mandag den 16. november 2009

In the spirit of Benjamin Franklin - farewell

Once upon a time I started writing these blogs/emails inspired by Victor Niederhoffer (, who not only spared me his time, but also his home, his food and unfortunately his tennis court (Victor was the first inductee to the hall of fame in squash)...

Victor idea was to share ideas and views with dinner table manners among people willing to invest their energy, mind and spirit into all sorts of discussions which would or would not be relevant to trading and trading strategies.

He also in the spirit of Benjamin Frankling ( started the Junto-club....

Inspired by him, never with any intend of pretending to know better, but always with the single objective of provoking people/investors to think out-of-the-box, to make a stand, to question the consensus, knowing at best my projections would be innocent at worst I would look silly....

Over time I have enjoyed personal benefit beyond my own input, something which often happens when you invest yourself into anything, but everything has its own time, and I now feel it is time for me to cease the public part of this blog. To say goodbye.

I will recommend some excellent replacements for my blog:

and if he choose to return, someone I have always enjoyed for his honest, direct approach: 

Like in Atlas Shrugged more and more "voices of reason" turns away from the public space, I do hope Fintag returns in earnest.

In the meantime if you feel like engaging me on the markets feel free to contact me on:  Steen e-mail

As always I will end by wishing you: safe trading,


Going on empty: Monday morning Quarterbacking.

I am back in London - and to my own surprise things does not look one Iota better than when I came here every second week.

Last night when driving to my apartment the taxi-driver told me he could not get a 250 GBP overdraft despite having been with his bank for twenty years!

Now he has to raise the money from his family to make his small business of running a Black Cab work - He saw less passengers, worked longer hours and felt depressed. Tell me about it!

Then after doing a guest host job with CNBC this morning - I took the liberty of checking the local shopping mall ! Wow - this rather upscale mall Whitley, had one in five shops closed, and of the shops still being open one in four was on CLOSING SALES!

Keep producing China - there is plenty of consumption coming your way. The world has become one big competition of EXPORTING. Let someone deal with your problems.

I hope the balance of the week in London will give more hope for the consumer as I am now getting seriously concerned about the markets.

We are at the phase where the stimulus is peaking - which can be seen in the much improved economic data (although the biggest amount of cash ever floaded to the market place still have left everyone short of trend growth).....what comes in its place?

Will private investment come through -not - will business investment re-emerge ? Hardly.........will rates stay low? Absolutely - so more of the artificial help....swapping future consumption for present.......

The marginal benefit of extra stimulus is waning. In 2006 one percentage point of extra growth came at a price of 1.5 USD, now the price is 7 USD. Japan have taught us what you get when you create the third bridge across the same river!

Well enough from me - its expensive to be a grumpy bear, but in closing here is a sound-bite from my guest hosting this morning:

Safe trading,

Steen Jakobsen

lørdag den 14. november 2009

If two men agree on everything, you may be sure that one of them is doing the thinking (Lyndon Johnson)

A quick Saturday blog from me: I have finally figuered out what Obama/Geithner/Bernanke modus operandi is based on:  or more dramatic:

The only way to explain their actions and policies must be based on knowing its futile anyway!

I found the Mayan prophecy when reading a thriller and it struck me as the only sensible explanation for the comment/actions/policies enacted under what surprisingly to me now look an even more incompetent administration than that of W. Bush!

Another far more elegant commentator who is having a hard time not only with Geither et al, but also the never ending praise of China is Hugh Hendry:

His latest monthly report is so well written had there been a Nobel Price for financial market commentaries he surely would have won it for 2009 - unless obviously Obama runs away with it as he has once considered writing a commentary, which these days seems enough to win a Nobel price, but PLEASE READ IT. It is concise and raises several issues which I myself agree with:
  • The non-demise of the US Dollar
  • The non-believe in the Chinese miracle (where is the consumer for their production?)
  • Deflation - double-dip
Last week was big range trading - there was some "noises" that the "too big to fail means to big to live" could see regulation next week as the lobbyist fails to make their voice heard:

It seems Dimon agrees (or playing the game?):

The charts for banks should cause some concern:

Meanwhie the good old Dow Theory still not decided whether to confirm Primary & Secondary Bull Market or to make divergence indicating top in place for now....:

On the markets I have increased LONG US dollar exposure - and added slightly to option downsides - the odds of "see no evil - hear no evil " long environment is rising ... Even the bears now embrace this line of thinking as Goldman Sachs and others are now proclaiming more incoming STIMULUS is coming with the Job Summit in December -

