“Any sufficiently advanced technology is indistinguishable from magic” – Arthur C. Clarke

In This Issue:

• Strategic Resources/ News
• Game Changers
• Mapping Markets
• Disclaimer

Strategic Resources/ News

For up-to-date news on Market Insights, see my twitter postings:

• 1) Future of Mobile (50 page slideshow)
• 2) How to Spot the Future (Wired)
• 3) A Decentralized Internet? (ExtremeTech)

Game Changers

Think about this – it takes an ecosystem to create Game Changers, which are built on top of other systems or technologies. Consider all that went into the creation of Edison’s Light Bulb. The article Preconditions for Edison’s Lamp points out that “Pioneering work by Franklin, Faraday, Volta, Morse and many others laid a foundation upon which Edison built.”

Many, many variables went into creating Edison’s wonderful invention that literally changed the way we live and work. Just look at three inventions that helped pave the way for Edison:

• Batteries “produced a constant electric current, opening the way for many other discoveries and inventions”
• Generators “could produce much more electrical energy than the magneto”
• Arc Lamps “Edison’s goal lay in “subdividing the light” of an arc lamp”

“If I have seen further it is only by standing on the shoulders of giants” – Sir Isaac Newton

If you really want to understand something, then take a step back and look at what led up to the situation. And this goes double for technology! Technological advancement comes from standing on the shoulders of past technology innovation. Take the Integrated Circuit (which lies at the heart of our most advanced systems today) as an example of standing on the shoulders of giants.

History of Integrated Circuit

As you gaze out into the vast unknown, think about extrapolating current trends (such as energy use) and then look at what things might spring forth.

Many traders, by their very nature, are short-term oriented with the long-term often being next quarter. Even most investors rarely think beyond the next year. So, to really stand out, you may want to think like Newton and look at the next 5, 10, or even 20 years. Just be careful not to end up predicting the future. Instead, build various scenarios and compare those scenarios to the market. Does the market agree with your assessment or not? What is the market really saying? Scenarios are living documents and need to be re-assessed from time-to-time so you don’t get too far off track.

And, don’t forget that arguing with the market is like being the captain of this ship.

Final Thoughts

Companies exist as part of a vast ecosystem and innovation leaps forward by standing on the shoulders of other technology pioneers. For a starting point, extrapolate current trends and then look more closely as to what change might occur.

Please feel free to contact me with your comments or feedback and be careful what you doubt, “Fooling around with alternating current is just a waste of time. Nobody will use it, ever.” – Thomas Edison, 1889

Mapping Markets

FlashBack/ FastForward

Here’s a brainstorming tool that may help that I call FlashBack/ FastForward that you might use to anticipate change. If we look back over the past, say 10 years, we can map out what change occurred and then use that to anticipate changes over the next 10 years. Just to be clear, prediction is not the goal – anticipation is the goal. In fact, you may want to anticipate several scenarios and then look for indicators to help you identify whether or not such scenarios are on track.

Let’s look at the Computer Sector from 2002 to 2012 as an example.

FlashBack to 2002:

In 2002, a typical computer was built with:

• Celeron or Pentium 4 processor
• 256 or 512 Megabytes of Memory
• 30 or 60 Gigabyte Hard Drive
• CD-RW/DVDROM Drive
• CRT’s being replaced by LCD Displays
• Wi-Fi emerging as Standard 802.11 b (11 mbps)

SuperComputers (2000)

• 10^13 Flops
• Cost per GigaFlop = $1,000

__________________

Now look at the world today. In 2012, a typical computer might be built with:

• CeleronD, Atom, or i7 processor (@ least 20x faster)
• 4 or 8 Gigabytes of Memory
• 500 Gigabyte to 1, maybe a 2 Terabyte Hard Drive
• 16, 32, and maybe even a 64 GB SD card
• LCD Displays Standard Ultra-high resolution
• Wi-Fi Standard 802.11 n (up to 450 mbps)

SuperComputers (2010)

• 10^15 Flops
• Cost per GigaFlop = $1.80

And two new forms of computing are now mainstream – Smart-phones and Tablets!

FastForward to 2022:

While it’s hard to know exactly what the future holds, there are signposts to guide us to possible futures. First, Mobile Devices are certain to become the new standard. Second, wireless will be all around us. And, if Moore’s Law holds, computers (who knows if  they will even use that term in ten years) will be anywhere from 100x to 1,000x more powerful.

Here are some websites that may peak your interest on what the future holds:

Chips in Everything
Wireless SD cards

Let me leave you this: “Since we have no choice but to be swept along by [this] vast technological surge, we might as well learn to surf.” – Michael Soule

Best of luck out there in the trenches and drop me a line sometime.

Disclaimer

All material in Byvation is for informational purposes only. Any and all
ideas, opinions, and/or forecasts, expressed or implied herein, should not be
construed as a recommendation to invest, trade, and/or speculate in the markets.
Be advised that Michael Davis and/ or Brencom Business Technologies, Inc. will
not be held responsible for any investment actions that you take as a result of
any information mentioned in Byvation.
____________________________________________

Please share Byvation with your friends and colleagues.

“It is not the critic who counts, not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again because there is no effort without error and shortcomings, who knows the great devotion, who spends himself in a worthy cause, who at best knows in the end the high achievement of triumph and who, at worst, if he fails while daring greatly, knows his place shall never be with those timid and cold souls who knew neither victory nor defeat.” – Theodore Roosevelt

Sponsored by

Brencom
4621 S. Cooper St., #131-289
Arlington, TX 76017
http://www.brencom.com

© 2012 Brencom

“Always in motion is the future” Master Yoda (Star Wars)

In This Issue:

• Strategic Resources/ News
• Game Changers
• Mapping Markets
• Disclaimer

Strategic Resources/ News

For up-to-date news on Market Insights, see my twitter postings:

1. The High Cost And Extreme Stickiness Of Free Stuff (Fast Company)
2. The (rapid) decline of the media industry
3. The Next Digital Decade: Essays on the Future of the Internet (over 500 pages)

Game Changers

One of the key elements of being a Game Changer is economy of scale. Economy of Scale is where costs go down as production goes up. Let’s look at a few examples from history and then we’ll dive deeper into why economy of scale is so important.

Step back a few centuries and look at the Industrial Revolution. Innovations such as the Spinning Jenny (1764), Water Frame (1769), and the Cotton Gin (1793) revolutionized the making of clothing. Prior to these technological innovations, clothing was primarily a domestic chore for families – mostly women. Making clothes for the family was an arduous process, requiring women to devote significant amounts of time to make and repair clothing, who repairs clothing in this day in age? 

As the above innovations came to market, each of them facilitated faster production and more output. As clothes became cheaper (economy of scale), demand increased – soaking up the increased production. Soon … an industry was born!

Another example is Henry Ford’s use of the Assembly Line. Bringing the parts to the worker greatly increased production speeds  – thereby lowering costs significantly. As a result, automobiles became more affordable and the auto industry starting growing by leaps and bounds.  More recent examples include Computer Chips (Design once, manufacture millions or even billions) and Pharmaceuticals (One time, up front R&D costs; then spit out pills for pennies a piece).

So … why is economy of scale important?

