Making money off the new 30 Year Middle East War between Shia and Sunni

(Author's note: here’s a sequel to the other article I wrote on investments and conflict:)

I’ll be going to Erbil, Kurdistan, to check on some our company’s investments. I’ve gotten my GoRuck pack, my desert boots, and of course my iPad with the Bloomberg app installed — baller. Our investments include but are not limited to ShaMaran, Hunt Oil, HKN Energy, and a few others.

Now, in this on-going conflict we should give the readers of WSO some perspective given the region is like a great, big, long brown porcupine for investors (a porcupine because the region bristles with quite exceptional difficulties). Fundamentally, the market should exploit the market inefficiency of the United States having supported a weak-Shia government in Iraq, while supporting Sunni rebels against a Shia (Alawite) government in Syria. End result, chaos... but with chaos comes the possibility of large returns!

Background... if you know it skip the recommendations:

When I was growing up, in the early 1990s, there was a war called the First Gulf War (Operation Desert Shield and Operation Desert Storm). You could say Iraq had a rage quit after losing the Iraq-Iran War that was, and has been, the only war between Middle Eastern combatants to have casualties on par with any European conflict — to put it another way, we made a ton of money as oil prices spiked and we held deposits elsewhere with high NPVs, with lots of willing investors. So they decided to invade Kuwait, go figure. That led to lots of conflict and a great time for oil companies.

My review of Michael Lewis’ Flashboys: A Wall Street Revolt

‘Socialism’, Albert Einstein said, is humanity’s attempt ‘to overcome and advance beyond the predatory phase of human development’, and for G.A. Cohen ‘every market … is a system of predation.’

It reminds me of the FX HFT market. Imagine a large men’s club, the larger men in one area, and the smaller, younger ones, uglier ones in another. All of them are trying to get the attention of one girl, of two, or three.

Finally, one of the big men tells someone half his size: “you’re predatory, get up and leave and never come back” as if he’s the one who’s threatened.

Although all parts of HFT are different, between FX, Equities, and Futures, Lewis’ book operates more as a novella than a true champion and essay that can add luster and varnish on boring texts on HFT from Fabozzi or Wiley Books.

Lewis’ book is scintillating drama, first and foremost, with creatively drawn historical characters rather than something that you would use in an interview to say you now know a lot about HFT.

Still, in an era where the normal retail investor trades 200 shares at a time, HFT trades up to 1,000,000 (BATs under David Cummings is one of them and mentioned several times) in just a few seconds and up to a 1 billion a day; one invariably wonders if the markets are rigged for the favored few rather than the everyday plebe with his 401k and Fidelity account.

Why the recent flight to quality to Africa is an untold epic fail

Safety from the Ukrainian Crisis investors?

Fine, begin your sadly shortened investor’s joinery with a mixture of funk and bewilderment into the heart of financial darkness — the likes of Greece and Africa and two big winners in the most recent flight to quality.

It does seem odd.

In a year where $100 trillion dollars worth of bonds exist externally and only $300 billion inside this great torch-shaped continent, very few countries contain the credit histories one would normally require for a an 'all-buy recommendation' as vast inflows have moved toward Africa.

Making Money off of Fallen Countries

I recommend first looking into my previous article about the Ukraine before this in order to understand the strategic scope of a crisis, plotting it over-time, and how it can be alleviated for the sake of us, the financial observers.

What's below acts more as a guide than a real blog post.

When I worked at the World Bank

Before I went up the mid-sized fund I work at now, which primarily focuses on distressed credit, I worked for this peculiar portiere of development-aristocrat speak known as “The Bank”, or in wikipedia-speak The World Bank, or The Evil Bank if you're the former Chief Economist (Bill Easterly).

Ukraine: What’s going on there and why we should buy Ukraine Bonds

Putin once replied to a British Diplomat who sat beside him in The Kremlin saying, 'You have Guards with 18th century costumes, why shouldn't we!?' To which the diplomat replied, 'My dear President, you are supposed to be running a forward-looking Russia -- old costumes from Soviet-era films do not cut it'.
The memory of the Cold-War lives on this day -- much more than many critics would say. In many ways, the Russian General Staff and Kremlin cold-era mindset has not changed substantially.
Russia has always been keen to hold on to the Crimean bases on the Black Sea since the time of Peter the Great. The large facilities include Sevastopol Dock, Sevastopol Airfield near Belbek, the base of Novo-Ozyorne, and airfield near Kerch.

What will the PRC Bank do with their Bad Banks?

Note: For those not in the know, the PRC only delivers PRC –released data. Moody’s, Fitch, and S&P have slightly elevated access, but for the most part everyone receives the same, bad, information.

Is the carry trade the way forward?

As a fixed income guy, it's entertaining it see the the S&P go up all the time as the bond market resets from the major losses of the last half of the year. Here's the hitch with the consensus view on the bond market.

For many of you who do not know, borrowing in a low-interest market to attack countries with loose capital controls is something that helped bring about the Great Depression in 1929 - for those who do not believe me, read Barry Eichengreen’s book, Capital Flows and Crises, it explains the role capital outflows which could have created a small sneeze on the German and British economies morphed into deadly contagion with dire, infective power as investors looked for one thing to profit from this: carry. Now, today’s carry trade carries many hidden long-term risks.

Why it’s not Samsung’s fault that it’s screwed

All companies see the world from their own belltowers, and the Apple tower is the tallest.
- paraphrased from an old Russian saying

Jobs and Cook and the Samsung management will probably fight the Samsung/Apple legal war until the end of the time. Observing from their bell towers in Caupertino and Seoul over the pocketed lawsuit battlefield, the finger pointing, pointless suing, and overall childish absurdity simply in the act of prolonging the act of agony of not coming to a settlement might be explained better understood by taking a longer-term view of one of the two firms: Samsung.

But before starting, it’s important to point out it is not that Apple is more efficient with their R&D spending, or even that their infrastructure to create and innovate is more streamline and better managed, or if Samsung is simply unable to keep up with Apple’s so-called “creativity”, but we can think of the problem in terms of the effect of R&D on both firms.

The China slowdown.

To over a year of cross-calling by every major institution on the planet sounding the horn of optimism on China, to now deluded naysayers saying to everyone how hard its economy will land with a ‘hard impact’, these massive deviations in forecasts say much more about what the forecasters are missing than what they actually say. .
In 2012, Goldman claimed it would see Chinese growth go above 8% and ‘almost certainly’. Now, in 2013, Goldman claims it might be under 7%. That 1% difference is quite a lot. While 8% was, at one point, the base case – the bottoming of growth – now 7% is considered to be the magic number the Chinese Politburo is trying to target.

Overall, there seems to be a lot of confusion when it comes to analyzing China’s economy, not in some facile way of seeing it as becoming the #1 economy, or as a communist state, but simply as it is – where one part of the ship is squeaky clean and the other is simply full of holes.

Is Micro-managing all that bad?

Part I of the series on: Learning from Failure and the Justification that They’re for the Sake of the Learning Curve

Let me turn to you the attention of one article that would probably not have grabbed your attention: CNBC's "How Start Ups Can Climb the Global Growth Learning Curve". But how do know we are in a learning curve situation? Let’s put it another way. How do we know that we have to agree that failure in the beginning is almost a superior alternative to success. Had we been successful, little would have changed; and for the long-term it’s a more advantageous proposition. Or is it, that we use this as an excuse to justify our failure after we have committed the crime of a long-termism and forgotten the ‘short picture’ or the ‘small picture’ as one might put it?