Intentions are good - action better (Steen Jakobsen)... It seems to me that the last Deficit Summit brought nothing - I expect Job Summit will bring... Nothing ... The Obama policies are the worst nightmare this world have seen - when the Chinese engine have filled the last few storage facilities with useless products no one wants to buy - the day of reckoning is in ........This is 1999 all over - no values, no metrics for fair-value.....maybe the Mayan Calander is right ? :-)

Safe trading,

Steen Jakobsen

PS: I will be in London for most of next week, but will try to update... nice week-end...

onsdag den 11. november 2009

There is no atheist in a fox hole - Weekly Investment Meeting

We had our weekly investment meeting and to say the least there is a matter of different opinions. In the blue corner we got the resident equity bull Mr. Lars Thørs, who sees no evil, hear no evil(but highly profitable) -and in the red corner we got yours sincerely who is on the verge of committing public Harakiri in frustration over how much B.S there is flying around on a daily basis.....

The gist of the conversation goes as follow:

There are really three if not four different scenarios for balance of 2009 and 2010:

Note: The X-axis is time, and Y- the return(yield)....

(Click on diagrams to enlarge)

Note: The different scenario's with impact on macro and asset allocation.
(Click on diagrams to enlarge)

In our opinion there will be a movement from presently: Sweet-spot through Double-dip into Crisis 2.0 over the next 6-9 month, but we could be wrong a below we have assigned our consensus vs. the market in terms of odds.

Note: Limus Capital view relative to consensus

The conclusion on the outlook is: It's either going to work or not, we do not see how a V-shaped recovery can be established - but oddly enough here we are at odds with some of the major players in the macro world, who all seems to think the bubble in US Treasury is the biggest, but while we agree on the overvaluation we feel that if we move out of the Sweet-spot then it will be due to increased concern about rising yields on Treasuries - in other words - a starting crisis of confidence.

This scenario is based on several key points:

Maturity of both banks and government debt has shortened considerably making the next 24 month the biggest issuance period in monetary history

There are simply not enough demand to take the supply in our opinion, which in turn will force the rates higher. The US Government has shortened the average maturity from 70 month in 2000 to less than 50 month early this year ( - this happens as the public debt reaches USD (8 trillion US Dollars), but more importantly almost 50% of that debt expires in the next year! 

This should on its own create some concern, but at the same time the banking system has done exactly the same exercise according to Moody's report out this week:

The average maturities of new debt issuance by Moody's rated-banks around the world fell from 7,2 years to 4,7 years over the last five years! This constitutes the shortest average maturity in history. Practically it means the banks will face maturing debt of (10 trillion US dollars) between now and 2015 - or between now and 2012.

Let us not kid ourselves, there is always some debt maturing - T-bill normally constitutes 30-35% of funding, but the point being that even the slightest crack in confidence could have a snowball effect on confidence and catapult  rates higher, as the shortened maturity increases the demand for higher yield and in a world of falling disposable income (due to higher unemployment) - the private sector savings will be in great demand across all assets not just funding the mighty US of A.

More stimulus & how Obama could be forced for more to 'print money again despite a political lack of will to do so

The recent talk of town among Obama's clones is to not only keep up the spending but even to increase it as he did too little to start with! Lately former Labour Secretary Robert Reich and Paul Krugman have called for such measures. The philosophy was reflected in my 'analysis' on earlier blog this week.

From Monday morning quarterbacking, Nov. 9, 2009: Geithner said it best this weekend: "If we put the brakes on too quickly, we will weaken the economy and the financial system, unemployment will rise, more businesses will fail, budget deficits will rise, and the ultimate cost of the crisis will be greater," he told reporters in Scotland. "It is too early to start to lean against recovery."

Ok, let me get this straight: So if we continue spending tax payers money then: we will have smaller deficit, lower unemployment, less business failures, and smaller ultimate bill for resurrecting the world? If that does happen I will be playing for Denmark upfront in the next World Cup in soccer in South Africa next year (despite my 45 yrs and less than fit fitness level)

My friend Daniel Arbess, who runs the Xerion Hedge Fund inside Perella, Weinberg Partners had some excellent point on how US and Europe is mired in deflationary forces for two out of three macro themes working presently:
  • Consumer deleveraging. Rising unemployment ==> Deflation
  • Improving earnings via cost reductions and cheaper finished product imports from China ==> Deflation
  • Zero rate policy drives investors to speculative investments ==> Inflationary....
Dan has several others good observations among them that such a "global imbalance" is continuing leading to some sort of confrontation.

