Making Sense of the Citrini Debate

Citrini Research recently published a controversial report that rhetorically asked, “What if our AI bullishness continues to be right...and what if that’s actually bearish?”

Even though the authors qualified the report as “a scenario, not a prediction”, it ignited much debate among investors. As the work is labeled as speculative fiction, I am not inclined to address its points, other than to point out that it raises questions about the interaction between AI-driven productivity and employment. 
 

In reaction, the market sold off after the report’s publication, but rebounded the next day. Software stocks, which had been under pressure over the disruptive fears of AI adoption, ended the week by stabilizing. Technology stocks broke a rising relative uptrend (dotted line) and they are testing a key relative support level.

The full post can be found here.

Could the "Lag 7" Crater the Economy and Market?

Now that the Magnificent Seven has definitively weakened and violated a key support level, the next question is whether the decline can be halted at the 200 dma. More ominously, the relative performance of these stocks is forming an inverted saucer top after violating a relative support level (bottom panel).

It’s time to consider and stress test what was once thought as unthinkable. Can a sustained breakdown of the Magnificent Seven and AI hyperscalers crash the market and the economy in the manner of the Dot-Com Bubble top?

The full post can be found here.

Twilight of the AI Bull

We should all have seen it coming. At the end of 2025, Time Magazine named its person of the year as “the architects of AI”. This was the classic example of the contrarian magazine cover indicator.

As well, U.S. investors who watched the Super Bowl also saw a flood of AI-related TV commercials. Welcome to the 2026 AI Super Bowl. Tech ad spend was double the level of the “Crypto Bowl” in 2022, and we know what happened to cryptocurrencies in that year.

Companies like Anthropic, Genspark, OpenAI, and Wix, none of which are cash flow positive, spent big money to purchase expensive media during the Super Bowl to convince viewers that their product was going to change their lives. Not to mention ad spends by established players like Amazon, Google and Meta. 

The flood of AI-related ads is reminiscent of the ad spend during the Super Bowl in 2000 at the top of the NASDAQ bubble. In 2000, 14 internet start-ups bought Super Bowl ads at $2.2 million per spot. Are you old enough to remember Pets.com? Yes, the company spent 1.2 million on Super Bowl media.

History doesn’t repeat itself, but rhymes.

The full post can be found here.

Peering into 2026: Prepare for Momentum Tailwinds

My former colleague Fred Meissner revealed a disturbing contrarian warning in a recent weekly commentary: “The most concerning story: recently I was on a panel for the CFA Society of San Francisco. All three analysts had the same outlook, which is my base case – a yearend rally followed by problems in the first part of 2026.”

It seems that everyone is looking for a rally into year-end, followed by weakness in the new year. Here is where I differ from that consensus. I believe the stock market should rally into year-end, followed by continued bullish tailwinds, at least for the first half of the year.

 

My long-term market timing model remains on a buy signal. As a reminder, this model flashes a buy signal whenever the monthly MACD of the NYSE Composite (bottom panel) turns positive and sells whenever the 14-month RSI flashes a negative divergence.

The bull is alive, and it’s helped by three major tailwinds going into 2026, namely a stimulative monetary policy, a stimulative fiscal policy, and strong price and fundamental momentum.

The full post can be found here.

Drifting and waiting for the NVIDIA report

Mid-week market update: After the market reaches its upper Bollinger Band, it isn't unusual at all for it to consolidate sideways and drift for a few days before making the next move. As the chart below shows, this has happened four other times (grey shaded boxes) in the last six months. The latest episode is the fifth.

The market rose in two of the four episodes and fell in the other two, so there are no apparent clues to future short-term market direction. That said, I have heard concerns about the VIX Index declining below the 12 level, which is historically low. But the VIX did not fall below its lower Bollinger Band, which would be an overbought signal for the market.

The most important difference between now and past instances is the pending earnings report from AI bellwether NVIDIA. As a reminder, the last time NVIDIA reported earnings, not only did the stock pop, the upside gap took the S&P 500 with it and the market didn't look back for weeks.

The full post can be found here.

Beware of the AI hangover

Artificial Intelligence (AI) related stocks have been on an absolute tear. The Magnificent Seven, which is one proxy for AI plays, has beaten the S&P 500 for six consecutive quarters. But the degree of outperformance is decelerating. This looks like the early stages of an AI hangover.