Well, every company competes with rivals and needs a competitive advantage. But, where does this competitive advantage come from. The book Competition Demystified lists three sources of genuine competitive advantage:

• Supply (cost advantages that allow a company to produce and deliver its products more cheaply).
• Demand (typically some sort of customer captivity based on habit, switching costs, or substitution difficulties).
• Economies of Scale (costs per unit decline as volume increases).

Entire Nations rise and fall on the ability to effectively create comparative advantage. Sectors/ Industries thrive on generating high margins via Economies of Scale. And, companies within nations and industries alike must lower unit costs in order to 1) increase margins, and 2) lower prices for customers. Companies with massive economies of scale may even end up with so-called natural monopolies, as in the case of Electric Power Generation.

Final Thoughts

Companies must compete with rivals and as such need a competitive advantage. In fact, economies of scale can revolutionize the production of goods (and services) to the point of creating new industries. Just look at history and you’ll see many industries rise and fall as economies of scale make some production methods obsolete.

As you gaze into the future to anticipate change, look for potential economies of scale. What would lower the cost of X? How could the production of Y be increased?

Please feel free to contact me with your comments or feedback and I’ll leave you with this “Intelligence is the ability to adapt to change.” – Stephen Hawking

Mapping Markets

Wow! My history project really opened my eyes. Throughout the 1800′s massive change was thrust upon the world. Then in the 1900′s change accelerated even faster. And, as we sail through the 2000′s, I’m absolutely amazed at the accelerating speed of technological change.

Power, Transportation, and Communication were revolutionized in the 1800′s.

• Power – Steam power increased dramatically in the early 1800′s only to be augmented/ eclipsed by electricity in the late 1800′s
• Transportation – Steamboats and Locomotives drastically altered the landscape – cutting travel times by a factor of 10 or more.
• Communications – Both the Telegraph and the Telephone were invented in the 1800′s and spread like wildfire in the coming decades.

For comparison, let’s look at Power, Transportation, and Communication in the 1900′s.

• Power – Electricity soon took over from steam, which opened the doorway to an alternate reality barely conceivable by previous generations.
• Transportation – While railroads still exist, primarily for cargo, it’s the automobile that takes center stage in the 1900′s. And, now we fly through the air in airplanes.
• Communications – While the Telegraph fell to the wayside, the Telephone marched onward. Over the coming decades, voice communications were revolutionized by fiber-optics, satellites, and digitization (VoIP).

So, what’s in store for the 2000′s. Time will tell. In the meantime, here are a few thinking points.

• Power – It looks like power is destined to be cleaner and more efficient in the 2000′s. Alternative energies are likely to become mainstream and the creation, use, and disposal of products may be radically different.
• Transportation – Naturally the automobile is here to stay (any thoughts on a replacement?). But, who will do the driving? Driver-less automobiles may very well be in the future and the trend towards cleaner, more efficient fuel(s) is likely to continue.
• Communications – The future of communications is mysterious indeed. In my opinion, today’s Internet only scratches the surface of what is to come. I’ll leave this one to future discussions in Byvation.

Let me leave you with this; when you listen to experts, consider that “The longer the explanation, the bigger the lie.” – Chinese Proverb

Best of luck out there in the trenches and drop me a line sometime.

Disclaimer

All material in Byvation is for informational purposes only. Any and all
ideas, opinions, and/or forecasts, expressed or implied herein, should not be
construed as a recommendation to invest, trade, and/or speculate in the markets.
Be advised that Michael Davis and/ or Brencom Business Technologies, Inc. will
not be held responsible for any investment actions that you take as a result of
any information mentioned in Byvation.
____________________________________________

Please share Byvation with your friends and colleagues.

“It is not the critic who counts, not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again because there is no effort without error and shortcomings, who knows the great devotion, who spends himself in a worthy cause, who at best knows in the end the high achievement of triumph and who, at worst, if he fails while daring greatly, knows his place shall never be with those timid and cold souls who knew neither victory nor defeat.” – Theodore Roosevelt

Sponsored by

Brencom
4621 S. Cooper St.
Suite 131-289
Arlington, TX 76017 USA
http://www.brencom.com

© 2012 Brencom

“I have no special talent. I am only passionately curious.” Albert Einstein

In This Issue:

• Strategic Resources/ News
• Game Changers
• Mapping Markets
• Disclaimer

Strategic Resources/ News

For up-to-date news on Market/ Technology Insights, see my twitter postings:

• 1) Facial Recognition – How will it change the way we live?
• 2) Drones, A Game Changer
• 3) Food for thought/Changing Landscape. Who Wins? Who Loses?

Game Changers

Earlier this month I started an in-depth study of Game Changers in the 1800′s & 1900′s and to say the least, it’s fascinating how technology changed (and continues to change) the way we live and work. Although I’ve barely scratched the surface of all the change surrounding the 19th and 20th centuries, I’ve discovered many driving forces behind changes – and that’s the key to understanding the markets. Every day we’re blasted with a fire hose of information.

Here’s a sample from MarketWatch:

“Transports weakness may be a false signal”
“H-P shares sink to one-month low”
“Sears loses money but wins fans”
“Housing crawls out of cellar”
“T-Mobile to spend $4 billion on network buildout”

Okay ….. but what does it mean for the market overall; as well as various sectors, industries, and individual securities? To answer that question, ask why?

Think of the market as a series of waves. The key is to understand what’s causing these waves. Securities are driven by the perception of what the future will or will not bring in the form of profits. In short, the level of knowledge about what’s really going on (the real-world) is what drives prices. So, the question to ask is: what’s going on in the real-world? That’s why some traders are more successful than others – they get to the heart of the matter … what’s really going on and then gauging when that knowledge will be seen by others, thereby driving prices up or down.

Here’s something to think about – the History of Energy:
Intensification: Subsequent technologies were more complex.

Wood – easy to cut, process.
Coal – mining is a much more difficult process.
Oil – drilling is even more difficult.
Nuclear – wow, splitting the atom – now that’s what I call complex.

For some background, take a look at a couple of resources about the history of energy – specifically from the point of the Industrial Revolution until today:

History of Energy
Energy & Society

“While scientists were starting to understand electricity around 1800, the first commercially viable use of electricity came when Edison invented electric lighting in 1878, as a replacement to gas powered lamps.”

Often technology sweeps over the world and we think – wow, that’s really cool, it’s going to change life as we know it. But, in reality, technology develops over time and is rarely an overnight success. Success is a process and requires the right amount of LLC: Land (Land, Space, other Natural Resources), Labor (Physical, Intellectual), and Capital (Money, Equipment i.e. machines/tools, etc.). These three factors determine whether companies, industries, and even whole nations become successful or roadkill – pushed aside on the road to the future. Think about the Industrial Revolution. Why did it start in Great Britain? Here’s a Power-point Presentation that may help you answer that question:

Final Thoughts

The world didn’t just suddenly materialize! Game Changers, even if they look like instant change, percolate over time and then snap – they change the world, or at least that’s the way we see them in the history books. Take some time, map out the various factors to whatever market you’re looking at and ask why? You’ll see the world in a whole new light.

Please feel free to contact me with your comments or feedback and I’ll leave you with this “The only way to discover the limits of the possible is to go beyond them into the impossible.” -Arthur C Clarke

Mapping Markets

Last month we talked about the importance of looking at Themes. Therefore I embarked on a journey into the past – specifically the 1800′s & 1900′s to look for  Political, Economic, Societal, Economic, and Technological events and their corresponding ripple effects on industry and company fortunes. In the following months I’ll be offering up what I hope is a very compelling analysis – especially Game Changers, and of course, lots of thought provoking questions for my fellow traders, strategists, and big thinkers.

