Data Analytics wins 2012 US Presidential Election

Data analytics was the big winner in the 2012 US Presidential race. In fact, 11:17 PM (US ET) November 6th was the moment data analytics went mainstream. This was when Ohio was officially projected to go to Obama. It was the ultimate validation for Nate Silver and his data analytics approach to election forecasting. To much fanfare he accurately predicted the results of the election in all 50 states without doing any of his own polling. He used sophisticated analytic models based on data from as many third party polls he could find. To this he added the secret sauce of data analytics - a keen understanding of how different types of data from different sources relate to one another in context.

His FiveThirtyEight blog drove as much as 20% of the web traffic to the New York Times website - the 6th most visited US news site on the net - leading up to the election. As a result, data analytics is officially mainstream. Any business leader at any level that does not immediately embrace its power is putting his or her career and company in jeopardy.

Data analytics works. It does not produce miracles, but it does produce results that far outperform human judgment on its own. The Obama campaign employed an army of retail data analytics wonks to beat the Romney campaign in every battleground state. They did it by applying analytic techniques proven in the supermarket industry:

• Standardizing records: Unifying the customer (voter) database
• Widening perspective: Combining diverse data types: demographics; buying/voting history; response by media; donation/activity by trigger (celebrity dinner), model (contest) and method (mobile); group/church  membership, social networking activity (Reddit), etc.
• Judicious targeting: Carefully identifying the potential for influencing voters that could influence the election. Not worth targeting easily influenced voters if they don't live in a county that can help swing a state. Not worth targeting difficult to influence voters even if they live in a critical county. This is essential for achieving impact and ROI.
• Media mix modeling: which media channels have the greatest impact on which kinds of voters?
• Action oriented outreach: Understanding the specifics of why and how certain people act and designing multiple outreach experiments (progressive offers, channel mix, social references, etc.) based on that.
• Openness to innovation: data driven models may point to approaches that are counter intuitive for some decision makers. They can seem risky and mysterious. They will not be right all the time. Controlled risk is part of the evolutionary process to effectiveness. Without a tolerance for experimentation however, you will not develop a data driven culture, you will in fact kill it.

Marketers in the world's largest high tech companies are finally acquiring the enterprise data services needed to apply data analytics to long cycle B2B customer creation processes. We are already seeing signs of how significant the impact of these new approaches to marketing and sales can be:

• $200M EU lift based on a sophisticated solutions recommendation engine
• 45% more subscription revenue with no increase in a multi-million dollar marketing budget
• Tens of millions of dollars in revenue uplift from simple web behavioral changes

Embracing data driven decision making is now a matter of survival. You simply cannot win against competitors that have faster, deeper market insight. They will beat you in every stage of the customer creation process. Your marketing will be months behind, your inside sales reps will be calling customers already committed to alternatives, your field sales reps will miss opportunity after opportunity to get more revenue from existing customers. Your funnel will collapse, your pipeline will dry up, your renewable revenue will shrink, and at that point it will be hard to recover. Hyperbole, you say? In the great A/B test of who uses data analytics and who does not, stay in the B group at your peril.

IDC EAG group has done extensive research on the key ingredients needed to create the enterprise data services that are a prerequisite for data driven customer creation and has ongoing research into how to create a data driven culture. To find out more please contact Gerry Murray - gmurray(at)idc(dot)com. 

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Market Jeers Election Results

Markets in the US are down sharply pretty much across the board following last nights presidential election.  As for this post, the Dow is down 300 points, although it is still early in the session so its possible we could recoup some of this decline into the close.  Let's hope.

Sectors that were perceived to benefit under a Romney administration are getting hit hard today.  Coal stocks are down sharply (KOL), and financials stocks (XLF) are also down more than the other sectors today.  Interestingly, consumer discretionary stocks (XLY) are down the least.

Commodities are also getting hit hard, and the dollar is higher.  Oil prices are down more than $3 to $85.15.  Even gold prices are lower near $1710 despite the perception that Obama will reappoint Bernanke and easy monetary policy should be supportive to gold prices.

Stocks rising on earnings: SODA, M, THC, HFC

Stocks falling on earnings: WLP, DVN, PRGO, TAP, AGU

Overnight Asian markets were mixed following the US election.  China was flat and now turns its attention to the handoff in leadership in their country.

In Europe, the euro is lower today and European markets are lower on slowing economic data.  Spain and Germany reported disappointing industrial production numbers.  Also, Greece is set to vote on austerity measures today which need to pass in order for the troubled country to receive its next tranche of financial aid.

The 10-year yield is sharply lower today falling back to 1.63%.  And the VIX is moving higher.  It had a bit of a delayed reaction this morning, but is now up more than 10% to 19.35 as the selling in the markets intensifies.

