One of the Most Successful Trading Strategies This Year May Be Coming to an End (BusinessWeek)

Investors who've been minting money according to the Wall Street adage that the trend is your friend just got a reminder that nothing works forever.

A Citigroup Inc. index that tracks U.S. momentum stocks like Apple Inc. and Netflix Inc. did something last week it hadn't done since June -- it fell. While still trouncing the Standard & Poor's 500 Index in 2015, analysts at the bank have warned that the strategy is approaching a threshold where rotations have occurred in the past.

Virtually nothing has worked better in this year's thinning equity market than momentum, where you load up on stocks that have risen the most in the past two to 12 months and hope they keep going up. Sent aloft by sustained rallies in biotech and media shares, concern is mounting that the trade has gotten too popular, setting the stage for sharper swings.

"In the past few years, including this year, there have been a lot of moments when trades have become crowded," said Arvin Soh, a New York-based fund manager who develops global macro strategies at GAM, which oversees $130 billion. "What's different is that the reversals that eventually come do tend to be more severe now than what we've seen over a longer-time horizon."

With breadth narrowing before the Federal Reserve raises rates, sticking with winners has been a blueprint for success in 2015. Quantitative funds were among the best performers out of equity, event-driven and macro strategies through July this year, trailing only technology, health-care and activist managers, according to data by Hedge Fund Research Inc.

Individual investors have noticed. One of the largest exchange-traded funds employing the tactic, the iShares MSCI USA Momentum Index Fund, lured a record $125 million in July, boosting its total by about a fifth. It hasn't had a single month of outflows since it started in 2013.

Owning it has paid off, too: the fund is up 8.2 percent in 2015, compared with 1.8 percent in the S&P 500. Another ETF, the Powershares DWA Momentum Portfolio, recently saw assets cross $2 billion and has returned more than 7 percent this year. Still, some of the trades contributing the success have been weakening.

Since July, industry leadership in the S&P 500 has been shifting, not what momentum investors want to see. Utilities are leading the market since August and last year's winners, health-care and consumer companies, are trailing. The Newedge CTA Index, which tracks computer-driven strategies and funds that place wagers on broad economic trends, has fallen 6.5 percent from a high in April.

Even Apple, the company that has contributed more to the U.S. bull market than any other company, is faltering. After the iPhone maker's 10-fold surge since 2009, shares have tumbled 12 percent from an all-time high in February.

At 10:23 a.m. in New York, Apple shares slipped 0.6 percent to $115.85 while Netflix was down 0.5 percent to $123.41. The iShares momentum ETF lost 0.6 percent to $73.20 and the Powershares fund decreased 0.5 percent to $43.82.

Investors are suddenly paying more attention to companies in better financial shape with less debt -- qualities that have been absent in recent momentum winners such as biotechnology. In July, a Goldman Sachs Group Inc. gauge that tracks equities with the strongest balance sheets reached its highest level versus stocks with weaker ones since October 2013.

Because of the heavily correlated nature of momentum trades, selloffs can be sudden as everybody exits together, according to Nicola Marinelli of Pentalpha Capital Ltd. That raises the stakes for traders who will return from vacation just before the Fed meets on Sept. 17.

"There can be a reversal and it doesn't necessarily need a catalyst," said Marinelli, a fund manager who helps oversee 114 million euros ($126 million) of assets at Pentalpha in London. "In August, very few big players are going to make big decisions regarding their portfolio. If something happens, it's going to be more September, October."

 The surge in biotechnology shares may be at risk given concerns about pricing on some drugs, according to Hugh Grieves of Miton Group. The Nasdaq Biotechnology Index has underperformed the S&P 500 this quarter, after beating it for five years.

 "The question is whether you're seeing the narrative change around biotech and it's causing that momentum trade to lose steam," said Grieves, a London-based portfolio manager at Miton, who runs the firm's U.S. Opportunities Fund. "The problem with momentum trades is that you have no margin of safety. When you get on the bandwagon, you shut your eyes to valuation."