Consider Disruptive Innovation, that is technology which is:

• Simple
• Cheap
• Revolutionary

“The future is here. It’s just not widely distributed yet.” – William Gibson

Looking at the past gives us key insights on how and in what directions the future may materialize. Consider how were things:

• Made
• Bought
• Sold

Mark Twain … “History doesn’t repeat itself, but it does rhyme.”

Let me leave you with this – look @ history, it will open your mind. Yes we live in a high-speed, hyper-connected, modern society – but markets are driven by human psychology, and people resist change – especially forced change. Here’s an example to contemplate, the battle between live musicians in movie theaters vs. recorded music

Best of luck out there in the trenches and drop me a line sometime.

Disclaimer

All material in Byvation is for informational purposes only. Any and all
ideas, opinions, and/or forecasts, expressed or implied herein, should not be
construed as a recommendation to invest, trade, and/or speculate in the markets.
Be advised that Michael Davis and/ or Brencom Business Technologies, Inc. will
not be held responsible for any investment actions that you take as a result of
any information mentioned in Byvation.
____________________________________________

Please share Byvation with your friends and colleagues.

“It is not the critic who counts, not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again because there is no effort without error and shortcomings, who knows the great devotion, who spends himself in a worthy cause, who at best knows in the end the high achievement of triumph and who, at worst, if he fails while daring greatly, knows his place shall never be with those timid and cold souls who knew neither victory nor defeat.” – Theodore Roosevelt

Sponsored by

Brencom
4621 S. Cooper St., #131-289
Arlington, TX 76017
http://www.brencom.com

© 2012 Brencom

“If you don’t read the newspaper you are uninformed; if you do read the newspaper you are misinformed.” -  Mark Twain

In This Issue:

• Strategic Resources/ News
• Game Changers
• Mapping Markets
• Disclaimer

Strategic Resources/ News

For up-to-date news on Market Insights, see my twitter postings:

• 1) Imagining the Internet, Past & Present
• 2) Driving Forces
• 3) Is Decoupling Possible in a Global Economy?

Game Changers

Well, it’s 2012 and the world’s coming to an end – Not!

Let me start off by saying that Byvation’s content will be a little different. Instead of looking at today’s Macro Forces, I’ll be focusing on the history that lies at the heart of what’s going on in today’s world. Also I’ll dive into creating some possible future scenarios. To be more focused, most of what I’ll cover is what I call Game Changers – that is those events; be they Political, Economic, Social, or Technology – that really disrupt the status quo.

As Mark Twain said so wisely “History doesn’t repeat itself, but it does rhyme.”

Therefore, I’m embarking on an in-depth study of history as it relates to Game Changers. As I plot out these game changers, I’ll dissect the events in order to understand how change occurs. Just look at Kodak as an example. MIT published an article a few days ago titled Kodak’s Missed Opportunities that talks about how the company’s fate dates all the way back to 1975.

Plus I’ll look at future scenarios and map out where those possibilities may lead. It’s all about change.

“Change is the law of life. And those who look only to the past or present are certain to miss the future.” – John F. Kennedy

As Andy Kessler, a former Hedge Fund manager says, “if you look out into the fog and you can just make out even the outline of what an industry is going to look like, you can buy companies today that will benefit from these structural changes …” And, this is really, really important because Kessler goes on to say that “…usually, all the money is made in the first 5 years. Even for 20-year investment opportunities, the most of money is made in the first 5…”

Final Thoughts

The world is full of opportunity, it’s all around us. All we need to do is open our eyes and see it. And to do that, we must see what’s really going on in the world. History is a critical component in understanding what’s going on because it’s the foundation. Then we can move on to create, to anticipate future change. Notice I said the word anticipate not predict. Lots of experts out there predict the future and most of the time they come up empty. As baseball legend Yogi Berra said it oh so well – “It’s tough to make predictions, especially about the future”

Please feel free to contact me with your comments or feedback and I’ll leave you with this “The mind, once expanded to the dimensions of bigger ideas, never returns to its original size.” – Oliver Wendell Holmes

Mapping Markets

Last year we talked a lot about Contrary Thinking, so I thought it’s about time to talk about something different. In Mapping Markets I’ll cover subjects relating to dissecting markets – such as Innovation, Themes, Tectonic Shifts, and various forms of Ripple Effects. Let’s start off by talking about Themes.

Minute by minute, hour by hour, day by day, and week after week the market jumps all over the place like a pinball machine on steroids. It’s crazy! But … underneath all of this hyperactivity, the collective opinions which we call the market typically expresses itself in what may be called themes. Because of X, Industry Y will jump up (or come crashing back to earth), which in turn will affect Z stocks. Like ocean waves, themes will rise up, crest, and then other waves will take up the lead. The key is to spot upcoming waves early, jump on, and then get off before the wave collapses. To learn more, check out this excellent article in Mercenary Trader titled On the Importance of Themes (and Getting Around)

“Charting is a little like surfing. You don’t have to know a lot about the physics of tides, resonance, and fluid dynamics in order to catch a good wave. You just have to be able to sense when it’s happening and then have the drive to act at the right time.” Ed Seykota

Open your mind, explore the markets’ most inner feelings, and you’ll be amazed how bright the spotlight will be. Best of luck out there in the trenches and drop me a line sometime.

Disclaimer

All material in Byvation is for informational purposes only. Any and all
ideas, opinions, and/or forecasts, expressed or implied herein, should not be
construed as a recommendation to invest, trade, and/or speculate in the markets.
Be advised that Michael Davis and/ or Brencom Business Technologies, Inc. will
not be held responsible for any investment actions that you take as a result of
any information mentioned in Byvation.
____________________________________________

Please share Byvation with your friends and colleagues.

“It is not the critic who counts, not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again because there is no effort without error and shortcomings, who knows the great devotion, who spends himself in a worthy cause, who at best knows in the end the high achievement of triumph and who, at worst, if he fails while daring greatly, knows his place shall never be with those timid and cold souls who knew neither victory nor defeat.” – Theodore Roosevelt

Sponsored by

Brencom
4621 S. Cooper St., #131-289
Arlington, TX 76017
http://www.brencom.com

© 2012 Brencom

“Intuition will tell the thinking mind where to look next.” ~ Jonas Salk

In This Issue:

• Strategic Resources/ News
• Global Macro
• Contrarian View-Points
• Disclaimer

Strategic Resources/ News

For up-to-date news on Market Insights, see my twitter postings:

• 1) Market perception trumps everything
• 2) Self-Confidence – Big Time!
• 3) Multiple ways to invest in Natural Gas (use as template for other securities)

Global Macro

Last month we looked at the ripple effects of sovereign debt without going into much detail on exactly how to go about analyzing ripple effects in general. First and foremost, you must keep the human factor in mind because ultimately all market movement boils down to emotion. Secondly, it helps to break the market into chunks such as: Macro -> Sector/Industry -> Security

Macro:

Macro Forces can and do sweep through the market with massive force – much like a tidal wave. The key is to watch those macro forces that most impact the security you decide to trade. Macro forces affect Sectors differently and must be studied carefully to adjust for unique characteristics of the sector in question. Let’s take Technology as an example. First of all, there are two main revenue sources for technology companies – Business/Government and Consumer spending. Each of these entities is distinctly different from the other and is driven by different macro forces. Consumer spending is largely based on disposable income which may depend in part on Unemployment/Underemployment depending on whether or not the companies are catering to the masses or to the wealthy. Business/Govt spending on the other hand is largely replacement driven and flow through the market in waves over the course of several years. Also, for the business community, productivity enhancement is the driving force whereas consumers are prone to glitz and glamor!

