Irrational Exuberance

One of my favorite terms used in investing history is ‘Irrational Exuberance’, a term Former Fed chair Alan Greenspan used in a speech on December 5th 1996.  At the time, everybody was bullish, and the stock market was on a tear as shown by the S&P 500 chart below:

The full quote by Greenspan was:

Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?

— “The Challenge of Central Banking in a Democratic Society”, 12/5/1996

Looking at the above chart, its easy to see why there was a concern that irrational exuberance was fueling a bubble.  But remember, we had four more years of ‘irrational exuberance’ and rising asset prices, ending with the crazy dot com bubble of of 2000 – 2001.

Looking at the S&P 500 chart since then shows an interesting story:

Two ways to look at this.  If you got out of the market at the point of ‘irrational exuberance’, you would of missed out on almost a double of the market in 3 years.  However, you could of gotten back 13 years later in the spring of 2009, when the market was at its 2008 lows.

I bring this up today, because many investors feel we are again at a point of irrational exuberance.  2017 was the first year in history where the S&P 500 was up every month of the year.  So I tend to agree we are again irrationally bullish.  But just because the market may be crazily priced, it still may go up to even more irrational heights, and it may take years for the market to recognize it.  However, it is also a reasonable bet that in the next 5 years there will be a point where the market will be cheaper than it is today.  Remember, we are currently in the 2nd longest economic expansion in American history, and with the yield curve flattening, it looks like the party may be coming to an end – if you look at it rationally.

Bezos Interview

When I saw this Jeff Bezos interview, it occurred to me that I have never really watched or read an interview with him.  Gates, Buffett, even Paul Allen you hear from more than the founder of Amazon.com.  It was interesting to hear his perspectives on Amazon, his driving principles, his background, and he comes across as a thoughtful guy.  I also liked the interviewer here – I thought he asked some great questions and really hit a wide variety of issues.

Its a long video, but if want to get the perspective of the richest man in the world, watch the video below.  If you prefer, you can view the transcript here,  but I think the video provides a full insight.

 

AngularJS – What To Do Now?

Now that Google has announced it is stopping development of AngularJS, I have started to think about what I want to use for future projects.  Its been a year since my post on my Angular breakthrough, where I now feel like I am thinking in Angular when coding.  So do I abandon ship and migrate to the latest and greatest framework?

I still have numerous applications I maintain in AngularJS, and I see no reason to migrate them to a different framework.  Some are kind of slow, but acceptable, and I am not ready to take on the mental anguish of a framework migration.  Just because AngularJS will not get any new features doesn’t mean it will be broken.  Microsoft Access hasn’t received any new meaningful features in 10 years and it is still a useful product.

However, if I was to start on a new project, what framework would I pick?  It depends.  If I had an enterprise customer looking to build a robust app, I probably would pick Angular 2/4/5. That would be much more performant, and there will likely be Angular developers around for years to come, where coders in AngularJS might be has hard to find as COBOL or Access programmers.

If I was starting a small project for myself, I would probably continue to use AngularJS, since I am confortable in that and can crank out code pretty quickly. And someday it may be easily upgradeable.

I am also hearing alot of buzz about Vue – https://vuejs.org/, but that seems comparable to AngularJS, so whats the point.  If I didn’t know know AngularJS, I may have considered learning Vue, but at this point it is too late.

So even though AngularJS is being sunsetted, I am enjoying being competent in AngularJS so it’s hard for me to consider abandoning it.  But I will likely try a Angular 5 project later this year to see if I am ready for another learning curve spike.  If I do, I have to decide if I want to also learn TypeScript or Dart.  I hear Google writes a lot of it’s Angular in Dart, maybe that will be the long term winner.  Problem is most of the examples online are in TypeScript, which is an issue.

Azure – First Impressions

Over the last few months I have been working with a client to help move them to Azure, and from that I have gotten my first immersion into Microsoft Azure.  Azure is Microsoft’s Cloud platform, the future of the company as Windows becomes less and less profitable.  My client’s project primarily consists of setting up a Virtual Machine (VM) out there, and essentially moving the whole environment out there.  Thats the simpler approach, however IT is still on the hook for managing the VM, applying updates, etc. so its not the optimum long term plan.  It also isn’t cheap – the monthly costs are not much less than buying the hardware yourself, but you do offload the headache of dealing with hardware.