 
I believe AI stocks are overhyped short term but underhyped long term. Here’s why.

The full post can be found here.

Time to tiptoe back into Big Tech?

Preface: Explaining our market timing models 

We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade.

The Trend Asset Allocation Model is an asset allocation model that applies trend-following principles based on the inputs of global stock and commodity prices. This model has a shorter time horizon and tends to turn over about 4-6 times a year. The performance and full details of a model portfolio based on the out-of-sample signals of the Trend Model can be found here.

My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model becoming more bullish, or bearish?) and overbought/oversold extremes (don't buy if the trend is overbought, and vice versa). Subscribers receive real-time alerts of model changes, and a hypothetical trading record of the email alerts is updated weekly here. The hypothetical trading record of the trading model of the real-time alerts that began in March 2016 is shown below.

The latest signals of each model are as follows:

• Ultimate market timing model: Buy equities (Last changed from “sell” on 28-Jul-2023)*
• Trend Model signal: Bullish (Last changed from “neutral” on 28-Jul-2023)*
• Trading model: Bullish (Last changed from “neutral” on 16-Apr-2024)*

* The performance chart and model readings have been delayed by a week out of respect to our paying subscribers.

Update schedule: I generally update model readings on my site on weekends. I am also on X/Twitter at @humblestudent. Subscribers receive real-time alerts of trading model changes, and a hypothetical trading record of those email alerts is shown here.

Subscribers can access the latest signal in real time here.

 

Washed out Big Tech?

In discussions with investors, I have been asked if Are Big Tech has formed a bottom. Big Tech had been the leadership in the U.S. equity market. It’s an important group as it forms roughly 40% of the weight of the S&P 500. The NYSE FANG Plus Index staged an upside breakout out of a cup and handle pattern with long-term bullish implications. The index then pulled back and it’s bouncing off a relative support zone (bottom panel).

 
Is it time to tiptoe back into these stocks? What are the implications for the overall market in light of the outsized weight of Big Tech in the S&P 500?

The full post can be found here.

The path to Magnificent Exuberance

Signs of technical deteriorations had been appearing last week, but NVIDIA’s earnings report saved the day. The earnings report can best be described as a blowout. The results beat Street expectations on all metrics and the company guided upwards. There wasn’t anything not to dislike about the report. As a consequence, the Semiconductor Index, which is a bellwether for artificial intelligence (AI) related plays, rallied strongly after briefly testing the lower bound of its absolute and relative return rising channels.

Even though some excesses are appearing, I reiterate my view that the AI bubble has far more room to run before it reaches the phase of Magnificent Exuberance (see Why this AI bull is nothing like the NASDAQ in 2000).

The full post can be found here.

A focus on AI and technology stocks

Preface: Explaining our market timing models 

We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade.

The Trend Asset Allocation Model is an asset allocation model that applies trend-following principles based on the inputs of global stock and commodity prices. This model has a shorter time horizon and tends to turn over about 4-6 times a year. The performance and full details of a model portfolio based on the out-of-sample signals of the Trend Model can be found here.

 

 

My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model becoming more bullish, or bearish?) and overbought/oversold extremes (don't buy if the trend is overbought, and vice versa). Subscribers receive real-time alerts of model changes, and a hypothetical trading record of the email alerts is updated weekly here. The hypothetical trading record of the trading model of the real-time alerts that began in March 2016 is shown below.

 

 

The latest signals of each model are as follows:

• Ultimate market timing model: Sell equities (Last changed from “buy” on 26-Mar-2023)*
• Trend Model signal: Neutral (Last changed from “bullish” on 17-Mar-2023)*
• Trading model: Neutral (Last changed from “bearish” on 15-Jun-2023)*

* The performance chart and model readings have been delayed by a week out of respect to our paying subscribers.

Update schedule: I generally update model readings on my site on weekends. I am also on Twitter at @humblestudent and on Mastodon at @humblestudent@toot.community. Subscribers receive real-time alerts of trading model changes, and a hypothetical trading record of those email alerts is shown here.

Subscribers can access the latest signal in real time here.

 

AI mania

These days, it’s difficult to turn on financial TV without mention of artificial intelligence and technology stocks. Indeed, popular AI-related plays like NVDIA and C3.AI have been on a tear.
 

 

 

How sustainable is the move? Let’s examine the technical and fundamental underpinnings.

 

The full post can be found here.