Sector/Industry:

Sectors don’t exist in isolation – they don’t stand on their own. Each sector is intertwined with other sectors and by observing these relationships, the savvy trader can uncover market-moving scenarios on which to base trades. Let’s look at technology as an example. Technology companies buy from suppliers which are not necessarily considered in the technology realm and also they sell to mostly non-technology companies. Consider Opentable (OPEN), a technology company that sells software solutions to restaurants. Looking at Open’s Industry Dynamics: On the Supply side, programming (input costs) are affected by the world-wide labor market, while Open’s customers (restaurants) are subject to the whims of the consumer market.

Security:

Macro and Sector forces largely drive individual security prices, yet security specific factors must be added to the equation. In the case of stocks, each company must meet/ exceed expectations for revenue, profit, and perhaps most importantly – a positive outlook in relation to ongoing expectations for revenue and profit. Otherwise the market will knock down the price accordingly. Technical analysis may add significant value in deciding when to enter/ exit trades.

Final Thoughts

Forces that drive security prices may be categorized as Macro, Sector/Industry, or Security specific. Each force must be considered when trading, especially when looking for Game-Changers which may take weeks, months, and possibly years to fully play out. The key is to look for signs of what lies behind price surges or rapid declines. In other words, look for the underlying cause and then explore the various ripple effects and trade the markets accordingly.

I sincerely hope I stimulated your Trader Mind. Feel free to contact me with your comments or feedback.

Contrarian View-Point

One common misconception is that successful traders must always be in the market – always be trading. With the exception of day-traders, trading doesn’t need to be a constant activity. Recently I came across various materials on the value of sitting still. Although much trading wisdom calls for the absolution of emotions, the fact is that really isn’t possible because humans are emotional creatures. What we can do is to learn to control not eliminate our emotions. After all, the goal of trading is to make money – not be right all the time or even most of the time. Small losses may easily be outweighed by a few large gains. In the markets we must learn to let go – don’t fall into (and stay in) the monkey trap.

Meditation is one of the tools that may help traders in The Art of Sitting Still. Here’s an article that talks about information overload and how meditation can help traders achieve a competitive advantage.

The fact is that the lifeblood of the market is Hope, Greed, and Fear. All around us is a nearly limitless whirlwind of opportunities to go long or short. Attempting to absorb all the information the market generates is like attempting to drink from a fire hose. As you can imagine – that’s not going to work out very well. So, there must be a better way to absorb market information. Actually the key is to generate market insights, not just a simple understanding. Information changes second by second, minute by minute in the market. No one can track everything yet alone make sense of the information. To generate valuable insights into what’s going on requires us to think, and think deeply at that. Meditation helps us to get away from everything and opens our mind to new possibilities – that’s the true value reflection offers.

May you open your mind to explore the markets’ most inner feelings. Best of luck out there in the trenches and drop me a line sometime.

Disclaimer

All material in Byvation is for informational purposes only. Any and all
ideas, opinions, and/or forecasts, expressed or implied herein, should not be
construed as a recommendation to invest, trade, and/or speculate in the markets.
Be advised that Michael Davis and/ or Brencom Business Technologies, Inc. will
not be held responsible for any investment actions that you take as a result of
any information mentioned in Byvation.
____________________________________________

Please share Byvation with your friends and colleagues.

“It is not the critic who counts, not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again because there is no effort without error and shortcomings, who knows the great devotion, who spends himself in a worthy cause, who at best knows in the end the high achievement of triumph and who, at worst, if he fails while daring greatly, knows his place shall never be with those timid and
cold souls who knew neither victory nor defeat.” – Theodore Roosevelt

Sponsored by

Brencom
4621 S. Cooper St., #131-289
Arlington, TX 76017
http://www.brencom.com

© 2011 Brencom

“I’ve missed more than 9,000 shots in my career. I’ve lost almost 300 games. 26 times, I’ve been trusted to take the game-winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed.” ~ Michael Jordan

In This Issue:

• Strategic Resources/ News
• Global Macro
• Contrarian View-Points
• Disclaimer

Strategic Resources/ News

For up-to-date news on Market Insights, see my twitter postings:

• 1) Financial markets have become driven by politics
• 2) Too many indicators?
• 3) Do technology revolutions drive economic revolutions?

Global Macro

Ripple Effects of Sovereign Debt

Leverage is a double-edged sword with a multitude of implications. All around the world, politicians are loathe to cut spending and afraid to raise taxes. Instead they continue to borrow and borrow, and borrow (or print fiat currencies, but that’s another story).

The natural question for traders is: what are the implications (or ripple effects) of continued debt expansion by sovereign nations? How will this shape the trading landscape? As I think about how debt re-shapes world dynamics, a number of implications pop into my head related to Political, Economic, Societal, and Technological factors. To start with, let’s classify countries as Snails (with No/Low Growth) or Gazelles (with Accelerated Growth).

PEST

Political/ Economic

Snails:
Austerity measures may be order to stave off more serious future consequences. While tempted to kick the can down the road, a tipping point will eventually be reached where the shit hits the fan – most likely resulting in serious economic damage. Politicians focused on keeping their positions of power often play a dangerous game of chicken with national economies. If (when) the train wreck comes, the question to ask is will it be Deflation or Inflation that rules the day. Deflation may result if economic growth slows drastically and if consumers and businesses retrench too much, it will wreak havoc on a country for many years to come. Inflation on the other hand may be more manageable – if it doesn’t spiral out of control into hyper-inflation and if governments don’t clamp down too hard – causing another market crash.

Gazelles:
Inflation is a major concern. In an effort to further boost growth, even Gazelles may over-stimulate, thereby causing too much inflation. Therefore, political and monetary measures to stimulate the economy must be carefully measured.

Societal

Snails often suffer high unemployment rates and even civil disruptions ranging from simple protests to outright mob violence.

Gazelles tend to suffer less unemployment, yet must remain on guard as wage increases may flame the inflation monster.

Technological

Snails, with less money sloshing around the country, may struggle to fund/ jump-start the industries of the future. Furthermore, business may significantly decrease capital spending and consumers may hold off on discretionary spending – such as electronics, as they dive in to survival mode.

Gazelles are much better equipped to jump-start future technologies, yet they must be sure to arouse enough domestic demand to offset less demand in Snail countries.

Inter-Market Effects

In the end, perception of No Growth (Deflation) / Growth (Inflation) scenarios around the world accounts for a significant share of market movement. What should traders keep their eyes on?

Deflation

• The USD$ rallies significantly, staking out new highs.
• Interest rates will tend to fall and bond prices will correspondingly rise. To watch: TIPS, 10/ 30 yr. Treasuries
• Commodity prices by the very nature of deflation will fall, although some commodities (such as precious metals) may spike if doomsday scenarios play out whereby national economies experience a loss of confidence domestically and/ or internationally.
• Stocks in general are likely to decline due to diminished demand for products, although this may vary sector by sector depending whether the sector is defensive or non-defensive in nature. You might want to keep an eye on the S&P Sector ETFs which may be split into Offensive (Risk on) and Defensive (Risk off); Offensive: XLF,XLY,XLK,XLI,XLB | Defensive: XLE,XLP,XLV,XLU.

