tirsdag den 16. december 2008

Happy Holidays and Post Fed comments

It is time for me to write the final piece for 2008 - I have under the circumstances had excellent year in the fund, but somehow I am totally exhausted watching the S&P go up-and-down 100 points every day.... and today I went to the funeral of my dear friend Jens.....and it made me realise that I need to take some time of - enjoy the good year - and let markets be markets as the "lottery" circus continues into the year-end.

Fed was decisively desperate - "all in" poker style as my friend Jesper calls it....and Bless them, I wish them luck..... hope is good, especially considering the year we are going to face in 2009 with rising unemployment.

I will keep a few positions - would not be able to sleep if not - so.... long puts in STOX50 still, bought some EUR p USD c @ 1.4050 ish today...., and our allocation model still maintains the exposure as stated before.

Finally, let me wish you all a Happy Holiday, may the presents be big and expensive for you all.

Safe Xmas,


Aren't we forgeting the true meaning of Christmas? You know, the birth of Santa. Bart Simpson. Weekly Investment Meeting

The three driving PREMISES remains:
  1. Cost of funding drives market and valuations
  2. Price of liquidity new unknown (tax on money)
  3. No prior analogy historically will work (because this is different, very different)


Zero visibility from here - main topics for 2009 being:


  • Unemployment - we see >10% in both Europe and the US (see more under overall conclusion) - and losing your job makes people STOP ...stop living, stop buying, stop thinking... making it binary - while in the Ivory Tower of the banks they talk like its continues process - its not! You lose your job, you lose it...
  • Low oil prices - the impact could be massive on Social tension, geopolitcal risks and earnings power for EMG countries and companies. No one seems willing and able to imagine <20>
  • China growh makes it to zero - A story I have carried around since my Asia trip - seems banks now overtaking me..all of the sudden China not growing is the new Black, but even with growth at 3-5% China will be losing jobs, millions of jobs...and the 2009 will be real test for the THIRD WAY (you all know what happened to the 3rd way of Clinton, Merkel and Clinton)


  • Psychology so negative it can work positively for the market. If there is 100.000 jobs right now in Bank of America and 30.000 needs to go - then 100.000 are afraid and living like they will lose their job, but when job cuts are done theoretically the 70.000 will start spending again. (The risk being 30.000 jobs become 50 or 60.000 later on)
  • Q1 2009 circumstantial evidence would suggest there is "plenty of cash" on the sidelines, some of this should be deployed when we go into 2009?
  • Fed/Treasury plans does work. Unrealistic but let us put it up there. Fed takes rates to zero, start engaging in Investment Grade, they borrow not 3 trillion but 10 trillion of the future earnings of America... and it works!!! Hurrah!!!

I have put our target out before but for now we remain with key predictions of:

  1. S&P500 will see 500.00 in 2009
  2. Yield in Europe & US will go to zero
  3. China growth will be less than 3%
  4. Tension in the EU will increase
  5. Oil goes below 30.00 maybe even 20.00 US dollars
  6. EUR/USD will see both 0.9500 and 1.4000 in 2009?
  7. EMG underperforms everything else...
  8. Credit spreads will continue to widen.....

Investment meeting conclusion: There is some "nervousness" ahead of the FOMC on the text and its implications. It seems unlikely Fed will deliver more clarity if only because they do not have it themselves, but there will the usual: We will do whatever it takes to restart economy....market looking for minimum 50 bps. Meeting could disappoint.

We are still see incoming data being extremely negative, earnings likewise, and there is growing recognition of our own main theme: Unemployment - when this hit the "Street" it could take us down again to new lows.


This week: Unchanged 90% in cash, 10% deployed in negative stock markets.

Last week: Move from 70% to 90% based on lack of direction and incoming policy response being confusing.

Economics: (David Karsbøl)

  • Economy in freefall
  • Tankan worst in 30 years
  • CPI drop today expected to +1.5% from 3.4% biggest drop ever (?)
  • Empire Manu. contracting
  • Every single indicator at multi year low, some of the indicators can not go further down due to the way they are constructed!
  • Our weekly model remain low - staying low
  • The US and Sweden the two most decelerating economies

Main themes: Lack of credit & unemployment rising

Fixed Income:(Jesper Christiansen)

  • Where the Government is involved "value is being created"--- i.e lower spreads, but everything else is still showing pain, lots of pain
  • Next move from Fed would be to enter Investment Grade and High Yield -- Q1 2009?
  • Plenty of value prepositions. On-and-off-the-run Treasury gives you guaranteed 50 bps!
  • TIPS underperforming
  • US ABS almost unchanged - EUR ABS wider spreads
  • Danish mortgage spreads more or less unchanged with refinancing over
  • NOK and SEK putting pressure on DKK (deval in 2009?)
  • US Government fixed income outperform EU on quantative easing, Trichet talks down rate expectations, massive supply in EU Gov. FI in January
  • Credit spread making high after high - Deutsche Bank impact?
  • Investment grade starting to do better - FDIC bonds included?

OVERALL: Our mechanical model maintains serious overweight, so do we: (check bottom part of this blog for models allocations) http://saxomacro.blogspot.com/2008/12/market-is-long-hope-hope-and-hopethe.html

Technical Input: (John Hardy - copy version available here: http://drop.io/itvld6d# password: saxobank

Stoxx50 and S&P: Waiting to Bearish stance. Failure to maintain upside break disappointing.

VIX: We need > 60% for bearish sentiment go gain tracktion.

10 yr US: Buy option for downside (price risk) ?

Yield curve in EU and US huge different. Europe is steepning while US is flattening.

EUR looks stretched.


  • Market is historically fairyl priced, but based on forward earnings expensive
  • Lack of credit remains key issue.
  • Unemployment will hit earnings and consumptions.
  • Commodity cycle repricing from recession to depression a negative?
  • Low low physcology could lift the market.


  • Contango begs for being crude for delivery but no one got balance sheet to do so.
  • Gold, Silver at breaking point failure would lead to big sell of.


End of the year, we are in wait-and-see mode, however almost as per usual we remain extremely negative on the outlook - believing there have not been a proper pricing of the impact on ACTUAL UNEMPLOYMENT ABOVE 10.0% into stock market and valuations of housing stocks.

There simply is not anything worse the losing your job, except death, and for some people losing their job would be equivalent of that!

When people lose their job everything stops for them. They do not care if stock market goes or down, that Wal-Mart has discount of 50%, that Bernanke talks positively, that the Government wants to help them, they need to be back at work that's it.........

Obama gives us(US) hope, but is it enough, is it too late? I think so - I would love to the positive guy calling for higher markets, lower unemployment, but I am paid to be sceptical, paid to deliver real return (unlike Madoff's)....so for now I will be concerned, more concerned than ever before, but then again, I am merely a poor farmer boy from Denmark.

Safe trading,


mandag den 15. december 2008

Monday morning quarterbacking..again...

Watched some good old American football yesterday and Monday morning quaterbacking was certainly part of the speakers "game".......anyway kind of interesting how Bernie Madoff all of the sudden becomes front-line news, not as much because of the size, big as it is at 50 bln. $, but due to the fact no one seemed willing to "call the bluff".....It sad to see "innocent" people getting hurt, but this is really the part of cycle we are.... where EVERYONE who could/should pay pays...

Why did Madoff' game got called? Redemptions! It was not due diligence, it was not financial oversight, it was not even the SEC!

No, everyone thought this was cleaner than clean, despite the performance being a serious anormally not even copied by the great George Soros ......I believe the side-effects from this will be much bigger than market willing to acknowledge as it is another blow to the confidence of ANY FINANCIAL institution - if there is not any any confidence left, what is the "goodwill" on their balance then?

EUR is flying, of course, but we took profit too early as the game continues - I see the weaker US Dollar as the market call on the Ponzi-scheme directed by Bush, Paulson & Bernanke - some nice gentleman from Barclays sales-team claimed today they were doing a good job! I do not know if this was based on him being nervous about keeping his job or his firm believe that offering "public money" for private would work wonders.. ????

EUR is going to get US disease on growth..or lack of it.. but for now we are in a December EUR rally which could easily see 1.3700 and 1.4000 on-route to our tactical call change as of last week....... of 1.5000

Stock market - in broad based consolidation - got feeling with the US Dollar starting to weaken that post FOMC, there could be a price to paid for the stock market, but as some of you have commented maybe I am tooooo negative for my own good. Investment meeting tomorrow... we start @ 90% cash, rest in negative markets positions.....full disclosure tomorrow.


Keep powder dry to post FOMC - our indicator/model shows increased risk of sell-off as credit spreads continues to expand, short-term fixed income remains bid, US Dollar weakens, and foreign press officers throw shoes after the Prez Bush.........Calling him "a dog" would be considered a compliment for him in the US I guess... ? ;-)

Valuation hard to figure out.....but I am looking forward to the investment meeting and to measure our conservative stance vs. the alternative "normal allocation" in the last week, month and quarter.

Main concern remains the turn-of-the-year in the money markets, and into Q1 my counterpart risk. I got nasty feeling Lehman will not be last major institution to "die"........if the hope connected to Obama does not materilalise soon....this could get ugly....

Safe trading till tomorrow,


fredag den 12. december 2008

Market is long: Hope, hope and hope....the cynic Friday comment

No one seems to care for 50 bln. $ fraud scandale, no one seems to notice Obama is knee-deep involved in Chicago and that ALL PRESS, ALL WEEKEND will be on him trying to explain away how apperently the 2nd most important man in the US.. the Chief of Staff got involved in Chicago... dodgy politics....

