Improve cognition
Re-frame your thinking non-stop
Draw connecting nodes
Saturday, February 16, 2013
Expanded Consciousness and Entrepreneurship
It's genius time once again here at Alfidi Capital. I shine the spotlight on innovation whenever I can and some really bright folks are doing stellar work on how innovators can maximize their cognitive abilities.
The Expanded Consciousness Institute is mathematician Tom McCabe's project for showing entrepreneurs how they shift effortlessly between six different perspectives. The basic principle is that a human's thought process reflects a dihedral group governed by mathematical relationships. Each perspective contains a portion of the information needed to solve a problem, but the best innovators can integrate them all.
Tom McCabe developed the cyclomatic complexity metric for measuring the complexity of software code. I think the logical subsequent application of his Expanded Consciousness work is to develop a control flow graph for entrepreneurial decision-making. What would be the analogies between the graph's elements and real-life startup operations?
Reachability: Any task not directly related to a milestone in fundraising, technology development, or marketing can be aborted.
Infinite loop: The "paralysis of analysis" that leads to endless meetings with no problem resolution.
Dominator: A decision point requiring a yes/no decision from the CEO.
You know something, I'm starting to think that computer scientists and mathematicians would make excellent business process consultants and project managers. They already have an intellectual structure that lends itself to business processes. Hand them a PERT/CPM chart and they'll probably grasp it intuitively.
The Expanded Consciousness Institute is mathematician Tom McCabe's project for showing entrepreneurs how they shift effortlessly between six different perspectives. The basic principle is that a human's thought process reflects a dihedral group governed by mathematical relationships. Each perspective contains a portion of the information needed to solve a problem, but the best innovators can integrate them all.
Tom McCabe developed the cyclomatic complexity metric for measuring the complexity of software code. I think the logical subsequent application of his Expanded Consciousness work is to develop a control flow graph for entrepreneurial decision-making. What would be the analogies between the graph's elements and real-life startup operations?
Reachability: Any task not directly related to a milestone in fundraising, technology development, or marketing can be aborted.
Infinite loop: The "paralysis of analysis" that leads to endless meetings with no problem resolution.
Dominator: A decision point requiring a yes/no decision from the CEO.
You know something, I'm starting to think that computer scientists and mathematicians would make excellent business process consultants and project managers. They already have an intellectual structure that lends itself to business processes. Hand them a PERT/CPM chart and they'll probably grasp it intuitively.
Friday, February 15, 2013
Can Crowdsourcing Limit Algorithimic Trading?
The Gold Report has John Kaiser's interesting take on the TSX Venture Exchange. The exchange is at risk because the inevitable collapse of nonviable junior resource companies will deter more successful juniors from listing on the exchange. Crowdsourcing opinions on junior stock valuation may be a way out.
The discrete information provided by NI 43-101 reports leaves wide gaps in time that algorithmic traders can explore. Mr. Kaiser argues that adding crowdsourced estimates of mining project NPV and IRR would add market information that arbitrageurs strip away from share prices. I think that's a neat idea and I'd like to see it work. Let me throw out some hurdle questions.
How would you protect the integrity of the crowdsourced ratings from manipulation? Adapting Yelp's model works if the crowdsource platform uses a project's 43-101 data. The real problem is ensuring the identity of the crowdsource participants. Software that can create and manage multiple identities in real time exists. Unscrupulous parties could use multiple identities to game the project ratings on a portal. We'll need more than CAPTCHAs to fix it.
What is a sufficient critical mass of crowdsource ratings for a project? Hedge funds can execute millions of trades per day in deeply liquid markets. Crowdsourcers can render ratings on dozens of stocks several times per day. Measuring impact by frequency of execution leaves hedge funds the clear winners. The discrete number of crowdsourcers who publish project ratings would have to be numerous enough that their combined ratings approach the daily average traded volume of the project's associated ticker symbol. That is hard enough to do for large-cap stocks with huge volumes on major exchanges. The smaller daily volumes for thin issues on the TSX-V are an easier hurdle to leap for crowdsourcers. There's probably a shortcut to creating meaningful data, with an entrepreneurial opportunity for a portal that can build in the statistical corrections Mr. Kaiser suggests.
I think an existing equity crowdfunding portal could easily build out the tech that would enable such crowdsourced opinions. The portal that gets there first will have a value-adding service built for non-accredited investors who will soon be allowed to invest in private placements under the JOBS Act.
The discrete information provided by NI 43-101 reports leaves wide gaps in time that algorithmic traders can explore. Mr. Kaiser argues that adding crowdsourced estimates of mining project NPV and IRR would add market information that arbitrageurs strip away from share prices. I think that's a neat idea and I'd like to see it work. Let me throw out some hurdle questions.