Inflation

• A declining USD$ is both a cause and consequence of inflationary pressure.
• Interest rates will tend to rise and bond prices will correspondingly fall. To watch: TIPS, 10/ 30 yr. Treasuries.
• Commodity prices by the very nature of inflation will rise, although some commodities may fall if inflation gets out of control. For example, agricultural products may fall in price if demand falls off due to consumer substitution or avoidance if the price rises too much.
• Stocks in general are likely to rise, although this will vary sector by sector. As an example, companies unable to pass along input price (wage or product) increases will suffer unless they can mitigate such costs in other ways.

Final Thoughts

Countries around the world might be divided into Snails (with No/Low Growth) or Gazelles (with Accelerated Growth). Economic growth is in large part the deciding factor on the rise and fall of financial markets. Governments, in an effort to boost economic growth, often intervene and lately they’ve done so by adding huge amounts of debt to their balance sheets.

Fortunately for traders, we live in a world where you can go long or short. Based on history, economies are likely to either deflate or inflate – although politicians sheepishly call for a smooth ride as everything magically works out. So be on the lookout for signs/ continued signs of either deflation or inflation and then follow-up with a look at each scenario’s ripple effect – then take action in the markets accordingly.

I sincerely hope I stimulated your Trader Mind. Feel free to contact me with your comments or feedback. Until next month!

Contrarian View-Point

Contrarians by their very nature must challenge assumptions, which naturally are the mother of all screw-ups.

Once common assumption amongst investors/ traders is that past earnings growth is a serious indicator of future growth prospects. Although it may seem natural for this to be true, it may be deeply flawed. Earnings tell you what happened in the past – usually for the past quarter or year. Earnings or EPS Growth is not a crystal ball – it does not tell you what will happen next. What traders need to do is to dig deeper into what’s going on beneath the surface. Just like an iceberg, 90% of what drives the market is buried deep – way beyond mere numbers and statistic measurements. Remember that markets are made up of people and people are driven by emotions.

Actually Traders, especially for those with mid to long-term time horizons, need to dig deeper into what’s the underlying story. The underlying story is what the Smart Money relies on when they place their bets. And, the reason they’re so Smart is that they look at the Big Picture. Retail investors get swept up in the moment, jumping on the trend de jour. At the other extreme are institutional investors who in essence are the market in that they shift billions of dollars around each day. Slipping between the cracks are obscure hedge funds and market savvy traders.

“The secret to being successful from a trading perspective is to have an indefatigable and an undying and unquenchable thirst for information and knowledge.” ~ Paul Tudor Jones

Best of luck out there in the trenches and drop me a line sometime.

Disclaimer

All material in Byvation is for informational purposes only. Any and all
ideas, opinions, and/or forecasts, expressed or implied herein, should not be
construed as a recommendation to invest, trade, and/or speculate in the markets.
Be advised that Michael Davis and/ or Brencom Business Technologies, Inc. will
not be held responsible for any investment actions that you take as a result of
any information mentioned in Byvation.
____________________________________________

Please share Byvation with your friends and colleagues.

“It is not the critic who counts, not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again because there is no effort without error and shortcomings, who knows the great devotion, who spends himself in a worthy cause, who at best knows in the end the high achievement of triumph and who, at worst, if he fails while daring greatly, knows his place shall never be with those timid and cold souls who knew neither victory nor defeat.” – Theodore Roosevelt

Sponsored by

Brencom
4621 S. Cooper St., #131-289
Arlington, TX 76017
http://www.brencom.com

© 2011 Brencom

“If you want to predict how people will behave, just look at their incentives” – Charlie Munger

In This Issue:

• Strategic Resources/ News
• Global Macro
• Contrarian View-Points
• Disclaimer

Strategic Resources/ News

For up-to-date news on Market Insights, see my twitter postings:

• 1) Not all disruptions (or disruptors) are equal
• 2) Apply What You Learn or Stop Learning!
• 3) Trade Like a Navy Seal

Global Macro

In a recent paper on the Global Economic Outlook by Societe Generale there’s a Risk Map on page 14 that outlines several possible upside and downside Game Changers that you may want to use as Food for Thought as you contemplate Bullish and Bearish scenarios.

On the upside are:

- German Consumer Boom
- New EEM Boom
- Upside US Growth Surprise

On the downside are:

- MENA Tumult Spreads
- Japan Spillover
- China Hard Landing
- New Euro Turmoil
- US Treasury Sell-off

While it’s fairly easy to dream up a list of potential Black or even Grey Swans, it’s really hard to actually spot such events ahead of other Traders and Investors. When billions of dollars are plunked down every day in the market, you can imagine the ferocity that goes into gaining even the slightest edge. Information is typically injected into the market slipstream for all to see. Yet, information is only the tip of the iceberg. Insights, that is information taken in context, on the other hand are tough to come by and are hoarded like water in the desert.

Of course, I do create insights on various markets, but I share these sparingly for a number of reasons such as 1) I’m out to gain a trading edge, and 2) more importantly, insights are highly perishable. Insights must be acted upon quickly, lest they be discovered by others – then prices and spreads are bid up and the opportunity to profit vanishes into thin air.

Instead I’m here to offer food for thought on how to discover insights for yourself (or through teaming up with others).

“…the average man doesn’t wish to be told that it is a bull or bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He does not wish to work. He doesn’t even wish to have to think. It is too much bother to have to count the money that he picks up from the ground.” – Jesse Livermore

1) Use passion to your advantage, e.g. I love futuristic technologies.
2) Look at History. “History doesn’t repeat itself, but it does rhyme.” – Mark Twain
3) Compare markets – Perf Charts and ratios on StockCharts.com
4) Brainstorm – alone if you must, although the power of brainstorming rises exponentially in small groups.
5) Take action – but, be ready to shift with the market. Pick a fight with the market and you may as well go swimming with Great White Sharks.

Final Thoughts

Every day the Financial Markets wreck havoc on unsuspecting Traders. Black and Grey Swans shift like tectonic plates under the earth. Then, boom! Earthquake. Yet, it’s these tectonic shifts that create massive potential opportunities in the market. The key is to sift through the whirlwind of information flying around and generate insights that others don’t yet see. Then, and only then are you ready to take massive action.

Although I do enjoy exploring Global Markets, I absolutely love stimulating the minds of my fellow traders. Please feel free to email me with your comments or feedback. Until next month!

Contrarian View-Point

Stop being brainwashed!

Market information rushes at us like a Tidal-Wave and many Traders feel the need to Open-Wide in the futile effort to get more information than the other guy. Well, it doesn’t work that way. First of all, information isn’t worth much – it’s distilled information (insights) that are worth their weight in gold. And, secondly, most of the so-called information is actually propaganda cleverly disguised as news. Every news source is biased to some degree. Look at Fox, it leans to the Right politically and offers up lots of commentary catered to its’ targeted audience. The same goes for MSNBC, except it caters to the Left.