Washington wud not be able to sell a cold Coke in Sahara, but pretends things are good

Jamie Dimon, CEO JP Morgan pretty much tell the world Q4 is TOAST - and that they have serious issue with earnings and potentially capital... but still...market is long hope, hope and hope...

I bid you all a lovely week-end...and will not remind you that 2008 was the year of financial industry insolvency, it seems more and more 2009 will be the year of Consumer/Private insolvency, something much worse at its entails people losing their job.. as Reagan said: A recession is when your neightbour loses his job, a depression is when you lose your job... I am afraid...Depression is now the name of game - the key catalyst being EVERYONE on CNBC USA tells me its impossible.. making it a 99% certainty.........


Long 90% cash/fixed income - took profit on short cash S&P-500, took profit in the massive move in EURUSD.......took profit in Gold.....still MEGA long puts in STOXX50..... took profit in S&P500 put options (exp next Friday- decay starting to hurt).....and in our Allocation model we are:

All codes are Saxo system codes and number of shares/index based on 1mio EUR.....:

Short 12% S&P-500 (SP500.I) --- 145
Short 3% Stoxx50(Stoxx50e.I) --- 13
Short 3% Nikkei (NI225.I) --- 444
Long 3.5% Ultrashort MSCI Emerging market(EEV:arcx) --- 516
Long 5.0% Short DJ AIG Commodity Index(SALL:xlon) --- 520
Long 35% IShares 10-20 Y Treasury Bonds (TLH:acrx) --- 3838
Long 35% 7-10 Y Eur bons (IBCL:xlon) --- 2229

Safe trading,


torsdag den 11. december 2008

Tactical change - EURUSD in 1.5000? The Silly Detroit business plan....and finally...The idiots on CNBC US ....

Dear Investor,

This is my note from this morning for internal use:

It is simply frightening the logics behind this Detroit plan – please read this transcript from Nightly Business News – under PBS in the US…….there is no way Detroit can have
5-6 pct growth in sales, cut cost by 50% and then maintain solvency….. but…. Politicians more than willing to use 13-15 bln on this --- I remember when 10 bln. US Dollars was a lot of money.. no more…..

We are in process of changing our EURUSD call to 1.5000 by Q1 next year…..here is why:

1. Fed to issue debt? No governance.. must be junior-debt to Treasury? So why? Plus as friend point out: if they issue debt surely there will be CDS on it – meaning direct “credibility measurement of Fed”.. not something I think Bernanke would want.....

2. Treasury Czar (where do this idiotic term come from ?)… listen market: We will issue 1-2 trln. US dollar….. WHAT!!!!!!!

3. Credibility – as much as I think EUROPE going to break-down – I must say I think the US is close to being TOTALLY INSOLVENT……..

4. Yields – interest differentials very negative for US Dollar..

5. GMAC will face Chap. 11 it seems….

6. Money market funds yielding close to zero..and not taking in new money (as it dilutes present holders…)

7. Sentiment – I cannot shake of the feeling the US is only in 2nd inning of double header (Thanks E..)……..

8. Positioning – my prop. Indicators indicates building momentum on upside in EURUSD …most people “fading this move”….

Please, please listen to this clowns...... please please do..and realise that listening to CNBC is absolutely guaranteed to lose you money:(Thkx Matt for link) www.youtube.com/watch?v=2I0QN-FYkpw

Finally... this is from PBS... very interesting conclusion:
NBR's Darren Gersh Gives GM's Financial Plan A Test Drive

PAUL KANGAS: If GM gets the money, what happens then? And just what is this company worth now, anyway? Good questions. So we decided it was time to get some better answers about what's behind the numbers GM sent to Congress. While Washington debates a bailout, we sent Darren Gersh to get some expert input from outside the beltway.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: To test drive GM's financial plan, I went to Dartmouth's Tuck School of Business and asked finance Professor Anant Sundaram to scrub the numbers the auto makers gave Congress. All right professor, so here is GM's term paper. Let's start with what grade would you give it.

ANANT SUNDARAM, FINANCE PROFESSOR, TUCK SCHOOL OF BUSINESS: If this was a term paper in my class, I would have to give it unfortunately, a "C" plus.

GERSH: Ouch.

SUNDARAM: The reason is there is lack of clarity. There is lack of consistency and the data, the methods, the approaches, are just not transparent.

GERSH: So this is kind of an all nighter?

SUNDARAM: Absolutely. Never happens at the Tuck School of Business though, but I have to say it has the feel of an all-nighter that was pulled with a drop dead deadline.

GERSH: In that all-nighter GM apparently left out a cash flow analysis, the gold standard of finance. So Sundaram did some detective work to estimate GM's revenues based on a chart on page 21. You can see all those details on our website, but here's the result.

SUNDARAM: Making certain very favorable assumptions, assumptions favorable to GM, if I were to back out a revenue forecast, essentially tells me that GM is expected to have about $136 billion in revenues in 2009, but they expect these revenues to increase to something in the $160 to $165 billion range by the end of year 2012.

GERSH: OK, so you've got the revenues up there. Now how aggressive is that assumption? How fast do they have revenues growing and have they done that before?

SUNDARAM: This revenue growth implicitly assumes something like 6 to 7 percent in compounded annual growth rate in revenues, which is a little bit on the optimistic side. Actually, if you look at how their revenues have grown in the last five years, it's been less than 1/2 percent per year, in fact closer to a 1/3 of a percent, so we are talking about growth rates being about 15 to 20 times what they have been in the recent past.

GERSH: Sundaram points out GM plans to do that while cutting brands, employees and dealers, but if we assume the company hits that goal, we can put a value on GM. Sundaram cautions it's a rough estimate which compares GM to companies like Toyota and Honda. Bottom line: GM could be worth $50 billion to $80 billion after it has successfully restructured the company in 2012. And using some fancy math that we will spare you, Sundaram adjusts that figure back to get a value for GM today.

SUNDARAM: And essentially under some reasonable judgments one can make about discount rates and so forth for GM, suffice it to say that in today's value, this $50 to $80 billion by the year 2012 will probably be - we're talking about it being somewhere in between $32 billion to $50 billion range.

GERSH: But wait, GM owes banks and investors and its union $66 billion.

SUNDARAM: So if $66 billion were the claims against this company, then what we are saying is the value that is left over for equity holders is negative.

GERSH: Which is why GM is promising Congress it plans to negotiate a deal to cut its debt almost in half. So if you were the bank of Congress, the first amalgamated bank of Uncle Sam and this company comes to you and says, we want $12 to 18 billion? Would you give it to them?

SUNDARAM: I would hesitate to say yes, unless I'm convinced that they can get all the reductions, perhaps a little more than they're hoping for. If I were the car czar that they are thinking of putting in place, the issue that I'd be focused on night and day, 24/7, is the speed at which I can get the liability down to $34 billion or below, i.e. the negotiations with the lenders and labor.

GERSH: Consider those debt restructuring negotiations GM's real final exam, one it must ace to stay in business.

Darren Gersh, NIGHTLY BUSINESS REPORT, Hanover, New Hampshire.


We went long EURUSD @ 1.3098 (stop @ 1.3055 offered), Long Gold @ 816... (stop 793)...and we are short S&P cash @ 899.98... and VERY LONG puts in Stoxx50 and S&P.. into year-end....

I simply do not get this --- still @ 90% cash - with the 10% deployed negatively...

Safe trading,


China, China pants of fire......

My Chief Economist David Karsbøl has produced short piece on China growth - I remain extremely sceptical of the illussion of 8% even 5% growth in China - a lot of hope is built on China being able to pull demand with it and infrastructure et al... I will be surprised to see 5% growth, even 3% .... I think, unfortunately that China is going to have tough times ahead and as David points out the similarities with the US in the 1920s are more than relevant.

David Karsbøl, Chief Economist, Saxo Bank:

China, China, China. China has been THE story in the past five years. Who would not be invested in a country with minimum 10% growth per year, with a strongly growing consumption (at least sometime in the future), thousands and thousands of new millionaires and a voracious appetite on commodities? Everyone depended on China – both to get a return and to explain how the global growth could and would continue. Everyone wanted to go there, either physically or by investing.

Well, isn’t this exactly how investors were perceiving the United States in 1929 (albeit US growth was only averaging 4% p.a. before 1929, but it was still somewhat higher than in the rest of the world)?

There are more parallels: Both China and the US in 1929 experiences extremely strong growth rates (roaring twenties in the US) for almost a decade, which completely blinded observers. Both have had some of the world’s highest savings and investment rates in their boom periods. Both had significant current account surpluses that they tried to cope with (China by buying US Treasuries, the US by buying gold). Both were trying to uphold pegs to faltering and unsound assets: The US tried to prop up the GBP at a ridiculous rate after the re-peg to gold caused by WW1 inflation and China is now trying to peg to the USD, which despite the newfound strength is still trending lower and will end in catastrophe. For both of the countries and their boom periods, monetary policy was extremely expansive at the same time as the general price levels were flat to only moderately increasing, which led observes to erroneously conclude that monetary policy was “neutral”. Therefore, very big bubbles were allowed to evolve and burst.

In the 1930’s, the US was one of the economies worst hit by the crisis, because their monetary policy was taken to the farthest extremes. Chinese monetary policy has consistently been most extreme among the G20 countries. Over the past 10 years, annual M2 Money Supply growth in China has averaged +16%. That should be very frightening for the eternal China bulls. They will be lucky to see positive growth in the next three years.