Trading comment: The market is having a decidedly negative reaction to the election results last night.  I don't think it will last too long, but our job is to trade the market in front of us and not invest based on hope.  The S&P 500 has broken below recent support at the 1400 level.  The mid-cap index has turned tail and broken back below its 50-day moving average.  So caution is warranted until we see signs that the selling pressure is abating.  So far, the SPX is about -5.5% off its recent highs.  So we could see further declines in this current correction.  Corrections don't usually reverse overnight.  It takes some time to build a new base from which the market can launch its next rally.  So be patient, but also defensive in the meantime. 

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Is Australia Seeing China Stabilization?

Markets are higher in early trading on light volume ahead of tonight's presidential election.  There is much speculation about how the market will fare tomorrow depending on who wins.  I have said I think the market should bounce in the near-term either way due to the removal of uncertainty.  If the vote can't be decided tonight for some reason (remember Florida?) we could see some downside.

Overnight the action in Asia was mostly lower ahead of the election and the handoff in power in China.  The Reserve Bank of Australia surprised markets last night by holding rates steady at 3.25%.  The market had been pricing in another rate cut to 3.00%.  But the central bank noted that is seeing some signs of stabilization in China.  A pickup in growth in China would likely have impacts on global markets as commodity prices would rally, emerging markets would rally, etc.  China is the fastest growing large economy and is really the marginal driver of global growth these days.

European markets were lower early this morning but have since bounced.  Services PMI data in France and Germany both missed expectations.  EU commish Olli Rehn believes the Eurozone will start to recover next year and accelerate in 2014.  I think he is being a bit optimistic in his timeline, although I hope I am wrong and he is right.

Stocks rising on earnings: EXPD, AFSI, FUN, THX, AOL, EMR, VSI

Stocks falling on earnings: ESRX, Z, FOSL, NSM, DTV, CVC, DISCA

The dollar is down slightly and commodities are higher.  Oil prices are up to $86.20 and gold prices are rising to $1691.

The 10-year yield is up a tad to 1.70%.  The VIX is down -3% ahead of the election near 17.86, and has been consolidating around the 18 level for the better part of a week.

Trading comment: I'm still watching the dynamic of the S&P 500 consolidating underneath its overhead 50-day average while the S&P 400 midcap has recouped its 50-day.  If we see a favorable reaction to the election I think the SPX could break above its 50-day tomorrow.  But if the market trades down on the election results we will have to reassess the duration of this recent pullback and remain cautious.  Many leading stocks are still in correction mode, so I want to use them as a leading indicator as well.

KAM Advisors has long positions in ESRX, EXPD, EMR

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Monday Morning Musings

The market is off to a bit of a weak start this morning likely due to the uncertainty over the US presidential election tomorrow. 

In economic news, the October ISM Services index came in at 54.2, which was below expectations and down from last month's reading of 55.1.

On the M&A front, KBW announced a merger with Stifel Financial (SF) at a 7% premium to Friday's closing price.

Markets were mostly lower in Asia overnight ahead of the US election as well as the hand-off in power Thursday to the 18th National Congress in China.  China also released its services PMI over the weekend, which rose to 55.5 from 53.7.  In Japan, shares of Sharp plunged 7% after getting a 6-notch downgrade from Fitch, which warned about the company's ability to survive.

European markets are also weak this morning after German Chancellor Merkel suggest the euro crisis could still drag on for another 5 years.  Also, the IMF is reportedly urging Greek debt holders to take a haircut on their bonds in order to help Greece reach sustainable debt levels.

Shares of Apple are trading higher after the company said it sold 3 million iPads over the weekend, a new record.  This figure included the new iPad minis as well as the other larger iPads.

The dollar is higher today, but commodities are mixed.  Oil prices are up to $85 and gold prices are also higher near $1683.  Copper prices are lower.

The 10-year yield has slipped back below its 50-day average to 1.68%.  The volatility index is up 3.6% to 18.25.

Trading comment: The market continues to trade thin and cautiously ahead of the election tomorrow.  The polls show the race being very tight, probably too tight to call.  But I think that the markets could be poised to enjoy a relief rally regardless of the outcome only because either way this element of uncertainty will be removed.  I'm not sure how far any relief rally can carry us since we still have the fiscal cliff ahead to deal with.  But let's focus on a potential rally first.

KAM Advisors has long positions in AAPL

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Know What You're Marketing.

Andrew Grill (CEO of Kred) is a good guy and he's got a lot of coverage recently for his posts that detail his failure to connect to the brand new 4G service launched by EE. While he makes some good points, I fundamentally disagree with his assertion that marketing did their job.