The NASDAQ tail wagging the market dog

Mid-week market update: One of the key indicators I have been monitoring for the health of the market is the NASDAQ 100 (NDX), which is a proxy for large-cap technology stocks. So far, the NDX has been testing an important rising relative uptrend.

If the relative uptrend were to decisively break down, it would spell trouble for the overall market.

The full post can be found here.

How far can the market fall?

Macro Charts recently observed that S&P 500 DSI is turning down from an overbought extreme. Historically, that has led to either sharp corrections or a prolonged period of choppiness.

In light of these conditions, I have been asked about downside equity risk. Is this the start of a significant downdraft? How far can stocks fall from current levels?

I answer these question in the context of secular leadership change. The Big Three market leadership themes in the latest bull cycle has been US over global stocks, large cap growth over value, and large caps over small caps. Transitions from bull to bear phase act to cleanse the excesses of the previous cycle. Until we see definitive signs of leadership changes, it may be too early to call a market top just yet.

From that perspective, we can see that the relative performance of US against global stocks is consolidating sideways after an uptrend; growth beating value, but pulling back; and small caps still lagging large caps after a brief episode of better relative performance.

The full post can be found here.

A Potemkin Village market?

While the adage that the stock market isn't the economy and vice versa is true. one of the puzzles facing investors is why the US equity market testing its all-time highs even as the economy suffered its worst setback since the Great Depression. This market seems like a Potemkin Village, which shows an external façade of calm while hiding the real trouble behind the scenes.

The Fed isn't entirely responsible for the market's strength. The Fed has taken steps to stabilize markets so they can function in an orderly way. A Fed Put can put a floor on prices, but it cannot make asset prices skyrocket the way they did.

A more reasonable explanation is the unprecedented level of fiscal support to support growth. This recession is completely unlike past slowdowns. The government's safety net has allowed consumers to maintain their spending to prevent a complete collapse in demand.

In that case, why hasn't the stock market skidded as it became clear that Congress could not agree on a second stimulus package, and that Trump's Executive Order and Memoranda designed to do and end run around Congress appears to be ineffectual (see a detailed analysis in Earnings Monitor: Slower growth ahead). The Washington Post reported that the Street generally agrees with my analysis.

“If this is all we get for fiscal policy for the rest of the year it would represent a significant downside risk to our growth outlook,” JPMorgan Chase chief U.S. economist Michael Feroli wrote in a Monday note. “These executive orders likely will provide stimulus of less than $100 billion, while we have been expecting Congress to add at least $1.0-1.5 trillion of spending once an agreement is reached.”

The team at Oxford Economics comes to a similar conclusion, finding “the relief is inadequate, legally questionable and falls dramatically short of the booster shot the economy desperately needs,” per a note from senior U.S. economist Lydia Boussour. “In the absence of a more comprehensive stimulus package, economic activity will be constrained just as the recovery plateaus.”

Barry Ritholz offered a different sort of explanation, based on a radical difference between the construction of the market indices and the economy, in a Bloomberg opinion piece. Big Tech comprise a gargantuan weight in most major US indices.

The so-called FAANGs (along with Microsoft) derive about half -- and in some cases even more -- of their revenue from abroad. Beyond that, the pandemic lockdown in the U.S. has benefitted the giant tech companies’ sales and profits. No wonder the Nasdaq Composite 100 Index, which is dominated by big tech companies, is up about 26% this year.

Simply put, the rest of the market really doesn't matter no matter how badly the underlying sectors and industries perform.

Take the 10 biggest technology companies in the S+P 500 and weight them equally, and they would be up more than 37% for the year. Do the same for the next 490 names in the index, and they are down about 7.7%. That shows just how much a few giants matter to the index.

On some level, it’s completely understandable why many people believe that markets are no longer tethered to reality because the performance doesn’t correspond to their personal experience, which is one of job loss, economic hardship and personal despair. But what’s important to understand is that indexes based on market-cap weighting can be -- as they are now -- driven by the gains of just a handful of companies.

This week, we explore the outlooks and performance of two groups, Big Tech, and the rest of the market.

The full post can be found here.

Peering into 2020: New decade, new paradigm

Preface: Explaining our market timing models
We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade.

The Trend Model is an asset allocation model which applies trend following principles based on the inputs of global stock and commodity price. This model has a shorter time horizon and tends to turn over about 4-6 times a year. In essence, it seeks to answer the question, "Is the trend in the global economy expansion (bullish) or contraction (bearish)?"

