What new concept will take over Boca Raton deli?

Park Place shopping center in Boca Raton

Goodbye, pastrami. Hello, pasta.

Rappy’s Deli closed in May after just five months at the new Park Place shopping center in Boca Raton. The space subsequently reopened as a lower-priced deli,Park Place Deli.

Now the prime location at 5560 N. Military Trail will be turned into a different concept: An Italian restaurant, according to restaurateur Burt Rapoport.

The Italian theme is one the veteran restaurant operator knows well.

Back in 1989, Rapoport and another venerable restaurateur, Dennis Max, opened Prezzo on Glades Road.

The casual Italian joint that was a smash hit among area diners.

Rapoport said Prezzo, which operated for 10 years, was the first place in South Florida to have a wood-burning pizza oven.

And soon the Park Place space will have a wood-burning pizza oven, too, as well as other casual, “approachable” Italian dishes, Rapoport said.

An Italian restaurant is a concept Rapoport is confident will have greater success than Rappy’s did.

Rapoport said delis with an upscale tilt are springing up around the country, and that’s what his goal was with Rappy’s: Classic deli items with a modern twist.

“But it turns out this is the worse place in the country to do that,” he said.

Diners have a fairly set concept of what they expect in a deli, and creativity isn’t on the menu, Rapoport said.

“I knew the first week when we were serving this good-quality French mustard, and everyone said, ‘Where’s your deli mustard? How can you have a deli without deli mustard?’ ” he said.

“When people hear deli, the old-school deli comes to mind and that’s what everybody wanted, in terms of price and quality.

“I just totally misread the demand for the marketplace,” Rapoport said.

In addition, people tend to think of delis as breakfast and lunch places, he said. So dinner at Rappy’s wasn’t robust.

Now Rapoport is turning to everyone’s favorite food, Italian, which also tends to do well at dinner.

Of course, there are plenty of Italian restaurants in downtown Delray Beach, and several in east Boca Raton, including the newest one, Louie Bossi.

But Rapoport said there are few Italian eateries west of Interstate 95 in Boca Raton, with the exception of some chain eateries.

So he thinks there’s demand for a casual Italian eatery in the area.

Plans are to open the as-yet unnamed Italian restaurant at Park Place in October or November.

 

Posted in Business, Entrepreneurship, Leadership | Tagged , , , | Leave a comment

POST TIME: 50 years ago, tragedy spurred creation of Boca hospital

The fatal poisoning of Debbie and Randall Drummond led to the establishment of Boca Raton Community Hospital in 1967. A painting of the four Drummond children — Debbie (from left), Bobby, Randall, and Robin — hangs in the hospital’s lobby. Palm Beach Post file photo

Readers: Half a century ago, Boca Raton didn’t have a hospital. When it finally got one, the moment honored two children who might have been saved. Here’s more from an Oct. 18, 2012 column.

In September 1962, 351 Boca Raton-area residents formed the Debbie-Rand Memorial Service League. Their goal: to raise money to build a hospital. Debbie and Rand were Debra Ann Drummond, 9, and her brother James Randall Drummond, 3.

The youngsters were victims of one of Palm Beach County’s most disturbing crimes: Their 11-year-old neighbor confessed to disguising poison as milk and sneaking it into their refrigerator.

It was 1962 and Boca Raton had only about 10,000 residents. The nearest hospital was Bethesda Memorial, 15 miles away in Boynton Beach.

The children’s parents — their father was developer Robert Drummond — said having a hospital closer probably wouldn’t have made a difference, but the deaths spotlighted the need for one in Boca Raton.

Critics said a hospital there was unnecessary and would never happen. But the town rallied — a history of the hospital says one of every three city residents donated — and within five years, on July 17, 1967, Boca Raton Community Hospital opened its doors. Fiercely possessive residents call it “the miracle on Meadows Road.”

In the ensuing half century, the league’s efforts have helped contribute more than $30 million to the hospital and nearly eight million hours of combined service. Its ranks have swelled to nearly 1,200, making it one of the nation’s largest hospital-based volunteer organizations.