The process of migrating to a VM, while still complicated, is no where near as complicated as using Azure’s Platform as a Service (PAAS) or Software as a Service (SAAS) offerings.  As a side project, I have been working on a personal project to migrate some batch tasks I run every night on my home computer to run the process out at Azure.  This will allow me to manage these jobs even when I am not home, and free up my home computer in the evening.

I am surprised that something as simple as this is amazingly hard to get started with.  After attempting to find help in the Azure portal, I get nowhere, so I go out to Google and search for help.  Lots of results here, all different,  with many results for features that no longer exist with Azure.  OK, so I limit my Google search to only articles posted within 90 days, and settle in using WebJobs.   First, I guess I have to set up an App Service Plan, then I have to set up an App Service inside the App Service Plan, then I get to setting up WebJobsin that app service.   I set up a webjob, but its still not clear how to hook a webjob up to any code.

So back out to Google, and I end up finding a WebJobs SDK, which is a Visual Studio Solution made up of 17 projects.  Hopefully after understanding how this thing works, I will find out that WebJobs is the answer.  I may find out this is for something else, and that Azure functions are the way to go.  So many options, so many dependencies, and so many changes, I dont know how anybody can really understand the whole Azure world.

Here is a screenshot of all the services available:

This picture has the compute options expanded, but each of the other sections expand also.  By my count, over 200 different services available, each with it’s own set of dependencies and concepts to understand.  To use these, you pretty much have to think like the developer who wrote these.  And it seems like each developer thinks about each service a little differently.  I just don’t get a cohesive feeling about all this yet.

I am not an Azure hater, and I think it has all (and more) of the features I need, but the discoverability of it all is lacking in my opinion.  Granted it is still an immature platform, and Amazon’s AWS has its share of oddities.  But it is hard to know where to get started and how to do basic things.  Perhaps that is by design, as the cloud displaces the need for IT staff, perhaps this is the plan to start a whole new industry of Azure consultants.  Seems like it could be a booming business.

So I am sticking with it, and I hope to have some of my processing on Azure in the near future.  If I can do that, and retain my sanity, I will feel like I have made a big leap to the cloud.

 

 

 

 

 

RSI And Market Movements

Over the holidays I was talking investments with family members, and the question came up as to whether I thought the RSI Indicator was of any use or not.  To be honest, I responded I had never looked at it, so I couldn’t offer an opinion.  Since then, I have been casually watching it, and I am now of the belief there may be something to it.

In case you are not familiar with the Relative Strength Index (RSI) technical indicator, it essentially tracks short term momentum.  This page provides a great overview of how it is calculated and its history.  In summary, it flashes a sell signal when a dramatic increase has happened over 14 days, or a buy signal when a dramatic decrease happens over 14 days.  The theory being that after 14 days of buying or selling, the inventory of people who would buy or sell is pretty much exhausted.

So in late January, I noticed a bunch of stocks where the RSI was flashing sell.  In particular, the S&P ETF (SPY):

S&P 500 (SPY)

Notice after the big run-up the RSI was over 70 (SELL!)  and subsequently the market corrected.  It then switched to a buy (RSI under 30) at the bottom.  Note however that it kept going up after initially hitting the over 70 mark, so if you sold then it likely wouldn’t have worked.

Amazon was the one that caught my eye.  This was my first test case, as I was looking to reduce my exposure to Amazon anyway, I figured with the RSI over 70, that was a reasonable time to unload some shares.

Amazon (AMZN)

This didn’t work real well, since it dropped less than most stocks in early February, and it quickly recovered the loss later in February.

The current one I am watching is Zillow:

Zillow Group (ZG)

 Looks like it is following the classic pattern, and now the price is starting to break down.  My working theory is that the strategy is to underweight a stock that has been over 70 RSI for 4 days.  And consider overweighting a stock when it hits 30 RSI.  Of all the charts I have looked at, that appears to be the formula based on the patterns.

My next step is to start tracking RSI and backtest a number of different formulas to see if there is a pattern here.  And if there is, I will plug it into my stock technical model.

The above charts were provided by stockcharts.com.  Try running some of your favorite symbols thru there and see if you find a pattern.  I still am resisting technical analysis, it seems a little voodoo that this is all driven by emotion.  But if I can nail down a pattern with this indicator, I might finally give in to the dark side of investing.

