May 18, 2006

Honey you shrunk the trading world!

When I started my hedge fund in 1998, the trading world was gameable from the US market close. I woke up and read press releases from such pillars of US Capitalism for a feel of the trading day:

Egghead.com
Broadvision
Brocade
CMGI
SkyMall.com
AtHome.com

Tough life! I think I had to read the occassional newspaper and CNBC was important if you wanted the three second edge on the next 10 point move in Inktomi.

Most things have changed (Except CNBC's irrelevance) to make our markets more of a follower than a leader:

Blogs over Mainstream media
Boom in Commodities
Weak US Dollar
Nasdaq Bubble
ETF's (Exchange Traded Funds)

The culmination of the US gaming of markets came with the "front running " scandals.

This morning I am reading that India is down 7 percent overnight and Norway (commodity based) is down 5 percent.
Those are Dow 500-700 point moves. They are happening frequently from Russia to Japan as well.

They can't be ignored anymore. Their ETF's are held by individual investors around the world, including the US and therefore our markets will continue to react to these overnight moves,

Get used to first checking the morning price of:

The US Dollar
Gold (Australian Gold Stocks)
Interest Rates
Russia, Hang Seng, Nikkei, India

By the end of our trading day those moves have had an effect on our outcome.

Most important - get used to reading good finance blogs.

They are more important than the lousy S&P futures ticker on CNBC.

Comments:
Excellent point about the globalization of capital flows. A book like "Investment Biker" by Jim Rogers looks amazingly prescient right about now. Gotta zigzag and crisscross the world, looking for investment opportunities.

Anyway, borrowing a metaphor from Tommy Friedman, is this another case where the world is no longer spiky?
 
Markets are not perfect so the markets will always be spiky. Thomas is incorrect in my opinion
 
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