David Karsbøl, December 11th, 2009

onsdag den 10. december 2008

We should not let our fears hold us back from pursuing our hopes - JF Kennedy

Back in the land of 80% tax and winter depressions..........This does not make sense! I am a simple man by all accounts and I need things to make some kind of sense for me to enter into it, maybe that's why I never become filthy rich or make 200% returns, but somewhere deep in me I need transperency and I am none from the markets or the policy makers:

This morning starts with the Fed wanting to issue bonds- leave aside the fact Fed not authorized to do so, which havent stop them from doing things which is not kosher before, abd focus on the accountability: Who will oversee this? Who is controlling Bernanke ?

Bernanke is doing everything he wants - he feels like having a free option and he is using it - poorly........

Read Karl Denninger, Market tickers view: http://tinyurl.com/5dq93q

Market is on a bullish move and more and more people are joining the ranks of: End of year / Q1 rally ....... Be my guest. I need more than a few days of low volume trading to change my mind.....lets go through a few risk measurements:

  1. 3 month T-bill trades below 0.00% -- wow, that's positive news....
  2. VIX is @ 60% - wow, that's low...
  3. Itrax > 1000 -- wow, that's surprisingly low...
  4. Freight rates --- all of them floored-- wow, that's good news, then they can only go up...
  5. Earnings is being down-graded daily - wow, cool, meaning it will go up soon....

I could go on, but clearly all of above is "good" news and I should be buying everything in sight......

Seriously the world is not analog as everyone in the US told me - it's binary: It's either Zero or 1... 1 is the condition in which fiscal policy, monetary policy, tax rebates, central bank BS works and ZERO is a situation where everyone is more concerned about losing their job than anything else....

  1. Unemployment --- (0,1) = 0 --- No one outside Wall Street cares about the stock market - they want to know if they got a job or not. Everything else is irrelevant.
  2. Mortgage rates -- (0,1) = 0 --- Bernanke/Paulson the Dodgy Duo, DD, is busy helping out the banks - no real help to mortgages holders.... AND even with a perfect credit score your JUMBO rate is 10.0%!
  3. Pension return -- (0,1) = 0--- No one ever thought stock market would not go up forever!!!.... and now pretty much ALL public and private pensions are not only underfunded by they are also losing so much that many people needs to extend their retirement age by 2-5 years... nice job administrators..
  4. Refinancing --- (0,1) =0 --- 22% of corporate debt in the US is bank debt (vs 58% for Europe)...meaning 22% of all debt needs to refinanced inside one year - I wish everyone a Merry Christmas on talking to their bank managers on extensions(maybe they can get hair extension instead?)
  5. Balance sheets and real money ability to enter market --- (0,1) = 0 --- I went looking for ONE, just one bank or fund manager, willing and able to arbitrage some of the "free money" away in the fixed income market - I found none -- do you know any? This indicates that despite the rumors of big cash on the sidelines - no one willing to use it...
  6. Hope (0,1) = 1 Major hopes all around - let's hope it works going to Church praying for a better day tomorrow.

Call me bitter, call me negative, call me anything but untill I understand EXACTLY how this Ponzi Scheme of printing money and moving loss' from private to public sector works out - or give me EXIT STRATEGY for the DD.....then I will be most positive guy in the world.....I am getting nervous that my S&P500 in 500 next year is too conservative... but as fortunately for you and the Hopers... I have ZERO PREDICTIVE POWERS.......


We moved to 90% cash from 75% in the Investment Meeting yesterday - too much hope out there and too little analysis of facts..... the 10% is employed on negative markets.. we have been scaling short in S&P and Stoxx50 for the last 5% ......

It is soon Christmas... no need to risk the gains for this year.....

Safe trading,


tirsdag den 9. december 2008

Same mistake but expecting a different result

My friend Yoshi Fujioka has produced a new macro view - he is always worth reading:

Dear friends,

In the aftermath of the 1929 crash, conscience pushed some Wall Street professionals out of their office windows and the society then saw it as a part of the sorry story, but, in 2008…

Ed Seykota said, “Part of the function of economic downturns is to restore compassion, community and humility - and to support people in migrating to more profitable enterprise. It looks like we might have a way to go.”

Coordinated Governments’ Actions are Helping the Coordinated Attacks by the Big Banks

When the big prime brokers raised the margin to 35% from 15%, the market lost $1 trillion liquidity and was crashed. The big US banks not only get free money (290bp free positive carry vs. 10y UST) but they are now also in control of this market on the downside by manipulating the margin calls and lending amount. Who can say the 35% is the top? Insider trading is no longer illegal.

They may well let the market bounce to 1000 S&P, and then do it again sometime between over the year-end and Q1 2009 pushing the index down to 650 next time. The banks think their existence will always be justified at whatever the cost and they see investors’ and tax payers’ money an easy prey via Paulson and by squeezing the hedge fund industry because central banks are not in control of money, the big private banks are by margin calls, foreclosure and loan amount.

It makes me so mad that Japan, the country I had given up all my hope 29 years ago, again is stupidly contributing $100 billion to the US Treasury controlled IMF, which would only help to promote the US agenda, while the same department killed any chance of creating Asian Monetary Fund. Yes, China is a planned economy and not efficient distributor of resources, but the democratic US government is making more mistakes (the same mistake) more often and it is still expecting different result. So Asia still is my choice of lesser evil.

If this kind of insane transfer and extortion of wealth to the unfit continues when we will have real food, water and natural resource fights in a few years, yes we will have wars if not the second civil war.

But I still hope the people will soon wake up and do the right thing before too late. The US was my second home for 11 years and I know with my own eyes and ears that they are good and capable of doing the right thing.

“That the people have an indubitable, unalienable, and indefeasible right to reform or change their government whenever it be found adverse or inadequate to the purpose of its institution." James Madison


søndag den 7. december 2008

A leader is a dealer in hope. Bonaparte

Hope, hope and more hope. The readers of this blog knows what I think about hope - it belongs in Church on Sundays with the other prayers, but sometimes there is so much "pain" that it creates a psychological need for hope.

This is such a time - the frustrations in the US have reached levels which have made the Americans even more irrational than normal. Every single meeting I walked into in New York talked about the "choices being analog" - Analog? It was almost so indoctrinated that I started to believe they all had been brainwashed.

The consensus US story goes like this: (The score 12/13 meetings ):

  1. The political and economic choices are analog - there is no downside to fiscal stimulus and massive printing of momoney... its eithers ZERO or "something"......and it will be something... (bad?)
  2. Obama is a fine young man, who has the abilility to unite the US, and taking them through this crisis. He is rumoured to be more afraid of Speaker Pelosi than the GOP!
  3. The good news is that we are 50% through this crisis (apperently all recessions lasts exactly two years) and stock market always starts to go higher six month before recession is over - ergo: we are one year into the recesison, leaving between now and the next six month to be major rally point.
  4. Fed lies about the outlook (and denies reality) - they are saying unemployment peaks at 7.0% ish, but really believe its 9.0%+ -
  5. The closed circles of Treasury and Fed rallies behind each other like hangers on - or entrourages - there seems lots of room for Larry Summers( 'The women are less intelligent than men' former Harvard President....a former Clinitonite official) and the ever present Mr. Rubin, who despite taking Cititbank to the brink of bankruptcy is still called upon to help the US again - and unfortunately for me, and you, Volcker is merely seen as figurehead - a Statesman not to be heard.
  6. One day, soon, greed will return and the banks will stop asking the Fed or Treasury for more money and start taking risk on themselves.(I did not get how they in the meantime recapitalized the balancesheets?...but I am not one to let facts get in the way).. The only thing missing is the 4.5 mio. unsold homes - but with the printing press working overtime this is only matter of months before the inventory is gone.....
  7. 2009 is a lost year, but do not worry it will only make 2010 a much better year......
  8. The corporates in the US is doing great, hence there is no need for worry, it is "only"" the banks and the consumers which are toast ... but hang on.... aren't the corporations selling to those exact two audiences ? Apperently not.....and here I am being told US consumers is 70% of GDP- but it seems that's only when there is tailwind!
  9. The US consumers will never net safe - and here I must agree - they will move from spending more than they have to spending what they earn.... but they will not net safe... I agree, consider the average US smaller to medium sized cities ... they are built for people to consume.The US is built to spend money, it's a Ponzi scheme, where we continue to extract dimes in order to save on service, products and quality. Think about US cars, US food, design..........The US has given up on itself... it has lowered its standard to levels which is really only comparative to an emerging economy. In the middle of its biggest economic crisis I had the worst service EVER in New York, somebody needs to wake up!
  10. Pensions are now down so much it's impacting peoples work, life and future. I met several people seriously concerned about their future - their jobs.. and this is everybody from school teachers to Wall Street types.. they all live like they are going to lose their job...which to me indicated this economy will contract even further.

Friend of mine claims Wall Street will only be 50% of what it is today in one years time - I am sad to say I hope so, there is nothing to be had on Wall Street anymore - business is closed, and the IC, Intellectual Capital, remains focused on creating the consensus' scenarios like the above... maybe it is a good thing Obama creates hope, because if Bonaparte is right he may get the chance to be a leader.


Market continues to behave like it thinks this will work. Be my guest - I remain with 910/920 top in S&P which should be used to be maximum short. The sentiment will not change in six or twelve month. I was here in May, now in December its 50% worse.......

Finally, a personal note: My childhood friend Jens Christiansen, 44, passed away on Saturday all to soon.... Jens was my closest friend growing up....I will miss him, and my prayers goes out to his family...

Safe trading,


onsdag den 3. december 2008

Panic is near....