But all of the above really talks about is a double-dip, the fact that post the biggest stimulus in world history, the result was not even back to trend growth, and in 2010 without more stimulus then Crisis 2.0 will come back to haunt.

In order to make this more operational this our expected returns in the different scenarios:

Click to enlarge

It is worth noting that the key in Crisis 2.0 is the LACK OF POSITIVE RETURN from government bonds - this is the main driver of the worst to come scenario.

In normal markets long Government bonds would perform in times of crisis, in this one we have -3,9% expected return and the only positive being a much smaller volatility relative to Sweet-spot.

The way we use this is not as a way to make money, but these three basic possible scenario's are the ones we need to navigate. (The above is very much work in progress)

Right now we are in the sweet-spot for better or worse, and the expected return on this is close to 16%! 

Something which will please the market, but we(Limus) have a much smaller 1 in 4 odds vs. 2 in 5 odds among the consensus investors for this - again we stand almost alone with our projections, but as Groucho Marx said in wire to his club wanting him as a member : "PLEASE ACCEPT MY RESIGNATION. I DON'T WANT TO BELONG TO ANY CLUB THAT WILL ACCEPT PEOPLE LIKE ME AS A MEMBER"

Investment outlook conclusion:

There is nothing on the horizon indicating the see-no-evil-hear-no-evil lose monetary policy will end - on contraire - the central banks, the pundits, the politicians all firmly believe spending more money will create smaller deficits, higher long term growth, in this environment keeping to your Beta exposure is the only option. Our Beta model is very simple and can be executed through ETF's:


We continue to hold a negative outlook on the market in Limus Capital Partners, but our outside partners are either neutral or major bullish on the market. 

The correct allocation presently is to benchmark everything (the exercise of Beta-chasing) - in our case: Beta model long plus some down-side protection through our Alpha plays (which is the ones we describe mostly here on the blog)

The charts and most of the work done for this presentation was courtesy of my partner Mr. Jesper Christiansen.

Safe trading,


mandag den 9. november 2009

Monday morning quarterbacking

Dear Friends,

Well the market is back in 'jolly mode' - the lesson goes: Bad economics is good for stocks(WSJ article)- and easy money will last forever. (Where did we hear that before? Oh, yes - the "Greenspan" put)

Now we have the Geithner/Bernanke put - leading into the FOMC last week, there was 'rational' people like me, who thought maybe, just maybe the FOMC could see how they are now creating the exact same mistakes Alan-I-am-the-most-useless-centralbanker-in-history-Greenspan did, by promising the market NO hikes - whatever happens ....

Geithner said it best this weekend: "If we put the brakes on too quickly, we will weaken the economy and the financial system, unemployment will rise, more businesses will fail, budget deficits will rise, and the ultimate cost of the crisis will be greater," he told reporters in Scotland. "It is too early to start to lean against recovery."

Ok, let me get this straight: So if we continue spending tax payers money then: we will have smaller deficit, lower unemployment, less business failures, and smaller ultimate bill for resurrecting the world? If that does happen I will be playing for Denmark upfront in the next World Cup in soccer in South Africa next year (despite my 45 yrs and less than fit fitness level)

I will let the "picture stand" for a few minutes so you, yourself, can contemplate how deeply misguided the Treasury Secretary is in even the most basic economic-one-on-one!

Another headliner being thay Goldman Sachs not only depend on cheap government money, but apperently they are also doing the work of God - at least that's what the CEO Blankfein says: . Look I am a declared Agnostic, but with a firm believe in morale and the ten commandments, but telling someone you are doing the work of God is that on the border of blasfemi?

I refuse to be drawn into the discussion of what a serious CEO calling upon God in his defense for his industry does/tells me.... - as I remember a born again Christian President doing so for too long.......and the issue of everthing from Wars, violating individual rights......

The week-end did give some justification to my long held believe that over time justice will prevail:

 Warren Buffet got caught with his hands in the tax payers pockets, as he did not feel too big to take some tax credit from the US Government, making sure there is less money for the 10.2 mio. unemployed et al: and if you want facts, not CNBC hype maybe looking at this website could help level some of the God-like stature he likes to take upon himself.

