The Trans-Pacific Reality of Modern Dynamic Asset Allocation
Sparing for the moment all history lessons, the major economies of Asia (particularly the most highly-developed of those economies of South Korea, Japan, Hong Kong, Singapore, Taiwan and China) all have their own burgeoning and dynamic equity markets and industry sectors, just like in the U.S., and the rest of the West. And also just like U.S. equity markets, Asian equity markets have their own sector idiosyncrasies with their own major players, their own internal market dynamics and finance sectors, their own complex web of interrelationships with foreign investors and currencies, and their own fluxing relationships with their own central governments and regulatory institutions. Each economy’s equity market has its own opportunities, behaviors, and limits, and they all interact and overlap with each other in ever-shifting ways. The activity and volume of different levels of public vs. private. vs. State ownership within each economy is always evolving and the pieces are always jostling for position among other global economies competing in the same arenas and for the same resources. This is the current geopolitical playing field and a fundamental, not-to-be-ignored component of all international supply chains. If you think you can invest in equity markets without understanding how things work around the Pacific, where, for example, the majority of all international shipping occurs, well… good luck!
Over time, leaders turn over, demographics shift, policies evolve, and technology rewrites what’s possible in the modern world. Trying to comprehend the inherent uncertainty of the future and mitigate risk necessitates a perpetual process of revaluating the environment, particularly in the investment field wherein human participation ensures that
- a) the forces of competition will discover relatively better prices than others, and;
- b) the zero-sum-ism of trade itself will divide every transaction between more-profiting “winners” and less-profiting “losers”.
As a conservative assumption, one should assume that all other players in the game are constantly reevaluating their positions to competitively outperform you. These dynamics play out at every scale of investment, from retail speculators trading shares in online apps to national central banks hedging currencies against future inflation, and nobody wants to be the fool who didn’t and couldn’t avoid their own financial downfall (and no, human psychology is not a removable variable in the equation; it is a permanent feature).
Since financial survival in the modern world is a prerequisite to all other forms of prosperity, it must also be planned, maintained and balanced, from a “defensive” perspective, against the “offensive” activity of seeking higher returns. Furthermore, since virtually all major supply chains around the world have at least some global component to them, the interrelationships between nation-states is more than a background concern. Governments and companies are in constant economic competition. Take for example a particular company or country that has a lopsided trading relationship with another certain big player, perhaps a big player like China. If that big player dramatically alters their economic behavior due to unrelated motivations (say, domestic response to a new CCP initiative targeting some domestic concern and having nothing to do with their relationship with another country), the economic “shockwave” that ripples out can have crippling effects on the corporate accounts of any connected company, the availability of future financing, interest rates, response to inflation or market disruptions, or any other possible thing connected to financial markets in any way. Sometimes, because the trading relationship is so close, the “explosion” can’t be avoided before it’s too late, but the “fallout” can be dodged (and frequently profited from) with intelligent planning. Such phenomena are natural, expected events in the life cycle and evolution of human commerce.
Due to the combinatory nature of business efforts and the overlap of sector designations, key components also tend to emerge over time that hold particular importance across large swaths of the economy. Try to imagine building cars, computers or aerospace defense without the key component of semiconductors. Or imagine the ripple effects if world food output inconsistently drops by half because a key fertilizer component becomes suddenly scarce. The incredibly broad impact of such key components is never fully captured in segmented market data or market sector valuation; comprehension of the behavior and intersectionality of trends must be synthesized across informational sources that take into account widely varying types of data, including non-numerical information. The analysis becomes more accurate and economic rationale emerges more readily when information can be compared and measured against the same kind generated from independent and internationally-separated sources, which is why tkscm, limited cross-analyzes economic and financial data from different local sources and institutions around the Pacific Rim that can provide a reasonable level of trustworthiness.
Key components are just one of many variables that significantly influence how economic sectors and the companies that populate them grow, evolve, compete, and die. The globalization of supply chains, material constraints, the demographic shifts and population explosions along the Asian Pacific Rim, and the unrelenting modernization fueled by technological progress all contribute to sector evolution and all point to the significance of Asian markets as a going concern on both domestic and international scales. The limits and economic control of market sectors are always bulging and distorting and penetrating into each other, and the actual capital that constitutes all economic flows has no consciousness and doesn’t care what country it’s in. In this way, all markets are permanently interconnected through the inherent mobility of capital itself, which can never be permanently contained because it can always be enticed to be moved (though, it can also be destroyed). Neglecting to understand the economic and geopolitical dynamics that govern trade around the Pacific is to accept both an enormous blind spot, and a future reality populated by events that seem much more random according to less-informed initial conditions. Thus, a Trans-Pacific (TP) network of data analysis is a necessary framework for this Dynamic Equity Allocation Research Report (DEARR).
As the wealth in Asian markets grows, so will the infrastructural significance of Asian ports, exports, imports, manufacturing, currency, trade agreements, and demographic evolution, and every action therein will have increasing significance and greater market-moving potential. The companies, products and services that constitute each market sector are constantly evolving and dying out, and the definition and scope of each sector, in and of itself, is undergoing the same process. Analysis of how different sectors and industries evolve and adapt to the ever-shifting global investment landscape is an indispensable tool for any dynamic asset allocation investing strategy. One cannot effectively plan for investments in a global environment without an informed global perspective, and one cannot accommodate an informed global perspective without a sufficient comprehension of the global human economy’s newest central pillar: Asia.
We have used this TP approach to focus and profitably manage our own portfolio, and as long as it continues to remain profitable, we will offer a small number of individual players the opportunity to incorporate the same sector-based market research we use into their own trading strategies.
tkscm, limited 