The Early Years of Jesse Livermore

Jesse Livermore is someone who has caught my attention and transformed it into fascination. He was born in the 1870's in Massachusetts. He attended school until the age of 14 when his father demanded he work the farm rather than continue with his education. This disappointed the young Jesse Livermore who had found a deep interest in numbers, math, writing, and reading books that weren't available at home. His father had dropped out of high school and worked on a small farm. He expected his son to contribute to the farm work and dedicate his life to being a farmer. Jesse had different ideas for his future. Bitter from being pulled from school experience which had opened his mind on subjects beyond the farm, Jesse wanted to escape the iron grip of his father and the destined future living as a farmer all of his life, as his father had done. Deciding the only way to escape both realities, he conspired with his mother, that he would run away, and catch a ride into town where he could start a new life for himself, and not be condemned to a future that was already chosen, without his consent. Giving him $5.00, his mother kept their secret and Livermore indeed, crept out and headed towards the road. He eventually caught a ride into town. Away from the farm, young livermore could pursue his love of numbers, love of reading, and could enjoy a new found freedom.

Livermore Finds Work as a Chalk Boy

Jesse rolled in to town and as it so happens, he walks into the office of Pain Weber. Just looking around, he sees young men writing numbers across a chalk board while another set of men watched the boards and called out orders. This environment fascinated livermore and after asking a couple questions, he soon realized the numbers on the board were prices of stocks as they were being bought and sold on the stock market. One of the "chalk boys" as they were called then, was out sick and the manager of the place, asked a wandering livermore, if he thought he could fill in. The rest is history as they say! Livermore's love of numbers and fascination with the city life he was now experiencing, took the offer and wrote the stock market quotes of a company assigned to him, on the chalk board as another young man in the office, called out the stock quotes. Livermore was intrigued. He had a good sense for numbers and wrote the quotes so flawlessly, he was hired as a new Chalk boy for the office. The small salary was enough for him to rent a room a few blocks away from the Pain Weber office. Every morning, he would arrive to the office before everyone else. Sometime he waited outside at 6a.m. waiting for the others to arrive and open the office. He started reading multiple newspapers and developed a keen sense for what was happening in the stock market, in business, in the economy, in global trade, in finance, and many other subjects that gave him new and fresh perspectives on how the world operated. I have tried this approach, disciplining myself to read multiple newspapers every single day. I have done this for the past 8 years, and I want to say, IT WORKS! I see why this guy was so interested in newspapers now! One of the main and most important things I came to learn is that the news is distributed to the masses. This means people are getting the same general information. What is most important however, is how that information is interpreted! It takes time to learn, but if you're a newspaper reader and stock trader, I'm sure you know what I mean. Often stories and market activity appear at odds to the untrained eye.

Stock Market Repeating Patterns

Anyways, back to Livermore, Each day as he wrote the stock quotes on the board for the investors and spectators who would call out buy and sell orders when certain quotes were drawn, Livermore began to notice some repeated patterns. They included the patterns occurring in the the stock quotes he was writing on the chalk board. He began to notice and carefully observe the fluctuations in price movements. He watched how those price movements moved in conjunction with other stocks,or another company in the same industry. He watched the fluctuations occur as news events were reported in the office. He noticed there were patterns at those times too. The second and possibly most important observation that Jesse Livermore had was the reaction of the people themselves. From the other Chalk Boys, to the Manager of the office, to the men watching quotes, trying to decide whether to buy or sell stocks. They all reacted in predictable manners when certain events occurred. He noticed for example that when stock prices pulled back after a strong rise, men in the office would rush to sell their positions not wanting to lose their profits. As they sold, the price of a stock went down a little more but then start to rise again. He would watch the frenzy like excitement in the office as those same investors who just sold a stock, now jumped back in with excitement as it rose. Livermore noticed that emotions were high and seemed to guide investors decisions not only in that office, but surely around the country. He calculated that human emotion collectively could be predicted to have certain impacts on the prices of stocks. If bad news came out, investors quickly sold a stock, only to often watch it rise past the level they sold it at a few weeks later. He would watch the bewilderment and even the confusion the men exhibited in the office as they reacted to stock price fluctuations. in the market when certain conditions were met. He would go on to explain in his later years that his desire to work alone and trade his own account, was so he could focus on his own ideas, thoughts, emotions, without the distraction of investors who were excited, nervous, and the various other emotions the stock market can invoke in traders. The exhilaration that comes from testing your ideas on the market is amazing. Being right as a result of your work and trading execution, is a very rewarding feeling. The ability to repeat it with high probability, is even more rewarding.

A Numbers Game Becomes Profitable

Jesse began keeping a notebook that he carried with him. It was filled with stock quotes that he had seen or written earlier in the day. When he arrived to his room after a days work, he carefully went over his notebook, studying the patterns that he had seen in the office. He began making trades in his notebook that weren't real, but practice to put his intuition and theory of patterns to the test. Surely he thought, if the market had patterns just like he observed, than its movements could be predicted with good accuracy for the specialist trained to see such a thing. As the story goes, Livermore would use his experience and knowledge on movements, and make fortunes in the stock market with that knowledge. A self made, self taught, man whose life went from poverty stricken, to one of the wealthiest in the country in his day. He worked from a numerical basis only, saying charts were confusing and misleading. I had no idea what that meant until I forcefully trained myself (painfully in the beginning) to watch stock prices not on charts but only on time stamps that show a buy or sale, the share amount, the company, and the time the transaction was made. From an online broker, this is an option in your screen that you watch stock prices from. It's called Time Stamp or something to that effect. What you realize is the chart is an after shot. Whats on the printed time stamp list is real trades, letting you get a better sense of what directions stocks are going and how powerful that direction is. Charts show that after its already happened. I see why charts can be confusing! I use them but as a secondary measure, Watching actual trades on a list is much easier, and much more revealing! Another reason I like this Livermore guy! He got me off using mostly charts, and taught me how to see and interpret where the real action is! I prefer following stock prices on a numerical base now.

