Make the Right Choice

Lifehack.org has a nice post about how to make quality choices. One way to analyze choices is to ask yourself why, 5 times. I have to share this hilarious excerpt below:

Ask why – five times

The Five Whys are a problem-solving technique invented by Sakichi Toyoda, the founder of Toyota. When something goes wrong, you ask “why?” five times. By asking why something failed, over and over, you eventually get to the root cause.

Why did my car break down? A spark plug failed. Why? It was fouled. Why? I didn’t get a tune-up. Why? I was too busy playing GTA4. Why? Because I’m miserable and lonely and the people in the game are the only ones that really love me.

See? Your car broke down because you’re a sociopath.

The Past Month

I haven't posted much the past month because I have be remodeling my kitchen. We installed a ceramic tile floor, all new cabinets, new counter top, all new appliances. It's been an adventure, since I've never done any of it before.

I've been working on updates to TTR and making small progress on the opentick package, but blog posts have taken a back seat. I will have much more time to program and post when the kitchen is finished in ~2 weeks.

The Cause of the Liquidity Crisis

Classic!


Source:
www.dilbert.com

Free Real-Time NASDAQ Quotes

I used to watch the financial markets throughout the day via CNN Money, until most pages force-fed me streaming video that I have to pause/stop manually. That caused me to switch to Yahoo! Finance.

Google Finance will be my new home since they have begun to provide real-time stock quotes for NASDAQ securities. I have become quite the fan of Google products, not because I'm a fan of Google, but because they just make quality products: GMail, Google Reader, Google Calender, Google Maps, Google Code, Google Code Search, and - of course - Google Search.

I haven't tried it myself, but I've heard that Google's SketchUp is quite handy.

New Project

I've started creating a R API to the opentick data servers. My goal is to provide a native R interface to opentick real time and historical market data. I have reservations about being able to make it solely R-based, due to threading issues I don't totally understand at the moment.

Even though I've read of quality issues with opentick's data, the price can't be beat for small, part-time traders (i.e. me).

Due to the upgrading of its network infrastructure, opentick is not currently accepting new users. That should change in the near future, however. You can sign up to be notified when the upgrades are complete.

For those who already have accounts with opentick, you can find the very-alpha source code on r-forge.

Disclaimer: This software is not endorsed in any way by opentick corporation and I am not affiliated with opentick corporation.

Understated Inflation?

John Mauldin makes an excellent point regarding inflation perceptions in this week's Thoughts from the Frontline weekly e-letter. In short, consumers pay more attention to the items they buy more frequently and, currently, those are the items that are increasing in price the most.

[H]igh-frequency spending items like gasoline, food, education, and medical care make up 50% of the Consumer Price Index. These are items which we buy on a regular basis. And they are going up at a weighted average rate of 6.8%, a lot higher than the 4% for the CPI as a whole.

The 20% of the CPI which are low-frequency items like furniture, appliances, vehicles, and so on are actually falling at a -0.7% rate. Since OER (equivalent rent) is roughly 30% of CPI and is rising at 2.8%, even as home prices fall the overall rate is about 4%.

Our tendency to notice the price increases in more frequently purchased items more than the drop in less frequent expenditures is known as salience. What we see every day is more visible to us and is on our minds. And because the reality is that those prices are rising much faster than headline inflation, we tend to think inflation is understated.

More Upside to Come?

Quantifiable Edges has an interesting post regarding large gaps up in downtrends. Rob writes,

Buying gaps up of 0.75% or more during downtrends was actually profitable. In this case, 58% of the 105 instances finished with the SPY closing higher than it opened. The net total of the movement from open to close was a gain of about 26%...

I suspect short-covering is a big reason that large gaps tend to spark additional buying in downtrends but not in uptrends. Stops get blown through overnight and when they see the market getting away from them, panic-covering ensues.

The Nasdaq gapped up more than 1% today. If there is indeed more upside to come, I would be surprised if the Nasdaq Composite can sustain prices above the top of the 3-month trading range around 2,400.