Yesterday, I was enlightened by the talking heads on CNBC. Enlightened to their ignorance, I was flabbergasted by the naivete that many of them spew. They were speaking about the new Apple connector, as I listened my draw dropped. They had no idea what they were talking about. Ignorance stems from lacking an understanding of a topic, and when it comes to technology many of the news sources just fail to grasp it, and that is where I grind my ax. It seems more often than not, the more senior group of investors write articles or jabber on the telly about topics that they have no in depth understanding about.  Then again that may be why many of these so called “brilliant” investors missed out on some of the stock movements of a lifetime and are rarely positioned for the next “big thing.”

I skimmed an article this morning referencing Zynga and Facebook. This articles suggested that Zynga was merely a company that sent annoying request on Facebook. This individual then continued to define his bullish stance obviously based on his lack of need for their products. I may be a health conscious fellow and avoid eating fast food, but I can still see the need of McDonald’s by many. An intelligent investor can look outside their arena of comfort to see why other companies fill the needs of many. Facebook allows individuals to connect, so the uniformed investing community believes that they are similar to Myspace or AT&T in the 90’s(remember the house phone, the thing that hung on your wall). To put it in terms that many of you will better understand: just because you don’t utilize Facebook, Yelp, Kayak, or Zynga does not mean that the company will not succeed.

Look back to the initial run up of Apple, many of the talking heads suggested that their was no need for any of the products they made. I even recall myself suggesting that a tablet was pure lunacy. Obviously I was wrong in my initial notions. I have since learned from my mistakes and forced myself to think outside the box. So yesterday as Apple announced that they change the adapter on their phone, the inital reation of the talking heads was one enveloped by negativity. Why would they do that? Why would they change things? Won’t this be bad for business? blah blah blah. The transition will in fact set up for ease of use down the road as they set up one cord for the next few generations of phones. Also by allowing for a new connector this will make the new class of iPhones more exclusive. As I have spoken previously, that has repeatedly been one of the issues with apple products, that they were once tiered to a select group and now a majority of individuals have them. Hopefully the new phone will separate the New iPhone users and iPhone 4 users by leaps and bounds, making new apple products exclusive. I digress, the future moves so quickly that many can’t keep up, let alone look down the pipeline to see what is coming. So as an informed investor think outside the box, because when it comes to technology, the older generation repeatedly lacks an in depth understanding.

Sometimes it is better to take the wheel and make grandpa play backseat driver.

Photo by schnaars

The other day I come home to a lovely surprise on my porch step. There sat two giant yellow books. For those of you who are youngsters, these items were phone books. Years ago, I would relish in throwing out the old phonebooks and replacing them with a newer version (I have a little obsession with kicking out the old and bringing in the new). That day took a different route. Instead of performing a switch, I sat them upon the kitchen counter to revisit them later. After literally no debate, I then proceeded to merely discard them.

Many of you reading are wondering why my exposition has any relevancy to the stock market. Don’t worry yourself, the intricate relationships will shortly surface, in turn making you a more informed investor.

Over the past five years we have seen the movement of communication migrate from home phones to handheld smartphone devices. Apple led the charge in the smartphone market, ensuring their dominance. What does Apple have to do with the death of the phone book you sit wondering? Let me explain it via an example, the other day my mother sent me a text message, asking for the phone number of one of my close friends. Being that I like many others despise speaking on the phone, I sent her his contact information via text. For those of you not handy with your smartphone (technologically illiterate), you can send a contact information via text message. With the press of two buttons, you can connect two people that were previously not connected. The above stated example represents just one instance of how we as a society have utilized new technology to eliminate the needs of old tools, such as phone books. Not only has Apple connected friends, but with the use of many different apps and search engines, Apple (and its following smartphone competition) has allowed our privileged population to connect to countless businesses with ease.

