Every day I start my work, the world looks like this:
[Skype] Nov 18, 2010
[8:04:21 AM] US’s inflation was not as high as expected
[8:05:41 AM] this showed how strong the recovery in US had taken place
[8:06:30 AM] exhausted, get sick of ….. seems to be the common sentiment
[8:06:59 AM] China’s planning for inflation control
[8:07:46 AM] then oil immediately down by 2.3% on 80$/barrel
[8:08:34 AM] there is a controlling-inflation race
[8:08:50 AM] China is temporary at the 1st place
[8:08:57 AM] follow by US
[8:09:31 AM] Ireland might get the 3rd place due to it worse and worse gov’s debt
[8:10:02 AM] Vietnam also take part in the rate but maybe we just join for fun
[8:10:28 AM] 0.8% of inflation rall is the target for this month
[8:11:03 AM] but we both now, inflation was so hard to control
[8:11:08 AM] back to the market
[8:11:43 AM] foreign investor contribute much for the market volume these days through put through trading
[8:12:07 AM] stocks are cheap at the recent time
[8:12:17 AM] but the problem is it can be cheaper
[8:12:18 AM] hehe
[8:12:24 AM] we would test 420 today
[8:12:31 AM] just only 5pts to go
[8:12:39 AM] but jsut wait and see
[8:12:51 AM] – Update from Tuan Le
[8:13:00 AM] – From Horizon with love
I feel the world closer, everyday.
1/ The world is running through a very sensitive period. People talk a lot about financial crisis. People discuss about the power transitioning from United States to China. People share about the history after World War II. People care about poverty, ice melting, human right. Then people talk about the international relations between economies, the figures, the fluctuations, the global psychology. What do you hear most clearly?
You know, I feel the fear inside a hope.
Remembering the Thailand Financial Crisis in 1997, everything happened quite orderly. Thailand collapsed in 1997 as splendid and epic as what people could imagine. With unstable foreign exchange, trade balance deficit, highly USD shortage, global speculative community made a well-rounded attack on the Thai Baht by selling Baht and withdrawing the USD out of the country. Thai government tried to keep the line by selling off their US dollar reserve and declared that the economy was still fine. A few days later, their foreign reserve dried, Baht lost 50% value toward USD. The companies owed USD having to pay 50% more debt value by Baht. Most of Thai’s export-import companies defaulted. Thrifts and credit firms that were lending to these companies suddenly got a huge bad debt position that simply could not clear. And financial institutions that were lending to those thrifts and credit firms started to know that they were also stuck in this dead domino chain. The whole financial system of Thailand went bankruptcy. Good-bye an emerging market.
Confidence losing in Thailand quickly spread to Indonesia and Korea. A global fund withdrawal wave struck to emerging markets in Asia-Pacific. Good-bye emerging markets in Asia.
Thailand, Indonesia, and Korea collapse made the global commodities market wobble. Russia is a major crude oil exporting country to emerging markets. When the global economy slowed down, crude oil price sharply decreased due to excess supply. Russia’s economy became wobble. In 1998, Russia defaulted, good-bye Russia. Global hedge funds got massive losses and had to sell off their positions in other emerging markets like Brazil to make up for the losses in Russia. A global fund withdrawing attacked Brazil. Good-bye Brazil’s economy.
But afterward, people started to build again, decently. Super rich bankrupted families in Thailand started to do business again. The world economy started to recover, steadily. After the 1997 panic, the economy normalized around 1999. Everything got better in 2000, and people regained confidence in 2001-2002. In 2003, international monetary flows returned to emerging markets.
The world’s panic level at this time is much larger. There are too many things happening. There are too many perspectives to be considered.
2/ Recently, when the gold price got peak US$1420/ounce, I think, the wold as we know is collapsing. Gold price is a sensitive figure to the world economy. Gold’s story is also interesting.
In the past, the world applied gold standard. It means if a government wants to print money, that amount of money must be backed by gold in their reserve. And gold is the world common currency. Gold is special because people consider it as a value store-able asset for thousands years. When money turns their back revealing that they are just papers, gold will still keep its value. Therefore, the demand for gold is mostly for this value-storing objective.