Data Visualization

I was talking with a co-worker recently about data visualization, and he showed me a site he ran across with the latest and greatest in Graphing.  D3 (Data Driven Documents) has some pretty amazing ways to chart data – check out the gallery of examples here.

In playing around with these charts, this looks to be quite a step up from Google Visualization charts.  The JavaScript coding to load the charts looks pretty similar to Googles approach, so it should be pretty easy to migrate to this new D3 library.

One drawback to both D3 and Google Visualization charts is that they are JavaScript based, so they only run in a browser.  I am still looking for a decent solution for emailing charts.  While there are a few paid libraries that will render images, I still haven’t a library to replace the Google Image Charts that Google officially deprecated in 2012.  Google Image charts still work, but Google may pull the plug on those at any time.  One final note regarding emailing charts – to date I have been able to skirt the issue, because when I want to send an email with a chart – the better approach is to send an email telling the recipient to log in and view the data on their website.  This has the advantage of driving traffic to your website, and easily capturing info as to if your recipient actually viewed the chart.  So maybe it is just a bad practice to embed full data visualizations in emails.

With all the expansion of data we have seen over the last few years, its nice to see display technologies keeping up.  Now the hard part is in trying to figure out which kind of chart to use when displaying data – perhaps we have too many options.

Best Stock Portfolio Viewer

For years I have used Googles portfolio viewer to track stocks in my portfolios.  It was fast, had plenty of fundamental and technical data, and allowed easy tracking of news related to the portfolios.  Unfortunately, in the middle of November, Google deprecated their portfolio feature, leaving me to wander around for a better portfolio viewer.

I will miss the old Google interface:

Well organized and to the point.  I thought that with all the portfolio managers around, I shouldn’t have problems finding a new one.  My requirements were pretty simple.  Ability to track multiple portfolios, show daily price changes at a glance, and allow you to add stocks to a portfolio in bulk – i.e paste a string of symbols in to add stocks.  So I looked far and wide at all the various offerings, paid and free, and it took me a long time to settle on one that I liked.  The one I settled on?  The folks at Seeking Alpha seem to have created the best one I could find:

It meets all my requirements, has a clean interface with access to lots of stock financial information.  It doesn’t have the technical tools that Google Finance had, but I can do without that most of the time, and can probably find another source of that information when I need it.  One issue I have noticed is in the morning right after the market opens, it appears to be pretty sluggish.  My guess is a lot of people are finding this tool, and they are experience higher traffic now that Google has dropped out.

I would have been willing to pay for a full featured portfolio tracker, but I couldn’t find one that met my needs.  Maybe its time for some startup to really take advantage of the opening left by Google Finance’s changes.

In the meantime, I am very pleased with the tool Seeking Alpha has provided.  Check it out if you are looking for a new portfolio tracker.

Note to Readers:  This article was not sponsored in any way by Seeking Alpha.  I have written articles and been compensated by Seeking Alpha for those articles, but this is a personal blog post initiated by me and unrelated to my relationship with Seeking Alpha.

 

2017 Solar Year in Review

Time for my third annual Solar power progress report.  Overall, I saw in increase in solar production in 2017 over 2016, likely all weather related.  Below is a chart of my 3 years of production by Month:

A long stretch of sunny weather in the summer helped me beat 2016, even though the other seasons seemed cloudier than normal.

Payback Update

I had originally penciled out a 6 year payback when I made the decision to move forward with this plan.  Now that I have a better feel for my annual production, assuming the production credits stay above 40 cents thru 2023, I think I can achieve an 8 year payback, recouping by investment by the end of 2023.  Of course that 40 cent number is probably optimistic, though I am hoping the production incentive credits do get grandfathered for those of us that took the risk early.  And the fact that it seems every year I stretch my estimated payback a year, doesn’t give me a lot of confidence yet in this estimate.   At any rate, I was pleased to see no significant drop in solar power production as the panels aged a year, so that is a promising sign.