Robert Drummond died at 58 in 1989, in the hospital his family’s tragedy inspired. Gloria Drummond remained active with the hospital until her death in December 2011.

In 1996, many of the same people who’d supported the hospital over the years rose in protest when managers considered selling it for $187 million to a consortium of not-for-profit hospitals. Residents said that might be a good thing, but feared the hospital would lose its role as a community treasure. In the end, the deal was called off.

In August 2010, the facility changed its name to Boca Raton Regional Hospital.And in October 2010, local businesswoman and philanthropist Christine E. Lynn presented Gloria Drummond with a $10 million donation.

The hospital held an internal celebration of its birthday on Monday.

Posted in Business, Entrepreneurship, Leadership | Tagged , , , , | Leave a comment

Want To Be Successful? Learn These Three Skills

Source : Forbes

Natalia Nastaskin, Head of of US Music Operations at United Talent Agency

When you love music, but your mother tells you that you need to be a lawyer or doctor, what do you do? For Natalia Nastaskin, who moved to America from the Soviet Union when she was a shy eight-year-old kid, her solution wasn’t predictable: she graduated from law school and started her own entertainment law practice. It was crazy hard work and some may have said it was just crazy, but that didn’t stop her. Today she’s the Head of US Music Operations at United Talent Agency, a powerhouse agency for big name artists including Guns N’ Roses and Paramore. And she’s won a lot of awards: T.J. Martell Foundation Women of Influence, Billboard Women in Music, Billboard Power 100 and Variety Women’s Impact list.

How did she do it? Here are three of her Mentoring Moments, that she shares on this week’s Mentoring Moments podcast (condensed and edited):

When I was first starting out, I was scared to death. I was young, working by myself and I was competing with some of the biggest attorneys in the world. I had to be extremely professional and extremely on. There are things that I absorbed or was told by executives that I admired that have stuck with me. Here are three of them:

You’re Not A $20 Bill—Not Everyone’s Going To Love You

“You’re not a $20 bill—not everyone’s going to love you.” I was an extremely shy eight-year-old kid when I moved to America from the Soviet Union. I came here wanting to be liked, wanting to lose the accent, wanting to lose the extra pounds and wanting to have brilliant white teeth like all the American kids.

I was so concerned about: “Do people like me? Will they talk to me? Will they be my friends? Will they recognize that I have an accent? Will they be okay that I am from the Soviet Union?”

When that plagues you for the majority of your young adult life, it can impact your professional life. It took me a long time to get over needing to be liked. As an attorney, I’m in adversarial situations negotiating deals and I need to represent my clients to the best of my ability. I need to be a zealous counsel, advisor and guide to my clients. That means that sometimes I have to take unpopular positions—and that means that some people won’t like me.

Step Into Traffic

You have to step into traffic. If you don’t step into traffic, nothing will ever happen. ” As a young attorney hearing that, I thought, “What traffic? What does that mean?” As an entrepreneur, what I ultimately realized is that this means you need to get out of your comfort zone—network, meet people and collaborate. It wasn’t easy for me to put myself out there. But I did—I joined every possible bar association, the copyright society and I was a volunteer lawyer for the arts. I did everything to facilitate my network and I stepped into the traffic that was the entertainment business and absorbed things from experienced attorneys who were practicing in this space. I talked to lawyers who had business inquiries that were too small for them, but I could take them on.

If you don’t step into that proverbial traffic, you’ll get stuck in your own little world and you don’t learn. If you don’t step out of your comfort zone, you won’t create connections that can take you to the next level in your professional career.

Return Every Phone Call

A very important executive at William Morris Agency—it was called WMA at the time—told me: “ I want to give you a piece of advice. I promise it’s going to help your entire practice. Return every phone call.

I thought, “Okay. It’s reasonably simple, but when you’re inundated with calls as you’re growing, developing and nurturing your business, do you really have to return every call?” The reality is that you do because as he said to me, “You never know what’s on the other side of that line.”