Let us take a peek at another tech giant and observe their influence on the death of the phone book. With a large portion of society utilizing social media, in particular, the younger generation, connectining using a phone book has become obsolete. Today when one loses a phone or finds the needs to add new contacts, the do so by creating a Facebook page for this need or sending a Facebook message to a needed contact. Even more recently, through Facebook’s smartphone application users can call each other with the ease of hitting the phone icon beside a friends name. More often than not one comes across an old friend through the platform and can find their number as easy as sending a message requesting their digits.The connectivity that this platform allows goes above and beyond anything that we as a society have previously seen. The above examples are just the beginning as many of you know. Facebook has hinted at creating their own phone,taking the level of connection to a new level.

The one company that has almost exclusively brought about the death of the phone book is a technology giant in many sectors- Google. With its search abilities Google has allowed the world to access information in a ridiculously timely fashion. I along with everyone else can find the local collision center in a matter of seconds. Google also allows for us to see what fellow customers fell about their experience prior to even making our initial phone call to a company. Today’s customers are more informed thanks to the death of the phone book. Not only that, but the customers as a unit are taking a different approach to where they spend their money. Particularly in these harsh economic conditions customers evaluate where they will spend their dollar wisely. That is why Google sided with Zagat late last year, to focus on expanding resources for the ever important and money conscious restaurant eating crowd. They have effectively allowed customers to get a wealth of information they previously could not find. If you want local chinese food, you no longer get an outdated menu in a phone book, you get a live menu on the computer with customer reviews. The death of the phone book has made customers lives easier and added new intermediaries to profit from the customer business relationship.

Companies and individuals undoubtedly benefit from the change in access to this information. These technology companies have changed the way we interact with the world, I not only look forward to what the future brings, but also how these techs profit from the change in the habits of the masses.

Hate it or love it, the tech giants are putting the last nail in the coffin of the phone book.

Photo by Jamiesrabbits

I see it more often than not, traders thinking they can make a quick buck with the VXX. This usually this turns out miserable for a vast majority of those in the trade, at least in the recent months. You can call it what you like, fighting the trend, trying to outsmart the market, whatever you call it, it looks like a mistake. Maybe my opinion is slighted from my unsuccessful trade in the VXX at the beginning of the year. Though, one cannot sit by on the sideline and not witness the massacre to those who believed in the VXX story. Volatility will come back in due time, it always does, but the VXX will likely take a grimmer route.

We as a memeber of the new trading community (one tainted by the market actions of 2008 and  drop off last year) believe that we can call the next disaster, that we can pick the next collapse. This has slighted many of our opinions, we saw the money made in volatility from those who timed the trade correct. I know I did, I saw those that made a killing off of the VXX, doubling their money in a month period and I wanted in. I thought at the beginning of the year, that would be me, I would make a killing on volatility. seven plus months have past since then and the VXX has done nothing but decrease in value. Oh yeah, and that collapse, it still hasn’t happened either. Everyone thinks they can outsmart the market for the next drop. The VXX seemed like the weapon of choice to take on the market that I saw as bearish. Maybe the market was very bullish and I was wrong, maybe the VXX is headed towards zero,  either way, the VXX was far from a beneficial tool to my portfolio.

The VXX ETF continually loses value on a monthly basis. Ask those who have used it as a hedge for an extended period and they will tell you it is a losing proposition. I at no point claim to understand the inner workings of the volatility ETF and that is why I should never have put money to work there. Hindsight always lends itself to be 20/20. Luckily, I walked away from the VXX a long time ago, saving some of my position. Since that time, I have seen the VXX sink lower and lower, and am glad I walked when I did. Take a look at that graph and you will see, time and time agian, it has melted lower since its inception.

My ramblings suggest two basic principles. First off, predicting the next collapse is merely a fools errand. If you pick quality companies that will do better in the near future and the future not so near, your portfolio will be rewarded. Making foolish bets has netted nothing but foolish results, ask around. Secondly, know what you are trading. If you do not understand the inner working of an ETF, such as the VXX (at this point I don’t even think Barclays understands it), don’t buy it.  I am still waiting on my check from Barclays with an apology note saying, “sorry we created an ETF that doesn’t work, here’s some gold coins for your trouble.” That day will never come, so I suggest learning from those who made the mistake before you, and find another way to bet bearish. If you happen to be a volatility addict like myself, day trading this monster seems like the best option.