My Stock Sale: Real-Estate Company CBG

I recently sold CB Richard Ellis Group Inc. whose stock ticker is CBG, earlier this week after I noticed a couple days before the CBG earnings release, the stock prices seemed to be falling on heavy volume. There was a day this week where the markets were generally up as measured by the Dow Jones Industrial Average, Nasdaq, and S&P500, but CBG seemed to be falling. I immediately took this as a Strong Sell signal, and I sold. I had been holding this company since December 13th when I got in at $20.31 per share. It recently reached over $29.50 but began to pull back. I sold on Tuesday, April 26th 2011 at $28.51 per share, rise of 40.4% in four months! I do want to mention, I had been watching and studying this stock and its price movements for nearly 3 months prior to me Buying it. On Wednesday of this week, CBG Released their quarterly earnings and the Earning Per Share came in one cent short of analyst expectations. The Stock has been falling since. To see a broader chart with more info on CBG provided by the New York Stock Exchange - EuroNext website, visit CBG Stock Market Chart.


*** CBG 6 Month self-updating Chart ***

Patience in Stock Trading is Key

In stock trading, Patience is everything! Wait to get in at the right moment. Because its possible to buy a good stock at the wrong time, or even a bad stock at a good time, (don't teach that on financial network CNBC) making sure you enter and exit is so very important! I noticed this stock was in a leading industry and for months, I watched both the stock and the industry. When I believed it was going to rise and rise quickly, I got in. I have embedded a 6 month chart of CBG here. Notice the December month and how the stock just took off. In trading, you almost have to see what is going to happen, then act on it. As you can see, hard work studying this move paid off, as a nice rise in a short amount of time, was my objective with this company. When I bought, I'd just started my website: Investing for Beginners When I took a position in this stock. I want to stress, that getting out as strategically as you got in is as important as ever in my opinion. When you get in a stock, you should have an expectation for how high it could rise. For me personally, I want a 10 point move out of a stock. If I buy and don't think I'll get it, I'll sell and go to cash while I scope my next moves. As I look, CBG right now is trading at $26.71 and had dropped as low as $26.45 (3 days after I sold my CBG position at $28.51). I must admit, although I'm tempted to get back into this stock if it begins rising on heavy volume, my intuition and past trading experience, tells me to take my 40% return with a satisfied smile, now go look for another company to start tracking, and an economy awaits to be evaluated! This also takes patience as it can be tedious and a time consuming, constant effort process it seems. But just like a Wise Trader named Jesse Livermore once said, Patience is Key. I learned to respect it and now experience benefit of its meaning.

Microsoft Stock Price Falls After Earnings

In earnings announcements, releases, or updates - check for revenue levels (growth or declines in hard numbers and percentage terms compared to previous year, previous quarter, or same quarter in a year ago period) in core product or services i.e. Microsoft Reported Earnings on which revealed revenue had declined from its core operating system software. Reasons could include the strong emergence of the ipad and similar tablet computer devices. Because Microsoft was slow to enter or compete in these markets, many people are now using computing devices that don't run on Microsoft operating systems or Microsoft's networks. This could indicate that peoples preference for connecting to the internet and using computers, evolve from PC's and laptops, to these new futuristic like tablet devices that can do many of the same things. Microsoft in my opinion has to respond somehow.

With consumer interest expanding and sales of these Tablet Computers increasing, Microsoft may be missing out on this emerging market. The Tablet Computers don't run on Microsoft software and as more people switch from laptops to tablets, Microsoft may be getting left of this rapidly growing market. Microsoft software is not run on these devices and while more and more people leave their computers and laptops behind for a tablet computer, the effect could weight on Microsoft Core Revenue growth number for sometime. In my mind, the advent of Cloud computing has really contributed to the success of the computer tablet as a preferred way to access the internet.

Cloud Computing and Microsoft

Now without the need of built in software programs or many other files, Cloud Computing allows access to these type of things using the internet to access them on a remote server. This allows the light, sleek mobility and sharp look of the ipad or other tablet computers which can allow a user to simply access all their files and programs using cloud computing. Someone could log in to their works systems from home with an internet connection. Microsoft can still lease their software to companies that run servers and then lease space to users who can then access Microsoft's products. However, it is my feeling that Microsoft did not have an effective strategy or counter strategy to deal with the emergence of cloud computing and computer tablets. Although I credit them for battling Google with the launch of the search engine Bing, Microsoft should have had their attention more focused on Mobile Search, Cloud Computing, Social Networking, and even video. As more and more people begin to use the internet for the very first time, the services that rule like Sales Force's Customer Relations Management software (basically an interactive database) or EMC Corporation. efforts in the cloud computing field, The future I believe will be ruled by internet giants and makes me wonder if Microsoft days of glory have passed. I associate the revenue in core business that fell, as a correlation to what its stock price has done or even its co-founder, Bill Gates.