Last week was by all accounts an extremely expensive week for me, if nothing else, it shook my confidence as the Friday last big down close confirmed my long held view that a top was in place Mid-October, now it seems we need the classic re-test of old highs to see if there is more momentum above those levels - most of my positions is now under water, although still some distance away from the allowed 5% loss, but time-decay is very expensive.

The strategy for this week, will be to observe, recalibrate, because despite my lack of income from the portfolio last week, it is abundently clear to me that the financial market lives in a Fantasyland.... so while the market tracks higher, I will leave the final verdict to beyond the old highs, as I do firmly believe 10,2% unemployment is AN ISSUE - if nothing else to the miliions of families presently losing their jobs around the world.

Screenshot - 09-11-2009 , 16_28_56.png

My believe in mankind, the markets are positive, but we need the "forest fire" first, and if in the process people will start calling less on God, have higher morale standards, less leverage, and everyone will see how destructive egoism is, then I will be very pleased. On the issue of inspiration I found this link on a truely remarkable man: His message is for the environment, but as a trader, a person, there is some very interesting lessons in this.....if only..

Safe trading,


onsdag den 4. november 2009

FED's biggest problem is that the economic data is improving too fast - Macro Blog

On the eve of the FOMC meeting I will dare to suggest that the 'real issue' for FED is the fact that the data is better than expected!

Yes, lending is still weak, yes all in all housing is still dismal, and most of the improvement is in sentiment index', but... that the whole plan of Obama or the Harvard School of Economics as some people with tendencies for compartmental disorders.

Yes(again), you are reading this correct!

Obama has been successfull in creating the illusion of doing something, not unlike him winning the Nobel Prize on intentions alone!

He has now succeed in getting everyone to buy-into his 'hope' (Do not worry - it is ALL hope - no substance).

This leads me directly to todays FOMC meeting - the mere talk of EXIT STRATEGY gets people nervous, but it is hard for Fed to not change their communication:

1. Because its too tempting, always, for politicians and bureaucrats to take claim for something they nothing to do with (See chart below where US PMI surges past China and Europe)

Screenshot - 04-11-2009 , 15_44_00.png

Source: Societe General Cross Asset Research

2. It is paramount for Fed to create another illusion, the illusion that they have a plan for how to take the easy monetary policy back, for how to sell their old bikes, ladies hats on their balance sheet in the future.

This should be tied in with the massive shortening of term debt-structure which has been happening in the US: (see link below)

  • Maturity of outstanding US Debt is down to 50 mth from 70 month
  • Almost 50% of debt is due in the next 12 month (Will Fed hike making it more expensive for themselves to refinance?

It seems that the thinking in Fed is to 'pre-alert'the market, to communicate is the tool. Some observers Financial Times, and other insiders feels this meeting is too early - but that is it imminent.

Another interesting aspect as pointed out by the excellent research done by Societe Generale Cross Asset Research is the fact the world has a potential for a "decoupling"  (See PMI chart above)

Where early on it seemed the US was lagging China and Europe, it is now clearly the US which is in the lead as seen by recent surge in PMI data!

This would be major game changer - as the US Dollar has become the funding currency of choice.

Imagine if the market would/should/could starts repricing a rising rate structure in the US (it sort of makes sense the US needs to pay more...) while Europe lags - that seems to call more for 1.10 EURUSD than 1.70/1.80 which the consensus in the market.?

At the end of the day the market is in my opinion unprepared for the next move(s) in monetary policy, fiscal stimulus & geo-events.

In other words: Across all products VOLATILITY IS TOO LOW relative the uncertainty of path, which is the true volatility curve.

FOMC tonight I have no clue about - the way the market is setting itself up indicates to me there is 60/40 chance of major disappointment for the RISK-ON people, but as it is always the case with central banks, politicians and people in general: It is not what they say but what they ACTUALLY do do which decides......


Still same positions - massive P&L swings - but will await tonight & most likely Friday Non-farm before moving from aggressively short this market back to neutral. Justice will prevail! :-)

Safe trading,


mandag den 2. november 2009

The revaluation of the banks on life-lines?

...and C gets the RBS-disease( - there is clearly some new valuation of the major banks on life-lines going on! -

It kick-started last weekend with the too big to fail discussion (

Then ING( was forced by the EU commission to downsize balance sheet by 40% and sell their insurance business....