Wal-Mart Is Getting Hit Hard by Thieves (BusinessWeek)

The problem of shrinkage

Wal-Mart has a shrinkage problem, and it's not the Seinfeld variety. It's the kind that, in retail industry jargon, refers to stealing and losing stock to damage or poor inventory management.

In explaining a fairly dismal quarterly result on Tuesday morning, the massive retailer called out shrinkage again and again. In the press release, it was mentioned three times. In the conference call, it came up 13 times. That's a lot of shrinkage. Walmart sales, in fact, were pretty decent, but expenses weighed on the company’s profit. Part of those expenses entailed writedowns for inventory that just disappeared. Store employees say they have seen everything from customers stealing meat in their pants to thieves bursting out a back door with a shopping cart full of electronics to be loaded into a waiting car.

What’s more, Walmart's chief financial officer, Charles Holley, said he expects the problem to persist. Walmart is restarting a program to teach employees how to spot thieves, be they coworkers or would-be consumers. Meanwhile, it is auditing its entire supply chain to "close gaps" while it adds staff to parts of stores in which items tend to vanish. Many stores now station an employee at the exit to check customers' receipts. 

Walmart is also dealing with waste from poor management of stock rooms and inventory, said Holley. When backrooms get clogged with merchandise, it can be difficult to know what items need to be marked down and moved to the sales floor. And too much food is getting damaged or going bad before it can be sold.

How big of a problem is shrinkage? For the typical vendor, it amounts to about 1.4 percent of sales, according to a 2014 survey by the National Retail Federation. About 38 percent of that is caused by shoplifting, an additional 35 percent via theft by employees, and the rest reflects damaged goods, cashier errors, and other administrative slip-ups. Walmart hasn’t said how much stuff is being nicked, but at that rate, it would be losing roughly $7 billion a year to thieves. In short, the return on any kind of shrinkage-prevention program is probably pretty good. 

The thing about shrinkage, however, is that chief executive officers don’t like to talk about it, which makes today’s statements from Walmart particularly telling. Of all earnings conference calls by Standard & Poor’s 500-stock index companies in the past year, shrinkage was mentioned on only 21 occasions. It’s been a bit of a problem at Whole Foods and the “Dollar” stores, but executives typically cite stealing only when they are cracking down on thieves.

Lowe’s, for example, has been bragging about “best-in-class inventory shrink performance.” Home Depot said its theft-prevention added .07 percent to its gross margin in the fourth quarter.

Walmart's theft problem swelled in a period when it was hiring employees, paying them more, and bulking up staffing across the board. Meanwhile, the company has a second shrinkage problem to contend with this morning: its stock price.

These 10 Countries Will Have the World's Biggest Populations By 2050 (BusinessWeek)

After America dominated the 20th century, a view formed that Asia would be the next to lead the world in economic and cultural influence. Africa may have something to say about that before the century is out. 

The continent will claim three of the world's 10 most populous countries in 2050, according to projections released Tuesday by the Population Reference Bureau in Washington. The largest of those, Nigeria, will be just 1 million people shy of the U.S.'s size, with Democratic Republic of the Congo and Ethiopia entering the list. They replace Russia and Mexico, with the former's exit leaving Europe with no country on the top 10 list.



Key to the countries' growth? Babies. While the U.S. and other developed countries struggle to adapt their labor forces to an aging population, African countries are experiencing a baby boom. Niger, South Sudan, Democratic Republic of the Congo, Somalia and Chad have the highest fertility rates in the world.

"The population gains are also due to a decline in mortality rates due to improvements in public health," said Peter Goldstein, vice president with the PRB, who oversaw production of its 2015 World Population Data Sheet. "Africa is going to be a key driver in population growth over the next few decades."

That may be one reason a majority of Africans surveyed by Pew Research Center believe today's children will be better off financially than their parents when they grow up.