How would you protect the integrity of the crowdsourced ratings from manipulation? Adapting Yelp's model works if the crowdsource platform uses a project's 43-101 data. The real problem is ensuring the identity of the crowdsource participants. Software that can create and manage multiple identities in real time exists. Unscrupulous parties could use multiple identities to game the project ratings on a portal. We'll need more than CAPTCHAs to fix it.
What is a sufficient critical mass of crowdsource ratings for a project? Hedge funds can execute millions of trades per day in deeply liquid markets. Crowdsourcers can render ratings on dozens of stocks several times per day. Measuring impact by frequency of execution leaves hedge funds the clear winners. The discrete number of crowdsourcers who publish project ratings would have to be numerous enough that their combined ratings approach the daily average traded volume of the project's associated ticker symbol. That is hard enough to do for large-cap stocks with huge volumes on major exchanges. The smaller daily volumes for thin issues on the TSX-V are an easier hurdle to leap for crowdsourcers. There's probably a shortcut to creating meaningful data, with an entrepreneurial opportunity for a portal that can build in the statistical corrections Mr. Kaiser suggests.
I think an existing equity crowdfunding portal could easily build out the tech that would enable such crowdsourced opinions. The portal that gets there first will have a value-adding service built for non-accredited investors who will soon be allowed to invest in private placements under the JOBS Act.
Thursday, February 14, 2013
The Haiku of Finance for 02/14/13
Invest in romance
Flowers for your Valentine
True love costs nothing
Flowers for your Valentine
True love costs nothing
Adding a Few Analytical Tools
The financial analyst must have tools. I search far and wide for the data sources that make this blog worth reading. Check out the widget to the right that says "Favorite Analytical Tools" to see the latest additions to my toolbox.
The World Bank Logistics Performance Index ranks countries on the quality and efficiency of their logistics infrastructure. In a macro sense, it's useful for evaluating whether trade flows for a given country will have structural friction, i.e., a country with poor infrastructure will have a hard time growing its exports. In a micro sense, I can use it in conjunction with the Transparency International corruption index and Heritage Foundation economic freedom index to assess the risk of a company's investment in a resource play. I will stay away from hard asset prospectors in countries that score poorly in all three data sets.
The OECD Statistics are an analyst's dream. I first used them in my MBA program to compare regional business conditions. The data sets can be mixed and matched in endless combinations. For example, compare the inflows and outflows of foreign direct investment to see the world market's snap judgement on which countries are considered to be hot investments. Once again, the multiple reports on transportation infrastructure investment show me which countries are serious about making their economies attractive.
The Federal Reserve's economic research and data is useful for those patient enough to wade through it. The most relevant basic data for analysts is the "Z-series" Flow of Funds Accounts report, which summarizes changes in U.S. credit markets. I've also been subscribed to the San Francisco Fed's regular email announcements of published reports for over a decade. The Fed's longer reports aren't as boring as what you'll find in most academic journals. Then again, they're not romance novels either. Maybe the Fed could spice up its reports with some hot action.
The ICI Research and Statistics pages show us what investors are doing in the public capital markets. The most instructive data for me is in the Weekly Estimated Long-Term Mutual Fund Flows (on the Statistics page). The downloadable data set says it all. Retail investors have been pulling money out of actively managed mutual funds and piling into bond funds for quite some time.
I've used these sites and others intermittently over the years but sticking them in a widget makes it official. Delving into these types of portals is how I spend my time here at Alfidi Capital. I don't expect professional portfolio managers to keep up with me because I'm so much smarter than them. They pretend to use hard data to make decisions but they really just copy other firms that succeed in selling hot ideas.
The World Bank Logistics Performance Index ranks countries on the quality and efficiency of their logistics infrastructure. In a macro sense, it's useful for evaluating whether trade flows for a given country will have structural friction, i.e., a country with poor infrastructure will have a hard time growing its exports. In a micro sense, I can use it in conjunction with the Transparency International corruption index and Heritage Foundation economic freedom index to assess the risk of a company's investment in a resource play. I will stay away from hard asset prospectors in countries that score poorly in all three data sets.
The OECD Statistics are an analyst's dream. I first used them in my MBA program to compare regional business conditions. The data sets can be mixed and matched in endless combinations. For example, compare the inflows and outflows of foreign direct investment to see the world market's snap judgement on which countries are considered to be hot investments. Once again, the multiple reports on transportation infrastructure investment show me which countries are serious about making their economies attractive.
The Federal Reserve's economic research and data is useful for those patient enough to wade through it. The most relevant basic data for analysts is the "Z-series" Flow of Funds Accounts report, which summarizes changes in U.S. credit markets. I've also been subscribed to the San Francisco Fed's regular email announcements of published reports for over a decade. The Fed's longer reports aren't as boring as what you'll find in most academic journals. Then again, they're not romance novels either. Maybe the Fed could spice up its reports with some hot action.