This morning RBS announced that the EU deal will mean divestment beyond their core-strategy - AND - Darling - yes it is a name - will tomorrow announce his plan for "dealing" with new banks, branches, competition - but will end up with 85% of RBS - what a joke. C under pressure tonight:

Fed not helping but for once talking common sense:

Comments from Fed's Greenlee:

U.S. banks face risks from souring loans, particularly for commercial
property, and some banks may face capital adequacy problems, a Federal
Reserve official said on Monday.
  "Credit losses at banking organizations continued to rise (in the
second quarter), and banks face risks of sizeable additional credit
losses given the outlook for production and employment," said Jon
Greenlee, associate director of the Fed's Division of Banking
Supervision and Regulation.
  Greenlee's comments were in testimony prepared for delivery to a
House of Representatives Oversight and Government Reform subcommittee.
  "Poor loan quality, subpar earnings, and uncertainty about future
conditions raise questions about capital adequacy for some
institutions," he said.

Strategy: Still the same - we believe mid-October was top - target: 930/40 minimu in S&P

Safe trading

Steen Jakobsen

fredag den 30. oktober 2009

torsdag den 29. oktober 2009

Silence is Golden

The market is now slightly oversold on my model - the top seems to be firmly in place and now we will await end-of-month-buying or not.

No doubt many fund managers are 'screen watching' over the next 48 hrs, potentially having to act on Monday should we take out 1050 in earnest.

It's not easy being a fund manager these days, actually never is, but 2009 the story very quickly became one of:

In 2008 we had the worst financial crisis, probably ever, and as expected 2009 became the worst year on the real economy. The numbers, the long line of unemployed confirms it.

Then the different governments decided to spend 5%-6% of GDP to 'safe the world from breaking down' but all they really did was to circle the wagons on their croonie friends in Wall Street - that's not a political statement, merely a matter of fact.

Now at the end of 2009 the banks - the major banks- are making billions on tax subsidized trading revenue (borrowing at zero with Geithner/Bernanke and placing them in...... Bernanke/Geithner long bonds) - you could say the its look very much like what a certain Madoff was doing recently, but do not let the facts come in your way.

Along the way, there was a public apology from Mr. Greenspan, effectively renouncing his Ayn Rand - Objectisvim and 'Efficient Market Hyphothesis' along the way. For many of you this may be relatively irrelevant if not for the fact that the whole principle idea of letting the market rule themselves came out of these two central "theories" - which Greenspan wholeheartdly subscribed to.

The only real issue with Ayn Rand and EMH being it leaves "morale" to the markets - and I must say: I have wrestled with the "morale" issue for a long time, but as its often the case in practical life, the answer came through observing the nature - in this case the banks, the politicians and the bureaucrats.

The conclusion: There is NO MORALE limit for people when they spend, invest, use other people money - I will even offer the preposition that man/woman generally have a lack of morale when it comes to dealing with money (and a lot of other stuff - which I will leave for your psychiatrist) but this old trader has lost all faith in the market place - the key issue remaining is the one of: What do you put in its place? I do not know - but 90% of financial people are talking non-sense, and 98% of what is produced in banks are waste not only time but also the paper its printed on - this a reality people needs to deal with, as the new world order in finance is not one where the government will come to rescue - ironic that the "free market system" most likely will be replaced by one where 'accountability' is the true measurement of success - lets see how is prepared for this down the line.

On the markets I have not traded for over a week really - got all the same positions as of last investment meeting - I'm surprised in two things:

The high level of GBP and oil keeping its bid tone - the rest is as expected and I will now await the month-end before putting further chips on the table (For those in doubt of my positions - follow the Twitters)

Safe trading,


mandag den 26. oktober 2009

When the fire breaks out the door will be to small for everyone to get out..

Dear Friends,


Above picture courtesy of my old friend: Ole Riis...

This is EXACTLY what I am talking about and today there is further evidence which needs to 'ADDED'

  1. George Soros - like him or not he is the 'Champ' and probably the only person I ALWAYS listen to:

  2. Bank of America breaking ALL support - this could be key....

  3. Dow Theory..continues.:$TRAN,$INDU

Safe trading,

Steen Jakobsen

fredag den 23. oktober 2009

Red alert is warranted...

Now I will do something which very few in todays world dare to do: Offer an opinion - one which statistically has zero value - but one which I feel I must share with you - if nothing else because in investing it is better to be on the safe-side / taking profit than believing in this miracle.

I believe it was JP Morgan who said when asked: 'How did you become rich?" - 'I took my profit too early' - wise talk.