Bill Gates Dumps Microsoft Stock

In November of 2010, I started noticing in the newspaper's business section in a column that lists large stock sells by an insider or corporate officer, That Bill Gates was dumping his Microsoft stock. Each day I checked this section of the paper, and sure enough Bill Gates continued to sell block after block, day after day of his Microsoft Stock. I must tell you, I don't pay much attention to what the insiders are doing. Most of these guys or ladies are professionals in their fields, not experts in investing. If they knew investing so well, they would run a hedge fund of something of that nature. That being said, they do have information or insights working for a company, but that doesn't necessarily mean the actions of the market are going to line up exactly with what they think will happen by deciding to buy or sell the stock of their own company. Anyways, back to the point... This selling by Bill Gates pretty much on a daily basis, went on to February 2011. This entire period, I watched Microsoft Stock price go from between $24 to $27 per share. The fact that I was watching and trading in other stocks, some of which went up over 60% during the same time, made me realize Microsoft stock at this point in time, is a dud. I don't see it going over $28 a share by the end of the year. It is currently trading at $25.62 per share. Although the increase I predict is minimal, there are many many better choices in stocks to make if you are looking for a better. I see Microsoft as falling behind in the internet / cloud computing era, losing ground to some might competitors like Apple, Google, or Facebook on various fronts. The way I see it, Bill Gates may have known this back in November 2010 when I first noticed that he was unloading big portions of his Microsoft holdings. Not only that, his heavy selling kept the price down. That's why it hasn't climbed. As Mr. Gates heavy selling of Microsoft stock undoubtedly, put downward pressure on the stock price, those still holding, had to deal with the effects of a stock that didn't really move. Investors shouldn't pay attention to insiders, but when its the second richest man in the world dumping stock of the company he founded, I think an exception can be made!

**Self Updating 90 day chart of Microsoft Corporation**

U.S. Economic Engine Slows in 1st Quarter

The U.S. Economy ended 2010 with a strong quarter. In the 4th quarter of last year, the economy expanded at a 3.1% rate. For the first quarter of 2011, that expansion rate dramatically slowed and according to the United States Department of Labor in a report they released yesterday that was titled: Productivity and Costs, 4th Quarter and Annual Averages 2010, Revised. The U.S. output for the 1st quarter of this year (which covers the January through March period) expanded at just a 1.8% rate. This is another example of how analyst can totally blow their estimates. At the beginning of this year, they were predicting a 4% GDP expansion rate for the first quarter. Obviously they are now giving new estimates, citing the middle east turmoil, steadily rising oil and gas prices, and rising commodity prices, analyst are now rushing to change their forecast and have the public forget about their last one. Kind of like the weather when the weather man says dress warm, its going to rain, only to have it become a nice sunny day. Yet, we are suppose to listen again to the next forecast!

Wheat Futures Continue to Climb

When I checked the commodity levels in the NY times yesterday, Wheat was at $8.41 per bushel. Keep in mind, countries around the world that included Jordan, Egypt, India and others experienced rioting in 2008 when Wheat was just over $9 per bushel. The rioting was largely attributed to rising food prices that was led by Wheat. In many of these countries, where the majority of the population is poor, a rise in food prices could be the matter of survival, leading to a feeling of organization to protest the exorbitant prices. I'm watching Wheat prices carefully; the high in a 52 week period reached $9.50 per bushel, and the current prices are steadily marching towards that direction. I've seen them climbing the past few weeks.

One exception in Commodity prices that I've generally observed recently is the falling prices prices of sugar futures. Interestingly enough, as I've watched other major commodity staples rising, Sugar has actually been declining. In the past few weeks, I've watched the price of sugar futures go from $28 to $23 per pound. To follow Sugar Prices or see other Commodity performance and charts, I visit www.indexmundi.com Obviously, oil continues to make production more expensive, as the cost of transporting goods or operating machinery has also risen in price. The added costs to run farm equipment and to ship goods, has become more expensive over the past several months, but for some odd reason, sugar continues to fall. The New York Times Business section reserves a portion of their newspaper for reporting on commodity prices. While I've watched most rise, it has been very interesting to simultaneously, watch sugar fall. I will keep a close eye on this situation for any further developments and will blog what I see in a future post.

Global Oil Prices March Higher

With the growing middle classes of China and other countries around the world, the increase global demand for oil and speculation of inflation across the board, has all contributed to the rise in oil prices. Consumers and businesses will have less discretionary income, since more will go to pay for oil related costs. On the other-side however, as the U.S. economy slowly improves, more people will go back to work, and more cars will be driven I personally have followed oil prices for the past 7 years. From what I see, these prices which currently stand at $112 per barrel, won't be going down anytime soon. As summer approaches and people begin to travel and take vacations, the added demand may send gas prices and oil prices up even higher. I learned not to be mislead by news reports or Analysts predictions. As a matter fact, here is a post I did on Goldman Sachs a couple weeks ago where they were publicly advising their clients to sell oil, saying short term prices would be going down. I completely disagreed and was somewhat outraged, as I felt Goldman Sachs was trying to pull a fast one on the public (Not like that has ever happened before right?) Here's a link to that particular post: Goldman Sachs Bearish on Oil, Yeah Right! I don't believe that for a second.

One could also look at the drop in home prices that continues to weight both on the market, and on consumer sentiment. Winter blizzards across the Midwest that have occurred in the past couple of months, shut many businesses temporarily, and even halted construction projects. The effect of this included a slow of investment dollars into non-residential construction projects, things like retail shops or business offices. This should cause prices in non-residential structures continue to fall as the added inventory means more competition to sell these building. With added competition, there will be sellers who drop their prices to appear more attractive to buyers. If others follow suite, prices will decline as a whole, much like what has already been happening in the U.S. real estate market. I've watched the 30 year fixed interest rate each day, and recently saw it currently stands at 4.77&. This is slightly higher than before, and indicates that loans for Mortgages may be going up. As more loans are demanded, the Interest rate goes up, since this means the lender can charge more for the loan and most likely get it (from increased demand for loans. I keep a close eye on many things in the market, but commodity prices, oil prices, unemployment situation, mortgage rates, lending rates, and stock market levels are some of the areas I focus closely on day in and day out. From what I can tell, the rest of this year should show expansion in GDP, but any unforeseen events like massive tornadoes or uprisings could quickly change that.

South Korean Search Engines vs. Google

South Korean Search Engine Companies recently filed complaints against Google claiming the Android that often comes preloaded on a phone, has Google as the default search engine and makes for uncompetitive practices in the growing mobile search market. NHN Corporation is the owner of the largest South Korean search engine, Naver. The second largest is Daum. Both companies asked the South Korean Trade Commission to Investigate whether Google intentionally offered their Android Operating System free to phone manufacturers, in order to reach the South Korean consumers directly when they buy phones with Google already installed as the search engine. The South Korean Search Market is competitive, especially with a growing base of smart phone users moving into the future.

