paulbissett.com

I was inspired today. It happened at a Super Bowl party by a friend as driven in her field as I am in mine.

We engaged on several subjects about what it takes to be successful. I am scientist, engineer, computer programmer and financial analyst. I have a bend for the quantitative that is great for puzzles and understanding how things work.

But I have struggled with the “why” things work. Particularly the “why” people do the things they do.

She had a different point of view. I didn’t quite get it until she sent me this 2009 TED video by Simon Sinek. (A shorten version can be here.)

I am inspired.

Thank you.

A friend of mine in the securities industry asked my opinion on the stock market for 2011.  I laughed because my opinions are worth about as much as he’d pay for them; however I thought I would humor him (and myself) and see what came off the top of my head.  The following was my 20 minute answer.  Let the buyer beware.

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If I were to make a guess, I would think we see a top side ceiling of 12,500 from today’s levels. We will probably bounce off this ceiling a number of times over the next year.

I think we are stuck in 1978-1980 cycle. Unpopular democratic president, lots of uncertainty, high unemployment, and loose monetary policy.

DOW Industrial Average on November 8, 2010. The graph shows the period of 1975 to 1980.

The keys are the loose monetary policy combined with high uncertainty. The money only gets into the hands of large corporations or well capitalized companies. These are not the “engines” of innovations, so asset prices get bid up and cash leaks into the system.

Asset inflation gets built into expectations, but the velocity of turnover in fixed assets remains low, i.e. business will still be operating below capacity but prices still rise. GDP grows but not at levels required to significantly reduce unemployment.

We’re seeing spot bubbles for tech companies, but the cash is not well distributed. Mainly coming from large investment funds and little tiny funds. Medium size funds are getting crushed. I think this effect is related to the greater markets. The liquidity is concentrated in the giants, with some very small players living well off big crumbs. This is a symptom of an inefficient distribution of cash into the economic system.

The caveat to this is the US demographics. The population is aging, changing asset allocation may continue to bid up bond prices keeping yields low and perhaps goosing the stock market.

Given the uncertainty, I don’t think this increases liquidity to the general economy. Banks will continue to hold on to the cash as they try to build up their balance sheets.

Look to the fed to change tactics later next year as QE II doesn’t goose the economy as much as they would like. They could change the rules on banks holding reserves at the fed, making it more expensive to hold reserves versus lending the money. This might actually goose the economy, but will also drive inflation as cash floods into the system. The increase in inflation expectation acts as a barrier to market upside beyond the 12,500 level.

Do you add value to the customers you serve?

Do you add value to the household you run?

Do you add value to the lives of your family?

How do you feel after reading these questions?

Life is giving and taking. You can not live without doing each, but adding value credits a positive balance in the ledger of life.

Plant for the future and add value to life.