My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model becoming more bullish, or bearish?) and overbought/oversold extremes (don't buy if the trend is overbought, and vice versa). Subscribers receive real-time alerts of model changes, and a hypothetical trading record of the those email alerts are updated weekly here. The hypothetical trading record of the trading model of the real-time alerts that began in March 2016 is shown below.

The latest signals of each model are as follows:

• Ultimate market timing model: Buy equities*
• Trend Model signal: Bearish*
• Trading model: Bearish*

* The performance chart and model readings have been delayed by a week out of respect to our paying subscribers.

Update schedule: I generally update model readings on my site on weekends and tweet mid-week observations at @humblestudent. Subscribers receive real-time alerts of trading model changes, and a hypothetical trading record of the those email alerts is shown here.



The remarkable FAANG run
Technology stocks, and FAANG in particular, have had a remarkable run in the last decade. The chart below reveals the level of dominance.

The top panel shows the relative performance of the NASDAQ 100 (NDX) in the last 15 years (blackline). Not only is the NDX dominating the market, the NDX has also been steadily beating the equal-weighted NDX (green line), indicating that large caps within that index have outperformed small caps. The bottom panel also shows the relative performance of large cap technology (black line) and small cap technology (green line) against their respective indices. Both have led the market in the past decade.

As we peer into 2020 and the next decade, numerous signs are appearing that this cycle of technology and FAANG leadership may be coming to an end.

The full post can be found here.

Apple: The new Rorschach test

I normally don't comment on individual stocks because I don't have the resources to analyze a zillion companies in detail, but here is a Black Friday thought on Apple, which kicked off a revolution in consumer electronics and created new product categories when it unveiled its iPods, IPads, and iPhones. The share price of Apple have cratered on reports of poor iPhone sales. The chart is a bull's nightmare. It broke down through the 190 key support level, and violated a long-term uptrend.

In some ways, AAPL is turning out to be a Rorschach test for investors and traders.

The full post can be found at our new site here.

Tech as the canary in the coalmine

Technology stocks have been on a tear in the last couple of years. Indeed, both the Tech sector and the Tech heavy NASDAQ 100 has been market leaders.

Tech earnings have surged in this cycle. By contrast, non-Tech earnings appear to be at or near a cyclical peak.

Can it continue?

The full post can be found at our new site here.

Peak FANG?

I had been meaning to write about this topic, but Barron's beat me to it with a terrific article called "Breaking up Tech" which detailed the anti-trust vulnerability of Big Tech companies. The Barron's article stands in direct contrast to a recent Josh Brown post which postulated that investors are rushing into the technology sector as a hedge against the obsolescence of their own skill sets:

A 45 year old married father of two with a mortgage and a pair of college educations to fund. The remote yet persistent threat of a nuclear war is not what keeps him up at night. In fact, he might almost see it as a relief should it come. He is a bundle of raw nerves, and each day brings even more dread and foreboding than the day before. What’s frying his nerves and impinging on his amygdala all day long is something far scarier, after all. He, like everyone else, is afraid that he doesn’t have a future.

He is petrified by the idea that the skills he’s managed to build throughout the course of his life are already obsolete...

We could be in the midst of the first fear-based investment bubble in American history, with the masses buying in not out of avarice, but from a mentality of abject terror. Robots, software and automation, owned by Capital, are notching new victories over Labor at an ever accelerating rate. It’s gone parabolic in recent years – every industry, every region of the country, and all over the world. It’s thrilling to be a part of if you’re an owner of the robots, the software and the automation. If you’re a part of the capital side of that equation.

If you’re on the other side, however – the losing side – it’s a horror movie in slow motion.

The only way out? Invest in your own destruction. In this context, the FANG stocks are not a gimmick or a fad, they’re a f***ing life raft. Market commentators rhetorically ask aloud what multiple should investors pay to own the technology giants. That’s the wrong question when people feel like they’re drowning.

What multiple would you pay to survive? Grab a raft.

Who is right?

The full post can be found at our new site here.

A warning for growth investors

The WSJ recently published a story about how money managers were piling into growth stocks because of the scarcity of growth:

[M]any fund managers say they are buying tech shares now. Valuations are a fraction of what they were before the crash in 2000, and top technology firms appear to be building world-class franchises that could generate large profits for years to come, analysts and investors said.

