tirsdag den 24. juni 2008

Wide diversification is only required when investors do not understand what they are doing. (Warren Buffet)

The above picture is courtesy of close friend who send it to me this morning with the comment: "...found one outlining your thought process" - Thankx ;-)

There is a very stubborn bid in the US yield curve - its all across the yield curve, but most disturbing to me is the projected + 131 bps hikes in the 1 year time -

I am even more disturbed as I, as I do most morning, saw NBC evening news from last night on my Ipod: http://www.msnbc.msn.com/id/21134540/vp/25333552#25333552

Everyone and everywhere in the US the combined pain of higher food and energy prices is hurting every day life. Last night NBC was talking about how schools across the US now needs to cut down on school buses - and more and more often choose between: firing teacher, reducing kids on the school bus, or not doing maintenance. This is one of the "richest" countries in the world, and local executives in the schools are now paying for the duo Greenspan/Bernanke is come, easy go policy.

No wonder this link was major headline yesterday:

But in terms of tomorrow wording and action; FOMC, Bernanke is in a corner and that's always dangerous for us hedge fund managers, but ultimately Bernanke is "political" meaning he will have to tone down inflation worries, as higher short-term yields is not helping him or his bosses in the Administration, expect balanced wording with focus on downside on the economy.

Private Equity dead...for longer?

Another must read link is from the private equity house of the past two decades Carlyle Group: http://www.carlyle.com/Annual%20Report/Carlyle_Annual_Report_2007.pdf

In the letter from the founders I found this telling sentence:

"The credit crunch marks the end of of the period of extraordinary liquidity that began in 2003. For Carlyle, the implications are threefold:

First, the LBO debt has become harder - and more expensive - to secure. Because the mega-buyouts of recent years were possible only as a result of lender' willingness to provide billions of dollar of debt financing on attactive terms, we(and other private equity firms) are unlikely to participate in deals of this size until this credit markets recover.

Second, the slowdown in economic growth resulting from the credit crunch will likely create a more challenging operating environment for some of our portfolio companies.

Third, depressed asset prices may constrain our ability to exit from some of our current investments"

The third implication being the most interesting to me- The Private Equity fund spend 2006 & 2007 busy selling companies to each other in something which looked liked a Ponzi scheme. Private Equity is good, very good long-term, but the game became to simple and too leveraged in the last few years - like banking it is back to normal.

Stocks oversold?

We run number of "simple" scanners on market right now for STOXX50, DAX and DOW JONES - the number of stocks above it 20 day moving average is LOWER than in March low, and almost as low as the January low - makes the market oversold, but not undervalued in my world.


Will enact some negative yield plays on FOMC - Do not think in 100 years that FED will hike this year or next year - so.......but 2 years direct or indirect.

Danish mortgage bonds - very close to pulling trigger on 7% 2041 Nykredit yielding me 7.28% in 4.5 CIBOR market! -- though if rates does fall I will get converted........

Looking to add water long play ---- long Steel, long Drug stocks (hedged with short S&P).....

Long DAX puts, long EURUSD, VERY LONG JPY.......small long crude .......short Barclays....

Stay dry... this is tough times...


(PS: If you dont subscribe directly to this blog you can do so by sending email to: oll@saxobank.com headlined subscription)

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