“Opinions have vested interests just as men have.” – Samuel Butler

Although the market tells its’ story through Price and Volume, that’s boring. TV needs to spice it up to make it entertaining. And, think about all of the so-called experts that are hauled in front of the TV for all of us to see. Why are they offering there opinion, or valuable insights? Everyone has an Agenda! My gut tells me that many Financial News Guests give their opinion in an effort to enhance their reputation so that they can sell more newsletters, or raise more money for their hedge/mutual fund. Then again, others may be using the spotlight to push their trades deeper into the plus column by getting others to buy or sell certain securities.

To not be brainwashed means to think for yourself.

“To be nobody but yourself in a world which is doing its best, night and day, to make you everybody else means to fight the hardest battle which any human being can fight; and never stop fighting.” – e.e. cummings

Looking at the world rife with bias and hidden agendas isn’t easy, yet it is a powerful tool in understanding the market’s real story. As an experiment, look at Financial News from known biased sources. Then look for the hidden agenda. It may be political, or financial, then again it may simply be somebody looking for an ego boost. Look hard enough and you’ll start seeing the news in a whole new light – much like the way Neo (in the movie The Matrix) sees the world as people who are part of the system walk around him (video).

Best of luck out there in the trenches and drop me a line sometime.

Disclaimer

All material in Byvation is for informational purposes only. Any and all
ideas, opinions, and/or forecasts, expressed or implied herein, should not be
construed as a recommendation to invest, trade, and/or speculate in the markets.
Be advised that Michael Davis and/ or Brencom Business Technologies, Inc. will
not be held responsible for any investment actions that you take as a result of
any information mentioned in Byvation.
____________________________________________

Please share Byvation with your friends and colleagues.

“It is not the critic who counts, not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again because there is no effort without error and shortcomings, who knows the great devotion, who spends himself in a worthy cause, who at best knows in the end the high achievement of triumph and who, at worst, if he fails while daring greatly, knows his place shall never be with those timid and
cold souls who knew neither victory nor defeat.” – Theodore Roosevelt

Sponsored by

Brencom
4621 S. Cooper St., #131-289
Arlington, TX 76017
http://www.brencom.com

© 2011 Brencom

“If you don’t risk anything, you risk even more” – Erica Jong

In This Issue:

• Strategic Resources/ News
• Global Macro
• Contrarian View-Points
• Disclaimer

Strategic Resources/ News

For up-to-date news on Market Insights, see my twitter postings:

• 1) Nine Ways To Light Your Creativity ON FIRE
• 2) Open your mind – TED
• 3) Being “Right” vs. Making Money

Global Macro

Game Changers

Recently I read a Harvard Business Review (HBR) article titled The New M&A Playbook by Clayton Christensen (& others). While HBR typically resonates mostly with C-Level executives, a phrase certainly caught my attention: Why Disruptive Businesses Are Worth So Much. Reading on, the article stated “What produces a dramatic increase in a company’s share price? Growth that investor’s weren’t predicting”

And, in my opinion, they’re absolutely right. Disruptive innovation can create astronomical (and unexpected) profits, thereby driving share prices through the roof. This begs the question – how do you find disruptive companies to trade? Naturally my crystal ball is missing, oh wait a minute – I don’t have a crystal ball, and neither does anyone else. So let me offer some of my opinions on how to find Game Changers.

Game Changers by nature are elusive and may arise from a variety of factors involving PEST (Political, Economic, Societal, Technology) variables. Let’s take technology as a prime example, since it serves up a huge slice of Game Changers. Consider NetFlix (NFLX), a movie rental business. In its’ infancy (IPO – 2002), NetFlix didn’t really change the industry much – in fact, it lost money. Instead, it slowly crept into our living rooms, and before we knew it, millions were renting and then later – streaming movies all over America. Or look at Apple (AAPL) and how it rose up from the ashes.

By the mid-1990′s Apple was essentially left for dead. Then in 1997, Steve Jobs rejoined Apple as interim CEO and he later jump started Apple with the introduction of the iPod in 2001, which was the first of Apple’s long line of “i” products. Apple’s stock soared from about 2003/2004 until the 2008 market massacre. As the markets turned bullish, Apple sprang back to life yet again – up, up, & away. For a brief moment in time, Apple even became the most valuable company in the world – even more than mighty Exxon Mobile (XOM).

Finding the Next Big Thing, I’m sorry to say, is not easy. Yet, there are ways to improve your odds:

1) Burn the midnight oil. Research looks to be the best way to spot Game Changers because until they hit the spotlight they are mostly ignored by analysts and the main-stream media. And, by the time they hit the spotlight – the price’s already rocketed. Look at up and coming shifts in the landscape. For example, GRIN (Genomics, Robotics, IT, Nanotechnology) represents a cluster of technologies that are reshaping the world we live in. Read Blogs, Newsletters, and Magazines (on-line of course). Watch videos on forthcoming technologies – i.e. MIT, TED, and other cutting edge stuff.

2) Think Deeply. Between reading and action comes Thinking

“Thinking is the hardest work there is, which is probably the reason why so few engage in it” – Henry Ford

This seems to be the missing link among many traders.

Here are some things to think about:

1) What’s the size of the potential market? If the potential market is too narrow, then it doesn’t matter how great the breakthrough is, enough profit just won’t materialize.

2) Ask yourself, what’s so special about the product (service)?

3) How will the company fend off competitors? If it can’t, then profits may fizzle and the stock crashes.

4) Hold on tight and let it ride.

Game Changers may lurch forward suddenly, tempting traders to take a quick profit. Of course, there’s nothing wrong with taking profits – but to fully capitalize on the full potential of Game Changers may take months or even years.

Final Thoughts

Financial Markets are full of opportunities and Game Changers lurk beneath the surface all over the world. Political winds shift, Economic growth soars, stagnates, and crashes, Consumers are fickle within various Societies around the world, and Technology is often at the forefront of change as it brings the impossible to life. The key to finding the Next Big Thing is Research, Thinking, and going the distance. The past may offer some inkling into the future, but there’s much more below the surface – you must dig, and dig, and dig – then, and only then do you stand a chance of uncovering future rocket stocks.

I absolutely love stimulating the minds of my fellow traders and exploring Global Markets – I hope you do too. Please feel free to email me with your comments or feedback. Until next month!

Contrarian View-Point

Duality

Duality is a key concept in thinking as a contrarian and that’s really important in looking at Threats and Opportunities.

Aman Motwane is the author of The Power of Wisdom – When you change how you see the world, your whole world changes. This is especially true in the financial markets thanks to that ever-pervasive emotional state called confirmation bias. A lot of people, including traders, are locked into seeing what they want to see. Even worse is the fact that humans are ruled by herd instinct; which is why Fear, Hope, and Greed continue to drive the financial markets.

Duality looks at the concept that nothing exists without its opposite! Look at a coin – it has two sides, yet nearly all of us think in terms of heads or tails, but not heads and tails simultaneously. So many traders lock in on a certain view of the market, be it bullish or bearish, and stubbornly cling to any information that confirms their viewpoint. They follow the herd instinctively. They watch the same TV programs, they read the same blogs and newsletters. And of course they religiously follow Investor’s Business Daily or the Wall Street Journal.

The problem is that “If you do what everyone else is doing — if you read what everyone else is reading — then by definition, you will be stuck at ordinary.” And that’s what most traders (not Byvation readers of course) end up accepting – average performance.

