A Random Walk Through My Inbox
July 3, 2012
Even while here in Tuscany I go on reading my email, albeit at a pace that is somewhat less maniacal than usual. I can't help myself; I find it fascinating to "surf" my emails and other sources. I get several hundred emails a day and about 40-50 that get more than a cursory notice. (I always try to read emails sent to me personally!) Today, for your Outside the Box, I am going to do something rather different. Rather than posting one or two essays, I am going to cut and paste snippets that I have found interesting in the past 24 hours.
There's no theme at all, but this will give you a sense of what I am giving at least passing thought to. While we may have been focused on Europe in my recent writings, I do try to remain aware of the broader world and markets. I still actually read research on the equity markets, and read analysis of various alternative investments and their markets. I have a number of friends who gather information, and when they send me something, even if it's somewhat lengthy, I really do try to read it. And there are so many links to follow and searches to perform. This retreat to Tuscany has made me realize that I need to focus a little less on the immediate and urgent, as fascinating as it is in today's world, and more on the deeper, importantideas.
I am going to force myself to stop at five pages, so I don't know yet how many sources there will be. My Chinese translators are anxiously awaiting this note, even though I am somewhat ahead of my US editor's day here.
I will also go deeper into what I learned this week from the lengthy and stimulating conversations here in Trequanda, and share a few impressions of Italy. The villa is getting somewhat quieter and more relaxed, as there are only a few couples (Rob Arnott and his family, among others) for the next few days; and I have promised Tiffani I will actually leave the villa this week and explore during the day, rather than just making the evening forays to dinner; so there will be even more downtime, which I am finding I need more than I thought I did. And while my partners have all told me to actually take some time off, I am sure they will be glad to see me back in the saddle, which will happen on Monday. Speaking of which, I did go to Siena yesterday to watch that horse race (Il Palio) around the town square. It has been run for over 600 years, and there is an enormous amount of ceremony and pageantry associated with it. Google it.
This morning we saw Newt Gingrich and his wife Callista off. He has been here the last week, along with Neil Howe and David Tice, who brought their daughters (daughters seem to be the general theme this season). Steven Diggle dropped by on a few occasions. Steven ran what ended up being the largest hedge fund in Asia, turning what started out as a few hundred million into more than a few billion, although he modestly says that he simply had a few very good years during the recent crisis, while everyone else lost half (or more). He closed his fund at 'the top' and now runs his own family office. But his range of knowledge and insight is quite broad. He was of particular use in explaining the nuances of Italian football during the Eurocup games.
The conversations ran far into the wee hours most nights and were picked up the following mornings. I actually find such times more relaxing and invigorating than simply 'checking out.' And having a variety of views on numerous topics and subjects from people with widely varying backgrounds has been a real delight. The only downside from the past ten days is that my must-read book list was expanded by about 30 volumes. Listening to Newt and Neil expound on Roman history, a topic about which I realized I have no more than cursory knowledge, has inspired me to try to delve from time to time into the history classics.
So with that, let's jump into my inbox and explore some more or less random notes from today's reading. Again, the only criterion is that it arrived within the last 24 hours – and I promise to stop at around five pages. My comments are italicized or [in brackets].
Your living on Italian country time analyst,
A Closer Look at the Second Leg Down in Housing
June 28, 2010
Quickly, I will be on Larry Kudlow's show tonight (Tuesday, June 28), which is at 7 pm Eastern. Larry has promised that we will spend some quality time on some of the current issues facing us. See you there! And now, let's jump in to this week's Outside the Box.
Last January 2009, the Outside the Box featured FusionIQ's quant models that blend both fundamental and technical metrics to determine the strength of 8,000 equities as well as the overall markets (Trading With the Big Boys).