Had series of meeting in New York today and some things has become absolutely clear to me:
1. The incoming Obama will do ANYTHING-- including risking inflation and devaluation of US Dollar to restart economy.....EVERYTHING GOES - and Fed and Treasury agrees on this outlook even holding back their dire forecasts (They believe in +9 % unemployment)
2. The Fed, Treasury policy is driven by Entourage like - self-happy people who has no reality checks - It reminds me of Michael Jackson and his entourage Geithner being MJ....
3. The innner circle.. the entourage has been told to CUT ALL DERIVATIVE RISK before end of Q1 2009 or else.. they will lose their banking license... in other words.. there is going to be some SERIOUS UNWINDING in derivatives, which most likely will drive MARGIN ON FUTURES through the roof (the only leverage vehicle left when O's Dirigisme has left the station )...
4. Finally, there is NO balance sheet capacity left to do deals - in Fixed Incomeland there are so many arbitrage opportunities.. on/off the run 5/10s ... calendar spreads.. but NO ONE..and I mean no one willing to arbitrage it-- indicating to me.. there is massive downside risk and with some important calendar dates coming up.. 8/10 dec.. Jan 20/21..I am unfortunately more than ever convinced more trouble is coming......
More tomorrow for full report.... Over-and-out from New York,

tirsdag den 2. december 2008

Service in New York ? You kidding me?

Yes, it would have been a joke less than three month ago - but seems the crisis bites here - yesterday arriving in New York I had my taxi driver volentarily waiting for me while I checked in at the hotel before going to first meeting !!!!

I lived in New York for more than three years in late 1990s and never got anything but abuse day-in-day out!

Everything is 40/50% off on December 1st! Talk about crisis - and on top of that plenty of buy three pay for two deals ..... I am not the big shopper but this is close to bargain values.....

On the other hand something never change:I was "listening" to three New Yorkers discuss the world affairs and its striking how simple and full of themselves they are - Obama is "accepted" but only due to PC - political correctness - there is terrible jokes and one liners which not even I will commit to papers flying around - I must say all of the sudden I remember why I both hate and love New York.

It is great place to visit and the Americans are at large the nicest people but in a very strange way New Yorkers are the most "narrowminded" people I meet during my travels around the world. They make George from Seinfeld sound and look like a true globetrotter.....:


There is pain here, lots of pain, no one paying school fees, the Wall Street Trophy Wifes are unhappy - there is even rumors they are marrying for looks now! ----imaging sinking so low!

Paulson & Bernanke, aka The Muppet Show, goes on TV yesterday and the market sinks, and I mean sinks as they open their mouths - dealing rooms are "begging" and I mean "begging" them to shut up .........another new low for politicians and policy makers ? Absolutely! Please watch this old video:


Meanwhile in Fixed Income Land - there is massive fight in on- and off the run 10 year notes, the market makers sitting tight(long the papers) while the hedge funds and bond funds sits shorts the deliverable - there is sooooo much cheap, risk free arbritrage available - but NO ONE and I mean no one to do the deals due to lack of balance sheet - there is so big deals to be had that it screams to me that this market is far worse shape than anyone even willing to earn up to...... Fixed income could catapult itself this week - yes even after 6 figures move yesterday.....watch as we move into futures roll.....

Also redemptions continues:


Sitting next to senior executive in Pharma on the plane over - he was "desperate" in a positive way - saying there is NO WAY in Hell he could raise new money, but at the same time he was shown better deals than ever in his history as executive, so much so that he had hired senior banker to do his M & A - and that's fortunately the bright light here:

The well managed companies are starting to be shown the good deals - at least outside banking - meanwhile back in banking-land I keep getting pummeled for stating the obvious - banks should and will fail with or without protections from Governments - this is merely 6th inning (there are 9 innings in Baseball) - as my fellow traveler from pharma stated : I am a doctor I believe in evolution, the stronger must survive!



Still @ 75% cash/short-term fixed income, and applying the remaining 25% into NEGATIVE market views: short eurchf, short Stoxx50, long Stoxx50 puts, short EURUSD(still), short NZD in options, still down-side in Gold.......

We remain with our S&P500 in 500 and all Westerns world interest rates in ZERO....this is the 5th wave starting - the worst one......I have been on the road extensively last one month and there is only one uniform message: This stinks ........

Safe trading,


onsdag den 26. november 2008

Notes on Wednesday...

First the important stuff: Happy Thanksgiving to all my friends in the U.S - I wish I was in the US this week........

Friend of mine sent me these clips with our old friend Jim Rogers - he talks common sense, probably does not make him a lot of friends, but his thought process is crystal clear. Enjoy it: http://tinyurl.com/65r8wd

I must say I am more tired than at anytime this year - hopefully it is the travelling but the market goes on my nerves.

The policians keeps doing the same mistakes, the media keeps drumming the same drum, and it is all going in a big circle ..and leading us nowhere.

I am on the record saying I personally felt Obama at least would mean change - however it seems I was wrong, again, all his appointments smell of establisment and his policy indications feels like protectionisme and Dirigisme... in other words ..I will have to keep my negative outlook something I have come to fear as being "realistic" carries too much pain as everyone rather get the free option than face reality.

Talking inability to face reality looks like Bernanke is "dead in the water" post 2010 - maybe Princeton will take him back after all ? http://tinyurl.com/6427og

Maybe what's really bugging me is the fact I have spent far too little time on the market and thinking about them..... something I will change from next week.... but doing some small research this evening some things seems obvious to me:

S&P - consolidation and hope the main drivers - we had "patriotic call higher" into Thanksgiving (Am I the only noticing markets tends to go up on National days?) ..... 900/920 begs for perfect 4th wave correction before the 5th final wave down.... in other words.. neutral into 900/920.. watch if momemtum can carry us above if not... then full short......

Forward earnings still major league unclear as Ticker Sense indicates below (Thank you Jesper):

US dollar (EURUSD)- we may have seen the high in place for this 4th correction - inflation being called lower in Europe and Stark from the ECB even talked some common sense this morning......but Europe is on the verge of serious slow-down which will take all Euro-rates to ZERO...and fast....

Market is also dealing with Investment Bank year-end - or rather state owned Investment banks - sometimes in the past this had an effects - but for now US dollar got some fundamental potentials from waning Current Account Deficit and deleveraging of balance sheets - both of which makes short EURUSD the only real worthwhile deal to carry into month end.

Fixed Income- If I ever was in doubt I should listen my asset allocation model guys now is the wake-up call - despite US Yield being hysterically low - I still do not want to lend the US Government ..below 4 pct in 10 years - there simply is not any alternatives into year-end - more of the same - low after low in yields as "quantative easing" happens.....

Finally, we are, or rather my excellent team doing some research on our Outragous Prediction (into todays lingo: Our Black Swans)... without giving away the positions I note the calls themes are:

1. Hardly any US calls ... 1 of 10 - with Chinese calls having 3-4 of 10 - this to me indicates the clear paradigm shift - when looking into 2009 ... my analysts not really that concerned/bothered with the US - the policy lead will come from what happens and get done in Asia/China.

2. Dirigisme - Anywhere we look there is more State/public sector intervention in the markets - from Sarkozy to Obama- they all embrace the "hidden hand" of Keysianisme ---this time undercover as the 3rd way....and named: For the sake of greater goods (It will die as much as Tony Blair failed to find the 3rd way..) - Fiscal expansion will follow.

3. Social/political unrest - if commodities continues to fall there could be both political tension in some regions but also social unrest.... The impact too harsh to imagine, but in a Black Swane exercise this "mental mapping" could safe the investors a lot of money...

4. More of the same-- -as much as they want to find some sunshine - it quickly becomes as grey as a summer day in London...

On this positive note - I wish you safe trading and nice week-end


tirsdag den 25. november 2008

When given a free option you either.....

Sell it or use it! This was one of the most fundamental lessons ever given to me by my former boss in Swiss Bank Corp, Mr. BJ..........(Mind you I have failed to exercise quit a few times in my life despite this insight!)

The US govenrment have now given the ABS market a free option : http://tinyurl.com/62gg2h

Buy these issues - if it fails(lose you money) just give it back to the US Government, or rather Fed - it also... the lessons goes.... implies quantitative easing!

Wow, easing in near depression environment? - What a surprise!!!!!! I must say I am tired, extremely tired of this game of mouse and cat.

You know, I know, this is one big Ponzi scheme - and the game right now is to figure out who can stay solvent the longest. The US government got some cards on their hands being able as always to "print themselves" out of the trouble.

The risk being this time, it's a global crisis, it's not only global it's also the biggest uphill struggle in history with debt remaining at all time high 340 pct of GDP... so now.. if moving ABS debt from one pocket to the other is big "feel good" factor then my bank advisor should just move my overdraft from one account to the other - at least one of them will improve!

Feel free to buy this rally, even feeel free to cheer on the new O-regime with their Dirigisme.

I for one is tired of being the "warning signal" for this market but please free me from talk of this market being cheap, having seen the low, and please stop producing "counting" documentation for why this market is now going up 1000 pct!

I do not want it! - I am 75% in cash,yes...... seventy-five percent C A S H ! - and if anything I am likely to increase this cash ratio as I see nothing but utter disrespect for the forces of the market and a total lack of willingness to understand all these "help programs"... and the junk yard they all lead to.

My good friend Drew Baptiste have given me his new outlook on stocks which sort of mimicks my amateur levels: (Below is his and mine combined - sorry Drew!)

S&P could move into broad 650.00 - 1050.00 range - for now 905.00/900.00 is upside to break (S&P now @ 848.00) - downside still got some attraction before downside established for now....720/680/650 our new medium targets and long-term now 2009 we will see S&P 500 in 500.

For the mighty EUR/USD I still, alone it seems, feel Europe not priced correctly - The US Dollar has horrible outlook but at least they have done something - and with new Prez O from January there will massive fiscal stimulus - meanwhile in Lalaland- sorry Euroland - Trichet is about to publicly acknowledge things have slowed!