A lot of the great things that happened to me in my practice were not planned. A lot of the clients I have worked with over the years—clients that I could have never imagined I would be representing—started with a call from somebody who knew somebody who left a voice mail on my phone and said: “I was sent to you by so and so. Maybe you have a few minutes to take my call and I can tell you a little bit about what I’m working on.”

Often times we’re so busy, it seems easier to delete a message from a person you don’t really know. But some of the most exciting deals and clients that I have worked with came from those voice mail messages that I could have very easily deleted. Yes, you do have to return every phone call.

Posted in Business, Entrepreneurship, Leadership | Tagged , , , , , , | Leave a comment

What Can Your Organization Do To Become More Innovative?

Source : Forbes

U.S. executives are increasingly embracing innovation as a tool to drive their business forward, yet many of them have unrealistic goals and fail to generate the expected returns, according to a survey by Accenture. To be effective, business owners need to have different approaches to innovation, learn from their past mistakes and set reasonable goals, the study showed.

While 63% of companies are hiring chief innovation officers (CIOs) and more than 90% are using new technologies to support the innovation process, many still struggle to create and encourage a truly innovative culture across the board. Whether it’s by engaging your entire organization, learning how to celebrate failure, or looking for inspiration in other industries, there are multiple ways your business can become more innovative and change the way employees work together.

Here are 12 steps any business can take to bring a breath of fresh air to its ranks, as recommended by leading members of Forbes Coaches Council.

Members of Forbes Coaches Council discuss what organizations can do to boost their innovation efforts.

1. Create A Culture Of Innovation

Innovation is such a buzzword these days. What truly creates an innovative culture is open-mindedness to allow for new ideas, failure, and learning from the process. As the book Mindset by Carol Dweck states, people can have a fixed mindset (closed, not open to change) or a growth mindset. Teach your employees a growth mindset and allow for innovation to thrive. – Monica Thakrar, MTI

2. Celebrate Failure

To be innovative, you need to be creative. Nothing kills creativity like fear of being wrong. Create environments where failing and being wrong is celebrated. One social media consultancy has a “Church of Fail” that applauds people for sharing how they failed and what they learned from it. By celebrating mistakes and failure, you are allowing people to be more creative and thus more innovative. – Julia M. Winston, Brave Communication

3. Maximize Who You Already Have On Your Team

If your team has hit a wall where innovation isn’t the norm, it may be time to shake things up — not by hiring a new person but by adjusting the position of who you currently have. Give a project that is outside of their normal job description. This forces them to forget what they know and to create a new thing. Everything you need is often right in front of you. – Maleeka T. Hollaway, The Official Maleeka Group, LLC.

4. Stop Focusing On Products And Services

Any company can hinder innovation when it defines itself in terms of its products and services. Think instead of your assets and strategic skills, and build those into your core competencies. By defining yourself in terms of your assets, you allow your employees the freedom to utilize their skills to provide solutions rather than boxing them into a fixed format. – Lianne Lyne, PLP Coaching, LLC

5. Get Outside

It’s easy to get caught up in doing things the way they’ve always been done. Break the cycle by getting away from the desk and out of the typical environment. Enjoy summer! Have an innovation session in which you get outside. Have a meeting in a park or an open space and encourage free thinking. Keep it productive by leading a group exercise that results in actionable steps once back in the office. – Barbara OMalley, Exec Advance LLC

6. Look To Other Areas Of The Marketplace

Organizations frequently turn to the other companies within their industry to brainstorm or emulate. Instead, seek out insight and ideas in the places where you’d least expect to turn. Conduct due diligence on the companies that are thriving in other sectors. Find the innovative ways they engage their employees, the new apps their customers use, and the different processes that create efficiencies. – Loren Margolis, Training & Leadership Success LLC

7. Re-Humanize The Work

Innovation is born of creativity and vulnerability. People need to feel safe to fail in order to be both creative and vulnerable. Therefore, ensure all leadership, including the CIO, keeps humanity at the center of the work. Build trust intentionally, prioritize learning, create inclusive development space, and model behavior that illuminates the humanity of risk and failure. – Tonyalynne Wildhaber, Coaching & Consulting By Tonyalynne