Looking farther east, China is currently the world's most populous nation, though it's seen being lapped by India by 2050, according to PRB, a nonprofit group that analyzes and disseminates demographic data and research.


"China for several decades has been focused on driving down fertility rates," Goldstein said.

 "India's population is growing at a relatively moderate pace, but China's projected fertility rates will be below replacement level."

Americans Are Having the Most Babies in These 20 Cities (BusinessWeek)

More babies = more spending

Where do American babies come from? Mostly west of the Mississippi, it turns out.

The map below shows U.S. cities whose populations had the highest share of babies in their buggies as of July 2014, based on Bloomberg calculations using Census Bureau data. Cities in Utah, Texas and California took the top eight spots, followed by Wichita, Kansas, and the metropolitan area that includes Omaha, Nebraska.

The common thread that unites many of these cities is that they have high numbers of young households, according to Mark Mather, associate vice president for domestic programs at the Population Reference Bureau in Washington. Young populations tend to have lots of babies because there are so many people of reproductive age, even if an area's fertility rate isn't particularly high, Mather said.

In Utah, "you have a young population combined with a high fertility rate," he said. 

That's especially the case for Provo, home to Brigham Young University, where many of the students are married with children, said John Curtis, who has been the city's mayor for more than five years. 

Additionally, "there's a high Mormon population," said Curtis, who has six children himself. "Mormons like big families — we're not bashful about that at all."

Utah also has a strong economy going for it, evidenced by an unemployment rate of 3.5 percent, compared with a level of 5.3 percent for the broader U.S.

"Wherever you've got job growth, you're going to have population growth, which often means you're going to have young families having lots of babies, and that creates population momentum," Mather said. Same goes for Texas, he said, where the unemployment rate is 4.2 percent.

And babies don't come cheap. A middle-income family who had a child born in 2013 can expect to spend about $245,340 — or $304,480, adjusted for projected inflation — for food, housing, child care and education and other associated costs up to age 18, according to the Department of Agriculture.

Those types of expenses can mean gaining population is "generally seen as a positive in terms of the economy," Mather said. Young families become bigger consumers, and their babies grow up to become spenders and taxpayers as well should they stay in the area. A growing citizenry could translate into political gains as well, in the form of extra congressional seats.

As with all things, there are some drawbacks to rapid population growth. It usually means heavier traffic, more crowded schools, higher child care costs and potential negative effects on an area's environment.

And there are limits to growth, "both in terms of the number of jobs available and in terms of space and natural resources," Mather said. "You need to keep fueling job growth in order to keep people moving in. People will leave if there are no jobs."

Methodology: Bloomberg ranked the 100 most populous U.S. metropolitan areas by birth rates, which were calculated as the number of births between July 1, 2013, to July 1, 2014 per 1,000 people in that area's average population for 2013 and 2014. The top 20 are shown in the map. Birth rates were ranked based on the second decimal point and rounded to one decimal point for the map.

Why Your Boss Wants to Track Your Heart Rate at Work (BusinessWeek)

What’s good for the firm might not be good for you.

The future of the high-performance workplace is taking shape behind closed doors and kept quiet by non-disclosure agreements.

Across the U.K., hedge funds, banks, call centers and consultancies are installing tracking systems to link biosensing wearable devices with analytics tools once the preserve of elite sports.

“There isn’t a competitive sports team in the world that doesn’t adopt high-end analytics tracking the athletes on the field, off the field, at home, when they’re sleeping, when and what they're eating,” says Chris Brauer, Director of Innovation at Goldsmiths, University of London. “The workplace is heading towards that model.”

The new tools help link human behavior and physiological data to business performance. It’s a departure from typical wearable technology strategies, which tend to focus on operational efficiency or safety. 

‘A lot of smart managers think their algos have gone as far as they can go. The next step is human optimization’

The power of the new tools is being evaluated privately, partly to avoid accusations of intrusive behavior, partly because those running the tests believe it gives them a competitive edge.