Worldwide, Google's Android is expected to become the preferred Operating System on most Smart Phones. In South Korea, about 2/3 of all Smart Phones sold in 2010, were running on Google's Android OS . Combined, Naver and Daum control more than 70% of the mobile internet search market in South Korea. Part of the complaint was that Google was blocking installations of selecting a different search engine for your phone if it was Android equipped. The newspaper ran a story about this the other day and said it was proven that switching the search engine on an Android ran phone was possible. Nevertheless, the South Korean Search Engine giants do not want to yield market share to Google or any other competitor.

South Korean Mobile Search Market

The reality that more and more people are buying smart phones or trading their old cells in to get one, means that in South Korea, the Mobile Search market is expected to expand rapidly. Ad revenue from Mobile Search should grow, and a battle is on for Search Engine users who may be using it more from their phone than ever before. The numbers are staggering for the mobile phone growth. Looking at South Korea in 2009, the country had 800,000 Smart Phone Registered users. Now, the number is higher than 10 million with many analyst predicting that it will reach 20 million smart phone users by the end of this year. Whatever the number, one thing is clear, smart phones are on the rise, and competitive markets for mobile ad revenue are emerging in places beyond the United States where it use to to be Bing and Google who were the big competitors. They still are of course, but Google has more than just Bing on its mind in regards to its competition, it is looking to increase market share around the world. South Korean Companies undoubtedly will look to do the same.

Short Android Introduction Video

As I was researching Android after reading about they complaints from the two South Korean Search Engine companies, I came across this interesting video. Nick Sears is one of the co-founders of Android, he is the first person speaking in the video. It's short but just like its title, it is a very brief introduction into Android. Although I can see the South Korean company's point, I don't think Google is responsible for breaking any laws or conducting improper strategies to gain market share. Its like accusing Microsoft of having a monopoly on computers, since many come with the Microsoft windows preloaded. I think South Korea will have to find a way to remain competitive, much in the same way Google has been able to enter markets around the world. The Mobile Search Market is growing and growing fast!

Social Media - Online Communties

I remember several years ago, before Social Media really became a wide spread phenomenon - I didn't recognize its importance right away. Many people I knew were using Friendster or Myspace at that time. The sensation of instantly sharing with friends or followers, ideas, web discoveries, your own personal websites, photos, shared calendars that could send invites to your groups, was pretty remarkable. I now take it for granted, but I credit those early adapters who were using it before it got big and attracted millions of users across the planet. From this back drop, I watched the emergence of Facebook. I didn't join in the early days, but I watched carefully as others did. Many had Friendster or MySpace accounts, and opened I carefully observed the emergence and evolution of Facebook. Although I was not an early adapter, I watched as my friends, family, and colleagues opened Facebook accounts. One of my buddy's makes music videos and posts them online. They usually go somewhat viral attracting up to 8,000 views a month from YouTube alone. On his MySpace page, he has over 3 million profile views, and a butt load of friends. I asked him how he did it, and his reply was an early adapter of MySpace and when it got big, many people added him as friends to their social networks, increasing his access to be viewed by the friends of the new friends. That combined with the natural occurrence of search engines as a method to search for internet sites by content type has helped him get such a large following. He was a new adapter to Facebook after I introduced it to him about a year and a half ago. He was reluctant and did not want to switch (I could hardly blame him, his profile views were in the millions over four five years). Now however, he focuses his time staying in contact with his friends and new fans on Facebook, as well as sharing his music. Although he maintains both accounts, I only see him on Facebook when we are hanging out. Social Media has grown his list as it has for many, but it has also connected people with each other who did not have that option before.





The freedom of sharing your creativity or interest with others creates online communities the same way it creates them offline. The connectedness social media brings, is exactly what makes it "social" and the ability to print and write your ideas (in most countries anyway) means media has opened its definition to include more than just large media corporations. Social Media lets the online community share and essentially become producers of media in their own right, by sharing and the possibility to reach millions. Out of this environment emerged Facebook, Youtube, Twitter and others. Companies that organized the capacity into a tangible usable medium. Angel and Venture Investing These Social Media companies continues to allow them to expand their reach and add memberships, across the world. The question is will Social Media continue to grow into the future? Some Investors are betting the answer is a definite, "YES."

For example, recently the Investment firm, T. Rowe Price Funds, has invested in social media and related internet companies. The firm has $482 Billion in assets under management, and although it makes the $500 million they've invested in social media already, they can always invest more. Recent filings for example, shows the firm has invested $71.8 Million with Zynga - maker of games such as Farmville on Facebook - and $86.6 Million in Groupon. Here is an Article I found about the Investment Firm's Facebook Stake disclosed recenlty. T.Rowe Price's investments in Social media and related companies, is reported to be spread over more than a dozen of the firm's funds. As access to the internet continues to expand around the world, Investing in Social Media may end up being a wise investment after all. As participation on Social Media sites grow, so will the Ad revenue generated. This may very well attract even more investment dollars to the Social Media sphere, allowing them to grow and constantly enhance the social media experience. I've watched over the years, valuations of some of these companies, keep going up. Twitter and Facebook are valued at their highest ever. a few weeks ago, the NY Times reported Twitter had a valuation of $4.1 Billion.

Massive Shorting Denied by Goldman Sachs

A 650 page report titled, Wall Street and the Financial Crisis: Anatomy of a Financial Collapse was published last week by the Senate Permanent Subcommittee on Investigations. Many in the Senate including Senator Carl Levin from Michigan, believe Goldman Sachs saw the impending economic and market collapse, as early as 2005-2006, and positioned themselves accordingly, essentially betting against the market values of outstanding debt that was backed by mortgages. The CEO of Goldman, Lloyd Blankfein, denied last year in a hearing that Goldman had a massive short position, particularly on housing. I see this issue resurfacing, it will be interesting watching the latest developments and any further investigations.