Two major issues:

Issue 1:

Dow Theory is trying to warn us and what surprises me is the lack of focus on this - my partner Jesper got his CNBC going all day and they keep talking about Microsoft beating expectations - no talk of guidance being lower - and ABSOLUTELY no talk on how Transport stocks are tanking - it does not get more ironic than this -as a few weeks back everyone talked about Warren Buffet's favourite economic indicator: Rail road freight - This market is UTTER JOKE - and if you did not yet watch the Frontline prgoram I linked yesterday then NOW IS TIME. The defense rest.

Dow & Dow Transport (click to enlarge)

Issue 2:

Cable(GBPUSD) volatility is a concern. This morning Cable made cycle high - and now leaving the office it has made a 'key-reversal' - traditionally an indication of weakness to come. I may be wrong, but as an experienced FX trader the up-down-up-down moves where speculators 'chase' momentum is sign we are going to see some major reversals soon. You be the judge:

GBPUSD Chart (Click to enlarge)

Safe trading,

Steen Jakobsen

torsdag den 22. oktober 2009

Frontline on the go-go 90s....

Been watching this tonight:

You have to admire the quality, the pictures, the directing of this 55 min program from PBS (my favourite TV when living in the US - actually 2nd after Yankees/Giants) - and it is a lesson in what an idiot Greenspan was.......

Brew a cup of coffee and sit down and enjoy, please!

Then a comment from a young student lecturing me on why Philosophy is no better than economics as an education - what a talented writer!

Hello Steen,

You don't know me but I have been following your blog pretty closely and we also shared the same roof for a year in saxo bank (where I still work as a sales trader while studying economics in the lovely tiny town of lund). The reason i am writting to you has nothing to do with economics it's just a warning to NOT waste your second life studying philosophy. At least not in a university. Having been to school in a country where philosophy is force fed to every student (something like finnish kids having to learn swedish) i have a few words of advice for you. Typical philosophy class goes like this:

- Teacher tells you to read text (say plato's republic, or socrates' apology if the teacher is kinky) and then write an essey about it. Then the possibilities are:

1. You don't understand it and he does not understand as well. But nietzche did understand and wrote something about it so the teacher knows how to rationalize the bad grade you will get.
2. You don't understand it but he does. He is a genious and of course he is bitter because nobody else in the world understands him, he is still virgin even though he teaches classes with 1/10 Male/Female ratios (the reason i took philosophy classes back in the old days) and worst of all he has financial problems. He fails your paper and you are not even in the mood to ask him why, just repeat the class and hope that next year it's being taught by a less clever teacher. Eventualy you get disapointed, drop out of class and study economics instead.
3. You understand it but the teacher doesn't. He pushes the button, the floor below you opens and you find yourself in a pit of crocodiles, snakes and piranhas. So long sucker, better luck in your third life!

Above all, if you decide to study philosophy anyway, do NOT do it in Greece (and preferably not in UK, sweden or germany either). Try some country that doesn't try to teach it like it's math. If you really really can't find one do this: Study MATH but only socialize with philosophy teachers. They will speak to you without seeing you as a person retarded/severely retarded/too clever to be kept alive.

by the way, very nice presentation, unfortunately in lund 90% of the time we have to hear the swedish (my correction) idiots speaking... But hey, we were founded in 1666, so all our clever guys are long dead, or retired and moved to an island house in greece which they bought back when SEK could still buy stuff.

Best regards,

He talked with more claret than clarity.

Dear Friends,

Not that I want to impose on you my views, but often when having to do a speech you need to clarify/project your thinking more clearly..

This presentation was done with help of my good friend Olof Lindgren and my two partners Jesper Christiansen and Carsten Høgh.

The presentation took place last night at the Copenhagen Business School and hence the CV and other 'crap'... but some key take aways:

Denmark - for those of you mainly interested in out Danish view go to the back-end of the presentation.... u will find some food for thought.

Yield - for those w. mortgages... rate exposure ... the core-inflation discussion could be of interest... as it seems we will continue twds lower yields...

Stock - our 'gut' feeling and tech. model tells us.. there may be breather in this rally...around now ....whether its merely correction before higher.....will need to be seen....but 930.00 in S&P is our target for now (1100 now)

Macro - the global imbalances... are now worse than before the crisis -.. as china reserves keep rising.....

Bottom line: the world feels good.. lots of hope.. but we are afraid..this is ....the calm before the storm.. but we(I) have been wrong before..

