We all have preconceived notions about how the world works, but due to technology this notion is outdated daily. Last month I suggested in And They Say This Isn’t A Tech Bubble that we were seeing a repeat of what occurred in the tech bubble of lore. I am now standing here realizing that I was wrong, very wrong and my impudence can be explained simply. To make the advent of technology easy to understand for all ask yourself, how many people can a website reach? Then proceed to ask yourself – how many people can my local big box store reach?

Ahh the skeptics are now questioning there positions. Well reconsider your ignorance for a moment. Many of you live in a decent sized city, anywhere from 100,000 individuals to 1,000,000 and more. Look at your local Best Buy, Walmart, or even Apple Store and ask yourself, how many people can that store serve in one day? You obviously get the direction in which I am headed, the fact that a store has limitations to the amount of people it can serve. Limitations do not apply to tech companies, I am not suggesting they have super powers by any means, I am merely proposing that tech companies can reach many more consumers than stores. Big box stores have been a key part of our society for the last century, they are by no means dead, but are making room for the world wide web to take a piece of the pie. Consumerism will run rampant in our society for years to come, it will profit from both stores and the web, and these new sites that have millions upon millions of users will be positioned perfectly in the years to come.

Social networking is a key aspect of our life, not a fad of the late 90s. People get up in the morning and check there twitter for news rather then picking up the newspaper, the world is changing. Websites are what shopping (consumerism) was at the turn of the century, an arena with unprecedented growth posibility, a newfound aspect of life we cannot live without. Look at your phone, more and more americans can access the internet from there hand! So to sit here and say the tech bubble is back borders on stupidity. These tech companies may have high valuations, but have growth potential to back even higher valuations. Social media, social networking, and websites that serve a purpose are changing the way we interact with each other and interact with our daily world. If there are consumers to buy goods, which there will be, then these companies can find a way to monetize content (which many already have). I suggest realizing the trend before down the road you say I wish I had.

Photo by TrendsSpotting

On this day full of apples – apple slices, apple cobblers, caramel covered apples, and oh of course Apple earnings. I wanted to remind investors the difference between investing and gambling. You may think that you know the difference, but many of the brightest have been triickd into thinking they are investing when they are gambling away. Investing in the simplest terms is looking at the variables of a company and inferring if the stock price will go higher or lower. After making this inference one will allocate a portion of capital to this endeavor, calculating the risk, so that as an investor you will always know how much you can lose. Gambling, hoping, praying, those words are all defined differently, but an investor that gambles knows that hopes and prayers, are just that.

I am not standing her telling you how to invest, I am merely reminding everyone during the exciting earnings season, not to get caught up in the hype. It is easy to think you know a company, how the earnings will play out, and in turn how the stock will react. The fact of the matter is you and I don’t know the results until they are posted. What we do know is that if the company does well and the market responds nicely, the stock will continue to rise. Look at Apple over the last quarter, if you missed out on the initial earnings day you could have made tons of money the months following and not taken on as much risk. You can also look at the other end of the spectrum, Netflix last night, where investors lost 15% or more in an afternoon. Or take a look at Netflix when there earnings were bad and continued to trade down for some time.

Just look at the above image, after earnings, where the arrow is located, Apple went off like a rocket. In the case of earnings waiting may be the best policy. As Apple showed us in January, good earnings are just the beginning of a run. So don’t gamble with earnings, invest afterwards.

Photo by ohhhbetty

Emotions, the worst thing a trader can have. No matter what literature you have read or what pros you chat with, the opinion on emotions is the same, they are the downfall of a good trader. One of the worst disadvantages of emotions is it creates a fear of getting involved in the market. As traders and investors, not being invested can harm you. One should never trade as if those dollars in your account are burning holes in your pockets, but one should trade. No matter which way you look at it, the truth of the matter is that money has to be invested to make money.

There was a time in when putting money in the bank or real estate could make a rich fellow richer. Those days are gone and with that, we see a new group of retail investors. Men and women that see the advantages of trading, see the big rewards that can be made, but at the same time see the catastrophes (look at those who pulled there money out of the market  in the end of 2008). In more recent times just look at the downfall of Research In Motion and Netflix in the last year. We all fear of losing our precious capital, that is why we all have good money management practices (if you don’t feel free to email me and I will give you some).

I am not here to preach on the matters of diversification and good money management ideas. There are 100s of books and websites contributed to those ideals. What I am here to remind you is that if you follow good money management practices you can conquer emotions. You must follow the mantra that you must play to win. I see more often then not that the retail investor cannot make the right picks so they sit out of the market. The sit on the sidelines and watch other make money. Making the right picks is never easy, but you cant ever make the right picks if you don’t make any picks. I look at it this way, a trader does not have to be right 100% of the time, they just have to be right more then they are wrong.

Just like at the beginning of the year, when everyone was convinced the market can’t go down, that seems to be the recent interpretation of technology stocks. Don’t get me wrong, I am a big bull on the tech space. Social media has legs to run and it is going to make me a lot of money in the process. So to sit here and say that the tech hype is dead and gone is ignorant. What I will stand behind my podium and preach is that there may be a changing of the guard. As of late people seem to be a little more leery of Apple, Yelp, Zynga, Google and so on. While at the same time things like Renn, Sify (Redf intraday on Friday), and LinkedIn have been doing well and/ or holding up fine. What may be happening is a movement away from the tech leaders of early 2012 into the new tech leaders of the late 2012. Keep an eye on this as the next few weeks play out. I may be trying to call thisone to early and things like Apple, Yelp, etc. may just be cooling off before they are hot once again. I am going to keep an eye on Apple earnings to help me gauge this movement, so we will revisit it again after the 24th.

Shout out to Fifty2weekhi in his article Don’t Overstay The Flagging Welcome for bringing this up in his technical analysis.

Over the past few months I have attempted to contribute adequately to the investment community via my blog here on Capital Overlook. Looking back at some of my calls, I can gladly give myself a pat on the back.

My goal daily is to be more right then wrong. As easy as that sounds, it is far from a nice stroll down the park. Two calls of mine I can gladly look back upon and smile. A majority of my calls are more of a long term view on the macro economy and only time will tell. Below are the links to my articles from earlier this year.

VXX: They Took Fear Out Back And Shot It 3/21
I suggested at this point to avoid the VXX until we see a hard pressed reversal that would give the VXX some real legs to run. We haven’t seen that and if you avoided this fund you would have made some money elsewhere.

Zynga: Zynga Scares Me 3/15
In the above article I suggested that the shares that were coming to market would decrease the price of the stock. I was right and as I said “Why buy at $13 when you can by at $9.” Don’t get my wrong I think social media is hot, but Zynga wanted to go down and I am not touching it until it shows some good upward momentum.