that, "buy and hold is a crock of shit", and the idea that one should be almost fully invested in the markets at all times is similarly bunk.

As Cuban puts it: "Unless you really have a commitment to something, just keep your money in cash - knowing that at some point in time there's going to be a week or two like we've had [recent volatility and stock market plunge]."

Mark explicitly states that these are his times to look for opportunity in the market, and implicit in his statements are a belief in the value of market timing and his own ability to find relative bargains in the capital markets. He likes to find things that are cheap, but is not seeing the bargains he needs in leading shares yet. You'll hear more about what he's doing and his philosophy on the current realities of trading and investing in the interview.

What's really interesting to me, beyond the investing discussion, are Mark's comments on patents and the current business environment. Cuban says patent laws and patent litigation are having a "huge", negative effect on the economy and job creation, particularly with technology companies. In fact, he flat out says, "You don't need patents...ideas are easy", citing his own experience with Broadcast.com and its technology patents in the dot com boom environment.

Note that Cuban's remarks on defensive purchases of patent troves came just ahead of the Google - Motorola Mobility deal (driven largely by patent protection needs for the Android OS in the litigious mobile phone industry) announced this week.

There are a few things that I may not agree with in this interview (mostly Mark's ideas about government grants for job creation), but I really like the fact that Mark speaks his mind and is just so off the cuff and straight up with his remarks. Really refreshing at a time when you see so many mealy-mouthed individuals hemming and hawing with their measured, pre-planned responses in interviews. Great stuff, watch and enjoy.

Related posts: 

1. Howard Lindzon interviews Mark Cuban on StockTwits TV - Finance Trends.

2. Billionaires are different than the rest of us - Abnormal Returns.

Market plunge and relative strength: Caribou Coffee (CBOU)

In the week that's passed since our last post, the stock market decline deepened, Standard & Poor's downgraded the US' debt from AAA to AA+, several European countries enacted a short-selling ban, and many stocks were taken to the cleaners. 

Of course, after declining 16 percent in 3 weeks (from 1,340 to 1,120 on the S&P 500), the US market has seen a bit of a relief rally the past few days. 

Still, it's been very tough to find names that didn't get hit hard in this market. Which is why the relative strength in a stock like Caribou Coffee (CBOU), which not only held up but is making new highs, is impressive. 

Here's a view of CBOU vs. the Nasdaq Composite index. You can see how the stock has held up during the index's recent decline. 

While the action in CBOU looks good and it's earned a place on the watch list, I'm still proceeding with caution here. Anything can happen in a volatile news-driven market like this, and we've seen industry-leader, Starbucks (SBUX) and recent favorite, SodaStream (SODA) slump or get knocked down hard after recent earnings reports. 

Build your watchlists, view developments from the sidelines, and keep a close eye on your risk management process if you choose to speculate here on the long or short side.

Sitting on the sidelines, reading

"The worst thing you can do when you're having a hard time is flail. In trading, when there is nothing to do, the best thing to do is nothing." - Scott Bessent (Bessent Capital). 

Well, the damage is already done for those who were heavily long heading into this week's market decline. 

I look at the S&P 500 component data on freestockcharts.com and see that only 3 stocks in that index were up today. We saw a -4.78% decline in the S&P to go along with that. Here's an updated chart that shows the recent breakdown below the 1312 line we've fluctuated around in recent months.

There's been a lot of whipsaw in this news driven market of late, and it doesn't seem like the recent deficit/debt ceiling deal reached by Congress has quieted things much. Even gold and silver got whacked today. But just look at all that money piling into Treasury bonds.

At a time like this, perhaps it's best to step aside and watch the action from the sidelines. That may not be the proper stance for a short-term trader making hay from all this volatility, or a professional money manager tasked with managing positions on the long and short side, but for now it suits me fine. 

In July, I closed out a couple of losing stock trades and haven't put on any new trades since. I've mostly been pruning watchlists, reviewing my trading journals and trading mistakes, running through charts, and reading. A break from trading was needed, and this was the time to do it.

Today, while reading Steven Drobny's Inside the House of Money, I came across our intro quote in an interview with "stock operator" and hedge fund manager, Scott Bessent. On a day like today, you can really appreciate the time honored truths that: 1) being in cash is a position, and, 2) activity (trading) for the sake of activity can be a real hazard to your trading account and your emotional capital. 

