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Bo Peng
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I run a fund based on automated trading and technical analysis. But my favorite pastime is thinking and talking about political economy. I guess I'm George Soros. Writing helps clarifying my thinking. All opinion expressed here is mine, wholly mine, nobody's but mine. And all trading/investment... More
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  • Does Obama Have ADHD?
    I have a different reading about the Massachusetts' Senate surprise. It's not that the people don't like healthcare reform. Instead, what I heard goes something along the line of "WTF??? With the biggest recession since before Cold War and WWII and massive job losses and foreclosures and negative asset values and forever-lost retirement funds and college funds, your Number One priority is healthcare reform? O, my God are you f*cking kidding me?"

    Healthcare is of course very important. But that's irrelevent. The relevent question is always: what's the most important/urgent?

    I have always been befuddled why Obama decided to put healthcare, among >10 competing issues, on the top of his agenda in 09 and invested so much of his political capital in it. The only rational explanation I could come up with is that he's been assimilated by Clintonites, what, with all the old Clintonites he's surrounded himself with and all the Clintonian neo-libs in Congress?

    But that was not real source of my befuddlement. The real source was the fact that he seemed to be taking on all the ills of the world at the same time. financial crisis, Iraq, housing, Afghanistan, bailout, HEALTHCARE, global warming, HEALTHCARE, regulatory reform, HEALTHCARE, terrorism...

    Just over the past week, he's added three major major issues on his agenda, with hundreds of closely related issues. He started with the shock -n-awe Volcker Plan, sending half of the world into a huge "FINALLY" excitement and the other half into a paralyzing "WTF-did-that-come-from" trauma.

    But the next day he switched to jobs. After my brains finally caught up, I said to myself: huh, um, ok, fantastic! That's what should've taken the place of healthcare in 09!

    But by then Obama has left the building, and come back with another extremely worthy, extremely important goal: deficit.

    Alright, sure, let's do it, man.

    Today news has it that in his State of The Union he'll push for healthcare.

    My son thinks Obama is the best thing happened to the world, after me obviously. And I'm trying to teach him the importance of focusing and killing one thing dead dead before moving on. If this ADHD streak doesn't end soon, I'll have to have some unpleasant talks with the boy.

    But what does this mean for the market? Any item in his long list is a worthy cause and, if progress is made, it'd be a boost to the market at least in the long term. But the way he's been attacking them, only failure, disappointment, and confusion could ensue. 

    Disclosure: None
    Jan 26 5:39 PM | Link | Comment!
  • Too-Freemarket Is Anti-Free-Market

    How did we get into this mess?

    I mean, our financial industry has so overgrown that it has taken over iconic manufacturers such as GM, GE, and Boeing and become their main profit center for years, even decades. It has hired so many traders who don't even understand their own trades, risk managers who blindly throw VAR at everything like snakeoil (or Gaussian distribution, or mean reversion, or my personal favorite, 40% recovery assumption), executives who don't know or even care about what their companies have been doing, programmers who don't understand anything about programming beyond the syntax, and a vast army of middle-management whose only job it is to foward emails and track status. It has hijacked world governments and public policy to such an extend that the society has no choice but to bail it out, because it is too big to fail.

    But here's the rub: we're making it even more too-big-to-fail.

    There is no stronger an advocate of free market and presumed righteousness of market pricing than Wall Street. But when Wall Street's puppet government, across two supposedly ideological opposites no less, insists on using public money to create an artifical market, you know it has gone too far. It has gone straight around the circle of Yinyang and become its own moral enemy, its own Judas.

    Free market has committed suicide.

    But it gets worse. The Unholy Ghost of Anti-Freemarket is still walking the Earth, preaching the same words to the Great Unwashed Public, who nod and chant in unison: Yeah! Thou shalt not nationalize! Amen! WTF?!

    No, that last part was me.

    Free market is inherently unstable due to built-in positive feedback, which is in turn due to human greed and fear among other behavioral patterns. This is the source for fat tail or Black Swan. We may never be able to eliminate the instability short of killing free market altogether. But pretending we're still a Freemarket while using public money to create an artificial market is sheer lunacy.

    I'm still against government regulation. And what we have now is regulation to the extreme. Instead, we should let banks fail as they may, re-enact Glass-Steagall, and let free market return to Wall Street in the form of private partnership investment banks.

    Derivatives is not the problem. The problem is people playing derivatives with other people's money.

    Bonus is not the problem. The problem is maturity mismatch between bonus and risk, or letting incompetent managers allocate bonus based not on merit but on personal politics.

    Even bubble is not the problem. It's inevitable (instability, positive feedback). The problem is denying the possibility of bubble in the name of omnipotent Freemarket.

    Kill Freemarket. Long live the free market.

    Apr 08 7:01 AM | Link | 3 Comments
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