Summer Financial Risks

I just got back from Barcelona. I went for a couple weeks, mainly to see a certain woman. She is spectacular and we are wonderful together, but at the same time I also got to see how amazing Barcelona is. It’s weird sitting on the beach of the Mediterranean, with hills in the background. And being right next to the train that takes you right back downtown. And then having these completely absorbed Gaudian tributes to God in the middle of a city that is very laid-back and content on just getting by. Barcelona made Spain sexy for me, and I could feel its Roman influence (which continues to pull on me even as the time from when I visited Rome gets even more distant).

It’s safe to say I’m living a very good life right now. I’m intellectually stimulated, being rewarded for being a little different now, and got to travel to an alluring city to see a classic embodiment of the complete modern woman.

But the subject of this post is the economy and the market. I ended up selling everything again, after gradually building up all my positions again. I was fully loaded on Nintendo and on international funds in my retirement account. I still owned some Sirius from way back because the risk was lower than potential reward.

But I ended up selling it all over my iPhone while connected to a random hotspot in Barca.

Things just seemed to continue to worsen in the markets. Still credit problems, still write-downs. Intuitively I know that it’s bad out there, and I had that gut feeling before I left that you get when you know you should sell but you don’t want to. So I held on a bit longer than I should have, and lost a little money as a result.

But afterwards, Nintendo fell over 6 points because of expectations being realized and not surpassed. And the market seems clearly to be in a bear mood.

So I’m 100% cash and following my gut that says things won’t really improve economically until structural changes are made.

You see, we’ve benefited from globalization, but now with food inflation and a breakdown in the Doha rounds and outdating of our institutions, there is risk that countries will make bad decisions that worsen free trade. I think this might be part of what is hurting the markets.

You read among the economists a call for restructuring of the World Bank and IMF and creation of an international economic body. Right now it’s almost becoming a mercantilist environment again. Countries are out to protect themselves in the short-term. Oil has finally sent shocks through the system.

What I am hoping to see is the US reengaging the international community and calling for a new Bretton Woods agreement that makes it difficult for countries to shirk their obligations towards lowering transaction costs and tariffs and other barriers.

I think the market may be waiting for signs of something like this — clearly our current system is inadequate for scaling in a growing international environment.

Meanwhile, that 100% cash is languishing in American dollars. I found that they didn’t go that far in Europe, while meals there were also seemingly 25% higher in cost, along with everything else. There were no “bargains” and it’s clear that there’s a division between where Spaniards ate and went and where tourists went. Spaniards know where the bargains are. Because they have to.