8. Create Employee Personas

Truly bringing out employees’ creative juices starts with finding out more about what their unique needs are to unleash innovation company-wide. Borrowing from marketing that uses buyer personas — think employee personas. Creating employee personas gets companies to understand the unique needs of distinct employee segments so as to uncover practical insights on what employees need to innovate. – Alexandra Salamis, Integral Leadership Design

9. Invest In Knowledge Management

Often, the challenge is not having innovative people or ideas, but rather identifying the people and the ideas. Many of the best innovations percolate from the bottom to the top of organizations. Hence, organizations can best foster innovation and collaboration by having a culture of knowledge sharing. Investing in a robust knowledge management infrastructure provides the necessary mechanisms. – Eddie Turner, Eddie Turner LLC

10. Solicit Feedback And Spy On Workarounds

Encourage employees to rave and rant about processes and policies. Then ask them for suggestions. Also, spy on the loopholes, shortcuts, and workarounds they already employ to get around bureaucratic, stifling, inhibiting processes. They are implementing great ideas, albeit unauthorized. Praise their initiative, and see how it can be adopted/adapted company/team-wide. – Vikram Rajan, phoneBlogger.net

 11. Get Everyone Off Their “Buts”

The simple semantic shift from “yeah, but” to “yes, and” creates a culture of innovation! “Yes, and” encourages whimsy and rewards high ideaphoria (rate of flow of ideas). “Yes, and” eliminates in-the-box thinking. Make it an organizational game to intentionally respond and reward all ideas, comments and solution-seeking conversations with a powerful “yes, and” instead of a discouraging “yeah, but.” – Terri Babers, Positive Changes Coaching & Training

12. Invest In Training, Redefine Incentives

Equip your existing employees with tools, technology and time to collaborate and innovate. Schedule this time. Invest in innovation workshops and training. Don’t just talk about it and carry innovation culture as a slogan, and don’t appoint one person to wear the innovation culture hat alone. Then back that culture with metrics, incentives and bonuses that correspond. Want a great idea? Invest in your people! – John O’Connor, Career Pro Inc.

Posted in Business, Entrepreneurship, Leadership | Tagged , , , , , | Leave a comment

Why Coca-cola’s new CEO needs to think bigger for the company to succeed

“A ham sandwich could run Coca-Cola” — Warren Buffett to Bill Gates.

Berkshire Hathaway CEO Warren Buffett may be as famous for his aphorisms as he is for his love of Coca-Cola. CHRIS SALAMONE

He jokes that he’s “one quarter Coca-Cola,” referring to his anatomy, not his holdings, as he drinks at least five cans of Coke or Cherry Coke a day.

A man drinks a Coca-Cola at a store in Phnom Penh, Cambodia, December 5, 2016. REUTERS/Samrang Pring

A man drinks a Coca-Cola at a store in Phnom Penh, Cambodia, December 5, 2016. REUTERS/Samrang Pring

Buffett is big backer of the stock as well, as Berkshire owns more 9% of the company and counts Coke as its second-biggest holding after Wells Fargo. Buffett’s son, Howard, even sat on its board before announcing his retirement recently. In many ways, Coca-Cola is a classic Buffett stock. The company has a huge brand that, along with its distribution network, gives it an economic moat, and its business is focused on recurring small purchases that happen in an up or down economy.

Though Coke made many early investors rich — it was one of the best-performing stocks of the 20th century — the stock’s reputation his taken a hit in recent years. As the chart below shows, it has significantly underperformed the S&P 500 and Berkshire Hathaway over the last five years.

Buffett’s quote above looks especially relevant today. Coke is set the hand the reins to a new CEO as COO James Quincey replaces Muhtar Kent at the helm on May 1, 2017.

Quincey’s anointment is no surprise, as Coke had signaled that he would replace Kent when Kent retired. Quincey has led the company in various regions, including Europe and Mexico, and became COO last year, but his job running Coke’s iconic portfolio of brands may be more difficult than that of his predecessors. Coca-Cola today faces several challenges that won’t be easy to overcome.