Goldman Sachs CEO Faces Inquiry

Many believe large firms like Goldman Sachs were not only over leveraged with too much risks on their balance sheets, but that the severity of the 2008-2009 market drop was partly do to Goldman Sachs Shorting the Stock Market, while also betting against bonds that were backed by mortgages, sub prime mortgages in many instances. Senator Levin is now considering sending the matter to the Justice Department, as he's convinced Goldman Sachs misled not just investors, but the committee set up to investigate the market collapse. By having a huge short position, when things went bad, stocks would fall and fall hard. This is exactly what they did from 2008 to 2009. Goldman is accused of profiting heavily from this and using their influence to dodge committee questions or further investigations. The New York Times reported Mr. Blankfield had told a close friend, he was thinking of retiring, saying he was exhausted from leading the firm; and may step down soon.





As speculation of a succession plan began circulating, Goldman Sachs appears to be once again in the hot seat with the feds. William D. Cohan is the Author of the new book, "Money and Power - How Goldman Sachs came to rule the world." I haven't personally read it yet, but added it to my books to read. I'm curious as to how Goldman's rise is portrayed, whether accurately or biased. Ordered today, will blog about it later after I've read it. I'm currently reading another book written about Goldman Sachs that is entitled, Chasing Goldman Sachs by Suzanne McGee. So far, it is very interesting. I know that many bankers appeared to have taken too much risk and consequently were bailed out by Tax payer dollars. Now that some of that risk taking is coming to light, we are getting a glimpse into the world that Goldman Sachs influences through its standing as one of the largest investment firms in the world. The way its reputation seems to be getting tarnished, could put downward pressure on the company's share price in the near term while the recession and anger at bankers is clearly visible not just in the U.S. but around the world, similar to sentiment for years after the Great Depression.

United States Government Debt Outlook

Global preference to the dollar has helped America secure a stellar Credit Rating from rating agencies including Standard and Poor's and Moodys. As the world largest economy, the U.S. has long had an economic engine that provides trust and security when investors buy its government issued debt. Something happened yesterday however that has brought question to America's debt sustainability. Can the U.S. government pay interest on outstanding treasuries notes and treasury bills. On Monday, one of the major rating firms in the world - Standard & Poor's - lowered its outlook on the united states rating to negative. This does not mean the U.S. has lost or been downgraded from its actual rating of AAA, but it's the first time since Standard & Poor's started issuing outlooks for countries in 1989, that its outlook for the U.S. was something other than "stable." The three U.S. major indexes which are the Dow, Nasdaq, S&P 500, were all down more than 1% after the news was announced. Here's an Editorial from the NY Times About it: Good Advice from S&P.

Treasury yields - the interest the U.S. government pays on its debts - spiked on the announcement. The U.S. has more than $9 Trillion outstanding in government debt to the public. When the Treasury Yield goes up like that, it means the interest payments that are going to be made towards paying the United States National Debt, increase. This effectively increases the debt burden because interest payments to debt holders cost the government more money to pay. Since interest rates are so extremely low right now, whether its the 30 year mortgage rate of 4.87 or the 60 month car loan of 5.97 (I remember when this was 6.17 several months ago) rates in the short to midterm, will eventually go up. This increases the debt the government pays out or issues because it becomes more expensive for them to borrow. Good economic policy in which the economy is once again firing on all cylinders, is what is needed here in my opinion. The U.S. would have to borrow less if its tax receipts and economy were strong and showing promise of sustainability, bringing investors off the sidelines. Of course more money in the Treasury, means the ability to pay off debt, preventing a potential downgrade in near future. The U.S. must focus on Economic growth and tax reform right now.

Medical Device Company in Talks with J&J

buyout talks with Johnson & Johnson and a Medical Device Maker, Synthes, announced the talks between the two companies were ongoing. I found the announcement interesting especially after learning a bit more about who was at the helm of Synthes. It is the Chairman of the Board and also the Chief Executive, Hansjorg Wyss. Collectively, he and his family control about 47.8% of the company. Not only that, he is one of Switzerland's richest citizens with an estimated net worth of $6 Billion, according to Forbes magazine. Mr. Wyss is a 1965 graduate of Harvard Business School and did not joined Synthes until 1977. In 2008, he set a record by donating $125 million to Harvard, the schools largest single gift in history. This man's Harvard education undoubtedly contributed to his ability to run a major company, while amassing a fortune in the process. His graduate degree came from 1965, this makes me realize the education must have consisted of teaching students how to conduct research to keep up with the changing times in industry, technology, business, and government. The fact Mr. Wyss is selling to Johnson & Johnson makes me wonder what he has in mind for his next venture, maybe a Harvard Professor?

The Chinese Real Estate Market Heats Up

The Chinese Real Estate market was the focus of an article I read today in the NY Times, regarding China's unrelenting Real Estate boom, which has driven prices up nationwide 140% since 2007. Keep in mind, this is about the time American and European housing markets began collapsing, sending real-estate values plummeting. In Beijing alone, real-estate prices have increased by as much as 800% over the past 8 years! This increase has frozen many working class buyers completely out of the market. At the moment, there is an estimated 65 million apartments across all of China bough as speculative investments, currently sit empty. The rise in prices have many economist and analyst worried that a Real-Estate bubble has formed and if it pops, it could be disastrous. Although I'm not sure if I agree with this assessment, I have watched as the Chinese Government has actively intervened to prevent economic and market chaos, seen in countries where the Real-Estate Bubble did indeed burst. This government intervention helped China through the recent Global Recession. Here is an article related to this post, it came out three days after this post, I've come back to add it since its relevant and informative:Inflation in China

I believe the Chinese have been watching the world's unfolding mortgage melt down and aftermath, very closely and will work very hard to prevent it happening in their country. The central government has undertaken several measures recently to address the concern of an overheating property market, by Raising Interest Rates, and requiring banks to hold more on reserves. Instituting these types of polices is suppose to reflect the Central governments attempt to reign in available credit and slow down the speculation that has sent prices soaring. As the Chinese middle class emerges from this world's most populous country, policy makers there, have their hands full for determining economic policy that both stabilizes the country, and makes it attractive to investors. China must balance its growth with price stabilization, like many countries around the World.