All core Europe rates will go to ZERO, ZILST, NOTHING in 2009 - the sooner the better - implying massive yield steepning........ but the EURUSD will neeed to pay the price and for me 0.9500 EURUSD is more than likely - just not this week ;-)

Talking about something I do like from long side, I remain positive on selective corporate credit - in the refinancing period between now and middle of next year there will be so much dislocation that VALUE DEALS will materialise......it is time to start new VULTURE FUND in Corporate Credit space.

I also maintain overweight Japan - versus short Europe - The Japanese have been in "recesison" the last 20 years - they know what to do AND they got the saving surplus to deal with it.

It is also time to look at inflation linked products - whether selective REIT or direct in TIPS - this explosive creation of money will have inflationary impact but delayed as the REAL ECONOMY for now will be bigger drag, but rest assure where there is ACTION there will be REACTION (= inflation) down the line.....

We are:

Short EURUSD (still), short EURGBP @ .851932, long bunds @ 120.50, short S&P(still)m small long JPY.... and just taking opportunistic view on everything.

Safe trading,


mandag den 24. november 2008

Weekly Investment meeting...

Finally back to order in the small investment world of Saxo Bank - we had long meeting where we touched on most of the intervention for this past week... - Is it not ironic that 20 bln. here and there has become something "normal" in this market?

I find it terrible and I must say I tip my hat to the brave people seeing this Citibank bail-out as something positive.

Looking at the lead into this week-end it seems Citi's DTA, or more precisely their 'Deferred Tax Asset' was the key issue - being more than 19% (vs. maximum ceiling of 10% of Tier 1 capital)....and 80% of all their tangible assets. I am not tax or accountant specialist but from what I read and being told Citi's Tier 1 capital was mostly........fantasy.... DTA can only be used as capital if expected to be used inside one year - Citi is hardly going to start making money inside this year, next, or even the next five years!

More troublesome for me being, I doubt C is alone using this arcane way of creating Tier 1 capital.

Hence despite being happy for my friends at Citi being saved(for now). I remain extremely bearish on financial stocks especially considering the new Mr. Dirigisme of America: Incoming Treasury Secretary Geithner, seems more than willing to "force" banks to comply with his and his Masters agenda. In other words: Bernanke is bad, Greenspan the worst, but the new Mr. G. looks, sounds and smells a lot like the old guys.

Having learned his craft with Kissinger, Greenspan and Summers it is hardly a surprise he does not represent change but rather mirrors his Master left-leaning interventionist agenda, which I understand from US electorate point of view, but one I can not recommend, not that anyone cares about my opinion in these "small matters". Mind you I will be in the US next week to take a more close look on things in New York and Alabama.

The Investment Committee remained at 75% cash- We clearly see some signs of oversold and crisis fatique, but the with volatility of VIX bigger than 80% the market has simply become one big lottery ticket, where you need 80 pct luck and 20 pct guts rather than models or even rational behavior.

The three driving premises for our research remains:
  1. Cost of funding drives market and valuations
  2. Price of liquidity new unknown (tax on money)
  3. No prior analogy historically will work (because this is different, very different)

We note the markets are extremely oversold but we also find it hard to find ANY economic reasoning for turning positive or even neutral on the markets.

The 25% invested is being changed around slightly - we have abandon our short Gold, and we recognize our long TIPS not exactly on the roll, on the other hand our long Government Fixed Income and cash still makes our portfolio massively outperform our alternative models - at least for now.

We reached our minimum target of 765.00 and we are in the process of looking for new targets -We stick with a simple S&P500 in 500 -

Looking into 2009 we are preparing ourselves for furher deleveraging - it seems to us the world, slowly, very slowly is figuring out why this credit creation not only was excessive but also directly damaging for long-term growth and behaviour.

We see credit spreads and mortgage spreads widen further into month-end and certainly into year-end - this will become the negative gravity of the markets, while the oversoldness will be the postive force.


We are almost back to neutral:

FX: short NZD (1 month option put) , small short EURUSD from here (1.2892) - we are looking to buy EURDKK again as we do not see Denmark escaping the Norway/Sweden turmoil in environment of widening spreads across all fixed income classes.

EQ: We sold into the close today @ 851.00 ( 1/2 ATR stop)... long STOXX50 puts...

COM: We were long Gold puts now worthless...

We will watch the market for opportunistic moves, but we are in game of protecting our relative ok year rather than being aggressive - as said, this market is for gamblers not investors or even traders.

Be safe and must Dirigisme go away,


søndag den 23. november 2008

Not impressed, not impressed.....

Back from the summers of Australia and Singapore into the freezing cold of Europe both physically but also intellectually.

The week-ends bail-out of Citi smells like AIG to me - the "hopers" will maybe have their 5-6 hrs of joy, and the appointment of Geithner as Treasury Secretary being behind 7 pct rally is simply too funny. Geithner is in the mold of Sarkazy and Dirigisme. A true politician who serves his masters in politics before being the treasurer for all of America. (Ergo: No change, but more of the same)

I had wished Obama has been a little less obvious in his choice - why not appointing someone with Seniority - somone who had acutally had a real job? No, we are going to see the US follow into the worst benchmarking of all: European standards.

Financial US is already expecting the worst from Geithner: Apperently he holds a serious grudge on anyone making more money than him, and the only reason for the praise bestowed on him right now seems to similar to press policy in Russia: If not positive about the "great man"......there are a price to be paid down the line....

I note with interest this piece on how Geithner in true Russia fashion seems to be "reshaping" his views post......http://www.newyorker.com/online/blogs/jamessurowiecki/2008/11/geithner-and-le.html

More later - just wanted to be my "anger" out early today..


Still the same ...... We need to recalibrate our new S&P target as we met our 765.00 minimum last week - but let me give you insight to the information I gathered this past week in Asia - It is not going to be higher - on contraire - I am more negative now than before last week.... I simply can not get this semi-pregnant stuff which Government by government does - on the context of: Systemic risk....... this is going to be very, very painful road to recovery.........I am really sorry, people are starting to point fingers at me for being too negative, but again, as I have said all along I am driven by some simple objectives:

1. Being realistic in all market conditions
2. Always trying to make people think out of the box - mental mapping I call it...
3. Make money for my investors

I may not reach as high on point 1 and 2, but the least I can do is point 3 - and right now the opportunity costs to being EXTREMELY DEFENSIVE is zero..........hence I remain sceptical and realistic. The hope I leave for the ones going to church.

Safe trading,


torsdag den 20. november 2008

The nine worst words: We are the government, we are here to help - Ronald Reagan

Today from Sydney - Australia - I am watchting the late US session from Hunter Valley, and it seems our final minimum target of 765.00 is within reach on deal/no deal package for auto-industry.

Radio silence & either you are pregnant or not

Why is it the world continue to have this "half-pregnant" atttitude to intervention? I was on small hedge fund panel the other day and made my usual simplistic presentation of the world, pointing out this crisis can be dealt with two ways:

1. The slow grinding, extended version, which is more expensive as errors upon errors are compounded to even bigger cost, when Mr. and Mrs Dirigisme Brown & Sarkozy continues to lead 'new' era state-capitalism where we selectively safe some individual stocks and industries due to 'national champion' status.... as said my Christmas wish remains that policy makers and politicians gets forced to do one or two year(s) of radio silence.

2. The hard and quick solution. Penalise bad behaviour and let industries die which have no competitiveness - this is the tough medicine but ultimately we need to own up to the fact that the only way to deal with this crisis will be to get saving rates up with the cost of serious dent on growth, stock markets and sentiment, but we need the micro economic agents (investors and consumers) to readjust their behaviour in order to get ahead of the crisis.

The policy makers and politicians creates so much 'noise' that the investors and consumers falsely continues to believe this crisis is something which can be dealt with from the top - and hence they delay their adjustment.

Having done my above 'spiel'; I had every single panel colleague go: I agree and disagree with what Steen just said! C'mon!

Maybe the 'good' news is that the crisis is now so total in impact that they(investors + consumers) will be forced to react despite the inadequate policy makers.

Evolution tends to happen from periods of stress rather than success, when we need to - we will respond to the challenges and this time is no different.

Interlectual capital, i.e our adoptiveness and brain power will take us through this period, but investors and consumers need to stop talking/acting and presenting themselves as believing in this "half pregnant" theory of intervention. Either you believe in it or not, you can't have it both ways.

The fundamentals for strong US dollar

I had lunch, as always, with Barclays Economist Peter Redward on Wednesday and we both had a stronger US dollar on our minds; Peter, who you should all follow, had a couple of interesting views:

1. The weaker oil improves US terms of trade, impacting trade and current account positively

2. The depression-consumer means they no longer using their credit cards, and with this the import is collapsing (seen the amount of cars stored at Long Beach?) - again improving the terms of trade.

3. US now got pretty much ZERO interest rates, but UK, ECB, Scandinavia, Australia, New Zealand still needs to deaccelerate (cutting rates to zero).... hence even from interest rate perspective there will be support.

It is interesting how a deal; being long US Dollar, have moved from being based on a balance sheet funding story to now being a real fundamental story (let me hasten to add that both Peter and I realise there is devaluation risk long-term, i.e 18-24 month from now on the US Dollar) as the world gets the US disease.

One of our Outragous Prediction could very well end up being EUR/USD in 0.9500 next year.


Nothing changed our end:

Short NZDUSD, EURUSD, EURJPY, STOXX50 and GOLD. Long Fixed income and cash(75%). Applying our 25% into negative outlook views.

