Counter Activities in the Stock and Futures Market

Added on by C. Maoxian.

Odd that I can't find these articles from 1998 anywhere online.  Interesting to see how weak Bloomberg was compared with Reuters and Dow Jones back then.


HONG KONG MARKET SOARS AS GOVERNMENT BUYS STOCK; CITY AIMS TO THWART SPECULATORS 
BLOOMBERG NEWS
14 August 1998
HONG KONG - The Hong Kong government bought stocks and futures today for the first time to fend off an escalating attack on the city's currency.
The unprecedented step caused an 8.5 percent surge in the benchmark Hang Seng index, the biggest rally in six months.
Two government funds made the purchases to counter speculators who sold a substantial amount of Hong Kong dollars and stocks while trying to break the currency's peg to its U.S. counterpart. The latest attack by speculators has been triggered by talk that China might devalue its currency.
Hong Kong's move broke with its long-standing tradition of not meddling in its stock and futures markets.
Observers said the government's gambit may backfire because it shows Hong Kong can no longer protect its currency, among the last in Asia still tied to the dollar, through the foreign-exchange markets alone.
Hong Kong, which has said repeatedly it will bear the economic pain of defending its currency, is headed for its first recession in more than a decade. Doubt over the stability of the Hong Kong dollar has been increasing interest rates as the economy shrinks.

Hong Kong's Government Buys Stocks In New Bid To Thwart Speculators
 14 August 1998
Dow Jones Online News
NEW YORK - The Hong Kong government Friday took the unprecedented step of using foreign-exchange reserves to buy stocks and futures in addition to propping up the Hong Kong dollar as part of a complex defense against speculators who want to sever the local currency's link to the U.S. dollar.
The government - through the Hong Kong Monetary Authority - spent an undisclosed amount of its $96.5 billion in foreign-exchange reserves to buy blue-chip stocks, Hang Seng Index futures and the local currency.
The move worked, at least for now, and Hong Kong Chief Executive Tung Chee-hwa vowed to do it again. "We will do it time and time again" to thwart speculators, he said.
Overnight in Hong Kong, the blue-chip Hang Seng index soared 564.27 points, or 8.5%, to end at 7224.69, erasing Thursday's 199.06-point fall to a five-year closing low. Before Friday, the market had tumbled 16% this month.
However, analysts were quick to point out that Friday's action exposed the currency market's vulnerabilities. They said the move has provided speculators with exactly the kind of tactical information they need to try something new. "It's kind of counterproductive. It highlights their own predicament," said a currency trader in London.
"They probably don't frighten anyone," said Miron Mushkat, director of economics and strategy at Indocam Asia Asset Management Ltd., adding that emotion might be getting the better of the Hong Kong government.
Because Hong Kong's currency is tethered to the U.S. dollar under a modified version of a currency board, interest rates will rise when the Hong Kong dollar is sold. So the recent speculative attacks on the currency have triggered massive selling in the Hong Kong stock market.
Armed with the knowledge that higher rates will hurt the stock market, speculators have first sold short stock futures and then sold Hong Kong dollars. Selling short involves the sale of borrowed shares or currency. The speculators profit by buying back their stock futures at a lower price, after the currency's decline sparks a rise in interest rates and a decline in the stock market.
The government made it clear the speculative attack has been calculated and intense, but wouldn't say how big either the threat to the peg system has been or how much its defense has cost.
The speculators' ultimate goal is to push interest rates up so much that they crash Hong Kong stocks and property prices to the extent that the government delinks the Hong Kong dollar and lets if fall like other Asian currencies have done over the past year.
"This rise and fall in the Hang Seng Index is not my concern. My concern is to drive those speculators out of the market," said Hong Kong Financial Secretary Donald Tsang Yam-kuen. There is concern that Hong Kong's free-market system is at risk, by following other Asian governments down the same path of blaming outside forces for its own problems. 

HK govt buys shares to foil speculators
By Andrea Ricci
14 August 1998
Reuters News
HONG KONG - The Hong Kong government intervened in the territory's stock market for the first time on Friday, but officials said their aim was to foil speculators, not prop up the sagging market.
"The government has no intention to artificially support the stock market. The measures we have taken today are directed against specifically speculative activities," Hong Kong Chief Executive Tung Chee-hwa told reporters at a hastily called news conference.
Earlier, a grim-looking Financial Secretary Donald Tsang announced he had asked the Hong Kong Monetary Authority (HKMA) to launch "counter activities in the stock and futures market" against speculators that had attacked the Hong Kong dollar as a means to influence stock prices.
Officals refused to disclose how much the HKMA spent buying shares and futures contracts.
Last week, overseas investment houses and hedge funds sold billions of U.S. dollars worth of Hong Kong dollars in both the spot and forward markets.
Conventional wisdom has it that speculators are not really targetting the Hong Kong dollar when they sell it.
Rather, they are trying to push up rates and cause stock prices to fall, either because they already have shorted the share market or want to buy stocks at cheaper prices.
Tsang said that was exactly what happened in the latest attack.
"This would enable them to benefit from their very substantial short positions which they have accumulated in the Hang Seng Index futures market," said Tsang.
Tsang said the government had no evidence past attacks on the Hong Kong dollar were linked to speculation in stocks.
"This is the first time we've intervened in the securities market because this is the first time we have seen a double play working against us in a critical time when regional confidence is fragile, when people wish to be reassured," he told reporters.
The Hong Kong leaders stressed repeatedly that they had not abandoned their hands-off policy in the markets, despite today's unprecedented action and the HKMA's ongoing purchases of Hong Kong dollars outside the currency board system.
"Our long-standing policy of non-intervention in the stock and futures markets remain unchanged," said Tsang.
He said the government would only contemplate intervention when it believed movements in stock and futures markets were caused by rate hikes engineered by speculators.
Under the currency board system, pressures for a weaker Hong Kong dollar automatically cause interest rates to rise and vice versa. Higher rates take a toll on asset markets and the real economy.
While most analysts say they expect the peg to stay, government actions to stabilize property prices and boost liquidity in the banking sector have raised questions about its willingness to take the pain of plummeting asset prices.
The latest massive attack on the Hong Kong dollar was foiled without a surge in interest rates because the HKMA purchased the local dollar for the government treasury, skirting the currency board system and recirculating the dollars back into the banking system.
The treasury needed the funds to fill a shortfall, but the move nevertheless was viewed by some as a convenient tactic by the government to avoid rate rises.
Analysts took a jaded view of Friday's stock market intervention.
"It won't change a thing. I think they (the speculators) will come back with a vengeance," said Steven Thompson, chief analyst at Nikko Research Center.
"They may have achieved a certain goal of burning these speculators, but at the same time they have probably damaged Hong Kong's reputation," said Thompson.
 The Hang Seng Index surged 8.47 percent to 7,224.69 on Friday after hitting a five-year low on Thursday, but Hong Kong shares traded in London fell modestly after the government's announcement.

