June 24, 2013 Update

DJIA:14,799 S&P 500:1,592 NASDAQ:3,357 Gold:$1,281 Oil:$93.55 EURO:$1.31 YEN:97.90

Memories of Booms and Busts

Memory is a narrative that a person chooses to bring forward based on experiences they have had in their past. The market is much more than an assortment of companies that fluctuate in value. Instead, it is a narrative of investor memories that make up the history of boom and bust cycles. The sharp decline in asset prices in 1929 tell the story of the loss of consumer confidence during the Great Depression. The plummet of the equity market on Black Monday in 1987 conveys the history of a systematic world wide crash; starting in China and spreading to the United States. The 300 point movement in the DJIA after the fake tweet about Obama’s supposed assassination is the story of how social media can influence mankind to make irrational decisions without legitimate research. I believe the way in which investors choose to recall market behavior may reveal their personal successes as traders; since, after all, markets are largely based on human psychology. What if it was possible to know how a trader manages money based solely off of the memories they choose to carry from their experience in dabbling with the markets? It may sound farfetched, but recall a time you were overexposed when the market was tanking. Has this experience impacted the future decisions you’ve made? If so, does the way in which you chose to recreate the experience make it apparent? 

Domestic News

• Market Update Futures are trading down as investors remain weary from last week’s selloff,  an increasingly bearish Chinese outlook, and a drop in bonds globally. 

International Updates

Asia

• Market Update Chinese equities have had a largest single day loss since 2009 as the world’s second largest economy become strapped for cash.   
• Goldman Sachs has cut its growth forecast for China GDP growth from 7.5% from 7.8% YoY based on its alarming credit crunch in the banking sector. 
• China took a major step towards internationally renminbi after the People’s Bank of China signed a three-year currency swap arrangement with the Bank of England worth up to 200B yuan (approx. $33B). 

Europe

• Market Update Trading down from systemic risks in Asia and the US, miners lead U.K.’s FTSE 100 index to sharp declines.  
• The Ifo index of German confidence rose to 105.9 in June from May’s 105.7, as expected. 

Corporate

• Rio Tinto (RIO) have halted form a 15-month effort to sell its $1.3B diamond business unit from failure of finding a buyer, which is a major setback in lowering costs, reducing $19B debt, and becoming more shareholder friendly.
• Vodafone (VOD) has confirmed that it will acquire Kabel Deutschland (KBDHY.OB) €7.7B (€87 a share) in what will be the U.K. operator's largest acquisition since its entry into India in 2007. 

Commodities and Forex

• Goldman Sachs has cut its outlook for metal for both 2013 and 2014, expecting gold to end this year at $1,300 a troy ounce - which is a 9.4% decline from previous forecast based on a strengthening dollar