By the way, the interview with Bessent is a great chapter from Drobny's book. Here is a guy who, amazingly, has worked for or trained under George Soros, Stan Druckenmiller, Nick Roditi, Jim Rogers, and Jim Chanos. It's quite something to not only read Bessent's thoughts on trading, but to hear what he's learned from some true all-stars of the hedge fund world. Check out this book if you're taking a late-summer break and keeping your powder dry as well.       

Charlie Rose interviews Barton Biggs (March 9, 2009)

Charlie Rose interviews hedge fund manager, Barton Biggs (Traxis Partners) for an episode which aired on March 9, 2009. 

Yes, that was also the exact day the S&P 500 put in its bottom at the 666 mark, amidst more economic gloom than some of us had ever seen. 

Thought it would be interesting to revisit this interview, and while I still don't agree with much of what Barton and Charlie said about the "need" for certain bailout measures and monetary stimulus, it is quite instructive to hear the discussion that took place at this particular moment in time (some might say this is real market and economic history you're watching). 

Note that Biggs is rather bullish on stocks in the interview, which, in hindsight, was the right thing to be up to this point. Of course, the two year bull move in shares we've witnessed has been helped along by holding interest rates at historically low levels and employing "quantitative easing" programs designed to keep asset prices aloft. 

Still, Biggs makes the sound point that the sharp declines of '08 had occurred in a short timeframe, thereby providing the necessary fuel for a sharp rally (even if only within the context of a bear market). He also compares the "scary" mood of the time with the terrible period surrounding the 1974 market bottom. In fact, he goes on to say that "[negative] sentiment is more extreme than in 1974". 

These points are quite similar to those made around the same time by Jim Rogers and Marc Faber, who argued that a forced asset liquidation period and extreme negative sentiment were signs of a potential share rally to come, as well as an entry point for long-term share investors in commodities and certain segments of global share markets.

If you enjoyed this interview, you may also want to check out Biggs' follow up appearances at Rose's table.

Clarification: email and RSS subscriptions

Hi gang, just wanted to offer a clarifying note on the Finance Trends blog subscriptions. 

I've received a few email requests recently for our "email subscription" list. At this time, we do not offer a site subscription (or any other material) via email. 

We do show an email icon under the "subscribe to Finance Trends" header in our top right sidebar, but this is simply a contact email link for our readers' convenience. You may, however, subscribe to our blog feed via RSS and follow our real-time updates on Twitter and StockTwits (which I'd encourage all interested readers to do). This should definitely keep you up to date.

 A view of the Finance Trends RSS feed in Google Reader.

I apologize for the misunderstanding on the email link and for any inconvenience this may have caused. Thanks for reading, and we'll see you bright and early next week!

Life imitating The Simpsons: trillion dollar coin edition

Thought surely this #trilliondollarcoin thing was a joke, but no. Life imitating The Simpsons, again: http://t.co/hKgQlaQ $$Fri Jul 29 19:09:51 via webDavid Shvartsman
FinanceTrends

Update: For more on this see Credit Writedown's post on the #trilliondollarcoin meme.

Bloomberg profiles Michael Burry on Risk Takers

Bloomberg TV just aired a special on Scion Capital founder, Michael Burry that is worthwhile viewing for any trader or investor. 

If you missed the program, tune in now for a quick primer on Burry's entry into the investing world and the structuring of his now-famous subprime short CDS trade. This is a great story of how one blogger-turned-investor got his start operating a hedge fund and eventually shifted his focus from common stock value investing to diligently uncovering opportunities in the subprime mortgage and credit markets.

If you'd like to get a much more in-depth view of Burry's struggle to stick with his hugely rewarding trade during the height of the real estate bubble, check out Michael Lewis' book, The Big Short. 

You'll also want to check out the video of Burry's recent lecture on his "big short" trade and America's financial future at Vanderbilt University. 

There you'll find added links to our post on Michael Burry's emergence as a global macro star, plus a great deal of interview material with Burry and author, Michael Lewis (including some Bloomberg interview transcript material you may not have seen). Dig in and enjoy.