Guillaume’s blog

Will American highly-qualified workers soon have no other option but to get a job at companies from the very countries they were calling third-world not so long ago?

Jeff NolanBryan Stolle of Mohr Davidow Ventures wrote this piece on investment opportunities in software for this year. Here are my takeaways:

• An innovative business model (ex. SaaS) is not enough. Focusing on solving an urgent, valued, critical business problem first and using/combining known models that fits well the solution requirements is the key of any successful venture. For instance, some companies like SaaS ease-of-setup but they don’t like having their data in the cloud. Their need can be answered by combining SaaS model with the appliance model. I think this should be particularly seducing to the ultra-conservative financial services industry.
• Actual operations globalization and decentralization of improvements (”IT consumerism”) is a driving force behind new software investments. I wonder if that goes with corporate culture finally moving from a Stalinian management style to actually applying survival-of-the-fittest strategies to management, operations and innovation issues: instead of a management by committee where a handful of people that are not users are tasked with choosing a software product for the whole company, actual users can pick products from the Web for free, start to use them, integrate them with internal products, add new functions, have other easily build upon. In the end, the picked product(s) is the one that is most used and driving most user satisfaction and efficiency.

Well, it was a sucker’s rally. The DJI is down 294 points a few seconds before the close. I used this opportunity to sell my shorts (SKF +2.91%, FXP +15.37%). I think holding SKF is a bit risky in the short-term, I agree with Jim Rogers, chairman of Rogers Holdings, on that, who believes that we might see a short-term rally in financial stocks in the short-term given the actions of the Fed and the reasonable earnings announcements from the Wall-Street heavyweights and their reassuring propaganda that everything is fine.

What was really interesting today was the action on Gold, IAU was almost down 4.5% in one day, and I think I’ve never seen this in 1 year of investing, so I used this opportunity to scoop up a little IAU at $92.44, but not too much (about 7% of my portfolio). Gold actually went up slightly towards the end.

I kept my Yen and I’m looking to buy more shorts, but on general market indexes, not specific sectors like Banking/Finance.

Before I start my comment on the day, I wanted to say that I should have probably waited Monday to close the positions I closed Friday. The Bear Stearns crisis drove the Yen, Swiss Franc, Euro, Gold and shorts financials to new highs. But who could have predicted this! Jim Cramer actually recommended Bear Stearns last Monday - What a joke, this show.

As for today, another spike (DJI +420.21) that MacroMan was prudent to not qualify, hesitating between calling it the latest sucker’s rally or as the short-term bottom. As far as I’m concerned, it did not convince me, and it offered me the opportunity to buy some SKF (-15.42% today) and FXP (-9.26% today) and some FXY (-2.19% today).

My portfolio is about 60% USD cash, 15% Yen cash, 20% stocks, and about 5% shorts. My YTD performance is 4%.

Gold (IAU) was down -2.76% today, which is probably explained by this part of the Fed statement:

The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization.

I tend to share this opinion, although the main reason for the drop today is most likely the momentary lapse of reason of the markets that this 75pts cut will bolster confidence in the U.S. financial system’s ability to absorb the current crisis. Nouriel Roubini agrees with the idea that Gold price will be under pressure in 2008 as a result of the recession’s reduction of long-term inflationary pressures.

As a result, I will adopt a wait-and-see stance with regards to Gold in the short-term. By the way, a chart I like to monitor.

Since the beginning of the year, my portfolio has mostly be betting on a further fall of the USD (long FXE, FXY, FXF, IAU i.e. short dollar), demise of the U.S. banking system (long SKF i.e. short banks), fall of speculative markets (FXP i.e. short Chinese markets) and resistance of a few companies like AAPL or GOOG with a following of highly-satisfied proselytist buyers/users at 30%/40% of their 52-week high. Apart from these two stocks, which I have acquired recently at respectively ~$135 and ~$431, this has just been a continuation of my 2007 bearish stance on the U.S. dollar and U.S. financial system.

I’m still a long-term bear on the U.S. dollar and U.S. financial system, but I believe that this may change in the very short-term. Now that the Dollar has fallen to a 12-year low versus the Yen, and record low against the Euro, oil is at $110 and gold at $1000 (from $650 in early 2007!), I think the danger of a downward spiral is becoming clearer by the day, and many of our “leaders” are freaking out, especially when cracks are starting to appear some high-flying names like Bear Stearns. As a result, I’m expecting in the next few weeks a massive coordinated action from central banks, with the objective to support the dollar (read “desperate attempt”). I don’t think this will have much more long-term success than the last attempt by the Fed, which propped up for a day the DJI by more than 400 points and which I used to buy more of the above, but in the short-term, it may have a dramatic effect on whoever is a U.S. dollar and U.S. financial bear.

If I look at the recent attempts, which were mostly based on a “news effect”, this attempt may actually be carefully coordinated over time, in a way that maximizes desperation of dollar bear speculators and changes the pyschology of the market (there is a lot of irrationality in currency markets). Anyway, I’ve decided that I’m not willing to bear the risk of a short-term spike in the dollar value and have cancelled fully my dollar bearish positions today and I’m adopting a wait-and-see, roughly 80% USD cash 20% stock strategy (expecting good surprises from AAPL and GOOG).

Let’s see what happens.

Disclaimer: This is not an investment advice.

NetBanker has an interesting post about a new banking service called SmartyPig, which socializes savings.

Essentially it combines:

• A interest-bearing FDIC insured savings account with a specific goal can be shared with friends and family
• An easy way for friends and family to contribute money to your goal directly from a checking account or a gift card
• Rebates from partner companies.

So, for instance, a teenager can open an account with the goal to save x thousand dollars to buy a car, have his family contribute directly to the account on this specific goal, and get a rebate from one of the retail partners on the purchase of the car.

I like this idea for multiple reasons:

• It’s what a product should be: not technology, but very well-done integration.
• It comes at a perfect timing: Americans probably will have to learn to save more and get in debt less as we enter recession and the rest of the world becomes less and less interested to finance them.
• It really comes back to the essence of money: a trusted promise between multiple people that increases collective wealth instead of moving it from the havenots to the haves. The manufacturer gets the promise his product will be bought at a certain point of time and can plan production accordingly. Friends and family who contribute get the promise that their money is used for what they intended.

In a nutshell, SmartyPig can be viewed as a small attempt at bringing back the social role of money.