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Tuesday, August 26, 2014
Why I Agree With Amazon's Purchase of Twitch.tv
First, some numbers. 1.35% of all internet traffic is made up of streaming, specifically the streaming of video games. Twitch boasts 55 million unique users per month as well as 1 million broadcast partners. Although these numbers help out the traditional investors, they leave out details that are to me the most important.
The intriguing thing for me about Twitch.tv is that the unexpected is relatively normal, which presents a dynamic opportunity for Amazon. For example, a game that was released in 1998 in the US, Pokemon Red, recently enjoyed an exuberant rebirth which resulted in millions of people watching the play through. Why did so many people watch? The reason is as simple as it is innovative: the viewers were able to input the controls through the chat function in each Twitch stream's page.
This may sound stupid, but bear with me. For gamers such as myself, our favorite games are burned into our memory, there is no way for us to simply erase our memory and play through them again for the first time. Or so I thought. What resulted from Twitch Plays Pokemon (the name of the stream/community) was one of the most incredible things I've seen on the internet: total anarchy. Without getting too bogged down in the details, "Twitch estimated that over 1.16 million people participated [over the course of 16 days], with peak simultaneous participation at 121,000, and with a total of 55 million views during the experiment." Imagine being able to relive your favorite memory, would you pay to be able to do that? I would. This is a single game. Yes, Pokemon Red one of the most popular games of all time (in my opinion at least), but before TPP came along there were literally a handful of streams devoted to the original game, played on an emulator. Almost overnight it went from being least to most popular, all because of someone's innovative approach to content.
This sounds simple, if not boring, which is understandable for people who aren't interested in videogames. But the important aspect of this event, which lasted for much longer than anyone including the creator intended, is that it spawned multiple knockoffs and imitations. Although none of them enjoyed the same popularity as the original, what with the new rules and mechanics, the introduction of "X Plays Y" is an interesting schematic that I am sure we will see more of in the near future.
Where some people see individuals wasting away their lives in front of a computer screen, others see opportunity. Whether that opportunity is economic, psychological analysis or just pure nostalgia, it definitely is real, and I commend Amazon for recognizing that opportunity.
I don't think that PotatoPlaysPokemon will catch on, though. There is only so much a franchise name can do for a product.
The intriguing thing for me about Twitch.tv is that the unexpected is relatively normal, which presents a dynamic opportunity for Amazon. For example, a game that was released in 1998 in the US, Pokemon Red, recently enjoyed an exuberant rebirth which resulted in millions of people watching the play through. Why did so many people watch? The reason is as simple as it is innovative: the viewers were able to input the controls through the chat function in each Twitch stream's page.
This may sound stupid, but bear with me. For gamers such as myself, our favorite games are burned into our memory, there is no way for us to simply erase our memory and play through them again for the first time. Or so I thought. What resulted from Twitch Plays Pokemon (the name of the stream/community) was one of the most incredible things I've seen on the internet: total anarchy. Without getting too bogged down in the details, "Twitch estimated that over 1.16 million people participated [over the course of 16 days], with peak simultaneous participation at 121,000, and with a total of 55 million views during the experiment." Imagine being able to relive your favorite memory, would you pay to be able to do that? I would. This is a single game. Yes, Pokemon Red one of the most popular games of all time (in my opinion at least), but before TPP came along there were literally a handful of streams devoted to the original game, played on an emulator. Almost overnight it went from being least to most popular, all because of someone's innovative approach to content.
This sounds simple, if not boring, which is understandable for people who aren't interested in videogames. But the important aspect of this event, which lasted for much longer than anyone including the creator intended, is that it spawned multiple knockoffs and imitations. Although none of them enjoyed the same popularity as the original, what with the new rules and mechanics, the introduction of "X Plays Y" is an interesting schematic that I am sure we will see more of in the near future.
Where some people see individuals wasting away their lives in front of a computer screen, others see opportunity. Whether that opportunity is economic, psychological analysis or just pure nostalgia, it definitely is real, and I commend Amazon for recognizing that opportunity.
I don't think that PotatoPlaysPokemon will catch on, though. There is only so much a franchise name can do for a product.
Wednesday, August 20, 2014
US Equities Markets Optimistic After Fed Meeting Minutes, Bunds Fall 8.20.14
For a third day in a row, US equities rose as the minutes for the Fed's meeting on July 29-30th were made public. The market is approaching a record high of the S&P 500 from July 24th of 1987.98. (at time of writing it is 1986.51)
The S&P 500 has experienced a 4 percent rally starting in the first week of August, USD rose to an 11-month high against EUR. The price of Oil rose, contrasting with the past three sessions. Gold is down to a 2-week low.
Michael Gapen of Barclays Capital says the Fed "still sees labor markets as far from normalized and is prepared to remain patient."
The bottom line is that although the Fed recognizes and is happy about the recent improvements in the economy, the data doesn't warrant an increase in rates unless there is additionally impressive growth and development.