“Yes, it’s already happening, starting off with some of the big hedge funds,” says John Coates, a Cambridge neuroscientist and former Goldman Sachs trader, who is actively working with companies to link biological signals to trading success. 

His academic research focuses on understanding the physiological drivers of risk preferences. “It used to be assumed that most things that you learned at business school were pure cognitive activity, and if you’re not doing well you need better information or psychological training,” he says.

However, science is starting to show that some hormones – including naturally produced steroids and testosterone – increase confidence and make us take more risks. Stress hormones like cortisol produce the opposite effect.

McLaren envisions how people might wear biosensing wearables in the future.

Wearable technology – be it heart-rate monitors or skin response sensors – can give this underlying  influence more visibility, says Coates. “You need to figure out whether you should be trading or whether you should go home. If you are trading, should you double up your position because you’re in the zone?” 

Coates says he is working with three or four hedge funds to implement such an early-warning system: “A lot of smart managers think their algos have gone as far as they can go. The next step is human optimization.”

While much is happening in secret, some companies across a range of sectors are open about their experiments with biosensing wearables.

The Military Tech Maker 

Equivital wireless human monitoring equipment comes from the battlefield. The firm’s Black Ghost chest-mounted wearable sensor measures heart rate, stress levels, breathing, skin temperature and body position. The company is currently working on a predictive system to flag when someone is 20 minutes away from heat stress.

Equivital's Black Ghost system tracks levels of stress on the battlefield

Equivital’s systems are now creeping into industry, starting with oil and gas, mining and  construction – still mostly for health and safety purposes. Chief Executive Officer Anmol Sood says that’s changing: “Companies are always looking at data to ensure their own business models are as effective as possible – it makes sense to bring that data from individuals working at the company.”

The Smart Badge Firm

Humanyze’s smart work badges contain microphones and and precision positioning technology.

“We’re doing voice analysis in real time,” says CEO Ben Waber. The system looks at how much individuals talk, how loudly they speak, whether they interrupt or sound stressed. “We also look at how much you move around and interact with other teams.” 

Humanyze makes smart work badges that track how you are speaking and who you are interacting with

Bank of America used Humanyze’s technology within its call centers to find out what made employees most productive in terms of numbers of completed calls. Yet it found that the biggest predictor of productivity was how staff spoke to their colleagues. Those with the closest ties to others in their group were more productive and less likely to quit than those who worked alone. The bank added a 15-minute shared coffee break to daily routines: productivity increased by 10 percent and staff turnover dropped by 70 percent. 

The Formula One Team

McLaren Applied Technologies works on evidence-based systems to maximize human efficiency, and counts KPMG and GlaxoSmithKline among its clients. Internally the company has been exploring how to get its Formula One teams to recover from jet lag most effectively. 

Eric Boullier on the pit wall.

“Our teams are travelling around the world a lot. Some of them have to change wheels in the pit stop and be alert and fit, while others have to look at reams of data and need to be cognitively alert,” explains Duncan Bradley, Head of High-Performance Design.

By plotting data relating to travel schedules with heart rate variability monitors and tests to monitor cognitive alertness, the company was able to reorganize journey times and teams to suit the way different individuals coped with jet lag and stress. 

The Lifestyle Monitors

Behavior outside the workplace impacts performance as well – including exercise, sleep, food, alcohol consumption and caffeine intake. 

‘You can’t all of a sudden tell people to wear a load of sensors. That’s creepy’

Peak Health works with high-potential leadership within financial organizations on joining the dots between health and performance. Founder Dan Zelezinksi has worked with people at Goldman Sachs, Bank of America and various hedge funds. He gives clients wearables to track stress physiology while keeping a journal of activities.