We may soon need to re-set our S&P500 call as 765.00 comes closer... the banking sector and mortgage sector across US and Europe is dying a slow and painful death. I am extremely bearish on banks at large for every day they are getting closer to the insolvency cheered on by a policy response which is so out of touch it makes one want to weep.

Safe trading,


mandag den 17. november 2008

When in doubt tell the truth - Mark Twain

Now in Singapore after a long flight out of Europe - Had a nice dinner with very smart group of people in Singapore last night who made me, once again, realise why travelling is so important for a fund manager like myself.

The early take-away from my Asian experience:

1. Increasingly the focus of all Asians will be the north-south corridor of internal Asia rather than across corridors into the US & Europe - adjusting your investment outlook to this new world order is in my simple opinion the most important change one needs to make to understand - let alone make money in the next few years.

2. RMB faith. There is tremendous support/believe in China's ability to compete as currency in the international market. The concept being that the US ultimately will devalue themselves out of the trouble, this is what they have done in the past and this time it is no different - Europe meanwhile will put up more and more protectionist measures as highligthed by Mr. Dirigisme Sarkozy, who makes Karl Marx look like an amateur in the game of Socialisme. Asia accepts JPY will go stronger, but they prefer the RMB as storer of value through the next few years.

I respect this concept, but I have a hard time being a 'hard line Liberal' to accept ANY model which is based on 'economic planing' and allocation through central planning. I can't see China going it alone, but I think the above argument extremely valid and I am not one to argue based on my simplistic views of the world.

3. China will link periphael Asian currencies to the RMB. This to me is truely new idea, but again from 10.000 feet perspective it makes sense: China can use the present crisis to extend "guarantees" to Indonesia and other weak foreign reserves nations serving multiple purposes: access to their resources, building co-depence on China reserves, secure military export, and align China interest with that on the linking currency. Truely if done it will catapult China status and have geopolitical implications not presently priced in.

4. Appetite for corporate Asian credit. A favourite theme of mine, seems to have fans in Asia to - there is so much dislocation in short-term corporate bonds, that the upcoming refinancing will make for excellent plays which taken correctly could yield 15-35% p.a. There was NO APPETITE - and I mean zero, zilst, nada, ingenting, keine interest for Europe or the US - This is the first time I have seen Asia so 'local' in their investment outlook. Clearly a tell sign things are to change.

5. We all had positions we did not want. Around the table pretty much all of us, where in positions we did not like: The US Dollar, fixed income, short equities.

This tells me one of two things:

1. Either we need further erosion as we all take profit too early not truely acknowledging this is the 'right' trade despite our reservations.

2. There is room for major (suckers) rally as 'we' move into what we really like.... altough talking from personal experience I never seem to have any positions on I really like, the ones I understand normally losing me money, and the ones I do not believe in being the profitable ones.

Overall I am very keen on Asian stocks (versus short Europe) - I am, probably naively, starting to believe Japan could outperform.

  • They have total savings in excess of all Sovereign Wealth Funds in the world
  • The dividend yield on Nikkei is now higher than JGB's - why would you then buy Japanese Fixed Income?
  • The premise of scarcity of capital makes the Japanese productio model appealing (think Toyota)

I hate travelling! Yes, hate is the correct word! However I am again totally humbled at how being on the ground explains so much more, and having the luxury of meeting people ten times smarter than myself and hearing them talk about the markets, makes me realise its all worth it - especially having been 'carried' to Asia on Singapore Airlines new 777-300 which makes travelling overnight as much of a pleasure as it can be: Check this: http://www.flatseats.com/Micro/index.htm


We are still long 75% cash, the 25% deployed in:

Negative Stoxx50, long jpy, short gold, short EURUSD & EURJPY. Small long TIPS, looking to buy selective Japan, SGD, utilities.

Finally, may I suggest you read my Singapore colleagues blog which is truely timely, wise and to the point: http://saxocapital.blogspot.com/

Safe trading,


fredag den 14. november 2008

G20, G7, G-ee this is waste of time...

Dear Investor,

I could write yet another blog on my views, but "fortunately" for me, and "unfortunately for you, I was guest on Bloomberg with Roger Nightgale from Pointon York - not that I said anything interesting but.....:


The Interview include present market themes, China, G-20 outlook.

Safe trading,


tirsdag den 11. november 2008

Meetings are indispensable when you don't want to do anything.

Meetings are indispensable when you don't want to do anything.
John Kenneth Galbraith (1908 - 2006)

This week has the G-20 meeting in Washington as the big highlight - even President George W. Bush will leave his ranch in Texas to attend!

We had our Weekly Investment Meeting this morning and unlike last few meetings we had some "clarity" in our assessment;

  1. Financial Solvency is yet again an issue - AIG, Fannie Mae et al all were "maybe" solvent for about two month but with stock markets down 25% plus in September and as credit spreads continues to be elevated they now need further capital.
  2. Private consumer solvency is now main issue - yes, interest rates have come down, taking off pressure momentarily, but now the private sector is starting to pay the price: net net we are now worse of than when it was merely a financial sector insolvency. Basically we now got both major parts of the financial sector and the private consumer being insolvent at the same time
  3. ==> We are entering final leg of the deleveraging proces

The political reaction to the above will be what we call the "50/50" solution:

50% of the insolvency will be solved through additional capital injection

50% through easier accounting rules, solvency calculations, tax deferences et al.

Problem with this being it as per usual does nothing to the real issue: the solvency - the model used right now is one based on "hope".

Hope the markets will correct and then improve market valuations through better asset prices - good thing religion is so popular these days!

The G-20 meeting does seem to have some "real soluations" on the table - the latest one which Wall Street Journal picked up yesterday does make some sense to me: Spain's Bank Capital Cushion Offer a Model to Policy Makers: http://tinyurl.com/6x6lms

The argument being that the accounting rule change in 2004, which made the companies only take loss' when incurred made sure the leverage increased dramatically, without making provisions for future loss' - should be unwinded.

The Spanish model will give some "cushions" against loss - the issue with this being it INCREASES THE LACK OF TRANSPERENCY - actually almost everthing policy makers does from TARP to accounting changes works the same way: Adding layers of non-transperency!

Back to our Investment meeting:

The investment meeting had following conclusion:

The three driving premises for our research remains:

  1. Cost of funding drives market and valuations
  2. Price of liquidity new unknown (tax on money)
  3. No prior analogy historically will work (because this is different, very different)

The market has re-entered negative bias - we still look for minimum 765.00 in S&P.

We remain at 75% cash but now we use the 25% for downside plays in markets

We favor being short stock markets, long US dollar (US Dollar balance sheet issue is back with year-end), short commodities and long fixed income.

Our asset allocation model (100% mechanical expects 1 month return of:)

MSCI World: -0.77%,MSCI EMG: -0.84%, Commodities: -1.22%, and Bonds: +0.87%

The model allocates as follows: Short 10% MSCI, Short 34% MSCI EMG, short 7% commodities and long 47% bonds - this is our WORST Scenario: OUTRGIHT bearish. The model is based on our leading Global Indicator Model - and regression analysis of expected return. It is not an exact science, but its a mechanical way of getting expected returns from one consistent source. The expected return from this allocation is: +1.75%


Incoming data continues to accelerate negatively - our model and forecast does not see any improvement in the next month.

The political landscape is getting more complicated. Treasury only got 40 bln. US Dollar left on the initial 150 bln. USD - and Paulson will soon be back in Congress asking for more, and the Democrats wants him to "fix" the auto-industry - making the bill bigger and bigger.

The fastest deaccelerating economies remains Sweden & Australia (hence best government bond buys).

Fixed Income

Credit remain scarce - credit spreads are not really moving - market starting to look at year-end balance sheet, and we expect serious deteriation of credit facilities and more and more corporate blow-ups like Circuit City yesterday.

We like Bunds over Treasuries. We like TIPS still.


Earnings forecast still too high - market looking for +15% 2008/2009 earnings. Per share it is at least 35-40% too high - I remain extremely sceptical on all earning forcasts with a positive sign on them - the insolvent private consumer is going to hurt EVERYONE in the business cycle, seems the analyst' have not been in out shopping recently.

I have to warn you - this is only the beginning - the next few month will be the worst part of this cycle - as several forces works against the markets:

  • Bankrupt consumers
  • Insolvent banks
  • No credit creation
  • Policy solutions based on hope
  • The "everything is "really"cheap "relatively" clowns
  • High expectations to G-20 meeting & incoming President Obama

We are short Stoxx50 & S&P. No longs at all.


Crude should hit 50.00$ - Gold below 680.00 - There is no value in commodities in this part of the cycle.


The meeting had higher conviction rate - we are now yet again outright short the markets - break of 895.00 on the close will confirm intermediate top in place - in STOXX50 this translates to 2540.00. Watch VIX above 63.00/64.00 will confirm next bearish leg has started.

We are: Short Stoxx50, long EURHUF, short EURCHF, short EURUSD, long Bunds - looking to sell crude, to buy some Private Equity & TIPS.

This is extremely important week.


I am just back from Dubai - I had the pleasure of spending the Sunday in the Desert - you must try it - makes you realise how insignificant ones life is in the grand scheme of things - but what a place, the quietness and light... amazing.

Safe trading,


tirsdag den 4. november 2008

One of the greatest discoveries a man makes, one of his great surprises, is to find he can do what he was afraid he couldn't do.

One of the greatest discoveries a man makes, one of his great surprises, is to find he can do what he was afraid he couldn't do.
Henry Ford

Dear Investor

Henry Ford qoute adress' the challenges of the new President of the US of A; President Obama.

President Obama is in place and with him the highest hopes since Kenney took office - both seemed(s) able and willing to inspire beyond the "standard protocol" of non-sense which politicians across the world spills on a daily basis.

