April 2011 - Phil Pearlman's Blog

Amazon Web Hosting Problems Are Incredibly Bullish for the Cloud

Tuesday, April 26, 2011

Since Amazon’s ($AMZN) web hosting services went down early last Thursday morning, much cautionary ink has been spilled regarding the viability of the cloud. The news media loves to jump on a negative story in a hot area and amplify the dangers.

But Amazon’s now widely reported storage problems which left many web sites (and some popular ones) down is actually an incredibly bullish signpost for the cloud.

I can’t help but think back to the outages the old $AOL suffered in late 1996 as it shifted from metered connectivity to un-metered for a flat fee of $19.95 . Usage exploded and AOL was unable to handle the increase and suffered repeated outages and dial up busy signals.

Subsequent news reports ranged in focus from the viability of $AOL to the internet as a whole. Both were ridiculous as AOL went on to grow revenues and its stock price substantially for three years before the Time Warner debacle and well, you know, the internet is now a pretty big thing.

Closer to home and a bit later on but still prior to Y2K, there was a period in which every time Amazon.com or other e-commerce sites like $EBAY went down for even short periods, the media would jump all over the story and the stocks would sell off hard.

The down time at Amazon is more representative of a new and profound technology being applied in its early days. This is a period when the technology is not well understood, where the vast majority of infrastructure build and business is ahead and in which the media will blow every hiccup well out of proportion.

This Is So Cool

The Beastie Boys have just released their new album on SoundCloud. So cool.

The Beastie Boys have just dropped their new album on SoundCloud. So cool.

On their blog, they write,

Good people, unfortunately due to circumstances beyond our control, the “clean” version of our new album, The Hot Sauce Committee pt 2 has leaked. So as a hostile and retaliatory measure with great hubris we are making the full explicit aka filthy dirty nasty version available for streaming on our site. We hope this brings much happiness, hugs, and harmony. Enjoy Kikoos for life!

SoundCloud has built trust among artists where others have squandered it.
/Hot Sauce Committee Part Two by Beastie Boys

(hattip @fredwilson)

Market Shrinkology Mail Bag

Thursday, April 21, 2011

I received an email today from a trader who has been struggling to stick to his stop exit plan once he is in the trade even though it is well planned ahead of entry to the trade. His struggle is causing him significant anguish. This was my response:

hi xxxxxx,
this is my brutally honest response.
everything in the world that is worth succeeding at presents a momentous challenge.
in trading the challenge is the “mindfuck of death.”
i realize from your passage that you are aware of this on some level.
the question is not what advice i might give u but whether u are up for staring this challenge down, meeting it and exceeding.
this depends upon how much u want it and if u are willing to make the sacrifice of murdering your ego.
ultimately u will either do so and stick to your plan or you will not.
there is no secret exercise i have for u.
the choice is yours.
phil

Learning to Let Your Winners Run

Wednesday, April 13, 2011

Investors and traders often sell their winners too soon and leave money on the table. This is so common as people become excited once they have a winner and enjoy the feelings associated with realizing gains.

On last night’s Market Shrinkology program I reviewed the psychological causes of this tendency and outlined 4 things to focus on in order to help you let your winners run.

1. Position Sizing – If you are habitually selling winners too soon, you may want to trade smaller at least until you have mastered the discipline of letting them run.

2. Concrete Exit Plans – Once you enter a trade, your psychology changes as a result of either having a winner or loser. Rational decision making becomes more difficult. By establishing a concrete exit strategy before you enter a trade (and sticking to it), you will be better positioned to exit when the time is right and not when you are impelled by emotions.

3. Visualizing and Journaling Past Successes – Establishing a vivid memory of instances in which you were successful in letting a winner run provides a mental blue print for your actions once you are in the trade. Journaling the episode enhances your memory. If you have never successfully let a winner run, make one up or steal a story from someone who has.

4. Risk Management – Pairing a winning position or trading around it goes hand in hand with responsible risk management. Establishing portfolio rules around risk will help you maintain rational control once in a position and will also help you maximize winners.

For a much more in depth discussion on this topic, here’s the video from last night’s program:

The Courage of Outrageous Predictions

Tuesday, April 12, 2011

I have seen so many outrageous predictions in my day. The $DJIA is going to 36,000. The $DJIA is going to 3,600. $GLD is going to 5,000. $GLD is going to $500.

I especially note those which preface their outrageousness with claims of being outrageous – self consciously meta.

I have seen so many outrageous predictions in my day. The $DJIA is going to 36,000. The $DJIA is going to 3,600. $GLD is going to 5,000. $GLD is going to $500.

I especially note those which preface their outrageousness with claims of being outrageous – self consciously meta.

I read one the other day that went something like this,

“here’s an outrageous prediction, we’ve seen the highs of the year.”

That’s not really that outrageous. This guy is bearish. He could have just as easily have said, “I am bearish.”

There is a motivation to making outrageous predictions and it is usually a red flag.

Here’s how it works.

If I make an outrageous prediction or label a prediction outrageous and I am wrong, I respond to ciriticism like this:

“Well, I said it was an outrageous prediction.”

This discounts my responsibility for being wrong to some degree. But if I am right, I will say,

“look how brilliant I am. I made an outrageous prediction and it was dead on.”

Outrageous predictions are used to manage impressions. One defers responsibility if wrong and gloats incessantly if right.

It is a manipulative gambit.

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