“A trader should have no opinion. The stronger your opinion, the harder it is to get out of a losing position” – Paul Rotter

Using duality, you could go one step further and hold two opposite opinions at the same time, and then let the market tell you which one is right. Visualize in your mind both scenarios – the market soaring and the market crashing – then look for clues as to which one is right. In doing so, you’re letting the market tell you what moves to make. Plus you can use duality to look at the various ripple effects within markets.

Every move in the markets sends out a cascading set of waves throughout other markets. Everything doesn’t go up and everything doesn’t go down – money must flow somewhere. The financial markets are one entity – the market for money. If one company crashes, others will benefit – the key question is which one(s). If a certain commodity goes up/ down, the question to ask is who will that help/hurt – then move on to explore the rippling effect through the markets. And, be ready to switch to your other opinion just as quickly if the market says that opinion is the right one (at the moment).

Although duality may be somewhat obscure, it can be a powerful tool in your ability to think outside the norm – resulting in above average, maybe even stellar performance. I sincerely hope this stimulates your trader’s mindset. Up, Down, Up, Down … that’s the market for you. Hope you’re out there looking at the flow of money – where’s it going – and then capitalizing on those insights.

Best of luck out there in the trenches and drop me a line sometime.

Disclaimer

All material in Byvation is for informational purposes only. Any and all
ideas, opinions, and/or forecasts, expressed or implied herein, should not be
construed as a recommendation to invest, trade, and/or speculate in the markets.
Be advised that Michael Davis and/ or Brencom Business Technologies, Inc. will
not be held responsible for any investment actions that you take as a result of
any information mentioned in Byvation.
____________________________________________

Please share Byvation with your friends and colleagues.

“It is not the critic who counts, not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again because there is no effort without error and shortcomings, who knows the great devotion, who spends himself in a worthy cause, who at best knows in the end the high achievement of triumph and who, at worst, if he fails while daring greatly, knows his place shall never be with those timid and cold souls who knew neither victory nor defeat.” – Theodore Roosevelt

Sponsored by

Brencom
4621 S. Cooper St., #131-289
Arlington, TX 76017
http://www.brencom.com

© 2011 Brencom

“Intelligent people know others.
Enlightened people know themselves.
You can conquer others with power,
But it takes true strength to conquer yourself.”
-Lao Tzu

In This Issue:

• Strategic Resources/ News
• Global Macro
• Contrarian View-Points
• Disclaimer

Strategic Resources/ News

For up-to-date news on Market Insights, see my twitter postings:

• 1) Visualization Of The U.S. Labor Market Over The Past 150 Years
• 2) Mastering the Machine: Ray Dalio / world’s richest and strangest hedge fund
• 3) The Technologist In Maid’s Clothing: Shifting definitions play havoc on Strategists/ Traders

Global Macro

Recently I saw an article in TechCrunch titled: Google’s Six-Front War that’s an interesting piece worthy of more in-depth study. Be sure to keep in mind that (at least for traders/ investors) the ability to satisfy customers and generate revenue is secondary to the company’s ability to generate profits.

The six fronts covered are:

• Browser
• Mobile
• Search
• Local
• Social
• Enterprise

Let’s look at each of these in more detail to explore its’ potential to generate earnings.

Browser:
Google’s Chrome is actually a browser and an operating system (O/S). What’s most critical for Google (GOOG) is to drive users to surf the web using its’ browser – thus exposing him or her to Google’s Ads. Other browsers are not a real problem for Google unless users are swayed away from using Google’s search engine because Search is Google’s Bread & Butter.

Mobile:
Google, just like everyone else with an ounce of foresight, saw the world becoming hyper-mobile. Apple’s i-line of products (i-pod,iphone,ipad) cracked open their respective markets and in the end offered portable computers that fit in your pocket or portfolio. Naturally, Google wasn’t going to sit still and let Apple put rival search engines ahead of its’ own – so it introduced Android to offer an alternative development platform, thereby eliminating Apple’s quest for absolute mobile dominance. Android also offers up the potential for App Revenue, which is slowly growing in part because Killer Apps are difficult to come by in a highly fragmented market. Apple’s (AAPL) business model is highly dependent on its App Store, and Google knows this and that’s why it’s attacking this market.

Search:
As I mentioned above, Search is Google’s Bread & Butter, its’ Cash Cow. For all practical purposes, Google is an Advertising company. On Android devices, Google better controls the user-experience which is paramount since they are facing down Microsoft’s Bing and people are also spending a lot of time on Facebook, which scares Google. One of the key questions to contemplate is how well Google will be able to integrate socializing & location-based services into its business model. Google’s future is absolutely pinned to the mobile experience.

Local:

Most people spend the vast majority of their time in the real world and Google wants a piece of that action. Every search in Google gives the company a monetization opportunity (click-through). Off-line is wide-open and is very much in the early stages of being monetized. Some earlier movers are OpenTable (OPEN) which facilitates restaurant reservations, and GroupOn which offers up daily special coupons from local businesses. Foursquare is yet another up and comer looking to capitalize on the social nature of mobile computing.

Social:
Google + is facing off against Facebook in a heated battle. The web is fast becoming socialized and that hurts Google’s ad model because less and less information is available to be searched, indexed, and ultimately monetized through advertising. Facebook, LinkedIn (LNKD), and search sites such as Quora wall-off sections of the web and interfere with Google’s ability to index all of the web; more data/information = more searches = more ad revenue. Google’s latest attempt to fight off this trend is Google + which is an effort to monetize personal relationships.

Enterprise:
Google also competes with many enterprise players such as IBM, Microsoft (MSFT), Amazon (AMZN) through its’ Cloud Computing efforts which include productivity applications. Adjacent to that front is the Google’s Chromebook which may serve as an entry point into enterprise computing. By its’ very nature, the Chromebook is a radical departure from traditional computing. As a cloud(server)-centric device, the Chromebook aims to launch us into the cloud-era where everything resides in an ever-expanding cloud which of course needs to be indexable/searchable and ultimately monetized primarily through advertising.

Final Thoughts

Our world is changing fast and technology is driving much of that change. And, Google is a the forefront of much of that change. Therefore it is key to study the company for insights on what the future of tomorrow will look like. While some Traders may be able to dodge in and out of GOOG, my personal feeling is that the most important reason to study Google’s Battlefield is that it offers insight into other (smaller) industry players. What side of the battle will they find themselves? Will they be on the winning side? Or, will they be trapped behind enemy lines? The first case presents long opportunities, while the latter offers up short plays.

Although I enjoy exploring Global Markets, I absolutely love to stimulate the minds of my fellow traders. Please feel free to email me with your comments or feedback. Until next month!

Contrarian View-Point

Being contrarian doesn’t mean oppositional. Fighting the market is not only stupid, it’s suicidal. Smart Money is contrary while dumb money thinks mainstream.

Think of a chess game. Amateurs usually plow ahead and trade pieces often, whereas professional players will exploit this tendency to their advantage. Looking ahead a few plays, a pro will notice that if they offer up bait to the other less agile player, then they will quickly win the game. Greedily the less agile player will snap up the piece offered to them to the point of celebration. Then, bam — the pro strikes and the other player suddenly realizes the error of his/her way.

The same scenario plays out in financial markets across the world. Two factors play out routinely: information asymmetry and mass psychology. Lets’ look at each of these factors and how you can use them to your advantage.

