mandag den 30. juni 2008

The end is near? No way Jose!

Been lying in my hammock most day thinking about the markets joining the club of "hopers" ;-)

Hoping that I would get some divine "inspiration" - unfortunately for me, and to some extent you, I ended up in the same City, Same street, and Same building as before: The one named: "Castimonia Decoctor" - (I have included some help here:

Tonight I see how Lehman trades below March low and how volatility increase dramatically:

and if it was not sad enough...also Citi boss Pandit's letter to his employees! Maybe I should submit my fond memories of the Citi culture - I did work there in the late 1980s and enjoyed the powerhouse... Is it me or is memories pretty useless going forward? Funeral party at C? Pandit email to employees - A TOTAL JOKE...

I am not making fun of C, Leh or Barclay - It's pretty sad in my opinion, that the banking system is so lost for real talent.

The fact - as I have stated again-and-again- is that ALL trading talent has left the banks years ago, and so has the Risk Managers of any standard - The hedge fund industry is not only tempting money-wise, but also for quality of life - hence the people left in the banks of today are mere salespeople with little or no understanding of neither risk or trading!!!!

How about checking the credentials of all major banks CEO's ? You think it's random Goldman is runned by a trader? I think not

The fact is, the banking system will soon be depleted even for the best sales people - there are no future in banking - the new banking system is hedge funds, and even some of the hedge fund looks in trouble, with a large part of the industry made of fixed income strategies.

I love how Swenson of Yale Endowment - makes people aware that the difference between the best 25% quartile of the hedge funds in fixed income strategies - and the worst is :------ less than 25 bps! In other word total waste of time - buy some generic exposure instead)

On to the markets; I guess some of the work that convinced me; the catalyst was this "narrow" scientific research;

Leading me to my lists of why the house of: Castimonia Decoctor, is still the place to party:

  1. There has not been spike in volatility as has been seen in ALL major lows - this sell-off is extremely orderly - orderly and market low does not cooperate well.

  2. The above data states: Bottom line is that when the market falls 10% off of a recent high, and VXO stays below 30%, what was bad gets worse. In every prior instance where VXO failed to climb to above 30%, the market continued lower. The MINIMUM additional downside is another 10%. -- hmm....

  3. We passed the cyclical trough period, without reaction

  4. The banking sector again on the run. There is so much more reality which needs to be brought into the boardrooms before this is over. The banking system is the everything to market.....

  5. The yield curves - with the market "believing" both Fed and ECB on hiking spree - there be no easy rides from here

  6. The Fed has finally lost all credibility - Greenspan/Bernanke never had anything with me, but I note the market now ageeing with me (which scares me!)

So.. we are looking to reengage short positions across the board:

FX: Long EURSD, short GBPJPY(options)

FI: Long bunds calls - tiny delta, plus Dec- EURO dollar calls

EQUITY: Short DAX, Short C, Long Novo, Mittal, IVN

Commodities: Watching grains complex, nat. gas.

Strategy in short;

  • New low in US dollar
  • Rates expectations in both US and Europe too high
  • Commodities entering blow-off face w. geopolitical risk increasing day-by-day
  • Cyclical stronger JPY from here - like GBPJPY much lower
  • New lows in banking shares across the board
  • Like Drugs(stocks ;-), steel, agriculture, water- and solar energy

We had excellent June month for the funds strategies, and we are looking for weak data from Unemployment data Thursday, which also carries ECB meeting, so fire works all around this week.

In the S&P the key level is 1270/75 if broken we will see VIX & VXO above 30%

The summer is here, expect more "hammock thinking" from me, but further and further apart in July.

Best wishes


0 kommentarer: