Market Update - Asian Gaming Stocks On The Rise

Analysts from Barrons to Forbes are asking the question, "Does the current uptrend have any legs?" Last week was marked by impressive gains in the Dow, S&P500, and Nasdaq indexes. Although Friday and yesterday were down days, partly due to uncertainty about the the Obama administration's intervention in the auto industry, the volume wasn't all that impressive. On the other hand, today's activity seems to indicate the market has digested the news and is continuing its recent ascent.

I am as concerned as the professionals about the specter of poor earnings announcements and higher unemployment projections for the second quarter. These dynamics could derail the current uptrend. However my stock investing mentor, William J. O'Neil, hails from a heritage whose only sacred mantra is, "Never argue against the market!". Therefore we say that the market is heading up because, well, it is in fact heading up. We can leave the wherefores and whys to the professional analysts while attempting to benefit from the facts of the matter.

One area of impressive growth of late has been in asian stocks that provide computer gaming/entertainment to that part of the world. This morning, I decided to load up on some shares in this sector, we'll see how that goes.

In case you're wondering how my market adventure into stem cells went, I have two words for you: "not well". But I learned a(nother) valuable lesson from Mr. Market about my own tendency to predict which industry groups will lead the market and when. Today's purchases were not about predicting, they were about following what is already leading. (which, when you boil it down, is the main difference between value investing and growth investing)

Birthing the Books Inside Me

They say, "Competence happens in a moment," and I have observed this to be true for myself and for many of my friends. Have you ever held most of the pieces of a mental puzzle in your mind - yet there was one crucial piece that you couldn't quite put your finger on? Later, through some serendipitous circumstance, (an offhand remark, a book, a song, etc) the missing piece came to you and the entire puzzle was solved. Once a solution like this occurs to you, it seems like an epiphany - a moment of enlightenment that illuminates not only the original puzzle, but also numerous other minor conundrums that had been put aside in the cupboards of the mind for future inquiry.

Over the years of my adult life, I have held many of life's major philosophical questions (Who am I? Why am I here? What is truth? etc) in this state of mental suspension while living out various different lifestyle situations. Because I journal, I have been able to notice the essential things which have resonated within me as common and authentic among my experiences. Within the last twelve months, it has felt as if several "final pieces" to these puzzles have come to me.

As a result, I've got about five books inside me that are mostly written. By that, I mean that it would only take a few weeks of writing to get any one of them in manuscript form, ready for editing. One of them is actually fully written in my mind, but I want to find an artist to collaborate on the project. It is a short, illustrated, guided mental journey in book form that would also include a CD with the text of the book spoken in several languages.

There will be many details to work out over the next months, such as: who will be my publisher, what channels of distribution will I use (Traditional? My own web site? Amazon Kindle? etc) how will I promote my work? etc. But none of these concerns feels daunting, they are all just parts of the adventure of giving birth to my spiritual "children" - perspectives on life that particularly turn me "on" and that I believe in my heart will delight and benefit others. I'll keep you informed on my progress here, watch for it!

Late to the Rocket Launch

I'm a guy who likes to give advice. I'd like to believe that, over the years, I've mellowed from coming across as a know-it-all to becoming a person who gives advice back to pay off the good advice I've recieved.

Be that as it may, Friday marked an event that illustrates how easy it is for one to neglect one's own advice. I've been sharing a "hot tip" with the stock investing community for over four years regarding stem cell research companies. One of George W. Bush's earliest actions as president was to ban most stem cell research. It was as clear as clear could be to me that one day that policy would be reversed and a whole raft of companies specializing in this research would rise with the swelling tide of progress. On Friday, a West Coast company won FDA approval for the first-ever study of a treatment based on human embryonic stem cells. I have watched this company closely and have traded in and out of it several times in the last year.

When the announcement came out, the stock shot up over 50% between Friday and Monday. Was I already in this stock on Friday? No. Was I in any of the other stem cell stocks I've been watching for the last three years? No. I had recently moved my holdings to cash in the aftermath of the financial crisis, (a good move) but had unwisely allowed the other cares of this world to distract me from keeping tabs on the market.