Information asymmetry

Ill-distributed information is what makes trading/ investing exciting & profitable. Few profit opportunities would exist if everyone had access to the same information. The fact is that information is spread far and wide in the financial markets. As information disseminates, financial players of all types crank out trades and send signals to the market at large.

Mass psychology

Supercomputers crunch the financial data of companies everywhere and spit out key numbers and ratios, which analysts then use to back up their point of view. Every Tom, Dick, and Harry on the Internet slices and dices the Price & Volume of financial transactions into a seemingly infinite number of trading indicators all in the quest to understand the psychology of the market. It is psychology that drives the market and the market tells a story every second of every trading day.

A key way to capitalize on trading in the financial markets is to act more like the Smart Money, being contrary to what’s flowing across the TV screen. By the time information is crunched, torn apart by analysts, and then projected on the TV screen – that information is way too old. Instead, you need to look at the underlying story that the market is telling – if only you’ll listen.

I sincerely hope this stimulates your trader’s mindset. Up, Down, Up, Down … that’s the market for you. Hope you’re out there looking for what’s really going on and capitalizing on the hidden story.

Best of luck out there in the trenches and drop me a line sometime.

Disclaimer

All material in Byvation is for informational purposes only. Any and all
ideas, opinions, and/or forecasts, expressed or implied herein, should not be
construed as a recommendation to invest, trade, and/or speculate in the markets.
Be advised that Michael Davis and/ or Brencom Business Technologies, Inc. will
not be held responsible for any investment actions that you take as a result of
any information mentioned in Byvation.
____________________________________________

Please share Byvation with your friends and colleagues.

“It is not the critic who counts, not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again because there is no effort without error and shortcomings, who knows the great devotion, who spends himself in a worthy cause, who at best knows in the end the high achievement of triumph and who, at worst, if he fails while daring greatly, knows his place shall never be with those timid and
cold souls who knew neither victory nor defeat.” – Theodore Roosevelt

Sponsored by

Brencom
4621 S. Cooper St., #131-289
Arlington, TX 76017
http://www.brencom.com

© 2011 Brencom

“Think big, think positive, never show any sign of weakness. Always go for the throat. Buy low, sell high. Fear? That’s the other guy’s problem…” Louis Winthorpe III (Trading Places)

In This Issue:

• Strategic Resources/ News
• Global Macro
• Contrarian View-Points
• Disclaimer

Strategic Resources/ News

For up-to-date news on Market Insights, see my twitter postings:

• 1) Console vs. PC redux: reshaping the industry (again)
• 2) Web apps get the ultimate endorsement: Windows 8
• 3) Four part series on the Internet
  a) Secretive governments
  b) The West
  c) Dark Web
  d) Internet Flaws

Global Macro

Last month we talked a a little about Mobility and Cloud Computing. Well, the war is on for the Cloud. While there are stragglers such as the Blackberry (RIMM), and WebOS (HPQ), the real battle is being fought by the likes of Apple (AAPL), Microsoft (MSFT), and Google (GOOG). Let’s look at each of these contenders:

Apple

Apple’s iOS looks to be firmly mobile oriented in that its’ primary focus is Native Applications. Apple’s most recent iOS5, coming in the fall, synchronizes data in the (drum roll ……) iCloud!

Software updates will finally cut the cord as they’re pushed over-the-air. Apple’s vision of Cloud computing seems to be to offer up a plethora of native apps on its i-line of products and use the internet to synch up things in the background.

Microsoft

Like Apple, Microsoft is also mobile oriented with its’ Windows extension strategy. Microsoft’s business model focuses on selling desktop-centric software. Phones and Tablets are merely another desktop for the Windows family of products such as Microsoft Office. So far, Microsoft’s foray into the cloud is quite limited because it must protect its’ Windows legacy. Just like Apple, cloud computing means cloud + software.

Google

Like Apple and Microsoft, Google’s Android platform is mobile-oriented. However, Google is testing the waters with its’ Chrome OS. Google is at its core a cloud-based company with an advertising-based business model. Unlike Apple and Microsoft, it doesn’t sell hardware or native software applications. Its version of cloud-computing is simple – replace desktop software with the web.
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Native applications vs Cloud Computing is what the Cloud war is all about. Huge fortunes and losses ride on the outcome. In one corner are the traditional/ mobile-oriented companies such as Device manufacturers (PCs, Phones, Tablets), Software companies, and Telecommunication companies. In the other corner are Cloud-based companies such as Google (GOOG), Facebook, and Twitter on the consumer side; and companies such as Amazon (AMZN), Netsuite (N), and Salesforce.com (CRM) on the business side.

Cloud-computing pales in comparison when stacked up against today’s desktop-centric behemoths. Google, by far the largest Cloud-based company, weighs in at about 1/2 of Apple’s Market Cap. However, if there’s one constant in the world of technology, it’s change.

An earthquake can send a Tsunami half way around the world, and so can disruptive technology. Keep an eye on the horizon to see how companies are dealing with the shifting technology winds. Just look at the past decade. Out of the Tech bubble ashes, sprang to life the likes of Google, Facebook, and Twitter (now household names). Apple, once considered a sinking ship, soared to new heights with its line of i-gadgets and innovative software.

Final Thoughts

Massive trading opportunities may emerge over the next few years – both long and short. A shift to cloud-computing will create many winners and losers. Traders who spot technology changes early will be well positioned to score big with the key caveat being timing. Timing in technology is paramount. Just look at Apple’s stock over the past 5 years and you’ll see that it was one wild ride.

As always, I look forward to exploring Global Markets and sharing some of my insights with my fellow traders. Please feel free to email me with your comments or feedback. Until next month!

Contrarian View-Point

“Buy when there’s blood in the streets” – Baron Rothschild

Hot and Cold: When markets get steamy hot, the smart money may already be sneaking out the back door. And, when the market’s freezing, savvy traders stealthily buy into the market under the cover of darkness. Most investors/ traders are, as Samuel B. Pettengill states, Slaves to They where individuals subjugate their own thinking to focus on what THEY think.

Contrary thinking pays off big, especially at the ends – that is at the top (getting out or going short) and at the bottom (going long). The key of course is to look at what’s soaring, and what’s absolutely tanking, in order to create a starting point as to the underlying story behind the market. An excellent resource to do this is FinViz’s Bubble Charts.  At a glance (June 20) I see that a lot of bond ETFs (BSV, MINT, SHY) are at the top of the list; whereas India (PIN) and Vietnam (VNM) float near the bottom. Another way to look segment market performance is to look at Investor Business Daily’s Sector or Industry rankings.

As you compare and contrast various sectors, industries, and individual securities, you may be able to uncover hidden drivers that are moving the market. In doing so, you’ll possess an edge which you can use to extract profits from the market.

Right now the market certainly offers a wild ride; so get out there and look for what’s really going on – the hidden story. It was great sharing some of my insights and thought catalysts with you and as always I look forward to hearing from my fellow traders.

Best of luck out there in the trenches.

Disclaimer

All material in Byvation is for informational purposes only. Any and all
ideas, opinions, and/or forecasts, expressed or implied herein, should not be
construed as a recommendation to invest, trade, and/or speculate in the markets.
Be advised that Michael Davis and/ or Brencom Business Technologies, Inc. will
not be held responsible for any investment actions that you take as a result of
any information mentioned in Byvation.
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