Enjoy at least there is some good pictures in this presentation...

Download the presentation from this link:

Safe trading

Steen Jakobsen

tirsdag den 20. oktober 2009

Ceteris Paribus - Investment Meeting...

Tuesday means Investment Meeting .....The conclusion became:

There is 60/40 chance of more of the same - market is committed to upside now, the standard protocol says:

  • Recession is over
  • Fed will remain on the sideline at least through 2010
  • Earnings will be coming back after Q2/Q3 - was cost reduction, inventory build - Outlook upgrades relative to downgrades: +20% - setting a very 'high bar' for Q4.... Market will be good in Q4 - it's final. (says consensus)

We are however slightly concerned about this chart:

Gold, US Dollar(Inversed) and Crude(click to enlarge)

The fact Bernanke mentioned: An Asian Bubble in his speech yesterday could mean some slight distress with the "bubble" in Gold, US Dollar and Crude. (Created by reserves accumulation in China)

Crude going above 80$ historically been negative, and above 100 $ key concern.

The old rule of thumb on oil vs. growht goes:

For every 10 $ price increase in Crude - GDP loss is 0.4% in OECD - going from 40 $ to 80 $ means loss of 1.6% growth....Ceteris Paribus.....

But.. the real interesting discussion was based on the discussion "core-inflation" / Taylor-gap which led us to following conclusion:

There is no way the "traditional" rates will go up - but how about TRADING MARGINS ?

Core-inflation never moves - 35% of the index is "rents" - it's the equivalent of having a stock market index where 35% of the index is in bonds!!!! Joke as a policy measurement.....but it's yet another of the Alan-I-will-cut-rates-as-soon-as-I-can-to-become-the oldest-most-incompetent-central-banker-in-history-Greenspan.......

PCE - Core inflation -mean around 1.8/2.0% for 15 years!

A hike in trading margin would serve the right political masters plus its an effective way of short-cutting the never ending global imbalances going on again.......

More on this tomorrow as I will submit on this web a speech I am giving at The Finance Lab on Copenhagen Business School: with plenty of charts and fun. Link will be posted tomorrow night.

For now:

We still believe top is in place - but the BULLS not going to walk away without a fight - the fact remains: It would be suicide not to be long this market for fund managers, but it could, very likely, also be suicide to be long the market now.. :-)Safe trading,


mandag den 19. oktober 2009

Is it time or not - that's the question...

To make sure I follow my own advice I bought some 970.00 puts December in the S&P - for about 8.25/9.00 per contract. My work on the models keep indicating the top should be near or in place - and the objective on the down-side is minimum 930.00.

Tomorrow I will try to validate this objective - but it was expensive Monday back ignoring the first rule of trading - no edge means no positions...... ;-(

There is so much momentum in the market and I was "surprised" to see how the big Private Equity Funds all talk about EXIT from their long positions - some even admitted: "It is doubtful" how long the "window" for IPO's is open - once again I am reminded of the 1999/2000 analogy... but more on this later/tomorrow.

Also bought some 1.5600 Nov. late GBP puts -clearly there was some technical trading in GBP last week, and the incoming data may surprise - but the "rebound" is built on bank bonus' and profit, but the international bankers (and hedge funds) are leaving the UK is steady stream. I am not one for standing in their way...

Safe trading,


søndag den 18. oktober 2009

Back from the sun.....

It's Sunday, the market made a new top last week - and we are entering the "danger" zone where fortunes are made and lost - I got strong feeling this week could be bellwether for the next 25% move in S&P - You know I have been calling for October top since late August and now is the time to make a case either way...

For this week-end my friend Kevin Connors over @ Goldman made me aware of this article in Barrons / WSJ over the week-end: C'mon Ben (Barrons calling for exit strategy----)

More tomorrow ... nice to be back ...

Safe trading,


onsdag den 7. oktober 2009

“The best things in life are unexpected - because there were no expectations”

Market had chance of a 'correction Tuesday but going into the close it looks like another up day....

The strategy for the balance of this week is pretty simple:
S&P futures above 1040-00/1041-00 you are long...below you cut:

Alcoa came out beating top- and bottom line ( - setting the pace the next 48 hours? (Stock twitter - flow/and latest news)

The Alcoa chart looks pretty much like the S&P - an upward channel with potential break to the topside..:

NOW the disclaimers: and Dow Theory also looks like it sending out clear signal of potential divergence as DOW Transport is NOT close to making new highs....:


Core long equity (with time stop around middle of next week latest)Sceptical on fixed income - more and more focus on China waning trade surplus...