Egypt Detains Ousted Mubarak and Sons

Tens of thousands of Egyptians once again packed Tahrir Square Last Friday, to demand changes in the name of their country. They gathered to support each other and speak in Unison that they were unhappy with the speed in which the ruling military supreme council was moving with reforms, and that they wanted Hosni Mubarak, his sons, and many close associates to be investigated for fraud, abuse of power, and corruption which allowed them to amass wealth. That all changed as a government prosecutor (formerly appointed by Mubarak himself) announced publicly that Mubarak and his sons had been detained. Authorities followed this up by telling the press Hosni Mubarak and his sons were held for questioning related to corruption and abuses under Mubarak's three decade rule. Authorities disclosed the former leader's sons are currently jailed in Tora Prison.

Former Egyptian Ruler in Custody

The Former Egyptian ruler Hosni Mubarak, ousted by a popular revolt in February 2011, is under police custody at a hospital in the Red Sea Resort of Sharm El Sheik after suffering a heart attack. Authorities say he is well enough to answer questions. As anti-Mubarak protesters gathered outside the Hospital where Mubarak was being questioned, some political analyst suggested Mubarak may be getting assistance in getting out of the country, using the need for medical attention abroad as his reason. Whatever the case maybe, the English-Language website of Egyptian State-run newspaper reported the two Mubarak sons arrived to prison unshaven and wearing all white outfits (a far cry from the business suits the public is accustomed to seeing them in). The newspaper printed a quote from a source at the Prison saying "Gamal did not look like the Gamal we have seen on TV; he is in a state of total disbelief." The Associated Press reported also reported that as the Mubarak Sons were driven away to jail, a crowd that had gathered, pelted the police van carrying Mubarak sons, with stones, water bottles, and flip-flop (seemingly in a sign of disrespect as I don't think a Sandal can do permanent physical damage - although I might be wrong). Besides the two Mubarak brothers Gamal and Alaa, other prisoners at the Tora Prison include the former prime minister, the former minister of the interior, the former secretary general of the ruling party - Mr. Mubarak's former Chief of Staff.

It's believed that the ruling Military council and the de facto leader, Field Marshall Mohamed Hussein Tantawi, was feeling the pressure from the public's call for a faster investigation to be launched, and for the Revolution to move forward in a direction that would bring more equality to the Egyptian people. The recent Friday that protesters gathered by the tens of thousands in Tahrir square, there were calls heard for the resignation of members of the supreme council including Tantawi himself. A somewhat forceful and brutal push was made by the army to clear the square, the ended in several deaths. The square was filled with people through Tuesday even after the Army's attempt to forcefully remove protesters. Although progress in meeting the protesters demands with the announced investigation was made, critics warned of using extralegal means to try Mubarak and his sons, denying them of their full legal rights. Tantawi is an interesting character. He seemed to keep a low key up until the fall of Hosni Mubarak. Now he is the leader who must guide Egypt through this historical point in time, to transition into a government that hopefully meets the needs and aspirations of it's people. I can't help but remember however, about an article I read in the NY Times which I'll link to here, about the The Egyptian Military and the Economy. It was amazing how many interest the Egyptian army has in the economy. Reforms to open the economy seems to me, would mean giving up some of their control in the stakes they already hold. The enabler in many ways, was Mubarak himself who before his fall from power, was not only the President of Egypt, but also the Chairman of the Supreme Council that now leads the country.

Goldman Sachs Claims to be Bearish on Oil

I felt compelled to blog on conflicting messages coming from what are 2 of the largest Banks in the United States. First, lets start with Goldman Sachs. They recently released their views on oil and advised their clients to sell as oil had become "overpriced." Immediately when I heard this, I was very suspicious of Goldman Sachs intent on making this call. First off, If you want your clients to sell oil and oil related companies, you tell them only! Not make a statement that will be carried far and wide by the press and most likely acted upon by the public. I am holding an oil company, and did not "sell" as Goldman Sachs was suggesting investors do, and as a matter of fact, I expect the price for the barrel of oil will continue to rise with minor corrections along the way. I think Goldman Sachs has some of its old trick up its sleeve as advising the sale of oil now, seemed suspicious and made me immediately begin thinking about a possible alternative motives for Goldman's advice to clients to sell oil. One day later, Bank of America advised clients: oil prices will rise, buy oil.

It is known for example, that Goldman Sachs has recently been shrouded in controversy. One example that comes to mind in regards to misleading investors and shady practices on creating and marketing certain securities for sell, is the Abacus deal. Essentially, Goldman created a mortgage backed security for one of their major clients. This client was going to bet against the value of the security. The client was hedge fund manager, John Paulson. Mr. Paulson even picked out some of the underlying mortgages that were pooled to make the securities in the Abacus deal. All Mr. Paulson needed, was to someone to take the opposite side of his bearish bet on these particular securities. This is where Goldman comes in, they sold the asset to a German bank IKB. After the security lost most of its value, Mr. Paulson cashed in, winning on his bearish bet (where he profits if prices go down). The IKB

bank however, claimed Goldman did not disclose the risks nor the fact their client helped construct the Security that he than bet against. Mr. Paulson is an enigmatic Hedge Fund Manager who made Billions on his bet against the housing market. Goldman Sachs let him bet on instruments they sold to investors who were long on housing! Long story short, Goldman Sachs is not the most Virtuous firm in the world. They are filled with deceit and tricks. This call on oil I believe is just another one of those occurrences. Why make it widely known their position on oil and then advising their clients to sell oil related companies or oil future contracts. Here are several scenarios of why Goldman might have done this:

1) They are holding a large short position and getting people to sell in mass, pushes the price down further (benefiting a short position)

2) Ultimately they really felt oil might go up in the near term, so making statements that gets the public to sell in mass, could then provide Goldman Sachs with a potentially attractive buy price for oil and oil related companies.