Movies Watched -- Inequality for All

Added on by C. Maoxian.

This is yet another New Normal movie ... features Robert Reich, who comes across as a likable little fellow.  There he is below with the box he stands on when he gives speeches.  Tries to be more balanced about things, I suppose ... globalization, technology, tax code, stock options ... how government has been co-opted by special interests, etc.  

Pandora's Key Differentiating Factor

Added on by C. Maoxian.

Over 1,000,000 uniquely analyzed songs...

We believe that a key differentiating factor between the Pandora service and other music content providers is our ability to predict music that our listeners will enjoy. Our personalized playlist generating system, based on the Music Genome Project and our proprietary algorithms, is designed to enable us to predict listener music preferences and select music content tailored to our listeners' individual music tastes. We have invested, and will continue to invest, significant resources in refining these technologies; however, we cannot assure you that these investments will yield an attractive return or that the refinements will be effective. The effectiveness of our personalized playlist generating system depends in part on our ability to gather and effectively analyze large amounts of listener data and listener feedback and we have no assurance that we will continue to be successful in enticing listeners to give a thumbs-up or thumbs-down to enough songs for our database to effectively predict and select new and existing songs. In addition, our ability to offer listeners songs that they have not previously heard and impart a sense of discovery depends on our ability to acquire and appropriately categorize additional tracks that will appeal to our listeners' diverse and changing tastes. While we have more than 1,000,000 songs in our catalog, we must continuously identify and analyze additional tracks that our listeners will enjoy and we may not effectively do so.
The Music Genome Project is the foundation of our personalized playlist generating system and has been built by our music analysts to select songs tailored to an individual's music tastes. The Music Genome Project database was developed one song at a time, by evaluating and cataloging each song's particular attributes. Our music catalog currently consists of over 1,000,000 uniquely analyzed songs from over 100,000 artists, spanning over 500 genres and sub-genres ranging from classical, jazz, rock, pop and hip hop to post punk, Celtic and flamenco. Our musical catalog includes both well-known and little-known music and incorporates listener suggestions and independent submissions. Music is assessed on the basis of value to our catalog and we do not accept money or any form of consideration from artists or their representatives for inclusion in the Music Genome Project.
Once we select music to become part of our catalog, our music analysts genotype it by examining up to 450 attributes including objectively observable metrics such as tone and tempo, as well as subjective characteristics, such as lyrics, vocal texture and emotional intensity. We employ rigorous hiring and training standards for selecting our music analysts, who typically have four-year degrees in music theory, composition or performance, and we provide them with intensive training in the Music Genome Project's precise methodology.

International Comparison of Living Space Per Capita

Added on by C. Maoxian.

Nice chart from Nomura ... hard to be bearish on property in China looking at the big picture.

What's the deal with Russia? No one has upgraded from those squalid Soviet-era apartments, or what? My favorite movie of 2012 was 'Elena,' which features a suburban Moscow apartment block, beautifully placed next to a giant cooling tower. Those subtle Russian movies fill me with a dark joy.

How Much Lost Trading OXY?

Added on by C. Maoxian.

OXY was Monday's trading idea.  Assuming you got long that dummy spot in the morning, where was your initial stop? Could you have gone to breakeven by the end of the day?  When price rapidly reversed on Tuesday morning, how much of a hit did you take? 

White House West

Added on by C. Maoxian.

Architectural Digest has a feature on the Bush Ranch outside of Crawford Texas.  I noticed when viewing the satellite photos of the place that W. has a single golf hole there, approachable from opposite directions.  See it?

Movies Watched -- A Touch of Sin

Added on by C. Maoxian.

This is a movie by Jia Zhangke, a young Chinese filmmaker whom I joke makes copycat European arthouse films in the same way that other Chinese manufacturers make fake Gucci handbags and Rolex watches.  

There are four separate tragedies presented and the movie runs over two hours. The first is a pure revenge fantasy ... this movie obviously is banned in China because any kind of violent solution to the various social problems presented is a no-no.  I wasn't that thrilled with it, or any of Jia's other movies for that matter.