It Was A Bad Week For Volatility

My latest post for Alpha Baskets takes a look at the recent crash….and snapback. The dip/correction/crash of the last couple of weeks has provided a useful litmus test for certain alternative strategies, it has reminded us how risky some of the more complicated strategies can be and reminded us that equities are not a one-way trade; after nine years of going up, maybe after peaking at 2872 the path to 3000 on the S&P 500 or even 4000 includes a trip down to 2000 first. And please remember to check out my page at TheMaven. 27654500_2086320184982757_3373117337791190789_n 27798149_2086320094982766_1166892044244310827_o  

Volatility Is Back in Town and It’s Angry

The weekly Market Update is posted at Alpha Baskets is posted an includes the following; The CBOE Volatility Index took center stage last week with very dramatic action Monday and Tuesday. Monday, the VIX jumped over 100%, bringing an end to the one way nature of the short volatility trade. VIX had been going down for so long that a couple of the exchanged traded products became very popular for their massive gains. You may have heard the story of a Target employee to turned his life savings into a $13 million fortune by shorting the VIX via one of the ETPs. On Monday the VelocityShares Daily Inverse VIX Short Term ETN, one of the two big ETPs had an event acceleration, effectively terminating the product. Per the prospectus, a single day rise in VIX of 80% would allow the issuer to cancel the product, which they are choosing
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Ontario Healthcare Tech Scene, Hey

Two decades ago I would occasionally find myself in Ontario given the developing innovation corridor between Toronto and Waterloo, affectionately referred to as “Silicon Valley North.” Last week I visited again and saw the emergence of a strong healthcare tech ecosystem, leveraging historic strengths in telecom infrastructure and the recent (and significant) commitments to the artificial intelligence sector. Out of a coordinated series of university initiatives, Thomson Reuters recently reported that over $350 million had been invested in the AI sector over the past three years in Ontario, employing over 1,100 AI researchers alone. “Silicon Valley North” is the third most important AI cluster in the world according to Element AI. This past week, Salesforce said it would invest $2 billion in the Canadian tech sector. My meetings were on the Canadian side of the Niagara Falls, which I had not visited since I could barely peer over
Niagara
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The Ides of…February?

The weekly Market Update is posted at Alpha Baskets and includes the following; We would take a moment to remind investors that as of Friday, the S&P 500 has traded back to where it was in mid-January and is still up on the year. As noted, it is up more than 3% in 2018. At Friday’s close it was 3.9% from its all time high. At that level it is down a little and although it has been a while since it went down at all it is worth remembering that down a little goes with the territory of engaging in markets. All advisors have some sort of strategy they implement for their clients. That strategy is less important when the market is going higher causing no emotional concern, days like Friday is when that strategy becomes crucial for clients’ long term financial success. It is unlikely that too
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Software startups: Beware ‘magic’ bullets

I just read ‘Need More Time’? Guideposts For Tech Founders Going To Market When No Market Exists which is full of great tips for what they call ‘pre-chasm’ enterprise startups. The term ‘pre-chasm’ is a nod to Geoffrey Moore’s 1998 classic Crossing the Chasm and refers to companies that may have sold to early adopters, but haven’t yet found a way to sell to the mainstream. Getting sales going in those early years is terrifically challenging and requires great product and great sales. There are lots of common pitfalls that founders fall into and the whole post is well worth a read, but I want to highlight two sections which cover mistakes that in my experience many founders are prone to making.
  1. Over-value conversations and even deals with large enterprise customers. Here’s how they put it:Surely people paying you money for expertise is a strong signal you’re heading towards
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Four Weeks Of Gains To Start 2018? Don’t Mind If We Do

The weekly Market Update is posted at Alpha Baskets and includes the following; Furthering the discussion on equities, @tihobrkan tweeted a table from BofAML and EPFR Global showing $33 billion flowing into US equities last week, not fund flows but equities more broadly and this, he notes is close to a record. @awealthofcs tweeted that so far in 2018 the S&P 500 has made 13 new highs which equals the number of new highs made in the entire decade of the 2000’s. It is crucial for advisors to have a detached view on the comfort with which clients might have toward equities and educate them as to how unusual this type of environment is. The good times may or may not last for a long time still but this needs to be recognized for the unusual period that it is. Please click through to read the entire update.  After
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Monday links: when prudence doesn’t pay

