Killing Me Softly With His Bonds

Bugra Bakan

“Why are you always so suspicious? – Irene Adler

Should I answer chronologically or alphabetically? – Sherlock Holmes, A Scandal in Bohemia”.

For full time, professional investors, the good news is that there is never a dull moment. There is always a variable, an unknown, a potential chess move someone must be getting ready to make that you may not ready for. There is always that un-turned stone. The bad news is that, you can never allow yourself to get comfortable. If you think you’ve figured it out, ask again because as the saying goes “You can be right on the trade or the timing, but never both.” So before you call yourself a successful investor, accept that there will always be a healthy level of paranoia in your thoughts.

This could not be more applicable for the bond market movement lately. I, among many, have been projecting an end to the 30 year bond bull market with a correction to the downside. Some called it the “great rotation”, referring to asset allocation, shifting from bonds to stocks.

Filed under: Finance Continue reading

Emotions and Facts – US Economy and Markets

Bugra Bakan

“We are in the business of making mistakes. The only difference between the winners and the losers is that the winners make small mistakes, while the losers make big mistakes.” Ned Davis, Market Analyst

It feels like the markets are coming close to a critical juncture, which makes the opening quote from my favorite market researcher Ned Davis, all the more meaningful. During times of change, it is easier to make mistakes. The key question becomes how big is the mistake and how long has one resisted correcting it? What I can add to the Ned Davis’ quote, is that the biggest difference between the winners and losers is that the winners correct themselves quicker than the losers, and learn from their mistakes. As the US stock market might be approaching the end of the cyclical (short term) bull cycle that started in March 2009, the winners will be those whose tactical moves will reflect the tidal changes as opposed to fighting them.

First quarter 2013 real Gross Domestic Product (GDP) annualized growth rate came in at 2.5%, below the expected 3%-3.5% range. To give you a perspective, the post WW II average is 3.5% and the current reading is significantly lower than the historical average; 28% less.


US Stocks Hit All Time High

Bugra Bakan

“The secret of all victory lies in the organization of non-obvious.” Marcus Aurelius (Roman Emperor 161  – 180)

I only discovered Marcus Aurelius in 2000 Ridley Scott movie, Gladiator. I can’t forget the scene, in which to his son Commodus, he says: “Commodus, your faults as a son, is my failure as a father.” He openly and honestly acknowledges Commodus’ shortcomings, doesn’t sugar coat a thing, and accepts full responsibility as a father; my kind of guy. These two characters in the movie are portrayed quite accurately against historical facts. As a philosopher, Marcus Aurelius points out in his quote, to the importance of the non-obvious; the unknown. If you think you’re smart by knowing all the economic facts and you’re ready to invest, think again. All the information available to you (except insider information, which is illegal) is also available to everyone else, and most likely already factored in. The key question is: what might the other investors be anticipating with this information? Because if the known has already been acted upon, the unknown is where the victory lies.

Now, of course this doesn’t diminish the importance of research and collecting data. Even to anticipate others’ actions, you need to know what those actions might be based on. A reaction to certain set of facts, also called a trend, could be identified by looking at historical data and matching similarities to gauge what could be next. This is called a technical analysis, which is always confused with charting. Charting is a small subset of technical analysis, and nowhere near as reliable as trend analysis.


A Ticking Time Bond?

By: Bugra Bakan

Q: Why do Economists make predictions to the nearest tenth of a percent? A: To prove they too can have a sense of humor.

This is my fourth calendar year writing newsletters, and second in TABC Blog. Time surely flies If we don’t pay attention to where we are today in relation to our longer term goals, we may find ourselves getting a wake up call rather late in the game. The key question for someone in my position to raise is: do you have a financial plan and how are your current financial circumstances positioned in relation to that big picture? More on this later.