Declining soda consumption

It’s no secret that Americans are drinking less soda. Volume sales of the fizzy beverages have fallen every year since 2004, dropping 1.2% last year as per capita consumption reached a 30-year low. As health concerns have mounted, Americans have flocked away from excess sugar in drinks like Coca-Cola, and sales of diet soda have fallen even faster — trends towards organic and natural foods seem to be worse for artificial sweeteners and drinks like Diet Coke, which are perceived to be loaded with chemicals.

The Coca-Cola logo appears above the post where it trades on the floor of the New York Stock Exchange, Friday, Dec. 9, 2016. AP Photo/Richard Drew

The Coca-Cola logo appears above the post where it trades on the floor of the New York Stock Exchange, Friday, Dec. 9, 2016. AP Photo/Richard Drew

Coke brags that it has gained market share for 26 straight quarters in North America in the Non Alcoholic Ready To Drink market, but that figure ignores the fact that many consumers have moved on to coffee drinks available at Starbucks and other chains. Starbucks has seen U.S. comparable sales growth of 4% or better for more than 20 quarters in a row.

To counter sluggish growth, Coca-Cola has adopted a few key strategies. It’s begun selling smaller-volume drinks at a higher price-per-ounce, borrowing a page from tobacco companies, which have also raised prices to counter falling consumption. That strategy has helped pad the bottom line and given consumers lower-calorie options, but its potential is limited.

The company has also gone on a shopping spree in the hopes of diversifying away from its core soda brands. In recent years it’s purchased alternative beverage brands like Zico coconut water, Gold Peak tea, and Suja Life juice. It also took stakes in Keurig Green Mountain, which was bought out, and Monster Beverage. Coke now has more than 500 brands and derives 36% of sales from still beverages. However, the company may have missed an opportunity to diversify into food as its rival Pepsico has done well with brands like Frito-Lay and Quaker. As a result, Pepsico has outperformed Coke in recent years.

A turning tide

Coke’s organic revenue is still growing, up 4% so far this year, but a strengthening dollar has weighed on financial results, as have structural changes. Return on Invested Capital plummeted all the way from 21% in 2008 to 9% last year as the company spent on acquisitions while earnings remained stubbornly slow to grow.

As per-capita consumption has fallen in key markets, the company has also been confronted with an increasing number of soda taxes. Four cities in the U.S., including San Francisco and Boulder, Colo., passed soda surcharges on Election Day, and Philadelphia did so earlier this year. A number of countries, including Mexico and several in Europe, have also moved to tax sugary beverages. It’s an idea that’s gaining currency and is likely to present continued headaches for Coke, as the company has already mounted significant lobbying efforts against such measures. With the lobbying push, big soda, unsurprisingly, has often drawn comparisons to big tobacco.

A Coca-Cola delivery truck drives past an office tower under construction at Manhattan West, Thursday, Nov. 3, 2016 in New York. AP Photo/Mark Lennihan

A Coca-Cola delivery truck drives past an office tower under construction at Manhattan West, Thursday, Nov. 3, 2016 in New York. AP Photo/Mark Lennihan

Can Quincey cut the mustard?

James Quincey is stepping into a morass of regulatory battles, changing tastes, and slumping returns. There may be no one more qualified for the job, but the status quo will not be enough to revive Coca-Cola’s stock. In recent years, the company has acted incrementally — cutting, costs, making acquisitions, launching new marketing campaigns — but it hasn’t been enough to reinvigorate its core brands.

Coke may need to think bigger. For instance, scientists are working to make a calorie-free soda that tastes like the real thing, using sugar substitutes like stevia. Such a beverage could capture consumers who have been ditching sodas because of calories or artificial flavors. Pulling off such a feat won’t be easy, but an innovative push like that is more likely to generate long-term growth than Coca-Cola’s current strategy.

Investing in food is another such option. Though management has resisted it in the past, the company recently considered taking a stake in yogurt-maker Chobani before backing out.

