mandag den 10. marts 2008

....has the storm past is the ocean flat again?

The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again. John Maynard Keynes

I thought it appropriate to start this mornings report with the full sentence which include in the long run we are all dead. Keynes knew why economics is called the dismal science, which reminds of this mornings rally on stocks due to Goldman Sachs calls for more cuts by Fed!

I mean are people total idiots? Has there EVER been any doubt the lost Chairman of Fed would cut? No one seems to notice that GS has one of the worst records on predicting US economy, but why bother with facts. Actually I think only Greenspan is worse than GS in predicting the economy?

Back to business the financial rescue on Friday helped tame the 2yr Swap spreads from +112 to a more normal +103 this morning indicating some relief in the system, at least for one or two days, meanwhile the 3 mos fwd-fwd US swap remains stubbornly high at 71.5 bps, which indicates non-US banks have difficulties raising capital for the quarter end and turn, plus obviously funding their "small" SIV's et al. In other words; there is NADA lending and there will be nada lending going into the end of this month.

I have been a follower of T-Theory ever since I read "Pit Bull", Martin Schwartz back in 2000, and I was slightl shocked to read Landry's comments this morning: "S&P is approaching the key "last low" - according to my 40 year cycle work the S&P will break below this potential support as part of a very long term correction to the 1974- 2007 bull market. This basically means there should be no trouble in a 3rd sharp down wave the carries the S&P to lower lows".

Terry is not guy who easily gets carried away with his forecast, so I have to dig into some numbers to follow this the next few days. Terry Laundry is one of the hardest working guys around and totally unemotional. (Very unlike me!)

The other topic for this week for me will be: Inflation - I am trying to embrace recession into my investment outlook, if for nothing else because everyone else refuse to, I am presently thinking:

This slow down crisis, will run longer and steeper than most people think, on the other hand I do not buy argument the slow down will slow inflation down as it is both demand but more supply driven, and hence I found an interesting research by Ibbotson Associates, Michele Gambera:

Gambera ran through 30 years of data for the S&P 500, the spot market for oil and gold and the CPI. His conclusion: There is very little correlation between commodities and stock prices. But there is something else- Gambera found oil and gold to have a high correlation with INFLATION, 37% in the case of oil and 52% for the Gold. Kind of interesting nes pas?


Still hit-and-run mode. We took of negative US dollar view on Thursday last week around 1.5300-1.5330, now left with negative AUD, long EURSEK, long JPY with bias to try short EURUSD when the signs of Europe slow down/concern about EUR starts ringing some alarm bells with the tossers in the Investment banks ivory tower research departments!....

Equity - sold Stoxx50 today ard 3588 ish with one ATR stop. Long Dax puts......short Barclays banks, only matter of time before bottom goes out of UK banking system with credit card default, SIVs, commercial properties etc all compouding.......and lets face is Barclays is the most prominent fair weather management in the world!.......See no evil, hear no evil.....

Fixed income- Long bunds since 117.00.....just bet on ECB getting closer and growth getting slower - also long some out money 30y calls should the market implode....

Commodities - Short AUG crude from 100.60.....looking to sell gold, silver, corn, wheat, soya - the whole complex - some day, some time soon the world will take the RECESSION trade for real.... maybe we need to break stock market low in January, I dont know, I am merely farmer boy.........


The outlook still cloudy, but like here in Denmark today, there is some sun coming.......

Good luck


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