Do Foreign Warning Signs "Matter"?
...we must respect the potential for higher prices still while understanding that risk is manifesting as a function of time, price, psychology and societal divergences.
Editor's Note: This content was posted on the Buzz & Banter at 9:48 AM today and is now being reprinted for the benefit of the broad Minyanville community.
I'll never forget the 1998 Russian Ruble crisis. I was sitting in a staff meeting at a multi-billion dollar hedge fund and offered, before the schvitz hit the fan, that the flag wasn't the only thing that was gonna bleed Red. My boss at the time - one of the best traders out there - shut me down quicker than my prom date. "Russia doesn't matter," he said, with a sharp look that made it very clear I shouldn't debate the subject.
Of course, it did matter and, while I would have rather profited than been proven right, it taught me the valuable lesson. A butterfly flapping its wings in Asia, as the Thai Baht did in 1997, could shift the wind patterns through Russia, Europe and eventually the United States.
Why am I talking about this? A little blurb I picked up in the FT about growing signs of trouble for Russia's banks. Will it matter? It didn't "matter" in Ecuador earlier this year. It didn't "matter " in the US during the subprime contagion and it didn't "matter" in Europe during the collateral fall-out. Why am I using quotation marks on either side of "matter?" Because "matter" is a relative term in a cumulative context.
I keep Research in Motion (RIMM), Google (GOOG), Baidu.com (BIDU), Apple (AAPL) and Amazon (AMZN) grouped together on my third screen - right near the FXI - and have been wondering aloud whether we're in for an echo-bubble - a last gasp into the Beijing Olympics - or if the structural wall of worry has too many cracks in the foundation. The answer? Prolly a little bit of both for as long as the dollar will be allowed to depreciate before foreigners say "Nyet!"
It's easy to feel silly--ok, stupid--in this market. I've been too cautious and left some good coin on the table. Sometimes I feel like I out-think myself, a thought that I recently shared with Mr. Practical. His response? "You should continue to think through the ramifications. You just need to remember that alotta people out there don't and won't see "it" until it's too late."
How will it manifest? A slow road to hyper-inflation until a point of exhaustion. In the meantime, we must respect the potential for higher prices still while understanding that risk is manifesting as a function of time, price, psychology and societal divergences. Yes, I probably am over-thinking this but that's entirely alright.
The minute I close my eyes is probably the time to hang up my cleats.
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