It’s clear what Warren Buffett meant by his “ham sandwich” comment — Coke’s brands are so powerful and its business is so simple that the company is essentially a profit machine.

But that logic only applies to a market when soda sales have organic long-term growth ahead, not one in which public sentiment is turning against beverage-makers.  As Buffett may already know, today’s consumers don’t want any old ham sandwich. They want organic, grass-fed porchetta on a fresh-baked ciabatta with garlic aioli and house-made pepperoncini.

Today’s Coca-Cola requires a strategy beyond the stewardship of a perpetual profit machine. If Quincey is going to deliver for investors, he needs to aim for a higher standard than an ordinary ham sandwich.

CHRIS SALAMONE

Posted in Business, Entrepreneurship, Leadership | Tagged , , , | Leave a comment

A 75-year history of how Americans spend their money

Consumers are the foundation of the U.S. economy, and how they choose to spend their money is a telling indicator of the overall American economic story.

CHRIS SALAMONE

The above chart from HowMuch.net, a cost information site, plots data from the Bureau of Labor Statistics (BLS) for 12 different consumer categories over a period of nearly 75 years to show the changing way in which Americans spend their money.

The data reflects median spending, and is adjusted for inflation.

1

BACK IN THE DAY…

One of the most interesting things about this chart is the data from 1941. What did Americans spend their money on before entering WWII, and how does that contrast with today?

Interestingly, in 1941, more money was spent on food than anything else. That year, the cost of putting food on the table averaged $8,311, coinciding with a time when nearly 15% of the workforce was working in agriculture. Today, farming is obviously much more technologically advanced, and food is also grown cheaply in other countries for consumption in America.

Food is now only the third-most important spending category for Americans at $6,759 per year, and only 1.6% of Americans now work agriculture, according to the World Bank.

Housing has also changed dramatically over time. While it has always been a key component of spending, shelter was actually cheaper ($7,537 per year) than putting food on the table in 1941. Since then, rents and house prices have risen substantially, and Americans now spend $17,798 per year on housing. This makes it by far the largest expenditure, on average, for each person.

TRENDING UP, TRENDING DOWN

Over the years, cost reductions can be seen the most in both clothing and food categories, which have benefited from new technologies and cheap labor in other countries.

Meanwhile, significant increases in spending can be found in healthcare, education, and transportation categories.

Healthcare spending in the U.S. is a global outlier (and not in a good way), and we previously noted that textbook and tuition costs have increased 207% and 197% respectively since 1996.

Lastly, the trend for money spent on transportation appears to reflect the cost of oil, which hit its highest points in the early 1980s and late 2000s. The most recent year of data from 2014 shows a notable decrease in transportation costs, which likely reflects the collapse in oil prices that occurred in mid-2014.

Chris Salaome

 

Read the original article on Visual Capitalist.

Posted in Business, Entrepreneurship, Leadership | Tagged , , , | Leave a comment

Wall Street hasn’t seen the Santa Claus rally just yet

Ever year while stock traders recover from their Thanksgiving hangovers, they look for what has become the clichéd Santa Claus rally into year end.  But since Donald Trump’s election, stocks have already rallied strongly well beyond the statistical average.  This has begged many to ask: Has Christmas come and gone early this year?

Runners dressed in Santa Claus costumes take part in the Santa Claus Run in Budapest, Hungary December 6, 2015. REUTERS/Bernadett Szabo

Runners dressed in Santa Claus costumes take part in the Santa Claus Run in Budapest, Hungary December 6, 2015. REUTERS/Bernadett Szabo

The answer lies partly in the foundation for the year end rally. By understanding its causes we are in a better position to determine whether they still apply and the rally will continue.

Chris Salamone

 

Does Santa Exist?

The original Santa was certainly real. The ‘Santa Rally’ was first referred to in 1972 by Yale Hirsch in his Stock Trader’s Almanac. It used to refer to a rise in stock prices in the week between the Christmas holiday and the end of the year, a period which is only four or five days.

