Friday, July 27, 2007

Global Climate: Heat, Floods, Bulls and Bears!

More losses today in the stock market indices (New York, London, etc.). Financiers having TGIF drinks in London pubs after a hard week.

Is it a "crisis" or not? Many opinions and points of view. Optimistic (bullish), realistic, pessimistic (bearish). Only 3 weeks ago, the indices were hitting record highs! Wow! Extreme heat and deaths in Southeastern and Central Europe, extreme rain and floods in the UK, China and elsewhere.

Climates! Financial/Economic and Natural (of nature). Up and down, hot and cold (showers), can the human body and mind take such roller coaster "rides"? Panic? From heat or from "cold", from rain and floods or from debt and risk of money losses?

A lot of money that was fuelling the world economy was to really there? The sub-prime mortgage market growth is at "fault"? Why was this market created? Did it have the required fundamentals?

Hungry for more clients or to maintain growth, because no growth in some mentalities means recession, if you do not move forward, the nature of the system sees that as going backwards!!! Thus a new "instrument" the sub-prime mortgage lending, was created. Higher risk than usual. Packaged and repackaged to be sold to mainstream financial institutions and markets.

So what if there is a crisis there, if the risk has been well spread over many investors? Are the effects primarily psychological? Are the rational investor markets not as rational as they are supposed to be? Are they based on fundamentals or trigger selling happy investors, human or programmes (buying and selling done by software programmes)?

Have the "machines" been given too much role in stock and financial trading in general? But can those "automatic pilots" handle non normal, extraordinary, conditions (as was the case in some aircraft crashes in recent years)? But has the system (avionic or financial trading) become too complicated for "human pilots" or "traffic controllers" to grasp?

It is summer, so stock trading volumes are lower. The sub-prime worries give rise to wider worries. And "support levels" a special financial lingo term that from what I can understand means "signposts" related to "technical" (statistics and modelling) analysis of the stock and other financial assets (as opposed to "fundamental" analysis of each companies potential future performance) having all of the sudden been reached!

Is this beginning to sound like "Matrix" and which part, I. II or III? When is "Neo" going to save the day? Neo-what? Neo-liberalism. Neo-capitalism, Neo-nationalism, Neo-populism, Neo-Socialism or New markets, new clients, new ideas, new theories, new perspectives. Or newly found wisdom? Maybe good old cold blooded patience, such as the one shown by the British in the terror crisis in July 2005? Survival of the calm and collected? The philosophised?

It is only money! Yes but many people's "livelihoods" depend of that money and many people invest on behalf of others, and how can they explain to their clients the "nature of the beast"? Was the final consumer of financial tools. behind all the institutional and other professional, the John and Joan Smith, told of the down as well as the up potential of the game, or when these things are sold, the up side is oversold and the down side left out?

Back to the bottom line? How many people really grasp these days even the main elements of the financial global systemics?

I am afraid that much of the system is based on trust or faith or greed or confidence/hope and not full understanding of the risks involved, by the voter, sorry, I meant the individual/citizen/investor!!! How rational and cool-handed is the so called "rational investor" after all?

How much heat or rain can the average citizen take too?

People are not dummies. Thus, can they survive those crash tests?

"You have to be able to put everything into perspective". No, that is not a quote I heard on TV related to climate or finance. It was a sports related one! But sounded like it could have been about the weather or the markets!

So, how many people are able to put everything into perspective these days, when everything is so chaotic (ie huge, complicated, global)?

"I do not understand and I am not interested in finance and economics" says to me, often, a friend. Well, what you do not perceive as a threat cannot hurt you can it? Well, it can and it doesn but in some cases ignorance is bliss. This may be one of them and it may actually "save the day", ie the system! Life is so simple and yet so complicated and yet so precious. And the best things in life are free, as long as one can afford them, right?

Better go read some Plato. They say that this calms people down!!!! LOL And thankfully the air conditioning works! Things could always be worse! Always look at the bright side of life! Humour and philosophy will get us through! To where? That is another story!

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BRs
Nick

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