mandag den 22. oktober 2007

US weakness ? Not anymore...

Seem I am the only one thinking this week-ends G-7 was much closer to getting actual wording on the weak US dollar. I note with some interest this headline from The Guardian :

(America vetoes G7's dollar alert) add to this following text from post G7 press conference:

"WASHINGTON (Thomson Financial) - Euro group president Jean-Claude Juncker said the euro zone will continue to monitor exchange rates closely following the euro's strong rise against the dollar.

He said the euro zone and its G7 partners are monitoring exchange rates 'in particular in light of recent sharp moves' in currencies.

The euro set a new record of 1.4318 usd earlier.

Juncker told a news conference at the G7 meeting in Washington that the euro zone had noted 'with great attention' that the US authorities had reaffirmed to their G7 partners that a strong dollar is in the interest of the US economy.

Markets should be aware of the risks of one-way bets in currency markets, he added.

European Central Bank president Jean-Claude Trichet said the US authorities' comment on the strong dollar was 'very important' and he fully subscribes to US Treasury Secretary Henry Paulson's comments that a strong dollar is in the US interest."

You got mixture for a cocktail which I call 2000 in the reverse! In other words, 2007 will soon become like 2000, only this time it's to sell EUR vs USD, not the other way around.

We are still VERY long USD calls vs EUR, NOK and CAD.

In the stock market we took profit on short STOXX50 into the close Friday- we will most certainly sell again, but... rule of thumb is to wait 24 hrs before initiating new trade.

The SUPERFUND SIV, "sponsored" by Paulson, is getting a lot of bad press and rightly so, I will not add to this equation but note this: It will only move risk from 2007 into early 2008.

If you are in doubt whether there is new round of credit weakness coming let put this to you:

1. RBS and Barclays ... went to Fed, yes Fed to borrow money.. Not a sign of gr8 things to come. Barclays went lower than August 17 low todat and rightly so. It is a bank runned by fair weather guy who cant see any issues anywhere.

2. Robert Rubin will NOT sign Citibanks accounts. He is simply afraid of the new legislation which makes his personal fortune liable if Citi is sued. He is as smart as they get.. and he is not signing anything with C in it!!!

3. The Average decline from Oct. 3 to Nov. 8 in years ending with 7 has average decline of 14.2%. 11 such incident has happened only one deviated (small gain of 1.7%) (source: Peter Eliades, Stock Market Cycles)

4. There are 5.000 stocks in the NASDAQ, but the top 50 stocks accounts for more than 75% of volume. Equals = massive speculative. This is not broadbased.

I am certain the next move is about tangible vs non-tangible asset.

Gold will do well as the US continues to use printing press to create US dollar to sustain their excess demand. Inflation is coming and fast. Gold has become new reserve currency.

In the same mold crude and agricultural products. I am keen on DBA US and other related commoditiy funds.


Fx: Long USD vs NOK, EUR, and CAD
FI: Took 50% of big 10y position off. Strong seasonal into Nmovember.
Commo: Buying gold and crude on dip. Note that Crude makes cyclical high most often in October (>10%) with December being the low.
Equity: Flat, but short Cramer favourites: RIMM, GOOG, AAPL and AMZN
Selling Barclays today....for fall-out this Q4

Performance: +67 bps since live update started.


fredag den 19. oktober 2007

Back from Paris.. sorry for lack of updates...

Maybe I shud add that these updates are as live as when I m in my office in London or Copenhagen, unfortunately the next quarter takes me around the world once, but....

Leading into G-7 I got some feeling in Paris, or rather a confidence that the french feels they can get some sort of 'action' which could stop the weakning US dollar. The french do talk extensively, but this time there seem to be odd confidence I have not seen in a while. I know the media is busy saying this is non-event, but since then has the media been AHEAD of time?

I got strong feeling, which could be proven wrongly shortly, that we are inside 1-3 EURO from top of the EURUSD cross. I remember moving back to Europe in 2000 from the US and how EVERYONE was betting their house the EURO would go to zero even dissolving.......people forget quickly.

I will follow up with more detailed analysis this pm....

Otherwise straight to the positions..

FI: We are and haven been long 10y notes since the last blog...and this time size through Dec 110 calls...

FX: We are VERY long US call vs EURO and NOK - and obviously losing some money.....
We are also long JPY less size but with nice 116.00 strike...

Equity: Initiated one unit short (of maximum 3).. yesterday in STOX50 (4.464)...
We are also short AMZN and will add some more single stocks 2day - basically I am going to short the idiot Cramers index of high risers.... !!!

