fredag den 22. februar 2008

In the penalty box by my own choosing....

(Click on small box to see chart)

It's probably only me but I am spinning like a kite in a storm by this market....Like Bernanke I am pretty stubborn about my views, but when I execute my "good money management" rules I get stopped out again, again and then again.

And NO it’s not about the size it has become personal. Looking at the charts there is one false break after the other in all markets. The only stable factor right now is Bernanke willingness to cut rates lower, yet lower and then again lower.

Fintag ( puts it best with his question: "What will happen when rates are zero?” The speed by which the Fed is willing to cut is frightening, if for nothing else their total lack of believe in the US economy.

This week’s data showed yet again the game is not over in terms of weakening.
My former associate, now good colleague David Karsbøl has been running model on weekly indicators, which we "stole" from Paul O'Neills book, where he claimed, he and the Treasury people had high-frequency data model which caught most moves in the next six month in the US.

We have had some success in copying this.

This is clearly towards 2001 and 1991 levels, which in itself is scary. I particularly remember 2001 as I was the "fortunate/unfortunate" employee of the former Chase Manhattan Bank, which in 2000-2002 was fighting for its life - I am increasing starting to believe the major banks, with credit still being inadequate despite Fed helicopter approach could be REAL DANGER.

Think about CDS, which is most issue by BANKS - the same banks, who week-by-week, almost now day-by-day write down more and more, how much is my CDS protection bought from Citi/UBS/CS worth at the end of day?

I hate to cry "foul play" but the market is either positioning itself for major collapse or there needs to some external new thing coming to the market - think about it:

Fed has cuts rates with a pace not seen since 1930s
The Congress has given substantial tax credit, it has also made moratorium on debt
The got the Oracle from Omaha to get involved in monoline
They got BoA to buy some dodgy California mortgage company
They have allowed SWF's to buy banks (they could not buy ports?)

AND....still the market is going nowhere - we had the biggest "helicopter" rescue since Berlin was evacuated---- the result??? Trend less, nowhere going markets.

Europe seems to be on an island for now. Interesting to see how ECB rhetoric changes now that IG Metall deal is done. Time for change?

China runs its own game - so does India

Yes, I am lost, there has been so many false starts and closings that I have lost count - maybe the Oscars will help me see the perspective - or the Moon phase or... ???

Strategy -

I am a macro manager, but my good friend Andrew Baptiste from MS, probably describe the market best in his daily commentaries: “Keep the hit-and-run modes”

How true I only wish someone would hit someone else soon, not me again, again and again.

However, on a positive note - these market stands in front of major resolution and soon, there are so many breaks, and sideway ranges ready to pop that volatility soon will be rising.

Stay long volatility, stay long grains.

Nice week-end


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