February 13, 2013

DJIA:14,018 NASDAQ:3,186 10-YR TRS: 10/32, yield 1.982% Oil:$97.51 EURO:$1.3454 YEN:93.48

How to be Innovative 

My father always told me that I would develop similar traits of the people I spend time with, and for that reason I should not only be picky when it comes to selecting friends but to never spend too much time with one person. As it turns out, my Dad may actually be right. Behaviors and opinions are more similar within social groups rather than between them. People who hold ties within multiple networks have a greater exposure to diverse influences. Behavior is contagious. Gregarious people are more familiar with alternative methods of behaving and thinking than those who are bashful. Individuals who can reach across social networks and identify a “good” idea, tend to be the most innovative. Because of this, I argue a firm comprised of sociable employees of average intelligence is actually more valuable than a firm made of smart, but anti-social, independent contractors. The structural holes within the anti-social firm’s network will result in greater inefficiencies. Today, I challenge you to make a new friend. Expand your social exposure; become more innovative.  

Domestic News

• Market Update. Futures trading slightly higher as many investors focused on the retail-sales data that will portray exactly how much a payroll tax-hike affected consumer spending. Many investors remain in shock after hearing Obama’s State of the Union address and the President’s desire to raise minimum wage during times of high unemployment.  
• Data on U.S. retail sales will be released at 8:30 am, and is expected to be flat compared to a 5% rise in December thanks to the pay roll tax.
• The Federal Reserve President from St. Louis, James Bullard, will speak at 11:10am. He is a voter this year on Fed policy.  
• The Federal Housing Administration should hopefully be able to avoid its first bailout by taking more precautions to avoid foreclosures and by increasing the amount it chargers borrowers to deter mindless borrowing. In November, an independent actuary estimated that the FHA would need about $16.3B worth of aid. 

International Updates

Asia

• Market Update. Trading up, for the most part, with the Australian market finishing at its highest level in almost four and a half years! The Japanese stock market was not a lucky as it was hit by a strong yen.

Europe

• Market Update. Trading in a tight range as investors await the euro zone’s industrial-production data and U.S. retail sales. 
• In December, the Eurozone industrial production rose for the first time since 2008 increasing +0.7% M/M vs. November’s 0.2%. Other sectors: output -2.4%, production of intermediate goods -4.6%, durable consumer goods -3.9%, non-durable goods -1.3%, capital goods -2.9%, and energy products +1.2%

Corporate

• Apple (AAPL) has a team of about 100 designers working on a wrist watch that will function similarly to the iPhone and the iPad.