In every bull market regime there are naysayers, who are not convinced. When the market is down, they warn you of a value trap. A value trap is a condition when the price to earnings (P/E) ratio is low, which is usually one of the reasons to actually start investing. Ideally, you’d rather pay less for given earnings and that’s why when prices fall, stock screeners trigger a buy signal to a value strategist. Since it can’t be that simple, what could you be missing? This is where the value trap comes in. Are you getting what you are paying for, a low quality stock? A low P/E may be a warning for deteriorating earnings, which would further push down the price of your investment and that’s when you fall into the trap.

When prices go up, these naysayers will say that the market is overbought, too stretched, due a correction and resembles the last “sucker’s rally.” A sucker’s rally is typically seen just before a peak and a sharp drop after, or will follow lows and attract those who think the bottom is seen only to find out that this was a “dead cat bounce” and there is more room to the downside.


Instagram really worth $1 billion?

Facebook just announced that it purchased Instagram from $1 billion in cash and stock - what just happened here? Did we miss something? Is Facebook going to continue these purchases? I would bet yes, and here is why:

Facebook is a new media company that is about to go IPO; it is media offering is based on what it knows about you so naturally it wants to improve the quality of this information and create value for its share holders. Here is how it would do it:


Mobile Makes Its Mark at Y-Combinator’s Demo Day

With 66 companies attending this is the largest demo day for Y-Combinator took place in Silicon Valley today at the Computer History Museum in Mountain View. The event attracted Silicon Valley's elite, investors and executives from number of firms from around the country and around the globe.

The Demo Day has been dominated by mobile companies, not a shocker given that the combined reach of iPhone and Android's reach millions of users. Especially Android's fast market growth made mobile more attractive for entrepreneurs.

Some of the companies that delivered presentations  with mobile focus:


Google Robot Cars

I finally spotted a Google Robot car the other day and grabbed a shot.  Based on statistical data provided by Google, there has been only one car accident so far, and robot car was at no fault.

I can't help but wonder why would you tell a car to go somewhere without you in it.

1) children, old people, unconscious people are transported.

2) car drives you to work, drives home. No parked cars on the street. Or - you dont own a car. Taxis everywhere take people places.

3) you keep working while you are being transported.  Way to increase efficiency in our unnecessarily already efficient life.

Filed under: More Comments Off

Madonna’s New Album MDNA Is Turning Her Into A Techie

For the album’s debut yesterday, Madonna decided to forgo the typical round of morning talk shows.  She instead opted for an interview at Facebook’s New York headquarters, a live Twitter chat, and a giveaway on Spotify—two lucky listeners who play MDNA at least three times in the next two weeks will receive free tickets to one of her upcoming shows.  Madonna’s most unusual promotion, however, involves Fab.com. The nine-month-old design-focused retailer boasts 3 million members and has dedicated its homepage to MDNA, which it’s selling in both physical and digital format for $7.99, half the price of most other outlets.

Filed under: Social Media Comments Off

Are VCs Really Right For You?

If you are reading this blog entry I assume you are an aspiring entrepreneur and at least know what a VC is... But do you really know what a VC does? Should you really go after VC funding and if so at what stage? These are age old questions for the entrepreneur.


380 Facebook Friends: My Value to Zuckerberg is over $45,000

About the Contributor:  Bugra Bakan is the founder and president of Investment Advisory Firm, Shield Wealth Management.

How much are your friendships worth to you? Can your net worth be quantified based on the number of connections you have? Are you aware that you could be helping someone get rich…or even better help someone make more money through you, than you make for yourself?

Mark Zuckerberg can help us with the answers. The company he started, which needs no introduction to this corner’s readers, is doing just that; quantifying the value of relationships.

According to the recent Initial Public Offering (IPO) documents, Facebook is valued around a $100 billion dollars. Currently it has 850 million users, so each is worth $117.64.

Since I have 386 friends on Facebook , my value to Mark Zuckerberg is $45,409.04!!! Wow…

Filed under: Finance Continue reading