Those in the housing trade since the earlier part of the year have been repeatedly rewarded, if they timed their entries and exits appropriately. I am not one to suggest an end of the housing disaster, rather I sit here advocating that things are not as bad as once suggested by the talking heads, making the housing play less risky. On weeks like these, when the global macro picture seems questionable yet again, betting on a U.S. recovery remains difficult. Though, as we look back at the worst of the recession, seeing the jobless claims sit in more comfortable territory, and see the home builders making investor money, it may be time to look at the housing derivative play- department stores.

At first you want to be skeptical, that was my initial reaction as well. Well aren’t department stores dying, isn’t everyone buying items online? One would think with the huge onset of technology that would be the case, but just look at your actions and see them tell a different story. Humans, in this case consumers, must feel and touch items.  We as a species are inherently nosy. Merely seeing an item on a screen does not suffice our appetite of need and lust. Yes, once Americans whip out their wallets they will spend it with an online giant like Amazon, but when they are setting up to fill a home with goods, they will be spend all their money in the department stores.

The play is simple. One buys a new home, the must in turn fill this home. If someone buys a used home, they will also fill it with goods. Again and again the play stares you in the face. If housing continues makes big moves, the department stores will follow. How much stuff do we really need? The desire for more never ends when it comes to Americans.  We buy new houses to fill these new homes with new items. Even if you cannot afford to furnish a new home you furnish it via credit. society has deemed it more acceptable to have an home furnished on credit than a home not furnished at all. Consumerism has fueled our economy for almost a century and our habits will not be changing anytime soon.

This derivative play may not be the move today or tomorrow, but as we see the housing sector continue to make leaps and bounds, department stores will be the play. Just look at the earlier part of the year as an indicator. When the United States was thought to make a full fledged recovery, the shippers doubled almost overnight. The economic situation may not be as picturesque as was first suggested many moons ago, but the movement exhibited by the housing sector suggests some profitable improvement. If this mediocre improvement is followed by continual improvement, department stores are the play.

Photo by thetorpedodog

With the continued horrible economic conditions that have become a norm to a vast majority of Americans, the populous has had to adjust their spending habits substantially. Americans now think differently when they walk into a store, compared to the thought process that once encompassed them, prior to the great recession. A majority of Americans no longer spend frivolously. As a investor you must evaluate what the masses are doing, where they are spending their money, who will set to profit from the new spending habits. The American consumer who was once willing to spend money anywhere, now has the responsibility instilled  in their spending habits to shop name brand items at a discount.

The plays in this current environment are Ross Stores and TJX Companies. This move will reward those in a jungle of an economic situation that collapses for the next few years or a climate where we run head first away from an American slow-down. You sit there stumped, wondering how will this play work in both economic conditions? The answer comes simple and straightforward, the American consumers have changed their spending habits and will not be changing them back anytime soon. These “cheap” habits are now instilled in Americas arsenal of shopping weapons. If Americans are no longer forced to shop at discount retailers they will choose to do so freely. If the masses are forced to shop “cheap” due to economic conditions, as they have for the last few years, these stores will continue to profit as well. Why spend 50 or more dollars on a polo when you can pay a measly $30 for the same item. The above example is how Americans are thinking as they go shopping on Saturday, the masses methodology that can be applied to many name brands and items, be it furniture, kitchen appliances, shoes and so on. Call it wealth effect, call it nervousness, call it whatever you like, Americans are scared of being poor again (think 2008, think unemployed, etc.) so they will continually pinch pennies.

Many Americans have seen the dark side, living pay check to pay check, many Americans have lost a substantial portion of their net worth in their houses, they feel poorer. You can attribute the change in behavior to whatever you like, the reality remains the same, Americans will continue to be cheap and the discount retailers will continue this profitable trend from this behavioral switch.