Tuesday, October 09, 2012

Observing the Global Market Minefield

There are too many mines in the water to count.  The best course for a boat in these waters is to stand still and let some other imprudent captain detonate them.  Let's consider the mines in plain sight.

Some specialized analysts, as good as they can be with a given sector sometimes, still miss the big picture.  Wondering whether port capacity can keep up with growth in container traffic may be a moot point very soon.  The IMF keeps flashing the warning signal about a renewed global recession.  Ocean carriers won't need so many container ships after all and port officials can quit thinking about expansion for the rest of this decade.

Greece is all-in on a financial transactions tax and other European countries are cheering them on.  I've voiced my support for such a tax here in the U.S. because it will make hedge funds' HFT business lines painfully expensive.  This long-term social good comes with a short-term cost.  HFTs now generate so much of the volume on exchanges that destroying them will shatter market confidence and probably send indexes reeling.  That's fine with me, because I need some bargains to buy.

In the dust-up over whether the BLS's latest unemployment report was realistic, you may have missed the Census report on factory orders declining by 5.2% in August.  Ouch.

Sanctions on Iran are destroying its currency and economy.  Tehran is countering with tighter controls on currency trading.  The flexibility of that "exchange center" goes beyond currency and could easily adapt itself to a domestic rationing regime for basic commodities.  Iran may very well earn enough in net exports to muddle through tighter sanctions next year.  Never underestimate an authoritarian regime's ability to survive by transferring hardship to its people.  This contest with the mullahs would be terrific bloodsport if the world economy were healthy, but the Iranian wild card is to shut the the Strait of Hormuz and spike world oil prices.  There's your trigger for depression, if you wish to take notice.

BTW, the continued ability of World Bank and IMF officials to talk out of both sides of their mouths is unintentionally humorous.  The preferred solution to "fiscal cliffs" offered by globalist bankers is more kick-the-can delays in austerity that will eventually turn hard landings into smoking craters.  They know full well that heavily indebted economies cannot grow their way to prosperity.  The gods of the growth cargo cult must be appeased until the island is inundated by a hyperinflationary tsunami.

Why do I even bother connecting the dots?  Well, for one thing I just like to mouth off.  I also want a publicly available record that I did not throw my portfolio into a black hole along with every other dummy on Wall Street.  Let them strike the sea mines first.  I'll note the clear path marked by derelict hulks (i.e. asset classes to avoid) and tow them for salvage (buy the dummies' assets out of bankruptcy).