“High net-worth individuals, portfolio managers and owners of organizations on the buy side are looking for any kind of edge,” he explains. The “easiest wins” tend to focus on recovery – eating well and getting good quality sleep.


“A lot of it is intuitive but you don’t know it until you see the data,” says Jason Rabinowitz, a consultant who used Zelezinksi’s services at Goldman Sachs. However, as Zelezinski points out, there’s still a big leap between physical performance and profit or loss. “We might be able to find some correlations, but it’s difficult to track.”

Man sitting on bed unable to sleep

John Coates agrees: “The real problem is signal processing: having a deep insight into how your physiology is affecting your performance. Not a lot of people are doing that science. How do you link the data you are collecting to questions like, ‘Should I be trading today?’ ”
Even without those issues, there are glaring privacy and morale implications to consider. 

“You can’t all of a sudden tell people to wear a load of sensors. That’s creepy,” says Humanyze’s Waber.

Chris Brauer believes the privacy debate will fade once people realize the potential of this sort of human performance analytics.

“High achievers are very competitive with themselves as well as others. So allowing them to track when they are most productive, focused and satisfied will help them understand the conditions when they perform best,” he says.


“The idea that you can augment yourself with technologies will become absolutely commonplace and a natural progression.”

EN MI OPINION: Ricardo Tribin (Agosto 12, 2015)

Como se complementan la oración y la meditación

Buen punto, verdad? Es algo de lo que poco se habla y a la vez se escudriña el asunto con frecuencia en forma mínima. Parece que tocar el tema nos diera vergüenza, cuando quizás lo más concurrente es que nos generara satisfacción, pues su aplicación trae consigo muchas soluciones a los problemas de la vida los cuales pueden tratarse perfectamente desde una marco espiritual y no necesariamente religioso.

En la oración se hace la pregunta o petición por parte del interesado, no en un repetir sino más bien en un dialogar. En la meditación se escucha la respuesta. Logrado ello, este resulta ser el momento en que empezamos a ver la verdad, la justicia, y amar, tal y como debe ser en lo real y eterno de la vida, ya que no estaremos más preocupados por la aparente evidencia que nos rodea en los asuntos puramente humanos.

Por lo anterior se concluye que orar es hablarle a Dios y meditar es recibir la respuesta de Él, dentro de un proceso en el que la serenidad de mente será el primero de los productos del esquema el cual, a medida que pasan las vivencias, tendrá beneficios adicionales.

The Top Secret Pentagon Project That Had Its Own Super Bowl Commercial

The contract award for the U.S. Air Force’s newest bomber may offer a rare glimpse at a major weapons system entering the public spotlight.

The U.S. Air Force’s newest bomber is poised to emerge from the shadows of the Pentagon’s so-called black budget.

As soon as this month, the government will pick Northrop Grumman Corp. or a Lockheed Martin Corp.-Boeing Co. team to lead the Long-Range Strike Bomber program. It’s a decision that will expose the multibillion-dollar program to Washington adversaries long before the jet sees combat in the 2020s or beyond.

Black budget projects are used to protect classified and secret government programs, such as advanced weapons systems and intelligence operations, from public disclosure. Once the award is made public, some of the details will also emerge, though not all.

“The budget environment could make this a unique debate in Congress because the overall budget looks very uncertain,” said Todd Harrison, senior fellow at the Washington-based Center for Strategic and Budgetary Assessments. “There will be a lot of questions about funding and how the priority of the LRS-B program is placed above others.”

The contract award may offer a rare glimpse at a major weapons system entering the public spotlight. Air Force Secretary Deborah Lee James is grappling with how much to reveal about the highly classified aircraft, suggesting that she’ll discuss funding and acquisition but not “the crown jewels — the technical capabilities.”

A B-2 Stealth Bomber

Black projects are so closely held that the military won’t confirm their existence beyond a title in a budget document. The B-2 bomber’s public rollout in 1988 followed years of hush-hush development. And the most-secret U.S. intelligence agency, the National Reconnaissance Office, wasn’t acknowledged until 1992, more than three decades after it was set up.