And though the U.S. economy continues to expand, sales and earnings in many sectors of the economy are flat or falling, highlighting the relative promise of the technology sector.

“Growth is really scarce right now,” said Josh Spencer, portfolio manager of the T. Rowe Price Global Technology Fund, which manages more than $2 billion. Google is one of the fund’s top holdings. “The reality is that global GDP is just not that exciting. You really get a premium if you can show organic growth,” or rising revenue excluding acquisitions.

It really is different this time. (Yeah, right.)

“What’s different this time around is we’re seeing sustainable growth and real profits in a lot of cases,” said Dan Fletcher, research analyst on Neuberger Berman’s Large Cap Disciplined Growth team. He said the stock prices of large technology firms generally aren’t worrisomely high, but some unprofitable smaller companies have become very expensive.

Paradigm shifts, or wild claims?
One of the most dangerous comments in investing is, ”It really is different this time”. Izabella Kaminska of FT Alphaville was somewhat skeptical of the all the paradigm-shifting cheerleading for technology at her personal blog Izzynomics:

I’m increasingly coming across a whole generation of smart young minds who are convinced that “this time is different” and that free information/connectivity can not only save the day but that things like fintech can literally cure poverty and cancer…

I’m biting back. I’m biting back because I worry that this line of thinking is only going to create a whole bunch of suckers who are going to be scammed. Technology does have the potential to save the day. But technology alone will not be responsible for this.

As an aside, see this account of the comments from Andy Lo of MIT about how financial engineering can cure cancer. Kaminska went on to describe her reservations about the application of fintech to developing economies:

What bothers me about “fintech” in particular is that it assumes digitisation alone can help influence behavioural shifts. But really there only two ways that fintech can bring affluence to developing markets.

1) if it can enforce behavioural changes by better rationing access to consumption goods than the current system — mostly by way of algorithmic judgments. (Something that I’m actually not convinced it can do, because: endogenous money, theft, black market etc etc)

2) By anticipating your wants and needs through mass surveillance and data capture, and then manipulating them if they don’t fit the resources to hand, to the point you’re not really free at all.

For a different perspective, Tom Bradley of Steadyhand Funds also expressed reservations about an over reliance on advertising revenue by many tech companies [emphasis added]:

Have you noticed how many new age companies are dependent on advertising for their revenue? What leading growth company isn't counting on ads to make their business model work?

The powerful tech and social media companies like Google (including YouTube), Facebook (Instagram) and Twitter generate most of their revenues from advertising, and we read every day about new companies that have built an app, website or game to deliver advertising.

The disconnect? Are there enough advertising dollars to support the established mediums (television, radio, newspapers, banner ads, billboards, sports sponsorships) and justify the valuations of the newcomers?

It seems almost certain that the conventional media will continue to lose market share. Dollars currently being spent on newspapers like The Globe and Mail or "The News at Six" will be re-allocated to shared photos, a tweet and Grand Theft Auto 22.

And if the new providers can improve advertising effectiveness through enhanced analytics and precise targeting – i.e. deliver more revenue per advertising dollar – it makes sense that the advertising pie will grow substantially. If Molson and McCain Foods get more bang for their buck, they’ll spend more bucks.

But it seems to me, from an investment perspective, something has to give. The advertising pot is finite. Either conventional media will disappear more quickly than expected, or the total capitalization of the new media players will go through a correction. I'm betting on both.

Investors should heed his conclusion:

How inconsistencies in the market resolve themselves can have a profound impact on future investment returns. If you believe they're unsustainable, then you need to understand how they will eventually re-connect.

Growth and momentum stocks look extended
Even if we were to set aside the unfriendly market reception to the earnings reports of AAPL, MSFT and YHOO, the chart below shows that growth and momentum stocks appear to be extended. The middle panel is the relative performance of the Russell 1000 Growth Index vs. the Russell 1000 Value Index. This ratio has gone straight up in the past few days. Even if you are bullish on growth stocks, do you want to be chasing them here? The bottom panel shows the relative performance of the momentum stock ETF (MTUM) relative to SPY. MTUM is in a relative uptrend but also appears extended when compared to the market.

From a fundamental and technical perspective, do you really want to be chasing the glamour growth stocks right now?

Snowden Affair fallout: RIMM experience as blueprint for US Tech?

