Daily Speculations
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James Sogi
Philosopher, Juris Doctor, surfer, trader, investor, musician, black belt, sailor, semi-centenarian. He lives on the mountain in Kona, Hawaii, with his family. |
11/24/2005
Globalization and the Future of Finance, from Jim Sogi
The WTO, IMF, Security Council, G7, Atomic Energy Board, South America's Andean Community of Nations (CAN) Free Trade of the Americas Agreement (FTAA), Nafta, EU and Mercusor all affect global financial markets. The flow of currencies and capital is critical now, even more than domestic metrics. The markets collective breath holding before the Fomc meeting and minutes seems misguided focus when more important information driving interest rates lies in the flow of capital from China, Saudi Arabia, Japan, Russia, Mexico, heating oil from Venezuela, manpower from Mexico, and other countries into bonds and real estate stocks and the banking systems of G7. Yet these are all but ignored or not readily available or understood. It appears that globalization itself being so new is not well understood by government strategists or financiers and could provide an edge. List members speak of global measures and their effects on the American economy. How might this be measured and quantified to render actionable predictions?
Some systems take a baskets of global etfs and currencies and choose among relative performers or relative performance of pairs. What anomalies hide in the global data? Where is the data available? Systems to pick domestic portfolios might be applied to a range of different types of globally available vehicles, or those might indicate effects in the US. Surely the flow of foreign capital effects bond yields and spreads as a demand factor mandated by the law of supply and demand. The demands of Russia, China and the weather there affect the prices of our commodities. Why focus on domestic metrics so fastidiously when a world of information is flowing our way.
Todd Colbeck Adds:
China just signed its first free trade agreement with a non-Asian country, Chile. This could have an impact on both commodity prices and the Chilean securities. There are 25 Chilean ADR's on the NYSE, and the ETF: Chile Fund (CH). CH has moved up sharply in recent days.
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Jim Sogi, May 2005
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