According to the 2016 Stock Trader’s Almanac “since 1969 the Santa Claus rally has yielded positive returns in 34 of the past 45 holiday seasons — the last five trading days of the year and the first two trading days after New Year’s. The average cumulative return over these days is 1.4%, and returns are positive in each of the seven days of the rally, on average. Nevertheless, each year there is at least one day of declines. Alternative research over a longer period confirms the persistence of these trends: According to historical data going back to 1896, the Dow Jones Industrial Average has gained an average of 1.7% during this seven day trading period, rising 77% of the time.”

But, as with many of these sought after market aphorisms, they develop loosely over time. Any sizeable rally now in December invokes the Santa comparison often due to wishful thinking that the rally will continue until year end but also it sells more media copy to say you ‘believe in Santa’. The term ‘Santa Rally’ now is perhaps wrongly applied to a significant upswing within the extended phase from Thanksgiving to New Year.

If one compares December to other months of the year it is by no means the worst but, since the DJIA started in the late 1890s, the average December return has been a disappointing -0.04%. July fares much better. But the pattern over the last 87 years is clear.

Ed Matts

Ed Matts

The causes are less clear.

‘Christmas Comes But Once A Year’

Each year my wife wants to do Christmas differently. And each year we do the same. Why? Because me and my five children like it that way. Markets also have a habit of repeating themselves.

As Jesse Livermore, the famed stock trader of the first half of the 20 th century, said:

“Wall Street never changes, the pockets change, the suckers change, the stocks change, but Wall Street never changes, because human nature never changes.”

If traders and investors and confronted by similar conditions, they are likely to act in a similar way as their decisions are driven by similar conditions including greed, fear, complacency and even short-sightedness.  This process is further entrenched by algorithmic trading as firstly the data on which those algos are often created is itself sentiment driven data and secondly by the necessarily repeating nature of algos. They will, not might, repeat themselves if confronted by the same conditions.

But can those conditions be similar? Once you strip out the detail and the noise, there are not as many different types of variables as people imagine and their effect on markets are even fewer. Markets are like a ball rolling down {or up?) a hill. The ball will always roll the same way unless the wind blows it in a different direction. And It is remarkable how few different market reactions there are. Of all the markets we cover at Matrixtrade.com the complex US stock market has the fewest different types of patterns.

So what are the specific conditions in December?

Santa’s 7 Elves

There are seven possible reasons that help cause the Santa rally and could still apply even now.

1. Tax. The US tax year ends on December 31 st . In order to crystallise capital gains tax losses to use against other gains, both 401K investors and hedge funds typically sell losing stocks in December, to rebuy them in January. But if the losses had already happened earlier in the year (as is often the case), the net effect is, paradoxically, to drive the market up. The losing stocks do not decline further, but as there is little interest in selling a winning stock, the market stabilises or rallies. Furthermore as more people use tax-sheltered retirement plans they have no reason to sell at the end of the year for a tax loss. In both cases, it serves not to depress but often drive the price up more. Still Applies.

2. Window Dressing .  US Hedge funds and other corporations that trade stocks also report portfolio holdings as well as earnings as of December 31 ST This encourages the sales of losing stocks and the retention of the, often still rising, winning stocks. Still Applies.

3. Cash Charges.   A further hedge fund issue is cash holdings. Investors are charged an AUM [Asset Under Management] fee, typically 2%, and since 2008, cash at bank, or AAA bonds have yielded much less than this, leaving people distinctly unimpressed to see cash on the balance sheet. Another incentive to convert cash into stocks by buying those that are trending higher into year end. Still Applies.

4. Feel Good Factor.   The general feel good factor of the holiday season. At this time of year, we are surrounded by positive messages. Not just goodwill and hope, but a frantic increase in retail commercial activity which is visible to all. There is no mandate to report Black Friday results, so all one hears are the good ones. Still Applies.