3) They really are bearish on oil now, but that doesn't explain why they didn't tell their clients only (if their clients are selling along with the public, the price goes down even faster, and the selling execution price may not be attractive.

Bank of America Bullish on Oil

The very next day, Bank of America announces they are bullish on oil and made recommendations to buy it now. Now things are getting a little confusing. Goldman says Sell oil, Bank of America says Buy Oil - What is really going on here? That was a rhetorical question! I fully support the notion of doing your own research. Don't wait on the so called "experts" to tell you what you should do. A lot of people do, and look at the conflicting opinions of two of the largest banking powerhouses in the world. Just for kicks, I'm going to embed the Company ConcocoPhillips in this post. This company is in the Oil & Gas Integrated Industry. I have followed it for 9 months now. I'll follow up in a couple weeks to see where we stand for this company (April 12th closing price was $77.16). It's my belief ConocoPhillips, and oil Prices both go up.

ConocoPhillips 5 day Stock Chart

Yahoo Article on Oil Prices

Following Goldman Sachs' negative call on crude prices which took the wind out of the commodities rally this week, Bank of America Merrill Lynch is predicting a 30 percent chance that Brent crude could hit 160 dollars a barrel in 2011.

"Commodity prices should move broadly higher in 2011 on robust economic growth in emerging markets, despite relatively weaker growth in developed markets," said Sabine Schels, a commodity strategist at BoA Merrill Lynch in London in a research note.

"With oil demand expanding rapidly and Libya production down by at least 1 million barrels per day, we forecast (the) Brent crude oil price to average 122 dollars a barrel in the second quarter, and believe prices could briefly break through 140 dollars in the next 3 months," she said.

Given the risks from the situation in the Middle-East and North Africa, Schels says there is a chance the price could go even higher over the next 2 months.

"Under our upside risk scenario, Brent prices could average this year between 125 dollars a barrel and 160 dollars a barrel," Schels said

Changes for Russian State Company Boards

Several weeks ago, Russian President Dmitri Medvedev ordered top government officials in Russia to step down from the Board of Directors of State Companies. Although I didn't doubt for a second that top government officials sat on these type of Boards, on Tuesday, the NY Times reported that Deputy Prime Minister Igor I. Sechin, resigned on Monday as the Chairman on the Board of Directors of Rosneft, a Russian State-run Oil company. Mr. Sechin announced his resignation at the Rosneft Board meeting, less than two weeks after President Medvedev ordered the Prime Minister, Vladimir Putin, to "initiate" removal of his deputies and ministers from state companies. The Russian President appears to be leading with Putin carrying out the orders, instead of the other way around, a common conception of the power dynamic behind Russia's government.

Many people including many analyst, believe the Russian President is attempting to build support among his elite group of supporters, in anticipation of the upcoming Russian Presidential elections. The order that was given by Mr. Medvedev set a July 1st 2011 deadline for all state companies to begin the removal process of these government officials, from their boards, Well before the elections. Of course this means Mr. Sechin and Rosneft moved quickly, as his resignation has been accepted. Maybe a possible 3rd candidate? The deputy Prime Minister running against Vladimir and Medvedev?? Could get interesting but I do think the implications of the Russian President asserting his authority and ordering the Prime Minister and better internationally known (and former President), Vladimir Putin, speaks volumes that Medvedev is definitely seeking a second term as President. Many have speculated and still do to this day, that Prime Minister Putin is really the authority behind the Russian government.



It will be interesting to see if Mr. Putin and Mr. Medvedev are having a power struggle behind the scenes, or if this is all part of the political theater that can often be carried out when a national election draws near for two powerful men to face off. It will be interesting nonetheless. I am pretty sure the world will be watching. Here is an article in the NY times titled, "Putin Makes Russians Wonder Who Will Lead Them Next." I have linked to this story: Russian President (because this article came out a day after this post was initially created, I came back to add it).

Ivory Coast's Laurent Gbagbo Surrenders

There have been interesting developments in the world over the past several days. The Ivory Coast Strongman Laurent Gbagbo surrendered to French, UN, and Political opponent, Mr. Alassane Ouattara's forces. I have been watching these developments since back in November 2010, when the disputed elections took place. The Man surrendering today was unwilling to give up power even though he lost the presidential election. As this drama unfolded, I began watching the price of Cocoa. Since Ivory Coast is the worlds Largest Cocoa producer, I figured that unrest and political gridlock could lead to an increase in prices. I watched as Cocoa went from 2700 to 3700 in three months. It has since gone down but my initial instinct had been right: Cocoa prices did increase likely a result of the political drama taking place.

Observing Current Commodity Prices

I must admit, my development in trading commodities has to this point been just on paper. Meaning, that I am practicing and want to consider that I know what I'm doing, before I venture into the world of Commodity Trading. So far, my hunches, insights, and observations have made me feel satisfied that my hours study, observing prices daily, and taking a close interest into the price behaviors of commodities in general, have filled my ambition to learn the foundations. Now that the Ivory Coast has begun Cocoa Exports again (the Ivory Coast is the world's largest Cocoa exporter) I will expect prices to fall. I will keep an eye on this and will record any observations in my journal that I write in. Obviously the next step will be to venture into the field of Commodities trading itself, which is a whole new environment to learn and build lessons and experience. Don't worry, I'll be sure to write about them. Although I am glad the Ivory Coast conflict appears to be coming to an end, my heart goes out to all those who have to rebuild their lives, and find their hopes and dreams once again. I hope they do just that, and life becomes better for all who have carried the burden of the recent political violence on their shoulders.

