Not like this is any great revelation, but I felt like writing and this was what was on my mind. I'm a kid (quickly losing the right to use that title) who grew up in the hayday of the Information Age where we were supposed to be given data and info faster and more accurately so that things would be more efficient and up-to-date. No doubt this is the case, but when you're living day-to-day, can you tell?
All the news articles and reports and conjecture and editorials and the sheer volume of crap available to everyone now makes it really hard to figure out what's going on. I mean, do investors really have a better idea of when to buy and when to sell? After the boom and bust of the last few years, obviously not. Do people know when the right time to buy computers and electronics is, when the prices have bottomed out? No, not really. Do people, even with all the anecdotal info they have access to, know what the next hot things are before they happen? No, they're still in the dark. It's a phenomenon. If you wanted to know the next big music star or actor, you'd have to have connections. When it comes to predicting the future environment relative to the current one, the general public is in the dark. Despite what some people (cough) think, I'm not saying the general public is stupid, I'm just saying there's a lot of information and misinformation and disinformation out there, most of which is poorly researched by media outlets and thus reaches the public in fragmented, half-truth form.
Not to say that it's all bad...when you need to know what's already happened, it's hard to beat the current situation -- headlines pass over the Internet and news wires instantaneously and get rapid mindshare.
But I'm basically in the business of predicting the future, in various time frames, even if I'm just using history or probability as my guides. Some daytraders profess to only caring about the moment, about seeing bidders line up on the bid and watching the ask empty out, and riding that tide, but come on, anyone involved in the market is interested in what's going to happen. My time frame most of the time is a 6 month to 2 year range even though most of my trades are within a one week time frame. I want to figure out where the economy is heading, and where tech is relative to the broader market.
One of the things that works for me right now is watching what most daytraders work on most, the momentum stocks. These are the heftiest valuation stocks, the ones left of them anyway, that have large swings and tend to exaggerate their moves. Juniper JNPR, Ciena CIEN, CheckPoint CHKP, Emulex EMLX, Nvidia NVDA, Mercury MERQ, etc. I'm not sure exactly why this works right now, but these stocks tend to forecast moves in the rest of the NASDAQ pretty well by showing the coming move ahead of slower stocks.
For instance, the hugest rally bottoms both shared the traits of having the momentum stocks hitting intraday highs while the NASDAQ continued to try to sell lower. This divergence is fairly noticeable and shows that perhaps the momo is worn out to the downside and is turning, and traders are putting money into them. Maybe it's a self-fulfilling prophecy, since a lot of traders are watching for this divergence. At any rate, gradually the NASDAQ would turn itself around and lift up, springing the momo stocks even faster upwards. The rally would be born.
On the other hand, over 2001, some stocks like JNPR and CHKP failed to make new highs with the NASDAQ, and are now hitting 52-week lows well before the NASDAQ does. The NASDAQ has been dumping after their queue. Not that I think this makes it a certainty that the NASDAQ hits new lows, since it could make sense that the NASDAQ settles in the 2000 range while the stocks in the index shuffle their intrinsic valuations around, and hence, a bottoming process. (I think the NASDAQ goes much lower, but on a phundamental basis, not because of the momo theory)
So on such a small time scale I look for these leading indicators to pull through. Now I'm sure this theory will stop working and I'll have to start looking for another to trade off. Hopefully it's a basic law of trading physics, supply vs. demand, etc., and won't go away. But in general the market makes it so that things that work stop working. (except for running a good business =) )
Another leading indicator: electronics/computer hobbyists. Now, most people regard computer literate folks as people who just spent a whole lot of time learning how to use all sorts of different devices, and that the skill is unattainable. Really, it's not. It takes time at first, but anything does, but after a while you learn to sniff out what tools are useful and not buggy or cluttered or nonfunctional pretty quickly. It gets to the point when you can look at something for ten seconds and figure out if it'll make your car stereo system sound better, your computer run more stably, your cellphone save data better, or whatever. And when you put these people on the Internet, they have massive information gathering abilities. They can locate even the smallest application and spread it to the others if it turns out it's clearly superior.
I had an argument with my family at Christmas about how I think it's the hobbyists and hackers who play with shit years before it gets into the hands of people who don't use computers as much. I'm not sure why they disagreed with me (heh) because it's so true. I mean, Napster started off as a totally underground tool from some college student that made its rounds among the computer geeks first. I remember some guy in my Quake clan promoting it heavily and people were reluctant to try it, but once they did, they never stopped. And now Napster is being disassembled piece by piece by actual judges and multimedia conglomerations. Serious shit.
I look to the hardware folks to see what shit they're buying, or the gamers to see what the best vid cards or popular tech is in 3D, or my employed buddies to see what server platforms and database tools they use at work. I mean, you read shit in Wired and other rags, online and offline, and the info is like, MONTHS behind. I mean, shit, look how long it took USA Today to catch wind of netflix.com and adcritic.com. And when journalists try to stay ahead of the curve, they promote completely useless technology that no hobbyist is interested in. They promote shit like Cuecat, DivX (the Circuit City kind), and Gnutella. I bet in 3 months Wired will be doing a piece on how Morpheus is the clear Napster descendent. Watch!
Now, something interesting has caught my attention. It's come a lot from me reading stuff about the Japanese economy, about how it's breaking to multiyear lows on the Nikkei as I write this, and how they experienced a stock market bubble many years before us and are still suffering from it now. This stuff talks about how Japan made its economy uninhabitable for Japanese money and it flowed into the US, which we have been enjoying since then. It also ruined the Pacific Rim and is spreading outwards, which is why South America and Europe are feeling it now. In theory of course.