I have learned over the years to be politically agnostic when I put on my investor's and trader's hat, because political biases can color judgement and lead to negative investment results. While I have my own personal opinions about the Snowden Affair, I have kept them to myself in this blog. It is when Edward Snowden's revelations about the NSA's actions have an impact on the markets that I have to speak up.

The most important story in the Snowden Affair arose when it was discovered that the NSA bugged the EU offices in Washington and penetrated EU computer networks. This post over at Naked Capitalism put the spying scandal into perspective:

Oh, this is getting to be fun!

The lead story at the Financial Times tonight is about how the European Union is threatening to suspend two data sharing agreements with the US. The pink paper also adds that this row has the potential to undermine the EU-US trade negotiations which are set to start next week (we speculated a few days ago that this might come to pass). On our side of the pond, so far only the Wall Street Journal has weighted in, with a cheery headline U.S.-EU Trade Talks on Track Despite Spy Fears which is narrowly accurate since the trade negotiations have not been rescheduled but seems to understate the degree of unhappiness and ire.

The interesting question is how and why has this row escalated now? Mind you, the Eurocrats do have a lot to be angry about. Remember, the US was caught spying on EU officials. Der Speigel released information from Edward Snowden that charged that the NSA had bugged the European Union’s offices in Washington and the UN and hacked into their computers (which enabled them to monitor meetings) and targeted other missions.

If you remember, this story broke shortly before a G8 meeting in Dublin. Obama got the cold shoulder. The European officials appear to have cornered the Americans. This AFP story ran June 14, while the summit was underway:

The United States has agreed to share information with the European Union about its huge Internet and phone surveillance programme, a senior EU official said today.

EU Home Affairs Commissioner Cecilia Malmstrom and Justice Commissioner Viviane Reding secured the agreement from US Attorney General Eric Holder after talks with the American official in Dublin, Malmstrom said.

“Agreed with the US in Dublin to set up a transatlantic expert group to receive more info on PRISM and look at the safeguards,” Malmstrom said on Twitter, without elaborating…

The EU and US officials were meeting as part of already scheduled ministerial talks in the Irish capital.

The move comes days after the EU demanded answers from Holder and warned of a “grave” threat to the rights of European citizens from the intelligence programme.

As I am reading between the lines of the two FT stories tonight, US agrees to talks with EU on surveillance, and Brussels threatens to suspend data sharing with US in spying row, the Administration may be even more on the back foot that it appears. (I welcome input from readers of the European press, particularly those who have a good handle for how the EU deals with the governments of member states over jurisdictional issues).

Notwithstanding the ire of EU officials about American spying, this spying scandal will not serve to help US technology companies in Europe. The EU has privacy standards are far stricter than American ones. Consider this Financial Post story about the privacy concerns about Google Glass:

Google’s wearable computing project Glass raises significant privacy and data protection concerns, according to an international group of 36 authorities, who have signed a joint letter to Google chief executive officer Larry Page.

At issue are the “obvious, and perhaps less obvious, privacy implications of a device that can be worn by an individual and used to film and record audio of other people” – for example, fears of ubiquitous surveillance, and how data collected from the device is stored, shared and used.

It went on to cite a letter to Google CEO Larry Page from various international privacy officials:

The letter includes signatures from Privacy Commissioner of Canada Jennifer Stoddart and her provincial counterparts, but also privacy commissioners from Australia, Israel, Sweden, Mexico and more. The following questions have been raised:

•How does Google Glass comply with data protection laws?

•What are the privacy safeguards Google and application developers are putting in place?

•What information does Google collect via Glass and what information is shared with third parties, including application developers?

•How does Google intend to use this information?

•While we understand that Google has decided not to include facial recognition in Glass, how does Google intend to address the specific issues around facial recognition in the future?

•Is Google doing anything about the broader social and ethical issues raised by such a product, for example, the surreptitious collection of information about other individuals?

•Has Google undertaken any privacy risk assessment the outcomes of which it would be willing to share?

•Would Google be willing to demonstrate the device to our offices and allow any interested data protection authorities to test it?

Now combine those privacy concerns with this Bloomberg story that U.S. Agencies Said to Swap Data With Thousands of Firms:  

Thousands of technology, finance and manufacturing companies are working closely with U.S. national security agencies, providing sensitive information and in return receiving benefits that include access to classified intelligence, four people familiar with the process said.