The other development I have taken note of recently was the NYSE not interested in the deal proposed by Nasdaq / ICE. The fact that the NYSE Euro-next may be merging with the German Exchange Operator Deutcshe Boerse seems nearly inevitable at this point. What confused me slightly was NYSE reasoning for refusing the offer. Claiming that fears of antitrust related obstacles for passing a deal and concern that a consolidation with Nasdaq could mean job losses as overlapping functions of the exchanges would be aligned. The opportunity to have an Atlantic powerhouse by merging with the German exchange, according to NYSE, would help them expand and reach deeper into the European markets, while resulting in a lower unit costs, benefits that come from adding many new clients. I am watching this only because there seems to be a consolidation in stock exchanges happening right now. The Toronto and London Stock Exchanges were having talks earlier about possible collaboration, and so was the Australian and Singapore Exchanges. Those deals don't appear to be going through but keeping on eye out for emerging deals has been one of my goals. It is time intensive, but well worth the effort!

Math and Banking at the Khan Academy

The Khan Academy is a free online school that is available to anyone with an internet connection and a desire to learn more. This school was conceived and built by a Harvard Graduate. It has been a wonderful resource personally for me in understanding subjects from Calculus to physics to banking and investing. The Khan Academy offers prerecorded lessons to follow along with. The creator and founder is a former Wall Streeter who turned his energy and attention on creating a free online learning place accessible to anyone around the world.I want to tell a story about how I first came to hear of the Khan Academy. It was really a split decision on reading a newspaper one day, what a wonderful decision it turned out to be!



I was taking a lunch break nearly a year ago today, and as I waited for my food to be ready, a newspaper stand caught my attention. I didn't need a newspaper, I had the two delivered to my home each day, still to be read. But this was a funny feeling, so I turned and walked to the stand curious to what I'd see. There was one single newspaper left

for sale. It was the SF Gate, and a large headline that read, "Salman Khan, math master of the Internet" through his Khan Academy. Mr. Khan was a 33 year old MIT graduate who quit his job in the hedge fund industry. The article went on to talk about his desire for helping others that extended beyond just enriching clients or a firm. I liked this story, and wanted to read more about it. I ate lunch, bought the paper, and tucked it away to read later when I got home. I sat at my desk wondering, what the Khan Academy was.

Khan Academy Lesson on Banking

A few hours later after arriving home and sitting down to read the rest of the story, I realized that it was meant for me to see that article. I checked out the Khan Academy and was beyond impressed with what I found. Mr. Khan has methodically arranged his videos and lectures in organized subjects. For example, you can watch his videos on Banking, Compounding Interest, The Gold Standard, Money and finance, and much more. He has an MBA from Harvard Business School, and a BS in Mathematics from MIT. You can tell, the guys is pretty smart (he narrates most lessons). Here is an example of one of his introductory videos on banking. He is a simple genius in my mind. He also has many videos on subjects that vary from Algebra to Physics! I must admit that I have learned a lot from his videos. He makes things simple and guides you through his lessons. His style is making videos in which it appears you are viewing a blackboard. He uses the effect of chalk writing (using different colors) on the board, and his voice speaking (Mr. Khan is not visible in the videos) as he goes through the lesson, felt to me as if I had a high quality Harvard educated, private tutor. In many ways, that's exactly what it is.... I have seen people writing and leaving comments for him thanking him profusely because his videos helped them pass an exam, or become more confident about their math knowledge and understanding. I've even seen Mr. Khan responding, quite humbly.



This is a video where Bill Gates talks about the Khan Academy. I thought it was pretty remarkable and quite an achievement that Mr. Khan has received the attention of Bill Gates. Not only is he one of the richest men in the world, he also a steward in the field of education. This Video is from Mr. Bill Gates' website, the Gates Notes. I particularly like during the interview, when he talks about using the Khan Academy lessons himself. The reality that Mr. Khan devotes his time to using technology to educate and help others by providing his free online school, is nothing short of amazing. His desire to enlighten the world with education, opportunity, and free access to quality lessons, makes his Khan Academy a rare gem. I believe this is what Bill Gates saw as well. A dedicated, motivated, intelligent individual, using his talents and time, working on a project that ultimately enriches others in the field of education. I think Bill Gates knows a visionary when he sees one, and Mr. Khan is definitely one. He has begun to transform his vision, using technology to educate curious minds. I commend him and respect his hard work and vision that has brought the Khan Academy into existence. Having Mr. Gates interested in what you're doing, and potentially collaborating with the Gates Foundation, can't be a bad thing! This may help him expand and provide even more instruction online available anyone. There are plenty of lessons to see at the Khan Academy, I highly recommend experiencing Khan Academy for yourself. I have learned a great deal; I'm certain you will too!

Khan Salman Bio:
Khan Academy's Founder

Salman Khan (Sal) founded the Khan Academy with the hope of using technology to foster new learning models. He is currently the portfolio manager of a fund based in Menlo Park, CA. Prior to this, Sal was one of the initial employees at MVC Venture Capital. He has also worked as a Technical Architect at Scient Corporation and as a Senior Product Manager at Oracle Corporation.

Sal received his MBA from Harvard Business School where he was president of the student body. He also holds a Masters in electrical engineering and computer science, a BS in electrical engineering and computer science, and a BS in mathematics from MIT where he was president of the the Class of 1998. While at MIT, Sal was the recipient of the Eloranta Fellowship which he used to develop web-based math software for children with ADHD. He was also an MCAT instructor for the Princeton Review and volunteered teaching gifted 4th and 7th graders at the Devotion School in Brookline, MA.