onsdag den 29. oktober 2008

We must believe in luck. For how else can we explain the success of those we don't like?

We must believe in luck. For how else can we explain the success of those we don't like?
Jean Cocteau

Day two in the biggest rebalancing since 1987 puts the stock market is positive mode and with good reason - personally I believe that the climax in fear & panic has been reached - what comes next week is the final deleveraging of portfolio which will still have to happen:

  1. Redemption still a real issue
  2. Banks will need to find even more capital - Markets are down 20% this month - and with 10x leverage the banks needs capital and fast.
  3. Still too many "hopers" around - we maintain our minimum target if 765.00

Inspired by the article this morning in the New York Times: http://tinyurl.com/56gudn - I had my equity stragist Christian Blaabjerg do this chart: (Click on chart to enlarge)

To make this work "faster" we have even done 2-year average - the picture remains the same - we have come a long way, but there is still some way even on average to call this cheap. This is not exact science at all - and as John Boogle says in the article: You have to look at the alternatives - which is sooooooo true. We firmly believe stocks will be +/- 5% for a long, long time maybe 10 years before breaking higher, but the alternatives could be even worse!

Why would interest rate stay this artificially low forever? The credit cake is not only smaller, it is more expensive, so lending the US Government money @ 4.00% is total joke, when I get 3% dividend yield in actual private corporations. This theme could be the saviors of stock markets, if, and this is a big if, the fund managers tries to embrace true diversification as teached by Swenson at Yale Endowment http://tinyurl.com/6gzwlw (if you havent read or bought this book yet, you may be doomed)

The month is soon to be over and it looks ugly again - check this overview: (Click on chart to enlarge)

but it is still much better than long-only funds! Further redemption will follow these kinds of results.


We were long some 1010 Calls on the rebalancing - which we took of late yesterday, still have stoxx50 2800 & 3100 in place for final stretch of the month - still long 95% cash, but having we look to make some +400 bps in our Macro Strategy & +200 in our CTA account - which means we will playing safe for balance of the week.

Stay safe,


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