After World War II, economists designed the first global economic integration called Bretton Woods system. Bretton Woods united global economy to one focal point: each ounce of gold would be convertible to a specific amount of US dollar, and others currencies would use that to adjust for their foreign exchange. So, we could see that the total money in the world was tightened up to gold reserve and mining supply. However by 1970s, US saw its gold coverage dried up from 55% to 22% and therefore was not enough to back the USD at US$35/ounce anymore. By 1971, US unilaterally ended the Bretton Woods system. Global currencies then no longer had direct relationship to gold.
IMF and World Bank were established after the failing of Bretton Woods. Now any government want to print money – they just need to notice to IMF, no longer base on their gold reserve anymore. Gold price started to jump at this point.
This is US Treasury Bond issuance from 1940, equals to the amount of US dollar has been printing out
When people believe on the economy and the financial system, people buy and sell securities, financial instruments, and every other things that are invented by financial and economic community. However, when investors loses their confidence on that world, they will turn to “physical” commodities like gold, oil, copper, agricultural products, etc. To make it short: everything that is store-able and real value creatable.
This explained why the super rich and governments (especially in Asia) bought gold extensively in the last 10 years. They know there is too much money floating and the economy is so unstable and uncertain.
3/ If the world has a beta figure to measure the fluctuations between now and the past, that beta must be cruel.
As a whole, everything is going up. To compare with 2007, now is much better. There is less unemployment. Consumer confidence is recovering. Even investors worldwide do transactions with a little bit fear, but they don’t hold their wealth tightly as what they did when the financial crisis happened. VNIndex is miserable at 430 points but that is much better to the crash from 1000 to 200 points in 2008.
However, the journey ahead is quite difficult.
The super power position of the US is being challenged fiercely by China. In 1997, US drove the world economy, rotated monetary flows, organized the construction orderly. Now, the world has EU and China.
Every morning I have to check whether has Ireland gone bankruptcy? Has China increased its currency? Does EU bailout Ireland, Portugal, and Spain? What did Fed do last night? How did the markets react?
During the G20 meeting in Seoul days ago, I saw many friends and professors of mine had posted their statuses and shared ideas about the results of this meeting. Oil and gold prices fluctuated very sharply and suddenly with international news like prediction on China’s tightening monetary policy and public debts in Ireland and Portugal.
You know, the world is very near.
4/ So how does my morning continue?
[11/18/2010 8:13:09 AM] Ton That Hue Tri: 😀 thanks! Good luck from VI Group
[11/18/2010 8:13:29 AM] Ton That Hue Tri: I’m expecting it would stay flat around 400
[11/18/2010 8:13:35 AM] Ton That Hue Tri: 400-420
[11/18/2010 8:13:41 AM] Ton That Hue Tri: by the end of the year
[11/18/2010 8:13:45 AM] le van nhat tuan: uhm
[11/18/2010 8:13:47 AM] Ton That Hue Tri: nothing better than that 🙂
[11/18/2010 8:13:52 AM] le van nhat tuan: that’s the safe zone
[11/18/2010 8:14:13 AM] le van nhat tuan: we wont know what gonna happen if the market break that range
[11/18/2010 8:14:23 AM] le van nhat tuan: i mean from 380 and worse
[11/18/2010 8:14:35 AM] Ton That Hue Tri: yes
[11/18/2010 8:14:45 AM] Ton That Hue Tri: too bad might go in to be worse
[11/18/2010 8:15:00 AM] Ton That Hue Tri: it’s fine, the economy is not that bad 🙂
[11/18/2010 8:17:34 AM] le van nhat tuan: we are in the chaos 🙂
[11/18/2010 8:17:39 AM] le van nhat tuan: that’s so great
[11/18/2010 8:18:02 AM] le van nhat tuan: there’s always a light in the end of the tunnel
[11/18/2010 8:18:57 AM] Ton That Hue Tri: make sure you have enought first
[11/18/2010 8:18:59 AM] Ton That Hue Tri: 😀
[11/18/2010 8:20:04 AM] le van nhat tuan: i am not a fire-fly 🙂
[11/18/2010 8:20:11 AM] le van nhat tuan: but ok, i’ll buy some lamp
8:30 am – the market started, Tuan would fight with the market and I would keep my focus on financial valuations, industry researches, or business analyses. The world would still revolve, we sometime update news and discuss the market movements. We have our own world to be busy with, but you know, we know the world is revolving.
We feel the world closer, everyday.
– VI Group, Ho Chi Minh City – November 19th, 2010, 00:44 am –