Market Updates

North Korea attacked South Korea today, killing one soldier and injuring 14. I’m sure the trading floor is full of the frenzy of salesman/woman talking to his/her clients on phone about how the market sentiment would be low as a result of the political unstability in Korea, and it might be a good time to take a ride on Treasury or gold with the money the institutional investors have after dumping their euros yesterday.

Shanghai Composite, Shenzhen Composite, and Hand Seng seem to not care nearly as much about what is going on with the attacks happening on the peninsula. U.S market players usually say the Asia market players are not as sophisticated, which might just be a euphemism in saying that the Asian sales people are not as good at luring their clients into thinking the way they are thinking and the market is not as predictable. Well, at least the market did sink a little when the Chinese government requires LTV ratio to max out at 50% last week.

In my personal portfolio, outlooks are not completely optimistic given that my exposure in the financial industry is unhedged and Irish problem remains unsolved. But I dumped all my NYT shares today at $9.10 per share, after a 6% surge in gain with the unusual volume. Now, I have an outstanding limit order on UBS at $15.5 per share, just to lower my basis in exposure to financial services. And who knows if that wouldn't be a good thing?

Some random things: Ireland, Traders@MIT, and Horseback Riding

Over the weekend, Ireland approached EU/IMF for a bailout, leaving European market slipping and erasing last Friday’s gain for U.S., especially for the financial industry, including the GS shares I have in my Roth IRA. This is the second episode in recent history for a Eurozone country to seek aid; Greece is the predecessor, also triggering downgrading of the sovereign bond and the creditworthiness of European countries last year. Of course aid would arrive just as it was for Greece, preventing possible outcry that might hold off the value of Euros, but the Irish government is rather reluctant to let go control of its monetary and fiscal policies, especially its 12.5% corporate tax rate, which gives Ireland a leg up over its neighbors in terms of luring economic activities. It makes me wonder who is going bailout us when the treasury is insolvent. It’s almost universally agreed that our deficit will be 5x to 7x of GDP by 50 years later with the ubiquitous exponential projections. It wouldn’t be too bold to say that we are “too big not to fail” in a sense that no one would be able to provide enough assistance to us to actually bail us out. But if we failed, what would happen to the worldwide economy given that the measures of currencies and credits of other countries and corporate entities would be in a disaster because there is nothing else to be compared to?  To me, it seems like we are running on a crazy Ponzi Scheme in which we know we are going to fail sooner or later anyways that worsening it a little bit more by cutting taxes wouldn’t be too bad after all. However, although the congress has reached historical high in Republican ratio, it is unlikely that they will revert back to the Bush tax cuts.

Fortunately, the depressing market didn’t alter my personal life much. I had a great time this weekend winning one of the cases in the Traders@MIT competition and going on a trail for horseback riding in Randolph, MA.

Tong tagged John and me as “the couple team” when we applied as a team to Traders@MIT Intercollegiate Trading Competition over a month ago, quite embarrassing. We built models and discussed all possibilities we could think of for preparation, but almost all trading activities were momentum-driven since the stock prices were sliding down to South Pole after news “economic statistics are higher than expected” was displayed. But we got rank 1 for the CDS case because this is the only case involves value and by pricing everything correctly, we were paid what we had expected. I guess we are just better at valuing the securities than getting onto the rise and getting off of the correction before everyone else does. I am also very happy because it proves that we are really compatible when we work with each other, especially during the Sales&Traders case where I was in charge of doing the technical analysis to prop trade the stocks and John was in charge of working out favorable institutional orders. We each got $25 Amazon gift card as reward for the CDS case, and I made the executive decision to buy a pair of matching squash racquets for us by paying a little extra. Amazon’s two-day free shipping will again please me by delivering them here on Tuesday! I’m super excited!

Naisi and I went on horseback riding on Sunday in Randolgh, a little over 20-min drive from Cambridge. We were going to take a half-an-hour lesson then exercise on the trail but it was too late to do that when we got there, so the lady just made decision for us to go on the trail only. I was a little confused at the beginning, but it was fun overall. My buddy is named Be; she was kind of lazy when we were on the trail, stopped moving every now and then. I got a little mad at her so kicked her hard to move forward because I wanted to take picture for Naisi. But I think she is good looking, so I won’t pick on her too much...Not that I am superficial, but I just find it hard to pick on beautiful creatures.

PS:
A friend has asked what is the QE2 video that the GS panelists were talking about and why is it such a bid deal to GS in particular. I'm sharing a video here and I'm sure you'll understand.
http://club.ino.com/trading/2010/11/laugh-or-cry-watch-this-qe2-video-and-tell-us-which/

First Correction Since September Soar

If Naisi didn't bring it up today, I probably would have forgotten about my blog. I guess I'm still more or less ADD...

I want to talk about market today since it's the first time the market goes through correction since the September soar. It came as a surprise to me this morning when I picked up the Journal as the market was down .7% before the open bell, and U.S failing to negotiate export terms with South Korea was on the front page. Although it is a bad news for the U.S economy, especially if Obama's known for having increasing exports on top of his agenda, the sudden drop still feels like an overreaction as if Mr.Market has finally found an excuse to head south since September. The Journal leads the front-page news to A9, where an article on IMF was inserted. And of course, it talked about the same thing that it has talked about for the past month--how the world economy should not solely depend on the U.S consumption and other countries in G-20 such as Germany and China should increase their consumption levels such that they don't export as much. However, it seemed like the Journal completely forgot about how the leadership in U.S usually tells us to "spend our way out of the recession" while the Red across the Pacific Ocean drives 1.3 billion people to save big time due to the lack of social net of medicare and social security. It must be quite cool to write news articles since you really don't have to draw any conclusions and it's up for the readers to interpret what you wrote and act on their interpretation. Basically, my point is as a newspaper reporter, you're not liable as long as you can prove you're only keeping an journal of what has happened.