As easy as… AI

Google is pushing hard to make artificial intelligence as easy to access as cloud computing, building services that reduce both costs and the technical skill required from users. To my mind, there is a strong parallel with how Amazon Web Services made it easier and cheaper for companies to build web apps. Throughout 2017 they made steady advances, releasing Google Cloud Machine Learning Engine and grew Kaggle, their community of data scientists and ML researchers, to more than one million members. They now have more than 10,000 businesses using Google Cloud AI services, including companies BoxRolls Royce MarineKewpie and Ocado. And now they are introducing Cloud AutoML, which promises to:
Help businesses with limited ML expertise start building their own high-quality custom models by using advanced techniques like learning2learn and transfer learning
Google seems to be in the vanguard, but Amazon and Microsoft are
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Corporate ETFs and Risk Appetite

Via Bloomberg : Bond ETFs Awash in Pain May Be Red Flag for Risk Appetite (1)
2018-01-22 14:56:05.415 GMT By Dani Burger and Sid Verma
(Bloomberg) — U.S. corporate debt exchange-traded funds
have bled a near-historic sum of assets over the past two weeks,
but holders of the underlying securities are paying little heed.
The bonds themselves are enjoying some of the tightest
spreads on record as appetite for new issues remains strong. On
one hand, tax reform, rising oil and global growth may be
fueling demand for yield. Yet the ETFs — in the midst of the
longest outflow streak in at least seven years — point to a
downturn.
The divergence is stumping Wall Street strategists who use
the ETF market not only as a proxy for investor sentiment in
debt, but also as a gauge of risk appetite for equities and
other assets. Though technical Continue reading "Corporate ETFs and Risk Appetite"

Bitcoin Hedge Fund Proliferation

My latest post for Alpha Baskets is posted and includes the following; There is a do-gooder aspect to this that is interesting. I mentioned a while back having met someone very involved in Bitcoin who felt strongly that one of the big features of Bitcoin is that no government can debase it. This ties in with the NYT article talking about the banking system being rigged, only benefitting a few people and that Bitcoin can distribute the wealth more equitably. I am not sure how true this in terms of reports about how concentrated Bitcoin is, the article noted that 4% of Bitcoin holders might own 95% of the tokens. Please click through to read the entire post. Also, please check out my latest post at TheMaven which looks at a new multi-asset ETF that targets a 7% payout. Ruins from the Blue John Mine here in Walker. 26678145_2073263589621750_7984472295245505355_o 26685187_2073263539621755_5359888355366866779_o

Foundry Group goes after board meetings in latest video

Ever been to a board meeting where the independent director from Alexandria seems to drone on almost unintelligibly in large part because the audio conferencing system is almost inaudible? Or where the last 20 minutes of conversation reminds you of a conversation from the previous meeting two months ago? The Foundry Group does. Which is why the firm released its Manifesto on Board Meetings, a video aimed at setting record straight on “bored” meetings. (Production quality is high.) Watch it here. And remember, entrepreneurs, venture capitalists and board members waste nearly 13,729 hours a day attending meetings, according to the firm.      

Chip Off The Old Block…Chain

In case you missed, two blockchain ETFs started trading today. In today’s post at TheMaven I deconstructed both of them to explore what they own and what expectations would be reasonable for investors to have for now and how that might change. I also talk about the blockchain stock I own personally. Please click through to read the post. A recent sunrise here in Walker. IMG_20180108_073130_209

The Bond Bear Has Started…Again!

The weekly Market Update is posted at Alpha Baskets and includes the following; Bill Gross declared the start of the bond bear market…again. Barron’s made the case for the yield on the ten year rising up to 2.75%. While predicting interesting rates is a loser’s game, such a gentile lift would be surprise us, we might expect a more extreme outcome in either direction as opposed to just 20 basis points. If a bear market has truly started, we would expect higher yields. Or if something triggers a recession we would expect much lower yields. Take this as a call for volatility, not a guess of what rates will actually do. Please click through to read the entire update. And also please check out my latest thoughts about robo advisors at the Maven, I dissect a robo portfolio. 17015794_1891275087820602_3584678385008732794_o

Some Thoughts On Equity Compensation

A hallmark of startup companies, the tech sector more broadly, and certainly our portfolio companies, is that they include equity in their compensation packages for their employees, often all employees. If you work for a tech company, chances are good that you will get options as part of your compensation package. I have written extensively on this topic over the years and even published a framework for issuing equity to employees on this blog. That framework is now out of date as the market has moved (up in case you were wondering) and I need to update it. It’s a project and we are working on it at USV but I can’t promise it any time soon. A few years ago I met with a very successful entrepreneur who built his company outside of the tech sector. When I asked him about equity compensation he said to me “You people
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