Tuesday, October 14
Unusual Suspects, end of day, October 14, 2003.
Abnormal Characters, end of day, October 14, 2003.
This is how Britney dresses at home. When venturing outside the home she wears a traditional jilbaab coat.
What would happen if Fidelity were
the NYSE to kill the specialist system? Take away someone's exclusive access to the central limit-order book and you'd
have... a more competitive and efficient market. Heaven forbid!
I'm not sure if this Razanne doll is a gag or what?
"At home Razanne loves to dress in all the latest fashions. In a minute she can be ready to go out with this traditional jilbaab coat.
Razanne helps Muslim girls understand that in the home they can be the ultimate fashion statement yet still have attractive attire
while dressing modestly outside the home."
-- via Geisha asobi --
Looking through TradeStation Group's press release, I see that
they report annualized trades per account of 596, generating $4,300 in average revenue per account. Back in the day I knew people
who made 596 trades a week. And yes, they were all bald, even the women.
A nice pair of trades in the Trading for Dummies lesson today. Don't
forget to click on an ad to give me a nickel... last week I
was very disappointed having fallen just a nickel short of my 50 cent goal!
Countertrend types are still looking to get short on this Test of Top in the stock indexes. The trouble with getting short below
1040 is that buyers may immediately step up and squash you. When countertrend trades work out, it's wonderful; when they don't,
you get crushed.
Stephen Roach wrote last Friday about repeating the "guns and butter" blunders of the late 1960s.
"China is the means by which America finances its saving-short economy -- it is not the reason why we have a trade deficit.
And, by the way, as long as a saving-short US is forced to run a trade deficit, getting low-cost, high-quality goods from
China is certainly in America's best interest. Not only does it give US consumers a break in purchasing power but,
courtesy of China's willingness to recycle its trade earnings back into dollar-denominated assets, it also helps provide
America with the low interest rates so desperately needed to underwrite economic recovery."
"...Washington is going down the same dangerous road it did in the late 1960s -- building on the economic hubris of a failed boom
and attempting to provide both guns and butter to a clamoring electorate. Back then, it was Vietnam and the Great Society.
Today, it is Iraq and the war on terrorism, together with tax reform."
And yesterday Roach wrote about the recent excesses
of the Chinese credit cycle:
"In late August, the People's Bank of China (PBOC) announced its intent to raise reserve requirements on bank deposits from 6% to 7% ...
the motives behind this action are clear: It was aimed at avoiding an accident in a still fragile Chinese financial system.
In the first seven months of 2003, total bank loans increased by US$228.4 billion, even more than the $223.6 billion increase
recorded for all of last year. Moreover, the bulk of the acceleration appears to have been driven by China's four policy banks --
institutions that typically funnel funds into China's troubled state-owned enterprises. In other words, the recent
excesses of the Chinese credit cycle could well have translated into another surge of nonperforming bank loans.
The PBOC is now making a very serious effort to contain any such damage."
I'm familiar with this trick... there are four big national state-owned commercial banks in China: Industrial and Commerical Bank of China
(ICBC), Agricultural Bank of China (ABC), China Construction Bank (CCB), and the Bank of China (BOC). They are the "policy banks" which
hold most of the non-performing loans (NPLs) made to state-owned industry.
The way to make your NPL percentage look smaller is to make
new loans, which of course don't immediately appear to be in trouble, but may very well eventually become non-performing. Of course that's
only discovered later, and you can always make *new* loans to cover things up the next time around. ;-)
When government propaganda goes awry. In
the Internet age, this kind of effort just won't fly anymore.
Caroline Baum asks So Who's Stealing China's Manufacturing Jobs?
"It seems that China's advantage as a low-cost producer hasn't halted the insatiable drive worldwide to replace even dirt-cheap
labor with productivity-enhancing equipment ... No reasonable degree of yuan appreciation could offset the labor-cost
differential between the two countries. U.S. manufacturing workers make about 25 times what an average Chinese factory worker earns...."
After reading this short post, Herding Psychology and Financial Markets,
I looked up the article from the Wall Street Journal that is cited there. Written just a month after the 1987 crash, it's called
"Stock Market Experiment Suggests Inevitability of Booms and Busts."
It's an interesting account of
Vernon L. Smith's trading experiments. (Smith won the Nobel Prize in Economics in 2002 with Daniel Kahneman.)
"Vernon L. Smith knows why the stock market crashed. He ought to. He's seen dozens of 'bubbles' -- booms followed by sudden
crashes -- in the past three years [in his trading laboratory].
Almost every time, Mr. Smith says, the bubble occurred because inexperienced traders dominated the market. In fact, traders
had to go through at least two booms and crashes before they collectively learned to avoid these bubbles."
'People panic,' Mr. Smith says. '[B]ubbles and crashes would be a lot less likely if the same traders were in the market all the time.'
But, he notes, novices are always entering the market."
Thank god for the novices! I was once one myself, but now I'm very cool-headed when losing (other people's) money. ;-)
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