The long-range bomber is something of an exception; its broad outlines and basic five- and 10-year budgets have been disclosed. Given the history of defense cost overruns, the Pentagon faces widespread skepticism over its advertised price of $55 billion for a 100-jet fleet, or $550 million each.

However, the new bomber will have improved sensors and navigation equipment that’s harder for adversaries to spoof or disrupt, and more advanced stealth technology to counter advances in ultra-low-frequency radar and other detection gear and to enable the plane to withstand adverse weather better than the B-2 can, said two officials with knowledge of the LRSB program. Both spoke on the condition of anonymity to discuss the advances, which are classified.

The research and development costs of those and other advances made by a number of companies also remain classified, both officials said.

Black budgets have become a place to hide runway spending, said Edward Turzanski, a scholar at the Foreign Policy Research Institute in Philadelphia. With Congress squeezing defense budgets, there’s a temptation to “spread the pain” by placing programs in the black.

Bloomberg Government analyst Robert Levinson has estimated that the Pentagon’s fiscal 2016 spending request to Congress for classified and intelligence programs will be an 11 percent increase to $66.1 billion — a pool of cash about the size of the gross state product of Idaho that’s shielded from the eyes of U.S. taxpayers and enemies alike. The bomber’s slice: $1.2 billion.

The Air Force is promoting the jet as a replacement for its aging bomber fleet, which consists of 50-year-old B-52s as well as B-1 Lancers and the B-2 Spirit. It has committed to $15.1 billion in spending through 2020, according to its latest budget plan, which doesn’t include any work done in secret. 

Investors won’t get any help from U.S. Securities and Exchange Commission filings in trying to figure out what Northrop and Lockheed-Boeing may have received so far, according to Brian Lane, a former SEC corporation finance director.

“The SEC is sensitive to claims of national security when it comes to disclosure,” Lane said.

Congress will be considering the bomber amid shrinking budgets and skepticism that it’s needed in the fight against current global threats. Northrop cranked out a 30-second Super Bowl ad subtly trying to link its jet — shown as a flying-wing shape under a shroud — to the company’s B-2 and other past aviation glories.

Classified programs like the B-2 once “stayed black” from R&D through procurement because the government sought to shield new capabilities for as long as possible, said Steven Aftergood, a director at the Federation of American Scientists.

“Maybe the LRS-B program today is less of a departure from what we already have out there,” he said.

The new bomber will be manned, with the possibility of conversion for unmanned flight in later years. Defense analysts expect it to have radar-evading stealth traits like the B-2. Beyond describing the plane as having a worldwide reach, the Pentagon isn’t discussing specifics, and neither are the two would-be contractors.

The Boeing-Lockheed entry will give the U.S. “a flexible, credible, global precision strike capability,” said Todd Blecher, a spokesman for the team. Northrop spokesman Randy Belote said the company’s history with the B-2 leaves it “well positioned for the LRS-B competition.”

Building 100 jets is the linchpin of the government’s cost estimate. There’s a caveat: Each bomber’s cost would rise with the inevitable reduction in the number the U.S. buys, said Gordon Adams, a former White House budget official who is now a foreign-policy professor at American University in Washington. That’s what happened with the B-2, whose per-copy tag ballooned to $2.2 billion when that fleet was capped at 20 aircraft.

“The Air Force is saying the plane will cost $550 million in 2010 dollars, but we are in 2015,” Adams said. “If the law of averages holds true, it’s going to cost us two times as much because we aren’t going to buy as many planes.”

Harrison of the Center for Strategic and Budgetary Assessments said the government’s promise to disclose the schedule and funding for the new jet isn’t enough.

“My opinion is that it is incumbent on the Air Force to be transparent about funding for the LRS-B program,” Harrison said. “It has chosen to make affordability one of the bomber’s main selling points.”