Commodities: No present positions

Bank of America reporting was interesting in several ways;

1. The steep decline in investment banking..
2. The amount of loss provisions...
...but ...
3. Most interestingly, BoA is the cleanest RETAIL bet in the US. BoA is by far the biggest bank and with the biggest exposure to the US at large. I find that as KEY INDICATOR in that consumers are more hurt than present numbers indicate......

Add to this that SIV's and off-balance sheet vehicles seems to be coming back to the surface of the trouble water indicating ROUND 2 is about to start.

After having been EXTREMELY confident in August that this evolve into crisis, I am far more prudent this time. I think the odds are 60 vs 40 for a full blown crisis, but we need to break 1520-1525 in S&P ....

On the FX market, make no mistakes; the fact we brokes 115.80 yesterday made excellent medium term forecaster like Andrew Baptiste calls for bare mimumum of 111.61 low tested with real chance of 105.00.

My comment: Why not ? Despite some renewed disappointed in Japanese economic numbers, they JPY should based on their growth and future yield path have been much lower. I think 100.00 is fair value. JPY is quasi Yuan so follow G-7 for related follow through. In terms of positioning JPY carry is back in force although not in same size as in late July.

Performance MTD etc... up later - report running late today......


torsdag den 11. oktober 2007

Thursday before the Friday 2..

Well so much for "fading" the moves in fixed income, they came right back down today. Relatively good claims numbers and slightly better trade data was the menu for today.

Trading wise...we got stopped in long FI, small loss, Dax - broke the magic 8.100 in the future (-9 bps).. all in all loss account from overnight was down 15 bps.

We initiated new postions based on our model and general outlook. The Fixed Income sector is clearly doing some reflation we have sell signal from momemtum model in bunds, bobl, 2y, 5y, and 10 y. We now need confirmation for this but going into end of Europe session it looks valid. We initiated short bunds & bobl#s - the theory being short the most aggresive inflation hawks, I.e: ECB relative to Fed.

We also bought some EUR p USD c based on a couple of things:

1. The interest spread differential have moved 2.5 std. dev. in favor of the US dollar without any luck so far - we feel its days is closer.

2. There are some talks that the European trying to get some sort of consensus for G-7 communique next Friday on the weak US dollar. Getting all of G-7 to agree it much tougher job, but the Europeans seems confident they can agree something.

We feel the momentum is strong on the US weaker play, so we bought some 2 week EUR p USD c, 1.41 ish strike for less than 8% vol. (Yes, volatilities are back to almost pre credit crisis levels)

We also added exposure to energy, gold and agricultur through ETF's as this is beginning to look like smooth sailing in Q4 - I have been slow in acknowledging the technical signals which have been there as I have felt fundamentals have been missing, but.... this market is NOT about fundamentals - its feel underweight risk now that the economies are not falling over a cliff.

Finally, we added, although reluctantly DAX which broke its old high - it still looks like a 50/50 whether its going to stay above the break out level into the close but ALL stocks markets are now long in the model....


BPS: -13.32

onsdag den 10. oktober 2007

It's time to go to real time experiment

Well, this year has had it's up and down for your fund manager, YTD before this month was shy of +200 bps for the year after good performance in July and August, the reversal to normal cost some money. In order to keep head and tail my positions I will start inputting daily postions and thoughts - commentaries welcome.

Present positions (day 1)

Today we moved from long carry into a more risk averse position. Our models showed some nervousness and technically RSI looks to break of many stocks indices.

We also noted that during our model run that fixed income showed clear confirmation of "reflation" idea, but.... we have had two false breaks. Yesterday Gilts broke their buy-entry level only to fall back. The same happened in the belly of the US curve today with 5y breakink 106.11 only to trade higher again. We take this as sign the trades and follow through from Friday has lost momentum.

In itself not that unusual as main bulk of the last two month's Non-farm was the not-present-government-workers to the present government-workers! The reality remains private sector is not producing any jobs at all.

But to the order of business...

We sold EURCHF long with nice profit (1.6704 exit)
We took net loss in EURGBP where the follow through on the weak GBP couldnt carry it pass the 0.6930 in earnest (.6913 exit)
We tried to sell GBPUSD this am only to stopped out - 20437...
We took 1 tic loss on 10y note position 108 23/32

and we initiated new positions in:

EURNOK - Long @ 7.6951 (15% of net value of fund)
EURSEK - We remain short from 9.2017 & 9.1781 (30%)
NOKSEK- short 1.1877 (19%)
JPY c USD p, strike 116, Price 41 pips (Net risk 10 bps)

Dax(Dec)- short 8.055,50 (16%)

10y Notes (dec) - Long 108 23.5/32 (37%)

Return on live porfolio (1): +4 bps