You may recall that CEO Barry Ritholtz, (and good friend and Maine fishing buddy) had been bearish throughout 2008, and was still negative on stocks back in January 2009. Relying mostly on the FusionIQ metrics, Ritholtz flipped bullish on March 2009, and stayed bullish the rest of the year. The firm began raising cash in Q1 of 2010, and by the time the first quarter was over, was only 50% long. They sold more stock in April, and in a bit of good timing that Ritholtz will tell you was "dumb lucky" went to 100% cash on May 5, 2010 – the day before the 1,000 point flash crash.
Some economists see the world from a 30,000 foot overview (that would be me); other analysts work bottoms up. The quants – mathematical analysts whose world view consists of granular data –crunch numbers to reveal what it may about markets and economies. Ritholtz is one of the few that combines all three. This has led to prescient economic and market calls that made his clients and readers money, and kept them out of harm's way when things got ugly. Indeed, Dow Jones noted that "many market observers predict tops and bottoms, but few successfully get their timing right. Jeremy Grantham and Barry Ritholtz sit in the latter category..." heady company indeed.
Regarding the market calls, Ritholtz said "We cheat. We use everything that we know works. Macro economics, technicals, fundamentals, valuation, quantitative – it all goes into the mix. That's our secret sauce." Ritholtz added "I don't know why other people limit themselves to just one discipline – the value guys never look at technicals, the fundamental analysts ignore macro cycles. It creates blind spots in their analyses. When we go over other research reports, they are obvious to see."
I have been intrigued by the Fusion system's ability to warn investors to get out of the way of dangerous stocks sectors, even the entire market – before trouble hit.
Dumb lucky or not, I have found over the last year and a half, looking over Barry's shoulder, that this system does seem to (in general) give some very interesting signals about the market. I wanted to catch up with Barry to see what the FusionIQ system was saying these days – about Energy Stocks, about Housing and anything else that he thought noteworthy. As you can imagine if you know Barry, I got an opinionated earful. (Barry is like me, often wrong, but seldom in doubt.) I asked him to put it in a letter for this week's Outside the Box.
What follows is his explanation as to why Housing fall still has further to fall. He included some charts that explain what stocks and sectors to look at and avoid.
His application of both the macro and micro views, combined with using FusionIQ "to cheat," as he puts it, is why institutions and high net worth individuals seek out the firm's investment advice.
As is my custom, I will give you a link to where you can find out more about their services. Visit their site to learn more about FusionIQ. Watch their demo. Outside the Box subscribers are eligible for a discounted rate (less 20%) on the monthly subscription. http://www.fusioniqrank.com/signup.php?a=1
One caveat. This system is for serious traders. Most of you shouldn't be trading. It takes discipline and time. That is not a knock on anyone. I don't trade or have any business trading, either. A man's got to know his limitations. So I find what Barry writes about below interesting and informative. But some few of you who trade should explore his system as another arrow in your quiver.
Your writing away on his book analyst,
Juiced Data
August 8, 2005
This week's letter comes to us from my friend Barry Ritholtz, Chief Market Strategist of the Maxim Group and a frequent guest on CNBC and Fox. I have been reading his commentary for several years and he now keeps a Blog called The Big Picture.
The following is a combination of two commentaries about government economic numbers. It is hard to rely on statistical numbers if the government periodically decides to change how they are calculated and Barry takes a look at several statistics. Plus he shows how data can be graphically presented to make the same numbers look completely different, one way positive and the other negative. This is certainly Outside the Box material I hope you enjoy.
The Mystery of the Awful Economists
March 7, 2005
This week's letter comes to use from Barry Ritholtz, Chief Market Strategist of the Maxim Group and a frequent guest on CNBC. I have been reading his commentary for several years and this special report takes a look at the employment numbers.
Ten possible explanations as to why this is the jobless recovery are explored. The first two are the ones most cited by Wall Street economist, but the last eight dig deeper into the data and give us an Outside the Box look at what is going on with the numbers. Barry challenges the economist to find a way to include new factors into their models in the hopes of improving future forecasts of employment.
While economists have recently been over-guessing the employment numbers, last Friday they made a rare under-guess. The forecast was 220,000-225,000 based on several news articles and the actual number came in at 262,000.