But roughly the idea is that Japan is a leading indicator for the rest of the world. For me this is a tough concept because I never really considered Japan that important that it would affect even the United States macroeconomically. But I remember when I was a lot younger that everyone would talk about how the Japanese would take over everything and how they were brilliant investors, and then as I grew older, I stopped hearing that, as their economy busted, and then the US bravado kicked in. Psychologically speaking, I guess it makes more sense now.
I've noticed a lot in the past couple years, as I've learned more about what goes on in the rest of the world (yay daytrading as an educational process), that what I'm interested in tends to hit first in other countries, NOT the US.
I mean, the Internet was almost completely a US thing for a long time, and it still enjoyed the most success here in America. And in terms of new patents filed every year, the US is far and away the most creative globally. But, and hear me out, new cultural and entertainment and technological stuff is catching the craze in places like Europe and Asia before it does in the US.
A good example: cell phones. I ripped out a page from Red Herring that showed the infrastructures of different continents, and Europe was almost entirely GSM, while the US was fragmented between GSM, CDMA, etc. Asia is fragmented too but it includes a lot of geographically separated countries. And in Japan and Europe right now, stuff like I-Mode is hot shit. Everyone uses a cellie, and more increasingly, NOT for voice talking, but just for typing messages. They're not using pagers, or that Blackberry shit from Research in Motion. (I swear I have yet to meet someone who has one of those things, short RIMM!) They're continuously typing quick notes to each other. If you think it's bad here in the US with phone calls, you have to go to other countries and see how totally pervasive it is. When my plane landed in Frankfurt, a sea of beeps overflowed the bus to the terminal as everyone turned on their cellies. Sick.
But what about the US? Well, we have AT&T Wireless, Sprint PCS, Verizon, all providing fairly expensive plans with a few extra features, all using the hacked CDMA technology that doesn't easily allow for text messaging or anything beyond voice. SMS? Forget about it. Not really happening. The big companies write this off as "cultural differences." WHAT? Cultural differences my ass. People love to talk to each other. That they wouldn't have to get on a bulky computer from home to do it would be huge! They are full of shit.
Another example. Gaming. PC gaming has died out as it is an expensive industry catering towards a demographic of gamers (usually older) who don't spend as much money as younger kids who primarily play consoles or handhelds. Consoles are where it's at now. And where is most of the work being done with consoles? Japan. Japan is wild about consoles. Everyone skips school when Final Fantasy comes out. Hoards of Japanese people get the latest consoles like the PlayStation 2 months before the US gets it. Much of the attention is geared towards Japanese first, and then the US. And in case you were going to slight gaming, it's one of the main pushers of technological advances in silicon and software, and has been part of the youth culture scene since the arcades and maybe Nintendo. People my age grew up on that shit.
And music. Music! Did the US come up with trance, electronica, jungle, garage, all of that? No. Do those genres have an impact on culture worldwide now? Definitely. Raves and dance clubs are internationally recognized now and DJs are reaching the status of rock stars. Brixton, Manchester, Ibiza, NYC, San Fran, London. Most of that shit came and still comes out of England. And it grew slowly and hit big before even hitting American shores. Of course, now that it's in the US, there are lots of American electronica artists and once edgy techno tracks are now used casually in TV advertising. But it didn't start here. The art of the rave was perfected abroad.
The same goes for fashion, and much more liberal and relaxed views towards sex, drugs, religion, marriage, and so on.
Not that Europe doesn't have its own set of hangups, but my point is that all these things have one thing in common. They're the playgrounds of the youth of the world. It's the kids who go out to a rave, talk on their cellies, down some MDMA, smoke some hydro, get fellatio on the way there, trash school and talk up the latest dish on games and music and pop culture. It's not the elite doing this. It's not wealthy philanthropists. It's not writers, or teachers, or the politicians, or fundamentalists, or lawyers, or anyone who people want to be when they get older.
If you're thinking I'm being anti-intellectual, I'm not. Not done yet. The point is that kids don't identify with such people because (as if you didn't know this already) they're into the new thing while the big wigs are busy trying to mesh the old way and the new way together. The big wigs have to play by rules while the kids play with trends. Where the intellectual part of the equation first comes in is in accomodating products and services to meet those kids' demands. That is, the people who come up with the music are actually in their late 20's and 30's, who've grown up in the past music scene and now want to push the envelope. The scientists have to produce the tech needed for cellies and the Internet. The teachers have to teach the kids what the past was like so they can subconsciously handle the future. The writers have to write the books that define the new generation and the new philosophy. And so on.
Virtually everyone I know is so anti pop culture that it's sickening. They scoff at new fashion trends that show more skin, and balk at pop music, and poopoo every new movie that comes out. They announce the death of civilization with every new fad that comes and goes. But, you see, in my opinion, stuff like pop culture is where everything is coming from!
I mean, fuck, it wasn't the old school of people who found telephones useful, or computers useful, at first. It was the people willing to try new things who perhaps used the new tech in irresponsible, useless ways, like video games. Sure the Internet was some huge defensive communications network, but let's be honest, it started out as text gaming, hardcore porn, and goofoff web sites for university students. If you were keeping abreast of what the trendsetters were into, you could've maybe invested well. If you thought it was all an insignificant little toy for the spoiled, you would've missed.
The point? It's chaos out there, but the emerging trends can be identified and capitalized on if you have an open mind. This is what I spend a lot of my time doing. Looking for ways to predict trends in different areas. And when I end up being right, it's a great feeling, for the world makes sense for once, when usually in my life it's a convoluted mess that seems to have no obvious direction or conclusion. I have to pursue this.
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