This is a good lesson to learn: It's not enough to see an event coming, you have to be sure to set yourself up to benefit from it should your prediction come true. As Lao Tzu wrote in the Tao Te Ching, "People usually fail when they are on the verge of success. So give as much care to the end as to the beginning; then there will be no failure". How hard would it have been to bought on some shares in the days before President Obama's inauguration? Answer: not hard at all. So why didn't I take care of this in time? As my mentor, Jim Rohn, would put it, "It was also easy not to."

Luckily, I'm in on the secret that there is no lack of wonderful, exciting opportunities in life. I guess I feel the "missing" of this opportunity more strongly because I've been mentally invested in its eventuality for what seems like a long period of time. Practically speaking, the long term upswing for stem cell stocks in general will almost certainly dwarf the gains my favorite stock made on Friday and Monday. As the market would have it, the stock's price has pulled back on lower volume from it's lofty Monday highs and I have picked up a number of shares. All of this is well and good.

Nevertheless, I intend to be aboard the rocket beforehand the next time I forsee an inevitable blast off.

No Such Thing as Refuge

Last week, the CEO of the corporation I work for announced they are going to make cuts (including closing entire facilities) in order to lower costs and focus more resources on fewer game titles. The following day, the Orlando studio president met with all of us. He told us that while no specific decisions had been made yet, there would likely be cuts here even though our is (by far) the most profitable facility in the global corporation. More will be revealed after the new year.

"Ha ha ha!" I can hear the Universe belly-laughing at me. "Silly boy, there is no such thing as security. There is only paying attention to what is happening in the moment, following your heart, and doing your best." Well, to be fair to me, I lived through the dot-com crash so I chose the way I chose as a gesture toward "learning from the past." As if. As if the past were ever a reliable gauge for the future. (c.f. Real Estate marketing in 2006, "Historically, housing prices have always gone up.") I'm not saying I should have gone with a Silicon Valley startup instead or even that I'm expecting to be laid off. But my imagination that a large corporation would automatically be a safer bet in troubled times has not borne out to be true. As far as I know, the companies I turned down have not announced cutbacks.

An NFL football coach once called a "trick" play that fell apart badly - so badly in fact that the opposing team was able to steal the ball and run the other way for a score. After the game, the press asked the coach how he felt about that play. "You know," he answered, "It's one of those things where if it works, you feel like a genius and if it doesn't work, you feel like... well, let's just say I don't feel like a genius right now."

Florida Bound

I have decided to accept the employment offer of a large computer game corporation. I will be starting at their office in Orlando, Florida on Monday.

I had a couple of other offers available in Silicon Valley, both of them start-up gaming companies without a released product or current revenue. Although I definitely see myself returning to Silicon Valley, now is not the time. I am certain the recession that has just begun in the US will last a good two to three years. My judgement is that this is neither the time to work for startups nor the time to move to a high cost-of-living region. One of my friends responded to this reasoning by exclaiming, "Who would have ever thought you would choose stability over opportunity?" This is a pretty good question. Let me say in response that I feel there is a time for every type of strategy. You won't find me choosing stability over opportunity in the future, when the NASDAQ and S&P500 indexes cross back above their 200-day moving average lines. But for now, it feels like the right thing to do.

A recruiter friend of mine who set up some of the interviews in California asked me, "If plans don't work in Silicon Valley, there are always other software companies to work for. But if your plans don't work in Orlando, who else can you work for down there?" Another good point. Cost-of-living trumps again. I'd rather sweat out a period between jobs in a city where you can share an apartment for $500 per month than in an area where that would run $750 per month. (again, given the current economic climate)

But the bottom line is, I'm not planning for contingencies if this job doesn't work out. I'm focusing on the idea that it will work out spectacularly. It will be the best job I've ever had and I'll be the best me in it I've ever been. There's a subtle difference in how to think about these things - it's OK to weigh the good against the bad while in the cloud of uncertainty, considering competing possibilities. Once you have crystalized your intelligence upon a course of action and made a commitment, however, I've learned it's best to focus your attention on the best outcome you intend to experience.

What you focus on expands. It grows to form the foreground of your experience.

So wish me luck!