These programs, whose participants are known as trusted partners, extend far beyond what was revealed by Edward Snowden, a computer technician who did work for the National Security Agency. The role of private companies has come under intense scrutiny since his disclosure this month that the NSA is collecting millions of U.S. residents’ telephone records and the computer communications of foreigners from Google Inc (GOOG). and other Internet companies under court order.

If you were the privacy commissioner or regulator in the EU or any non-US country (e.g. Europe, Singapore, China, etc.), how would you feel about allowing Google Glass into your jurisdiction, knowing that any data that Google retains may wind up in an NSA archive somewhere? Or knowing that Apple cooperates with the US intelligence services, how would you feel about allowing Apple products such as the new iWatch into your country? Do you want to formulate a policy regarding those Android enabled devices? How about allowing your local telecom services provider to enter into a joint venture with a US teleco?

If you don't think that none of that matters, consider the following thought experiment. Supposing that it emerged that the Brazilian security services embedded non-removable technology in every Embraer jet so that it would know:

• The position of the aircraft
• The identity of the crew and passengers
• Conversations of the cockpit crew and the passengers

And the Brazilian security services could access all this in real-time and archived it somewhere in Brazil in perpetuity. Would you be more or less likely to fly in an Embraer jet or to purchase one?

You're not a terrorist. You're not doing anything wrong. Why should you care about your actions being watched by the Brazilian government?

The Snowden revelations about NSA activities, at the margin, damage the competitiveness of American technology companies - and that's what concerns me.

For illustrative purposes, I can remember seeing the story that (then) Research in Motion capitulating to India's demands and handing the country access to its Blackberry network. For me, that was the beginning of the end of the company's competitive position. The same can happen to American technology companies.





Cam Hui is a portfolio manager at Qwest Investment Fund Management Ltd. ("Qwest"). This article is prepared by Mr. Hui as an outside business activity. As such, Qwest does not review or approve materials presented herein. The opinions and any recommendations expressed in this blog are those of the author and do not reflect the opinions or recommendations of Qwest.

None of the information or opinions expressed in this blog constitutes a solicitation for the purchase or sale of any security or other instrument. Nothing in this article constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment objectives, financial situation or particular needs of any specific recipient. Any purchase or sale activity in any securities or other instrument should be based upon your own analysis and conclusions. Past performance is not indicative of future results. Either Qwest or Mr. Hui may hold or control long or short positions in the securities or instruments mentioned.

Tech revival? Watch AAPL

There was some excitement this week about the relative breakout of the Technology sector against the market:

Given the dominant weight of Apple in the Technology sector, consider the relative performance of an equal weighted Tech index. the equal-weighted NASDAQ 100 (QQEW) against the SPX. While the XLK has rallied out of a relative downtrend against SPX, QQEW remains range-bound against the market. In other words, the average Tech stpcl has performed in line with the market in general.

The rally out of the downtrend is far more evident in AAPL:

So if you start to get excited about the potential rally in Technology stocks, pick the appropriate benchmark and know what you are betting on.



Cam Hui is a portfolio manager at Qwest Investment Fund Management Ltd. ("Qwest"). This article is prepared by Mr. Hui as an outside business activity. As such, Qwest does not review or approve materials presented herein. The opinions and any recommendations expressed in this blog are those of the author and do not reflect the opinions or recommendations of Qwest.

None of the information or opinions expressed in this blog constitutes a solicitation for the purchase or sale of any security or other instrument. Nothing in this article constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment objectives, financial situation or particular needs of any specific recipient. Any purchase or sale activity in any securities or other instrument should be based upon your own analysis and conclusions. Past performance is not indicative of future results. Either Qwest or Mr. Hui may hold or control long or short positions in the securities or instruments mentioned.

No recovery signal from semiconductors

Relative charts are useful devices for filtering out the effects of the overall market. Further to my last post on the homebuilders, I decided to look for signs of a recovery in other industry groups as the market has moved from rallying on signs of stabilization to rallying on indications of a cyclical recovery.

The semiconductor group (SOX) is an ideal indicator, as the semis were not directly impacted by the mortgage and banking meltdown. The chart below shows the relative performance of SOX against the S&P 500 Technology Index. Technology had led much of the rally since late last year and this relative chart shows the performance of the more cyclical semiconductor group against broader Technology stocks.



As the chart indicates, the more cyclical semiconductor group remains range bound relative to Technology stocks. Despite Intel’s positive report last week, there is no sign of a recovery from this cyclically sensitive industry.