The S&P 500 has experienced a 4 percent rally starting in the first week of August, USD rose to an 11-month high against EUR. The price of Oil rose, contrasting with the past three sessions. Gold is down to a 2-week low.
Michael Gapen of Barclays Capital says the Fed "still sees labor markets as far from normalized and is prepared to remain patient."
The bottom line is that although the Fed recognizes and is happy about the recent improvements in the economy, the data doesn't warrant an increase in rates unless there is additionally impressive growth and development.
Thursday, July 11, 2013
Best Performing Asset Class of H1 2013 is...
The best performing asset class of 2013 year to date are Japanese and US equities with gains of 15.5% for TOPIX, 13.4% for NASDAQ and 13.8% for the S&P 500. These markets have both been spurred on by the implementation of monetary policy from their respective governments. In the US, the Federal Reserve began purchasing $85 billion a month of mortgage backed securities and Treasury securities through QE 3 at the end of 2012. The Bank of Japan announced an addition to their QQE program on April 4th, pledging $1.4 trillion towards the purchase of government bonds in an effort to battle deflation that has persisted for over a decade.
The Bank of Japan is seeking to increase growth and end its deflationary cycle, targeting 2% for inflation by 2015 or early 2016 through the implementation of its monetary policy. With the target for inflation comes the increased likelihood that the equities run will continue as Japanese investors seek to own equities rather than cash as it loses value. The weakening Yen helps as Japanese assets are denominated in foreign currencies and liabilities are denominated in Yen. Additionally, a weaker Yen boosts companies' earnings as the majority of Japanese companies rely on exports for sales.
The month of May was full of speculation leading up to the announcement of the tapering of QE 3 which caused the 10 year US treasury bond yield to rise meteorically from lows of 1.63% to 2.62%, a 100 basis point movement in a little under two months. Speculation as well as the actual announcement on June 19th by Fed Chairman Bernanke caused global investors to move $80 billion from bond ETF's and mutual funds in June alone. Initially, the comments from Bernanke jolted the equities markets, resulting in a 4.8% loss in the S&P 500 and a 4.6% drop in the NASDAQ, but eventually markets managed to resume the bull market trajectory. The resurgence in housing and auto sales has given additional confidence to many US investors and as they compare domestic equities to fixed income areas such as bonds they see more room for the bull market in equities to grow.
The Bank of Japan is seeking to increase growth and end its deflationary cycle, targeting 2% for inflation by 2015 or early 2016 through the implementation of its monetary policy. With the target for inflation comes the increased likelihood that the equities run will continue as Japanese investors seek to own equities rather than cash as it loses value. The weakening Yen helps as Japanese assets are denominated in foreign currencies and liabilities are denominated in Yen. Additionally, a weaker Yen boosts companies' earnings as the majority of Japanese companies rely on exports for sales.
The month of May was full of speculation leading up to the announcement of the tapering of QE 3 which caused the 10 year US treasury bond yield to rise meteorically from lows of 1.63% to 2.62%, a 100 basis point movement in a little under two months. Speculation as well as the actual announcement on June 19th by Fed Chairman Bernanke caused global investors to move $80 billion from bond ETF's and mutual funds in June alone. Initially, the comments from Bernanke jolted the equities markets, resulting in a 4.8% loss in the S&P 500 and a 4.6% drop in the NASDAQ, but eventually markets managed to resume the bull market trajectory. The resurgence in housing and auto sales has given additional confidence to many US investors and as they compare domestic equities to fixed income areas such as bonds they see more room for the bull market in equities to grow.
Tuesday, July 9, 2013
Possible Responses to the Uncertain Future of Brazil
The economic situation in Brazil has been divisive for forecasters, with investors uncertain of whether the growth of the global economy will pick up. Some analysts are calling for an increase in growth in H2 of 2013 while others remain skeptical of China's ability to get through the recent cash squeeze. One scenario is that China will be able to transition with minimal difficulty, allowing the recovery of Brazil to hasten and bring more economic certainty. This would contract the spread between Brazil's dollar denominated bonds and the US Treasury bonds, making the option to buy Brazilian bonds and short the US Treasury bonds a possibility. The scenario of China's slowdown lasting longer than anticipated and the impact of the US tapering of QE hitting Brazil harder than people think is very real and due to that, the second scenario offers the possibility of shorting the iShares MSCI Brazil ETF, which was down 16.3% last quarter and could slide much more without a turnaround in sight.
Sunday, July 7, 2013
7.5.13 Week in Review
JPY Tankan Large Manufacturer's Outlook came in at 10 vs the expected 7, at its highest since Q4 of 2007. This outlook measures business trends such as anticipated profits and capital investment. The weakened Yen has helped the anticipated Japanese exports and since so much of the Japanese economy consists of exports it is a large indicator of the future direction.