I am, despite many of the readers seems to think otherwise, totally agnostic on politics - I merely learned long time ago that they are "destroyers of wealth" rather than visionaries and solution oriented people.

I am absolutely sure they have a firm belief in what they are doing and that they are doing so with the best of intentions, but history clearly shows "political vacuums", and here I am not talking about the empty space in their heads, but of periods where they are stalled have lower budget deficits and higher growth.

From this perspective the new Congress with 56-58 Democratic Senators and President O in the White House looks "dangerous" for the investors as we would expect all the normal Keynesian tools to come of the shelfs...... but is there hope for real change?

I hope so, I am one of the biggest fans of the US, and I want US to regain its strength, for the average American to not lose his job and for US to take a better and more rational place on the world scene again. Having read this blog before I am sure you all know however what I always says on hope: It belongs in Church on Sundays - we need to judge the new Congress and the new President on what they do and not what they say.

I expect the election on its own to have a neutral impact on the stock market for the balance of 2008 as President O gets his team in place - tries to pre-announce his policies and make himself comfortable in the Oval Office.

Data supports this view:

In "Presidential Cycle," Ned Davis Research notes the S&P 500 posted its weakest returns in the first year of the four-year election cycle. Since 1900, stocks have gained just 3.4% on average in the post-election year, compared with gains of 4.0% in the midterm year, 11.3% in the pre-election year and 9.5% in an election year.
Even after Tuesday's 305-point surge to 9625 in the biggest Election Day rally ever, the Dow is down 27.4% this year. How have stocks fared from Election Day to year's end? When a Democrat wins, stocks have lost 1%, while rising 4% if a Republican wins, Bespoke Investment Group says.


Another point is that whatever ones believe on politics - President O represent a new era and as such we need to make some changes to our projected future:


A few links on the election results:




Short-term there may be some impact for the day traders basing their position on "hope" and with the recent momentum of the market we maintain high odds for 1050/70 test - it seems for now that reallocation, "behind on benchmark" managers trying to get back to their equity weights - while on the other hand incoming data & redemption still offers the market its gravity on the downside. Mildly bullish - based on market being oversold but not yet undervalued.

The long EURCHF work as a charm yesterday we took profit - and awaits further "clarity" on risk - continue to moniotor VIX's 21-days moving average as lead indicator - while below its all go, if it turns back up there could be time for some sideways action...... JPY risk reversals another key indicator as they remain extremely bullish... I.e: risk aversion.

I am off to Dubai this morning - I will try to blog live from the Dessert in the meantime watch the political game for what it is: Politics is Hollywood for the ugly (Ronald Reagan)

Safe trading


Some national parks have long waiting lists for camping reservations. When you have to wait a year to sleep next to a tree, something is wrong.

Some national parks have long waiting lists for camping reservations. When you have to wait a year to sleep next to a tree, something is wrong.
George Carlin (1937 - 2008)

Dear Investor,

I am not trying to spam you, but we just had our Weekly Investment Meeting and with the US election tonight I felt it worthwhile, if for no one else then myself, to put into writing a few perspectives ahead of the result and action.

The investment meeting had following conclusion:

The three driving premises for our research remains:

  1. Cost of funding drives market and valuations

  2. Price of liquidity new unknown (tax on money)

  3. No prior analogy historically will work (because this is different, very different)
The markets (stock) are oversold but not undervalued.

We reduce cash from record high of 95% to 70%. We favor a short-term "relief" from oversold, but we like indirect Beta such as EURCHF, EURUSD, EMG and Crude better than direct market exposure. (More on this later!)

Putting any real metrics to valuation obviously difficult, but when our one and only key premise remains: Scarcity of capital. The "gurantee" we have for a further erosion of the market will come from when corporations, banks and governments needs to refinance.

What I am saying here is: The corporations can presently service their debt on the books on the "old terms", but when these credit facilities needs to renegosiated, the banks will need to tighthen the provisions and consequently create higher cost of funding.

This play nicely with our always present Three Driving Premises of research as seen above.

Being the sceptical crowd we are never really convinced of anything - I must say personally, I realised if I, of all people, have figured anything "out" then it's too late already, that's why I/We always keep everything as odds. We are "positive" on stocks to the odds 60/65% vs. 40/35% for one or two weeks of "rebate" to the present turmoil.

The key indicator as dictated by my red-hot Chart-guru John Hardy is the VIX above or under 21-day moving average, which John finds a good leading indicator right now. We expect at worst: some consolidation, at best some further drop in VIX volatility indicating some less pain on the stock market horizon.

I must also admit that moving from 95% cash is a must, if for nothing else the pure opportunity costs of having so much cash. Banks are off theirs low by 25% and we could like in the 1929-34 period see a further 25% upside before the always present bear trend re-establish itself.

If I am sounding confused its for a reason. From tactical allocation perspective trying to fine-tune probably the worst deleveraging cycle in mankinds history is a little like trying to convince politicians they should SHUT UP......A fantasy, not to happen... (Together with Central Bankers by the way)


Some stabilisation, the deacceleration has stopped - Sweden now remains the country with the fastest deacceleration - indicating if seeking to find Governmental Fixed Income - Sweden is a good buy on our models.

Our Global Economic Indicator model is falling for the 6th straight month, and our economist's believe it will continue to do so another good 12 month as things looks as of now, furthermore which is even scary, my Chief Economist David Karsbøl thinks that the World GDP growth per Capita could reach zero and even contract which will be first time since 1982 and a major indication of how the world is rebalancing towards savings away from spending. (AGGDWLD INDEX for the Bloomberg users)

Our currency models continue to favor: CHF, JPY and NOK vs USD & GBP.

Fixed Income

Tough Universe. Will you lend the US Government money @ 4.00% for 10 years? Not me, and yet another question: When will the bill arrive for all these nice "packages" ordered and delivered by the worlds leading Dirigisme fans; Bernanke, Paulsen, Cox, Trichet, Sarkozy, Fogh Rasmussen, Gordon Brown, Greenspan...??

We remain bullish TIPS - picked up slowly last week and we notice/respect the elevated levels in agencies and credit spreads in the US remains in place, while CDS' and Itraxx comes down slightly - finally money market wise - solvency seems to remain an issue? Year-end issue? Lack of trust?

Danish Mortgage market now expensive at 120 over on a OAS-basis.Note how Scandinavian mortgages trades similar to US ones pre/post bail-out deal.

First initial positive reaction, then slowly the real price will have to be paid(I.e: Higher spreads on worse credit)

Historically US and Scandinavian mortgages have traded on par rate differences - but Denmark and Sweden @ 120 vs. US @ 210 ... clearly indicates there are no REAL VALUE in this, and one can only hope my pension money manager is selling MORTGAGES as we speak. (Again I show how naive I am)


Forward Earning excl. Banks remains in la-la-land @ +5% going forward - unless the analyst' gets ahead of the curve and live outside their Ivory Towers we will continue to see revision pressure down in earnings forecasts. It is a good thing GE "helped" the Government by borrowing money from them ( Please explain to me who gives GM PR advice? I need to sell them short!)......

Europe is more expensive than the US - AND European banks will see MASSIVE write-downs based on their big investment programs in Eastern Europe and periphael Europe........watch this space...

Our stock team likes Ryanair & Easyjet on lower fuel costs and payable debt, while BA and SAS "stinks".....Their words not mine for once! ;-)

Consumer Discretion needs to see inventory clearance never a high margin business ?

Overall: We like the oversoldness more than the actual Mr. Market - and we are scared to death on the Barrons article on Real Money Managers (I have not been asked so I guess my money under management is not REAL or ??? ;-)) indicating 70% of the population in Real-money-Land expecting stocks to outperform other assets.


We favor long carry FX trades - presently we are long EURCHF.... and EURUSD.... and like some selective EMG as wel - however.. if VIX starts rising again we are out quicker than you can say:
"Rødgrød med fløde" (for the non-Danes - its a silly way of embarresing foreigners into speaking the most ridicolous of all languages: Danish!)


More exposure, we like somethings, we acknowledge nothing is one-way, but keep your eyes on VIX and JPY risk reversals. Cash to 70% - all our Premises remains in place - still keeping 765.00 S&P as minimum target- but for now chance of 1050/1070 first.

Finally two words of the US election - (as always I have no predictive powers):

Who becomes President is irrelevant for the economic agenda; but how White House and Congress is split is not. History shows when White House and Congress is in opposition- the economy does better: Budget deficits in stale periods: 1.89% of GDP, in periods of dominance 2.90% - clearly - as always doing nothing from politicians wins over them helping us out: Again Ronald Reagan is my hero: The nine most dangerous words: We are the government, we are here to help.

For a simple European, Elitist, High Horsed Tosser like myself, whether the Democrats gather 60 mandates or not is far more explosive - having said that - deep, deep down.... on very personal level, I can not stand four years of the moron McCaine... anything but him is good for me.....but as an investor I hope for: McCain in W.H and 60 mandates in the Congress.

Safe trading,

Steen Jakobsen

Does it matter ?

Back from small holiday - must admit a long life in trading taught one clear thing: When you have the good fortune to have had a good spell, it is time to go away as the biggest losses tends to come right after the biggest gains - in that spirit I took Friday and most of Monday off - now however I am back in the chair looking for clues in what to me is a more complicated story:

Are we to see major bear-market rally? Even in 1929-34 period we saw 50% rally from lows without putting the low in place.