5. Illiquidity. Less liquid markets tend to accentuate trend moves. One minor theory is that professional short sellers are on vacation. ‘Bear raider’ firms tend to operate during the summer, when, due to ‘Sell in May’ theory, their likely returns are greatest. Come winter time they may take a long vacation. There may have been a grain of truth in this once but in a world with a much shorter time horizon this argument becomes almost apocryphal. More importantly as many close or wind down their trading for the year, volumes and liquidity does decline. This tends to exaggerate moves and allow those, with reason still to trade, to dominate.  Still Applies.

6. Christmas Cash Flow. Another alleged cause is ‘the Christmas bonus’ in pay packets. This rush of investor money into equities is not substantiated. However, as again Jesse Livermore hinted,  a bent on making more money to pay for Christmas may encourage traders to over-pursue a prevailing trend. “There isn’t a [trader] on Wall Street who has not lost money trying to make the market pay for an automobile or a bracelet or a motorboat or a painting. Of all the hoodoos in Wall Street, the resolve to induce the stock market to act as a fairy godmother is the busiest and most persistent.” Similarly. In a more modern context , in a year where hedge funds have underperformed they will be tempted to chase the year end rally in order in a bid catch up to their benchmark, i.e. buying high betas stocks or leveraging low beta stocks so their beta of their portfolio is higher than their benchmarkStill Applies.

7. Self-fulfilling Prophecy.   The more people expect a Santa rally the more likely they are to buy stocks in the December period. Some attribute the more recent Santa rally phenomenon as front running what was traditionally known as the January Effect where (small cap rather than mid to large cap) stocks would rally at the start of the year.    Still Applies.

The number of internet searches for ‘Santa rally’ reflects the extent to which people are aware of the phenomenon even if they do not intend to buy into it.  Interestingly the apparent interest in the Santa has been subdued compared to previous years probably due to the prevalence of the Trump effect. Only now does it appear to be gaining some traction.

Matrix trade

Matrix trade

Even though December is normally and increasingly dominated by the Christmas spirit from start to finish, what we are seeking is to isolate a sizeable rally of more than 4-5 days. We have already seen one will we see another?

Naughty or Nice

Over the last 16 years the S&P has developed a dominant pattern.

Matrix trade

Matrix trade

For whatever reason, SPX appears to have a propensity to rally in the first half of December. This could generally be caused by anticipation of the Santa rally but consequently is often subject to a mid month sell off to take out any weak premature buyers.  A fake Santa then reminiscent of the naughty French Pere Fouettard who handed out coal and floggings to children as he accompanied St Nicholas on December 6 th .  In this case the rally has clearly been inspired by the election President Trump who promises fiscal expansion instead.  But will it still be subject to a nasty mid month sell off?

The market has been thrown by the election of the potentially radical Donald Trump rather than the ‘more of the same’ candidate Hillary Clinton. An aggressive 5% sell off on the night of his election (in line with the pre-election orthodoxy of Sell Trump Buy Clinton) followed by a sustained break to new all time highs. The market may now be compensating in the shorter term with a similar 5% rally from the immediate pre-election night high.

But there are 3 dominant factors that suggest we are yet to see the Santa rally.

1. Markets tend to trend until the reason for the trend is confirmed or denied (buy the rumor sell the fact). We will only start to know if the Trump Presidency will be inflationary from January at the earliest.

2. Stock markets are acting very similar to the 1929/1987 style blowouts we have touted for the last 3 years.

3. Any one or combination of the specific reasons for the Santa rally are yet to apply.

We have a very clear view what this will entail in the shorter and medium term not just for American stocks. Those receiving our free weekly newsletter https://www.matrixtrade.com/register/ can see how it translates to the German DAX and UK FTSE stock markets and subscribers to MatrixTrade.com can see our projected levels and trading strategies.

This year Donald Trump’s Christmas turkey may not be stuffed or half-baked but will probably be celebrated.

Read the original article on Matrix Trade. Register now at matrixtrade.com for more articles like this, and to see our range of premium subscription services. Copyright 2016.

CHRIS SALAMONE

Posted in Business, Entrepreneurship, Leadership | Tagged , , , | Leave a comment