The ICI Research and Statistics pages show us what investors are doing in the public capital markets. The most instructive data for me is in the Weekly Estimated Long-Term Mutual Fund Flows (on the Statistics page). The downloadable data set says it all. Retail investors have been pulling money out of actively managed mutual funds and piling into bond funds for quite some time.
I've used these sites and others intermittently over the years but sticking them in a widget makes it official. Delving into these types of portals is how I spend my time here at Alfidi Capital. I don't expect professional portfolio managers to keep up with me because I'm so much smarter than them. They pretend to use hard data to make decisions but they really just copy other firms that succeed in selling hot ideas.
Wednesday, February 13, 2013
The Haiku of Finance for 02/13/13
Con-man at breakfast
Smiling, lying, and praying
Phony and grifter
Smiling, lying, and praying
Phony and grifter
SAC Deleted Emails Stymie SEC Probe
Leave it to some hedge fund managers to avoid accountability with technological accidents. SAC Capital Advisors automatically deleted emails that described transactions the SEC is probing for insider trading. Smart firms save all of their client and analyst emails. Not every hedge fund is that smart. SAC changed their record-keeping policy before the SEC launched its investigation, so it will be hard for the government to argue that lack of records was a mask for wrongdoing.
If the SEC has enough information to probe SAC's subsidiary and its portfolio manager without subpoenaing emails or recording phone calls, then I wonder what source they used if all they publicly reveal are hints and snippets. Did some disgruntled inside rival of the accused spill the beans in exchange for immunity?
If the SEC has enough information to probe SAC's subsidiary and its portfolio manager without subpoenaing emails or recording phone calls, then I wonder what source they used if all they publicly reveal are hints and snippets. Did some disgruntled inside rival of the accused spill the beans in exchange for immunity?
Questions for the San Francisco Prayer Breakfast
The local supporters of the national Prayer Breakfast phenomenon held their annual breakfast today at the City Club. I have open questions for them.
Do you believe that a Christian should possess personal integrity? I define "personal integrity" very broadly as the general ability to distinguish right from wrong and the ability to tell the truth.
If so, do you tolerate members of your group who do not possess personal integrity?
Do you know anyone who has willfully and repeatedly worn unearned military decorations and has been expelled from the American Legion for misconduct?
Do you believe that military veterans who engage in fraud and misconduct after leaving the service should be held to account in a court of law?
I do not expect this group to answer me but I had to publish this article to put my concerns on the record. My colleagues already know how I would answer these questions.
Do you believe that a Christian should possess personal integrity? I define "personal integrity" very broadly as the general ability to distinguish right from wrong and the ability to tell the truth.
If so, do you tolerate members of your group who do not possess personal integrity?
Do you know anyone who has willfully and repeatedly worn unearned military decorations and has been expelled from the American Legion for misconduct?
Do you believe that military veterans who engage in fraud and misconduct after leaving the service should be held to account in a court of law?
I do not expect this group to answer me but I had to publish this article to put my concerns on the record. My colleagues already know how I would answer these questions.
Tuesday, February 12, 2013
The Haiku of Finance for 02/12/13
Traders in the pit
Thrive on action and loud noise
Finance bar-room brawl
Thrive on action and loud noise
Finance bar-room brawl
Fed's High-Yield Warning to Go Unheeded
The story of America's gravity-defying bond market is getting sad. A Federal Reserve governor is warning that his own institution's policies have placed high-yield bond investors at risk. Even Bloomberg can't hide its disdain anymore. I do not expect anyone in the markets to listen.
I remember the headlines so clearly from 2007 as the high-yield bond market started to hiccup. The rest of the bond market started to hit rough patches in the summer of 2007 and that was my signal to convert my entire portfolio to cash. I preserved my wealth and I have stayed very liquid since then.
I laugh at stupid hedge fund managers who are chasing this action. If they all pile in even harder then my eventual wealth will be even greater once I pick over their assets when they're in bankruptcy. Come on, hedgies, don't let me down now. Show me how dumb you are by throwing your client's money into junk bonds at the height of another credit bubble.
I remember the headlines so clearly from 2007 as the high-yield bond market started to hiccup. The rest of the bond market started to hit rough patches in the summer of 2007 and that was my signal to convert my entire portfolio to cash. I preserved my wealth and I have stayed very liquid since then.
I laugh at stupid hedge fund managers who are chasing this action. If they all pile in even harder then my eventual wealth will be even greater once I pick over their assets when they're in bankruptcy. Come on, hedgies, don't let me down now. Show me how dumb you are by throwing your client's money into junk bonds at the height of another credit bubble.
