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Paolo Pezzutti
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Paolo Pezzutti has been active in the financial markets for over 20 years and is currently based in America. He has his own trading blog at (, and contributes to other websites including Working Money, and Daily... More
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Short-Term Trader
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  • Fasten Your Seat Belts
    The media are starting to publish more and more articles about the possibility of a crash. Portfolios for black swans are very popular and the Hindenburg Omen is another very published topic.  Is it done only to attract readers or someone is working to create the pre-conditions of a crash?  Hard to say.  I am negative on the stock market and I see gold as one of the few alternatives to face an increasingly difficult situation.  The sovereign debt in Europe could trigger another crisis in case of slowdown with important political and economic implications.  I also see a weak Euro because of this.  So, if markets rebound some time during the weeek, in my view this is a good selling opportunity.  By the way, Elliott waves, for those who believe in this technique, are indicating that a wave 3 to the downside may be ongoing for the S&P.  Fasten your seat belts.  

    Disclosure: no positions
    Aug 22 2:33 PM | Link | Comment!
  • Sequoias And Markets

    Sequoias are often thought of as the monarchs of the Sierra Nevada ecosystem with good reason if you think how tall and old they can grow to be. The main cause of their death is toppling, since they are so resistant to diseases. Sequoia groves adapted to natural processes that must continue if they are to remain healthy.

    There are similitarities between the natural processes that help sequoias remain healthy and markets. These monarchs remind me of big banks and corporations that dominate and have dominated the markets over the past decades.

    During a visit to the Sequoia National Park, one of my girls asked me why there were fires in the forest and no one was doing anything to suppress them. I was surprised to find the answer as I was not aware of the importance of fires for sequoias. Fire is actually one of the major processes essential to the health of giant sequoia groves. In markets as well, fires can be important for the health and growth of the financial markets ecosystem. Researchers have determined that low intensity fires swept through the trees approximately every 5 to 15 years. Sequoias rely on fire to release most seeds from their cones, to expose bare mineral soil in which seedlings can take root, to recycle nutrients into the soil, and to open holes in the forest canopy through which sunlight can reach young seedlings. Sequoias also need fire to reduce competition from species such as white fir and Incense cedar, both of which compete with sequoias for water and nutrients. A natural fire cycle thins these competing species, and provides suitable conditions for sequoia growth. That is why forest management policies are aimed at restoring fire to its natural role in Sierran conifer forests. This is accomplished by prescribed fires burning.

    Here are a few more reasons why fire is so precious to sequoias and how this could relate to markets:

    - Seebed preparation. In a sequoia-mixed-conifer forest, moderate to heavy surface fires provide soft, friable, ashy soil on which the lightweight sequoia seeds fall and in which they are buried. Each crisis is good to prepare the environment for the next trend and expansion. Companies restructure and reorganize, governments improve the framework for investors.

    - Nutrient recycling. Fire plays a significant role in returning various mineral nutrients to the soil. The ash deposit increases available phosphorus, potassium, calcium, and magnesium. Entrepreneurs reallocate efficiently capital to increase their returns.

    - Impact on succession. Species requiring sunlight, such as pines and sequoia, were favored over shade-tolerant forms such as white fir and incense-cedar; and fire-resistant and fire-dependent species and associations were favored over nonfire-dependent forms. Big banks and corporations are favored in this environment of small and moderate fires because competitors don't manage to upscale their operations enough before the next crisis arrives.

    - Formation of a vegetative mosaic. Periodic burning causes development of uneven-aged stands, comprised of even-aged groups of trees of various age classes. Crisis and recessions create a landscape of investors and entrepreneurs which is rich and varied as old farts disappear and new players appear on the scene.

    - Faunal relationships. The influence of fire on wildlife is largely related to fire's role in stimulating germination of plants and trees that are useful to animals for food or cover; or making openings in the forest that favor wildlife. Fires create new opportunities and inefficiencies that can be exploited by market players.

    - Influence on insect-suscptible trees. Fire apparently has a sanitizing effect by thinning stands or eliminating old stands or old trees before insects and disease have overtaken them. I think here of the role of crisis to get read of scams and market cancers (see for example Madoff or the dotcom situations of Enron and others).

    - Influence on fuel and fire hazard. It is believed that the worst enemy of a fire-suppression agency in this regard may be its own efficiency because "the longer forests go without burning, the greater the fuel accumulation and the greater the hazard". Trying to avoid recessions and suppress fires may eventually lead to bigger problems for the ecosystem as a whole. Through fire-suppression programs, the cycle is slowed and it occurs a higher buildup of fire hazard. The 2008 crisis came after a long time where measures were taken to keep the economy going (may be unnaturally?). The crisis was so big that almost burned even the big giants so resistant to fire. Only the government help managed to avoid a profound reshaping of the ecosystem with the "too big to fail" considerations that were made (except for Lehman).

    Many other questions could be asked, such as:

    - What is the role of regulators or the Fed in managing prescribed fires?
    - Even after a big fire, the forest grows again. It is just a different forest. With no sequoias. Is it good or bad?

    Disclosure: no positions
    Aug 19 7:05 PM | Link | Comment!
  • Microsoft Struggles To Catch Up With Competitors
    From Short-Term Trader :
    Very funny! Once again Microsoft is following way too late Apple.....
    From the CNN:
    Microsoft is urgently working with its partners to unveil a host of tablet computers running Windows 7, to compete with Apple's fast-selling iPad.
    The CEO claimed that Microsoft needs to take its time to get its products just right to compete in the intensely scrutinized tablet space.
    An analyst told Ballmer that it appeared that Microsoft had "no clear strategy."
    This is the reality:
    Microsoft's CEO focused his entire presentation on the company's consumer businesses, which are almost all trailing their competitors.
    Bing continues to lose money. "I can't say there's a point on the horizon where the business results will flip," Ballmer admitted.
    After demonstrating Windows Phone 7, which is set to go on sale in the fall, Ballmer said the company still had a lot of work to do to compete with Apple and Google.
    Xbox is the exception. It's a consumer product that is finally making money for Microsoft .
    Microsoft is confident that its success in the future will depend heavily on how well it carries out its cloud strategy with businesses.
    Unlike its competitors, Microsoft can offer companies a full set of cloud-based services, including managed data centers and business software tools in one package .
    I am not convinced. It seems that besides the more than mature (I would say elderly) cash cows (Windows and Office), the Company is only struggling to catch up with competitors in a number of areas that are not part of its core business. It is amazing how this big company does not manage to lead innovation in any new product line. It is true, however, that innovation may a problem for all corporate America. They struggle and fail in any attempt. The bad experience of the new Kin Phone is pretty clear in this regard. With all the cash available they have it is not a matter of money. Iyt may be more a problem of corporate culture and values. If this is really the problem Microsoft has a huge challenge. If they do not manage to cope with these cultural internal challenges the decline is inevitable.

    Disclosure: no positions
    Tags: MSFT
    Jul 30 6:45 AM | Link | Comment!
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