torsdag den 10. januar 2008

Central bankers are lost... totally lost....AGAIN..

My "models" are very close to confirming a BEAR MARKET. No less, no more. The key final ingredients will be Bernanke's speech tonight - if the market, as it has done in the past, sell of during and after his finish, we will have first real bear market since 2000.

The only thing that will be able to help this market out is rumors. Rumors of Sovereign Wealth Funds (One wonders why considering their track record so far!!!), and inter-meeting rumors of cuts.

Having said all thay I am still in NEUTRAL mode - there is to much consensus in the market, which concerns me always. No less after having read the F.T piece about Ray Dalio of Bridgewater: - he made it his business to NEVER correlate with other managers, something I have always done, but to much less success than Bridgewater!

Strategy trading:

Fixed Income

Unchanged. Still waiting for cycle change in yields - we are close to breaking triple bottom, but for now holding out for "surprise" upside either through more liquidity (read: reflation) or better than expected US data.

Foreign Exchange
Long AUD.CAD - starting to accelerate - looks fine.
Long EUR P, 1.44 (spot @ 1.4710) 1 month
Long JPY C, 104 (spot @ 108.25) 2 weeks
Long EURSEK, and Long NOKSEK.
NOKSEK flirting with 1.20000 today, break should lead to 1.2500. In times of recession these two economies are VERY different.
Sweden is VERY open economy, with most of the Swedish companies being US dependent. This could be seen through Q3-4 in 2007 when the Swedish stock market significantly underperformed other European Indices. This is continuing, and as a rule to exception Riksbank is more negative than the local banks, leaving door open for much, much higher EURSEK.
Norway on the other hand, will see demand for oil and fish, BUT.. if oil starts to react to RECESSION fear, it should also find support around 7.90000.....
My biggest change - I have been drumming for GRAINS and Crude for almost two years now, but now I am getting square.
It has to be said I am a very defensive fund manager, but the upcoming USDA Crop report tomorrow got me worried. Following the "real experts" it seems we, the financial people are, too bullish in the wrong time of year. An excellent link
I sold my long time holding of DBA yesterday @ 34.45 -
I also as stated yesterday sold Crude(Feb) @ 96.95 - We have been trading in- and out so we are now comfortable short from 103 USD net, which have taken us above the critical 102 $ line.
Remember the play here is merely for Crude to "catch up" with the recession story - another way to play this could be to short SHIPPING........
Tried the long side into close yesterday, did not feel right and our model continues to ask us to wait for confirmation, which I will respect.
Early last week I put downside break @ 60/40, it is now 75/25, we really need "something tangible" from Bernanke tonight, next week in Congress or at the next meeting. Note that market got 50 bps @ 75% probability, almost destined to disappoint.
Still in day-by-day play, but getting feeling new trend emerging... Crude right now trading 93.70, having broken critical 95.55 - and gold offered to... 850/55 test will be critical, I am net buyer net seller, but not before those levels.
Theme: Recession light - and the repricing needed plus re-coupling, the US is not, not alone in lower growth rates..
I am attending conference tomorrow with Lawrence Summers, sponsored by Skagen Fonds, I am looking forward to asking him about "strong US dollar policy" if I get the chance....
Stay lucky,

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