US ISM Manufacturing Index came in at a three month high of 50.9 vs the expected 50.5. The rise shows an increase in optimism for the US to lead growth in the second half of the year. The forecast was put together through a median of 85 economists polled. “The pace of activity at the global level is moderate and stable,” said David Hensley, director of global economic coordination at JPMorgan Chase & Co. in New York. “We are not at a point yet where we are seeing a significant pickup in the growth rate. Our outlook is for growth to pick up a bit, though not extraordinarily so.”
US Unemployment rate came in at 7.6% vs the expected 7.5%. Unemployment has been one of the main areas of concern for the US Fed, having announced that the rate they are looking for before increasing interest rates is around 6.5%. The increase in unemployment moves the Fed further away from the interest rate hike in principle, but they could act without regard to the numbers. The Fed has stated however that they were relying on data rather than a specific date to implement the ending of QE, so that has to be taken into consideration.
US Change in non-farm payrolls showed an added 195K jobs instead of the expected 165K, prompting investors to think that the Fed will maintain its path on QE tapering beginning sooner than later. The addition of workers into the workforce has Ted Wieserman of Morgan Stanley thinking that the unemployment levels quoted as a target for the rate hikes by the Fed could be hit in March of 2015.
US ISM Manufacturing Index came in at a three month high of 50.9 vs the expected 50.5. The rise shows an increase in optimism for the US to lead growth in the second half of the year. The forecast was put together through a median of 85 economists polled. “The pace of activity at the global level is moderate and stable,” said David Hensley, director of global economic coordination at JPMorgan Chase & Co. in New York. “We are not at a point yet where we are seeing a significant pickup in the growth rate. Our outlook is for growth to pick up a bit, though not extraordinarily so.”
US Unemployment rate came in at 7.6% vs the expected 7.5%. Unemployment has been one of the main areas of concern for the US Fed, having announced that the rate they are looking for before increasing interest rates is around 6.5%. The increase in unemployment moves the Fed further away from the interest rate hike in principle, but they could act without regard to the numbers. The Fed has stated however that they were relying on data rather than a specific date to implement the ending of QE, so that has to be taken into consideration.
US Change in non-farm payrolls showed an added 195K jobs instead of the expected 165K, prompting investors to think that the Fed will maintain its path on QE tapering beginning sooner than later. The addition of workers into the workforce has Ted Wieserman of Morgan Stanley thinking that the unemployment levels quoted as a target for the rate hikes by the Fed could be hit in March of 2015.
Sunday, June 30, 2013
Using the Directional Movement Indicator
The Directional Movement Indicator (or Index) was created by J Welles Wilder in 1978, who also created the popular Relative Strength Index. The DMI is a very useful tool in determining price direction as well as strength. The DMI's primary purpose is to identify the strength of a trend, so that a trend trader can know whether or not the trend is strong enough to invest in. The DMI is composed of two separate lines, the positive directional movement indicator +DMI and the negative directional movement indicator -DMI. The +DMI indicator shows the strength of the upwards price movement while the -DMI shows the strength of the downwards price movement. DMI values under 25 are considered strong directional indicators while values of under 25 are weak directional indicators. The +DMI usually moves with price action, while the -DMI moves inverse to price action.
The location of the two lines is important, as the higher line is considered by some traders to the the "dominant" line and is the line that correlates to price action, when the +DMI is on top then it is more likely to be moving upwards in price and when the -DMI is on top then it is more likely to be moving downwards. A potential trading signal occurs when a crossover of the lines happens, signalling a change in the trend. A crossover occurs when the lower line crosses above the higher line, indicating that a change in trend strength is occurring. These crosses are less than reliable: in times of low volatility there are commonly false signals and in high volatility the signals are usually very late.
Peaks are important to note when looking at this indicator, peaks in +DMI reflect the highs in a bullish rally while peaks in a -DMI represent the lows in a bearish rally. A series of +DMI peaks above the -DMI signal a strong uptrend, while a strong downtrend is characterized by the -DMI peaks above the +DMI. Pivots appear in the DMI when price action changes direction. A +DMI pivot high is caused by price making a pivot high, a -DMI pivot high is caused by price making a pivot low.
The location of the two lines is important, as the higher line is considered by some traders to the the "dominant" line and is the line that correlates to price action, when the +DMI is on top then it is more likely to be moving upwards in price and when the -DMI is on top then it is more likely to be moving downwards. A potential trading signal occurs when a crossover of the lines happens, signalling a change in the trend. A crossover occurs when the lower line crosses above the higher line, indicating that a change in trend strength is occurring. These crosses are less than reliable: in times of low volatility there are commonly false signals and in high volatility the signals are usually very late.
Peaks are important to note when looking at this indicator, peaks in +DMI reflect the highs in a bullish rally while peaks in a -DMI represent the lows in a bearish rally. A series of +DMI peaks above the -DMI signal a strong uptrend, while a strong downtrend is characterized by the -DMI peaks above the +DMI. Pivots appear in the DMI when price action changes direction. A +DMI pivot high is caused by price making a pivot high, a -DMI pivot high is caused by price making a pivot low.
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