To paraphrase Tolstoy, all happy markets are alike but each unhappy market is unhappy in its own way.
Australia hates raising interest rates and the threat of higher taxes on resource extractor companies.
Tolstoy’s homeland of Russia is being roiled by the leader of its Kalmuk autnomous region that he was abducted by aliens. And maybe by the death of yet another prisoner in pre-trial detention because she was denied the right to be seen by a doctor.
China’s continuing to talk about cracking down on a potential real estate bubble frightens its investors and suppliers even though so far the big crackdown is on mortgages for third homes. Or maybe it frightens those learning from Macquarie (an Australian brokerage) that the crackdown on buy-to-let will be ended if the economy stops growing.
London is hung up about a hung parliament after tomorrow’s vote.
Grecian formula follies hurt Europe and the euro. Today the demonstrators set a fire which killed three people. Instead of Asian contagion, the new fear is Vacation Contagion affecting other resort countries with sun, sand, and debt. Some of them even have economic clout. Moody’s put Portugal on review and it may come up with a downrating in 3 mos form its current Aa2 rating (3rd highest investment grade). Moody’s did stress however that “Greece faces more serious fiscal difficulties than Portugal.” Obrigada.
Thai teases on both sides keeps Bangkok on the boil.
Lagging car sales growth, spotty re-employment data, housing price fears, the oilspill muck in the Mississippi mud boosting oil prices, and Al Qaeda back in the Big Apple frighten Wall Street.
But then the unhappiness spreads because after all, we are in a flat and interconnected world, except for an occasional belching volcano.
Here is a note from Steve the Mad Hedge Fund Trader:
As the public debate on risk control gets underway on Capitol Hill, instruments have been launched that will allow unsophisticated retail investors to ramp up their leverage, big time. It’s like handing out free fireworks right after your hometown burns down. Last week, Proshares launched a gaggle of new leveraged ETF’s on key benchmark international stock indexes that give individual investors opportunities to bet the ranch in ways they previously never thought possible.
They include 200% leveraged long ETFs on Brazil (UBR), Europe (UPV), Mexico (UMX), and the Pacific ex-Japan (UXJ). Short versions of these ETFs already trade. While it’s great to have a broader range of instruments to trade in the international arena, these are truly double-edged swords. When you’re right, the cash pours in; when you’re wrong, you hemorrhage dollars like a hemophiliac spills blood.
You also have the additional risks of tracking error, poor management, and liquidity. While on this topic, I’ll mention another ETF which should carry a surgeon general’s warning on every trade ticket, as with cigarettes. The Direxion Daily 30 Year Treasury Bear 3X ETF (TMV) gives investors a 300% short bet on the long dated Treasury bond. Triple the 4.6% current yield you are shorting and throw in the expense ratio, and long term investors are facing a 15% per annum headwind. Unless the US embarks on a Grecian style default on its debt in the very near future, it will be tough to make money holding this instrument. That is, unless you are a day trader, in which case, the cost of carry is zero. That is surely the purpose for which this potentially toxic instrument was intended.
Steve’s blog is free and fun. He is a speculator and a certified male chauvinist pig, complete with bunny photos to prove it, and moreover has never been jailed for drug dealing or child molestation. He also is aware of risks as the above note makes clear.
These are the good things I can say about him. As for the bad, you are all grown up and can judge for yourselves at www.madhedgefundtrader.com/
More for paid subscribers from Kosovo (honest), Mexico, Brazil, Canada, and of course Portugal, Spain, and Greece.