What scares me is how we all line up to micro-manage what is clearly a serious bear-market, potentially the biggest in the last 300 years! Barrons tells its best:

NOW THAT STOCKS HAVE tumbled to five-year lows, 62% of Big Money respondents say they're undervalued, up from 55% last spring. A scant 7% think equities are overvalued at today's levels. Almost 70% say stocks will be the best-performing asset class in 2009, compared with 13% who favor cash, and 11% who prefer bonds.

70% expect stock to be best performing asset - clearly the 3% dividend yield is part of that, but I must say the only way stocks become best asset would be serious unwinding of the low interest rates... which I find likely, and more to the point a serious increase in the steepness of the 2-10 curve is what we are betting on for 2009, when Governments will have to pay for all the public spending they have initiated.

Or in different words: Stocks performs as other alternatives performs worse - this is not to be belittled - when you are paid to invest, keeping cash @ 95% as we are now is now a winning formula!

We are having our Weekly Investmeeting today and I am looking forward to the above disscussion.

In this short blog also two links:

Carl Rove's map sees clearly Obama victory - but will Democrats gain 60 mandates and totally control politics?


Jim Rogers is always worth your time ;-)



95% cash - trying to figure out where to go from here...

Safe trading,


onsdag den 29. oktober 2008

We must believe in luck. For how else can we explain the success of those we don't like?

We must believe in luck. For how else can we explain the success of those we don't like?
Jean Cocteau

Day two in the biggest rebalancing since 1987 puts the stock market is positive mode and with good reason - personally I believe that the climax in fear & panic has been reached - what comes next week is the final deleveraging of portfolio which will still have to happen:

  1. Redemption still a real issue
  2. Banks will need to find even more capital - Markets are down 20% this month - and with 10x leverage the banks needs capital and fast.
  3. Still too many "hopers" around - we maintain our minimum target if 765.00

Inspired by the article this morning in the New York Times: http://tinyurl.com/56gudn - I had my equity stragist Christian Blaabjerg do this chart: (Click on chart to enlarge)

To make this work "faster" we have even done 2-year average - the picture remains the same - we have come a long way, but there is still some way even on average to call this cheap. This is not exact science at all - and as John Boogle says in the article: You have to look at the alternatives - which is sooooooo true. We firmly believe stocks will be +/- 5% for a long, long time maybe 10 years before breaking higher, but the alternatives could be even worse!

Why would interest rate stay this artificially low forever? The credit cake is not only smaller, it is more expensive, so lending the US Government money @ 4.00% is total joke, when I get 3% dividend yield in actual private corporations. This theme could be the saviors of stock markets, if, and this is a big if, the fund managers tries to embrace true diversification as teached by Swenson at Yale Endowment http://tinyurl.com/6gzwlw (if you havent read or bought this book yet, you may be doomed)

The month is soon to be over and it looks ugly again - check this overview: (Click on chart to enlarge)

but it is still much better than long-only funds! Further redemption will follow these kinds of results.


We were long some 1010 Calls on the rebalancing - which we took of late yesterday, still have stoxx50 2800 & 3100 in place for final stretch of the month - still long 95% cash, but having we look to make some +400 bps in our Macro Strategy & +200 in our CTA account - which means we will playing safe for balance of the week.

Stay safe,


tirsdag den 28. oktober 2008

Rebalancing - chances of three day rally

Dear Investors,

This is not even a "real blog" but I have to make you aware that potentially this month-end could be the biggest rebalancing going on since "crahs of 1987" - the following is an internal e-mail I did to explain - very simplistically what goes on! (Please, please do not send me email why its wrong, but accept the "drivers" of this totally mechanical process' which has ironically made most funds lose more money....but that's another story.

Rebalancing – the way most long only fund managers do their portfolio management is to hedge themselves versus a benchmark – for arguments sake let’s make this index:

60% stocks and 40% fixed income.

From end of September the performance has been:

Russel2000: - 34% month to date
EAFE International stocks: -30% month to date
Lehman +20 yrs bonds: +2%

A “standard portfolio” consists of:40% domestic bonds – here represented by TLT US Index, 60% stocks – where 75% is domestic (RTY index) & 25% foreign EAFE (MXEA) ---

now the math starts:

Assuming fund manager by start of October was balanced as per above his p&l looks like this:

Oct 1: AUM 100 USD.
TLT (Bonds) 40 USD
RTY (Domestic stocks) 45 USD
MXEA(Foreign stocks) 15 USD….

Oct 28th though:

TLT = 40.8 USD (+2%)
RTY= 29.5 USD (-34%)
MXEA= 10.5 USD (-30%)

In order to get back to Oct 1 “ratio” the fund manager needs to (look at 4th coloumn):

TLT 40.8 32.4 -8.4 -6.804
RTY 29.7 36.45 6.75 5.4675
MXEA 10.5 12.15 1.65 1.3365
TOTAL 81 81

He/she needs to:

Sell 8.4% of 81 USD worth of bonds or 6.8 USD worth
BUY 5.5 USD worth of domestic stocks
BUY 1.3 USD worth of foreign stock.

This is Totally mechanical and the closer we get to Friday the more this could play.

We have bought November call 1010 for 10.00 USD to play this – or 500 US Dollar per contract.

References: S&P @ 873.00, Stoxx50 @ 2355

Safe trading


mandag den 27. oktober 2008

Monday morning Quarter-backing......

The three driving premises for our research remains:

  1. Cost of funding drives market and valuations
  2. Price of liquidity new unknown (tax on money)
  3. No prior analogy historically will work (because this is different, very different)


We had our Weekly Investment Meeting this morning and we moved our cash from 85% to 95% reflecting this market has now entered what can only be called the final capitulation phase

95% cash reflects that we do not see how we can trade this market with any conviction. Last week we had strong both economic and pricing bias negative – this we maintain; We see our 765.00 minimum target being met shortly – also we have seen almost all of our long-term price target met:

Gold: below 700.00
EURUSD: below 1.2700 – our new target 1.2300 also met – now 1.2000 next level. Note this month end there will LARGE DEMAND for US Dollars on the fixing for benchmark’.
Crude: 50.00 $ getting closer
Bunds 117.00 + met.

We are in process of calibrating our 2009 view as to make money from here you need some “fundamental” valuation/benchmark to work against – not using our rule #3 – we need to asses things from forward-looking perspective not in analogies to history.

Why rule number #3 is some important can be seen in almost every single link below. The Hedge Fund Industry is dying day-by-day due to not accepting rule number # 3! When you talk of a true “paradigm shift” it means nothing can be interpreted the same any longer – Like science before and after it was discovered the world was not round!

I guess for most people paradigm-shift is just a word- maybe it’s time for people/investor to understand the true meaning of Paradigm as defined by Thomas Kuhn in his book: The Structure of Scientific Revolutions. I recommend the book for the few of you who are interested in facts rather than “nanny-stories”.

In my humble European Elitist, high-horsed, arrogant way (Did I miss any of the superlatives?) opinion this market still has 90% amateurs who should not be “authorized” to advice, let alone manage other people money. Look at the odds: There are fewer good fund managers in the world than brain-surgeons. At least with brain-surgeons you know they have performed the task before, has proper medical/surgical training & the have experience, but in fund management you have people who talk more BS than most College do when they seriously intoxicated. Shame on the banking and fund management industry – it is time for: transparency, best-practices, and proper measurement of risk. The evolution right now is fortunately letting the Cowboys die hopefully, there will be some money to manage for the remaining serious players.


Wait-and-see. We are long small down-side in Stoxx50, Short Gold – nothing else on. This market is UNTRADEABLE. Watch for Fed on Wednesday, and mind Sarkozy he is getting more and more dangerous.

Links for reading:


ONE of Britain’s best-known hedge funds, RAB Capital, has stopped investors cashing out of a second of its flagship funds. Investors in RAB’s Energy fund - which has lost more than 50% of its value this year - have been told they will not be able to liquidate their holdings.
Those who want to quit will be handed “redemption shares” instead of cash - a promise on behalf of the fund to pay back investors as and when it can sell out of enough stocks.
The fund, run by Gavin Wilson and Mark Redway, is entitled to do this under existing agreements with investors


Highbridge Capital Management, which is majority owned by JP Morgan Chase and has $25bn under management, is axing 10 per cent of its New York-based staff and plans cuts in Europe and Asia.
The volatility in global stock markets has savaged the performance of some of the world’s best-known hedge funds, raising fears of a collapse in the sector, which could cause a fresh crisis in the financial system.
Big names including Deephaven, Marshall Wace, Citadel Investment Corp, Lansdowne Partners, Third Point and Harbinger, have in recent weeks sustained losses of as much as 20 per cent in some funds.
Investors pulled at least $43bn (£25bn) from US hedge funds in September, according to TrimTabs Investment Research. This is nearly five per cent of the global sector’s estimated $2 trillion in total assets.


CHICAGO (Reuters) - Examiners with the Federal Reserve have questioned Wall Street counterparties about their exposure to debt and other holdings of Citadel Investment Group, The Wall Street Journal said on Saturday.
Citing people familiar with the matter, the Journal said the Fed questioned the counterparties in at least two instances in recent days.
Katie Spring, a spokeswoman for Citadel, said Citadel continues to have more than 30 percent of its investment capital in cash.
The Journal's report came a day after Citadel, one of the world's largest hedge funds, said it had more than $10 billion in available credit. The Chicago-based fund company, which manages $18 billion, held a conference call to quell rumors it was facing liquidity issues.
The fund firm, founded by Kenneth Griffin 18 years ago, denied on Friday market talk that it had approached the U.S. Treasury for a cash injection and that the Federal Reserve was coming to inspect its

Safe trading,

Med Venlig Hilsen Yours Sincerely Steen Jakobsen, Chief Investment Officer, Saxo Fund Management Saxo Bank A/S -London
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