Regarding maintenance, I have settled in to a pretty comfortable schedule.  In the spring as the days start to get longer and the weather better  – usually May’ish, I give the panels a good cleaning with a sponge mop and a squeegee.  I may clean them a couple months later if we have a heavy pollen outbreak that coats the panels in pollen.  But for the most part I can occasionally just spray them with a hose from the ground.  The panels are very little maintenance in the winter, as the production is so low it doesnt really matter if they are clean or not, and we get so much heavy rain that it keeps them pretty clean.

Power Use Report

Being the power geek that I am, I also updated my power usage report for the year.  My total household usage for the year was the lowest on record (well… since 2015).  Usage was down 7% after being up 4% in 2016.  A couple theories on why.  I have continued to replace bulbs with LEDs as they burn out, we had a very moderate summer requiring very little air conditioning, and we were also out of town on vacation a few more weeks last year than previous years.  I also added more lights to my Wink Hub, which I think managed my outdoor lights more efficiently.  For 2017, I don’t have as many vacations planned, but I plan to continue adding LED lights, as well as possibly hook up my furnace to the wink hub to better manage when the heat is on.  Overall, I am guessing the vacations had the biggest impact, so I would guess my power usage for 2018 will increase slightly.

My long term plan has always been to upgrade my panels once I have my investment back.  However, if the panels continue to perform, there is likely no reason to.  Interestingly, on Amazon, the price of solar panels has not dropped over the last year, in fact they have gone up slightly.  I would look to see that change in 2018 though as there are more advanced solar panels that should be coming online this year.  On a related note, Consumer Reports did an interesting payback analysis on Tesla’s solar roof – it appeared to be pretty encouraging.

Overall, still happy with my investment, and I still think residential solar / utility scale wind and solar is the power model of the future.

My Best Reads of 2017

It’s time for my second annual ‘Best Reads’ of the year post.  This year, since I didn’t read much, I decided to expand it to all the books I have read this year – so I am exposing how little reading I get accomplished in a given year.  These picks are ranked in favorite order, though I could be talked into the top two being a tie. So without further ado – here are my quick opinions of the books I read this year:

1.  The Pope and Mussolini:  The Secret History of Pius XI and the Rise of Fascism in Europe

An interesting book covering the rise of Facist Dictator Mussolini from the 1920’s til his execution during WWII.  Even if you have no interest in or understanding of the Catholic Church, this book provides an interesting look at how the church saw Mussolini as a partner in helping control the populace. A worthy read.  Readers of this blog may recall that last year I promised myself I would stay away from World War II histories, but I don’t count this one, as it covers more pre-war stuff, and more focuses on the rise to power.

2.  Carthage Must Be Destroyed:  The Rise and Fall of an Ancient Civilization

I really enjoyed this – it covered a period of time that I knew very little about – Carthage and the Roman expansion in the Mediterranean 0-300BC.  Well written and very understandable (even if everybody was named Hannibal back then..) and it provides a great understanding of the politics of the time.

3. Thomas Jefferson and the Tripoli Pirates:  The Forgotten War that Changed American History

  A real quick read – a nice break from some of the longer dives into a historical period.  Interesting story about how American forefathers were no strangers to getting involved in foreign war for capitalist reasons.  A nice little intro into the Ottoman empire of the late 1700’s also.  Recommended.

4.  Liars Poker

 I had been meaning to read this book for awhile – a lookback at the Wall Street excesses of the late 20th century.  Found it an interesting look into the culture of Wall Street then.. and likely now..  If investing isn’t your thing, this could bore you. This was the first Michael Lewis book I had read, and his style is very readable, so I will likely try another of his books in the future.

5.  Stranger in a Strange Land

Stranger in a Strange Land -10%
Stranger in a Strange Land
Price: $8.99
Was: $9.99
 I decided to do a quick science fiction read before heading back into historical non fiction, so I chose what was considered Heinlein’s best book by a number of reviewers.  In short – this book just didn’t connect with me.  I had a hard time immersing myself in this book.  It may be characters were dated (this was written in 1961, and the characters felt to me kind of caricatures of that time), or it may be Heinlein’s writing style just didn’t agree with me.   The next time I read science fiction, I will probably try a different author, to see if this was a problem with the book or if I have just lost my ability to enjoy reading science fiction.

For 2018, I could see myself sticking exclusively to history this year, and I might sprinkle in a World War II book – old habits die hard. In case you missed last year’s reviews (and if you have read this far you may be interested) – here is my list for 2016.