Lucky Rat

Who’s interest rate is it anyway?
APEC – will this prove to be the most important recurring conference over the next 25yrs as the US and China grapple with changes to global power and influence, decide on how to carve-up the strategically important and (increasingly depleting) natural resources still to be found across the globe, and decide on which of the rules to live by as discussed by capitalists and entrepreneurial-socialists. Obama is centring his first official trip to Asia around the Asia-Pacific Economic Cooperation summit being held in Singapore over the next few days, bringing together some of the fastest growing nations sitting face-to-face with some of those rapidly declining (ouch). The most crucial aspect to watch here is how much resistance to China’s growing sphere of influence America conveys whilst treading the fine line on economic co-operation.

Back in the US, just when Bernanke thought it was safe to dip his toe back in those shark-infested congressional waters, a seismic shift in monetary control and influence is up for discussion with congress looking to remove some of the influence the FED wields on important economic tools such as the all-important setting of interest rates. The argument for a depressing admission that market forces and independence from overly bureaucratic and political control no longer provides the best conduit for creating a stable and effective economic environment will no doubt re-surface as howls of objection mount and amplify.

Markets took all this political gesturing in their stride yesterday – just as they have become quite accustomed to ignoring plenty of what surrounds their casino-like activity. Being a trader in these markets is still providing overly-proportioned gains. There’s been a lot of talk about the new risk-trade that has been put on, with oil still bobbing above and below $80/brl (slightly below at $78.7/brl right now), recent weakness in the US$ following a (strangely delayed) recognition of the attractive carry-trade (Cable at 1.675, Eur/$ 1.50) of borrowing at US$ interest rates (0.25% officially) and investing abroad in much higher yielding assets – are we creating another mini-bubble? – even our favourite doom-and-gloom indicator the Baltic-Dry-Index has witnessed a magnificent revival in the last month, rising 23% as confidence builds in emerging markets catalysing the next big “new” thing, allowing all that spare shipping capacity to find a use. Remember that incredible picture of dormant container ships? Not something we want to see for much longer.

Rats saving the ships…
Talking of shipping, an incredibly fortunate craze may be the perfect medicine to the world’s trade-ills. There’s been a recent focus on “lucky” events, and the inventor of this year’s latest “must-have-Xmas-toy” is one of the biggest beneficiaries of this most desirable quirk of fate. So what is the source of heightened excitement and anticipation amongst children this Xmas? Is it a well-constructed and entertaining device that educates as well? Nope. How about an incredibly innovative puzzle? Try again. A company in middle-America (of course producing the goods in China) has been selling irritatingly-cute-cuddly-toys based on…Rats. Yep, I know, cute Rats? Go figure.

Apparently they blurt-out “adorable” catchphrases. The toy makers’ revenues are expected to increase from $1m/annum till mid-year 2009 to over $400m by the end of 2010. That’s quite an impressive percentage increase. Shame they’re so small that only a couple of containers are probably required to ship an entire annual supply. Someone out there hit on the next “hot” idea in the form of some lightweight, easily produced but absolutely humongous object that will give those ships something to do.

Talk about lucky. How about a software firm hitting on the biggest-selling game of all time and forecasting almost three quarters of its annual revenues from that one release? Never mind that the console game, Call Of Duty 2, is based on war and destruction, people just can’t get enough of it. Where in the past (the very past past that is, like hundreds of years back) these occurrences were often left to “divine intervention” with famous battles (such as that of Agincourt in 1415) left at the mercy of God’s decision to provide a resounding victory by small armies against far superior forces, nowadays we seek to quantify these strangely fortunate events. The truth is, as even the inventor of those rats concedes, “no one can really explain why this happened”.

The point to the above? A lot in life can be planned, strategised, researched and highly controlled – but at the end of the day, no matter how much preparation, consistency and regulation you impose on a business (or your life) almost 99% is left to randomness – or what is these days known as luck. The markets can provide an equally frustrating reflection of life’s such quirks. Spent a fortune on an algorithmic programme only to find it stumble when most needed (shame), or how about spending endless hours conducting due diligence on a trade but being felled with an “unseen” event? Quirks.

Even when an incredible stroke of luck occurs for some, there is usually some unwritten rule that another must suffer. Rather like a loser existing for every winner in the markets. Take the equally wonderful and heart-breaking story of recent record lottery-winners in the UK. A group of seven syndicate members are currently celebrating their share of $75m. Spare a though for Mr No. 8 though. Until only a few weeks back he had been part of this long-running syndicate but had to pull-out when faced with a squeeze on his finances.

Lucky for some, not so lucky for one. Rats!