No, marketing absolutely did not do their job. They didn't do job number 1. They didn't ensure that what they were promoting aligned with the reality of the product/service and not some fatuous ideal.

Under-promise and over-deliver are the watchwords. More than that, given the vagaries of technology, they should have insisted on a soft launch, ensured that customers were delighted rather than disappointed and followed up with marketing that promoted that satisfaction.

As for his assertion, that EE would have saved themselves £260k if they'd realised he was a social influencer, well the less said about that the better.

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SPX Turned Away At 50-Day Average

The markets were higher in early trading after a better than expected jobs report, but the S&P 500 ran into resistance and all of the major indexes turned lower such that they are currently back in the red.

Today's nonfarm payrolls report surprised to the upside with 171,000 payrolls added in October vs. consensus of 125,000.  The prior month's reading was also revised higher to 148k jobs added from the initial estimate of 114k.  The unemployment rate ticked a notch higher to 7.9%.

Separately, September factory orders showed an increase of 4.8%.

Overnight, markets in Asia ended mostly higher after the big gains in the U.S. yesterday.  Japan and Hong Kong led the way.

In Europe, markets got a boost this morning from the US nonfarm payrolls data.  The Financial Times reported that stock buybacks from European companies have slid to their lowest levels in three years.

Stocks rising on earnings reports: SBUX, PCLN, TRIP, WPO, RL, HAR, CTB
 
Stocks falling on earnings reports: AIG, SSYS, MHP, IT

The dollar is getting a big boost today and that is weighing heavily on commodities.  Oil prices are weaker near $85.44.  Gold prices have fallen back below the $1700 level to $1685.  And silver and copper prices are sharply lower.

The 10-year yield has gotten a boost from the economic data today, rising to 1.73%.  And the VIX has bounced off its 50-day support back to the 17 level.

Trading comment: Yesterday I commented on the price action of the SPX and how the overhead 50-day average would be a test.  This morning the senior index rallied right up to that resistance level and promptly was turned back.  I suspect after a little backing and filling that we will see a successful retest of the 50-day with a breakout above it.  The election still is a big element of uncertainty for investors, but next week that uncertainty will be removed one way or the other and that could lead to a rally in the markets. 

KAM Advisors has long positions in PCLN, SBUX

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Is China's Economy Bottoming?

Markets are sharply higher this morning on what has to be the first of the month type of action in terms of portfolio managers putting money to work.  There was some positive economic data out also, but not so strong that it would cause a 150-point rally in the market.

The ADP Employment report showed that private businesses added 158,000 jobs in October, slightly better than the 143k consensus.  The October ISM manuf index also came in above expectations at 51.7 vs. last month's reading of 51.5.  Consumer confidence rose to 72.2 in October from 70.3 in the prior month.  And Q3 unit labor costs actually fell -0.1%, indicating little inflationary pressure on the labor front.

So those are all good economic data, and its nice to see the data coming in above expectations.  Another thing that could be helping the market today is some hope that China's economy may be bottoming.  China's stock market rallied 1.7% overnight after its PMI reading ticked up to 50.2, the first expansionary number in 3 months.  But the HSBC PMI reading is still below 50 at 49.5.  The Chinese press reported that the PBOC injected a record 379 billion CNY into their financial system last week.  So if manufacturing is bottoming and monetary stimulus continues, we could see the slowdown in GDP growth subside.  Time will tell.

In M&A news, Williams Controls (WMCO) will be acquired by Curtis-Wright (CW) for a 41% premium.

Retail sales numbers are also out this morning.  Some positive reactions can be seen in stocks like KSS, JWN, and M.  While I see disappointments in ZUMZ, ROST, as well as TGT.

Stocks rising on earnings: V, K, CBOE, ADP, CTRX

Stocks falling on earnings: PFE, CRUS, GNC, ITRI, EL

The dollar is lower again and commodities are mostly higher.  Oil prices are up to $86.75 and gold prices are a tad higher near $1720.  Copper prices are also rallying on the positive China sentiment.

The 10-year yield is getting a small boost to 1.73%.  And the VIX is down 6.7% this morning to 17.35.

Trading comment: I said earlier this week that I thought we could see some beginning of the month strength in the market.  I didn't think we would see a 150 point rally, but that's why we play the game.  The market is always surprising us.  Of course, it's still early in the session so I don't want to jinx the rally.  Looking at the charts of the major indexes, the S&P 400 midcap is rallying back above its 50-day average today.  This is the first index to recapture this key moving average, so it will be interesting to see if the S&P 500 and Nasdaq follow suit.  If they do, I think PMs will rush to buy stocks.  I don't think we will see too much buying enthusiasm ahead of the elections though, as there is still that element of uncertainty.

KAM Advisors has long positions in CTRX, V

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