Monday, February 11, 2013
The Haiku of Finance for 02/11/13
Dummies cannot read
My blog says, "no advice here"
Quit asking for it
My blog says, "no advice here"
Quit asking for it
Financial Sarcasm Roundup for 02/11/13
The funny stuff crosses my desktop like prune juice through a senior citizen - fast, furious, and sometimes messy. I deal with it. You can too.
The top baloney item of the day is from the EU's Ollie Rehn, who wants France and Germany to make nice and get behind a stronger pro-euro stance. That's a thinly veiled threat to France and I'll bet Mr. Hollande doesn't listen. It may also have been a mild threat to Japan but Tokyo is determined not to listen. Japan has launched a currency war and pretty soon Europe will realize it can't print euros fast enough to win. Mr. Rehn, read my articles on how a Holy Roman Euro is the only way France, Germany, and Benelux can save themselves from a competitive currency devaluation.
Venezuela is wasting no time firing its own salvos in the widening currency war, devaluing its bolivar by a third against the dollar. That would be good news if I wanted to go down to Venezuela and pick up some hot chicks because it would be cheaper to wine and dine them. I have my hands full with hot women here in San Francisco so the Latina honeys can wait. It's bad news for President Hugo Chavez because he'll have to pay more for whatever imported cancer drugs he's taking.
I did a double take when China announced it had become the world's largest trading nation given their history of questionable economic figures. The article notes the low value added from China's existing finished goods sectors. Their strategy of enticing value-added manufacturing to the mainland isn't mature enough to have contributed measurably to this result. Recall that they've been shutting down rare earth mines and total rare earth metal production has not reached the upper bound of its annual export quota. Something doesn't smell right here, and I don't mean the won ton soup.
BTW, you don't need me to tell you that the Fed never intended to stop QE if it meets its macroeconomic targets. If you planned on stocking up on stored food to avoid panicked buying when the dollar collapses, you may be too late. Food and beverage makers are reducing the quality and volume of items they sell. Fresh fruits and vegetables are a different story as they can't be reduced in volume, but they may be sporadically unavailable if spiking energy prices make long-haul trucking less viable. Thanks a lot, Federal Reserve.
My final sarcasm is for a very stupid person who reads what I've published elsewhere on a different topic. Dude, you're wasting your time by calling me names. You'd be more productive if you prepare to confess your frauds in court. I'll see you there.
The top baloney item of the day is from the EU's Ollie Rehn, who wants France and Germany to make nice and get behind a stronger pro-euro stance. That's a thinly veiled threat to France and I'll bet Mr. Hollande doesn't listen. It may also have been a mild threat to Japan but Tokyo is determined not to listen. Japan has launched a currency war and pretty soon Europe will realize it can't print euros fast enough to win. Mr. Rehn, read my articles on how a Holy Roman Euro is the only way France, Germany, and Benelux can save themselves from a competitive currency devaluation.
Venezuela is wasting no time firing its own salvos in the widening currency war, devaluing its bolivar by a third against the dollar. That would be good news if I wanted to go down to Venezuela and pick up some hot chicks because it would be cheaper to wine and dine them. I have my hands full with hot women here in San Francisco so the Latina honeys can wait. It's bad news for President Hugo Chavez because he'll have to pay more for whatever imported cancer drugs he's taking.
I did a double take when China announced it had become the world's largest trading nation given their history of questionable economic figures. The article notes the low value added from China's existing finished goods sectors. Their strategy of enticing value-added manufacturing to the mainland isn't mature enough to have contributed measurably to this result. Recall that they've been shutting down rare earth mines and total rare earth metal production has not reached the upper bound of its annual export quota. Something doesn't smell right here, and I don't mean the won ton soup.
BTW, you don't need me to tell you that the Fed never intended to stop QE if it meets its macroeconomic targets. If you planned on stocking up on stored food to avoid panicked buying when the dollar collapses, you may be too late. Food and beverage makers are reducing the quality and volume of items they sell. Fresh fruits and vegetables are a different story as they can't be reduced in volume, but they may be sporadically unavailable if spiking energy prices make long-haul trucking less viable. Thanks a lot, Federal Reserve.
My final sarcasm is for a very stupid person who reads what I've published elsewhere on a different topic. Dude, you're wasting your time by calling me names. You'd be more productive if you prepare to confess your frauds in court. I'll see you there.
Sunday, February 10, 2013
The Limerick of Finance for 02/10/13
The analyst strives to impress
Write "bull" reports under duress
Companies expect lies
Best to leave and cut ties
Pumping bad stocks is not worth the stress
Friday, February 08, 2013
The Haiku of Finance for 02/08/13
High fee bank account
No point in paying extra
Just free checking, please
No point in paying extra
Just free checking, please
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