The Bigger Big Picture

One of the things I love about the age of the Internet is that we are no longer beholden to a single version of any given story. One who pays attention to this dynamic over a period of time comes to the conclusion that there is no one truth, no really objective voice out there. Unless you want to be content being spoon-fed by your favorite information provider, curiosity and intellectual rigor are required in order to come to reasonable, satisfying conclusions.

Take the current so-called economic "crisis". I have heard Barak Obama and other Democrats say that Republicans' penchant for deregulation has been the root cause of the irresponsible lending and opaque securitizing that led to our present difficulties. Interestingly enough, Republicans tried repeatedly in the last 15 years to increase regulation of Fannie Mae and Freddie Mac, only to be blocked at every turn by Democrats. Why would Democrats block stricter regulation of these government sponsored enterprises? They blocked regulation because they felt they had fought hard to ensure fairer mortgage lending to Americans through the various incarnations of the Community Reinvestment Act. Tightening Freddie and Fanny's capitalization requirements would have required stricter lending policies which were seen at the time to be a euphemism for denying credit access to under-served portions of the population.

Why were Democrats concerned that stricter lending policies would put fair house ownership opportunity in danger? Because stricter lending laws _had_ been used for this purpose in the past. The Community Reinvestment Act was sponsored in 1977 to counteract the practice of something called "redlining". Until then, many lending institutions would literally draw lines around low-income communities on municipal maps in red pen and automatically deny mortgage applications from these areas. This lazy, crude strategy for financial risk management meant that lower income whites were able to get loans that middle or upper income blacks and latinos could not obtain. Which tends to piss you off if you happen to be in the latter category.

Obviously, we could continue further back in history to see more examples of this kind of back and forth, but these two snippets are enough for the point I'd like to make: In both of these cases (lenders unfairly redlining and politicians being unwilling to effectively regulate) we have a group of people who were paralyzed from doing what was clearly reasonable due to an irrational fear that any movement in the "opposite" direction would cause some kind of cascading domino effect to an undesired outcome. What is ironic is that, in both examples, it was not the perceived enemy, but their own misguided obstinance that produced an outcome they were hoping to avoid.

Bankers have no one to blame for disruptive community organizations like ACORN but themselves. Indeed, they produced them. And Congressional Democrats could do well to take to heart the words of one of their own, Rep. Arthur Davis of Alabama, who recently said, "Like a lot of my Democratic colleagues I was too slow to appreciate the recklessness of Fannie and Freddie. I defended their efforts to encourage affordable homeownership when in retrospect I should have heeded the concerns raised by their regulator in 2004. Frankly, I wish my Democratic colleagues would admit when it comes to Fannie and Freddie, we were wrong."

What I am interested in is that we as a nation (and as a species) make progress toward noticing this tendency to irrational obstinancy and interrupt the pattern. It is not sufficient in any particular circumstance to say, "This is the situation I find myself in, I guess I'll just perpetuate it." It takes guts and a determination to transcend the mental paths of least resistance so that we can create the kind of world we'd all rather have. But nothing less that this makes anything worthwile of us.

Back Into The Fray

Earlier this week, I concluded the self-evaluation begun during my wilderness getaway. After taking everything into account, I decided to pursue returning to full-time work as a software engineer. I love the work and it pays well. There is still surprisingly strong demand in the market for my skills and it never hurts to make hay while the sun shines. (as my farmer relations used to say)

My other major option, raising capital and starting a small business, is still an important goal for me. A good portion of my getaway was invested in creating a specific business plan, including estimating startup costs, on-going cashflow, expansion plans, etc for the venture I had in mind. This was a valuable exercise and the plan I created may, one day, be the plan I pursue.

During my previous years of employment, I did a good job saving money in retirement plans and I feel like that part of my financial picture is in good shape. So beginning with my next job, I intend to divert my savings into a taxable investment account that will be dedicated toward helping to fund future business ventures and investment real estate purchases. I hear it works best to have a good chunk of your own money on the line when you present an opportunity to invest to others.

This decision (returning to employment) will likely mean another geographic relocation for me. If that turns out to be true, it will also likely mark the end of a short but incredible romance. Yet I feel the magnetic pull of my capacity for greatness in this world, and it is not a force that my spirit is inclined to resist. When you're in on the secret that love is not scarce, it is abundant - well, it doesn't make things easy, but it does make them possible.