US dollar weakness (but it seems Trichet was "pounding the table" about the weak US Dollar over the week-end, but I will dare him to "frank & honest" in the ECB press fade the Trichet comment ....sell US Dollars....

Long commodities..

Safe trading


tirsdag den 6. oktober 2009

Don't part with your illusions. When they are gone you may still exist, but you have ceased to live. Mark Twain

It became a long meeting today as we had a full plate with topics:h

  • Reserve Bank of Australia hiked rates first...
  • "Secret talks" among US Dollar creditors to diversify away....Gold new high...
  • Iran - October deadline is getting closer..Aghanistan - where is Obama heading ?
  • Earnings season
  • Latvia
  • Conclusion

We ended with "resigning" to the fact that we will have one more upmove into the middle of October, which has been the main path we have looked at since our initial investment meeting in September.

The possible dates could be both option expiry Friday October 16th or IEA visit to Iran on October 25th.

This leaves us with benchmark exposure to risky assets.

Reserve Bank of Australian hike (+25 bps) & Changed macro themes

Under "normal" circumstances a move like last nights rate hike from RBA would have had the market looking for the next central bank to hike, but since the non-farn payroll number last Friday the macro theme has moved to one of:

Potential for further "help" to the market Obama now talks of tax cuts - fully realising his political capital in Congress is all but wasted.........

The non-farm pay-roll should have led us lower as an individual number, but it merely delayed further back the dead-line for QE exit and it substansiated the need for another look at how the plunge team can work these markets higher.
The implication/conclusion is simple: There is further upside in this market as long as numbers and Obama deteteriates. Ironic - yet true.

US Dollar and Gold

It is pretty simple: Market wants something tangible - and that got me thinking: What did the market want during the "crisis" ? Yes, indeed something tangible. That sort makes no sense, unless... you do not really believe in "new Nirvana" around the corner?

Gold is being bought as an insurance policy, as a bet vs. debasing, as the only "tangible currency" and as storage of wealth. If you look at the attributes for those conditions it is not exactly positive association you get - in other words: We are long Gold, we believe in all of above, but we must acknowledge it also implies we firmly believe we can exit those positions ahead of everyone else. It is indeed a suckers game.

The central banks are clearly sellinh, swapping Gold out in order to contain the rise in the Gold price, but to no avail so far... to us Gold symbolises to some extent what is also going on the Obama's popularity - there is no longer any believe in change, there are really only the hard, tough, dry long way home - a fact no one wants to prepare themselves for, so we continue to "like" the debasing - despite the fact is really more of warning signal than anything else.

Iran & Aghinistan

Obama is now fighting with his own Generals over Aghanistan - he lost Olympics bid, and he is having more press conferences than there are minutes in a day.......and then we got Iran - the IEA deadline is October 25th, and with intensive leaking of information going on presently there seems to be reason to a little concerned (and long WTI Crude?) - but hang on - is it not pretty similar to the lead up into Iraq ?

We do not know, but the geopolitical risk is back in fashion and over the cause of Q4 this could become a driver for yield, commodities...

Earnings season

We do not per se have any strong convictio on the earnings season, but note that market expects above expectation earnings with the risk being on the outlook for balance of 2009. We also note the report from Hausmann Funds called:

Forward Earnings Imply a Return To Near-Record Profit Margins by William Hester:

1) analysts have penciled in earnings growth of more than 40 percent over the next year, and then another 22 percent between 2010 and 2011

2) Analysts expect sales to jump 5 percent next year and then another 8 percent into 2011, according to Bloomberg data

3) Analysts are forecasting that profit margins will reach almost 8 percent next year and then 9 percent by 2011, far above their recent trough and far above the long-term average of about 6 percent.

4) Assuming that analyst expectations for strong margin recovery are correct, the P/E is already at least 1.7 points above the long-term average. Assuming a 7 percent profit margin on next year sales, the P/E ratio would currently sit about 3 points above the long-term average. And at the long-term average profit margin of 6 percent, the P/E ratio on forward operating earnings would sit 5.5 points (nearly 50%) above the long-term average

Given these expectations, the ability for companies to beat earnings estimates may eventually become more challenging. Since aggressive profit margin expectations are already assumed, big earnings surprises would require companies to deliver those already expected high profit margins, and probably stronger than expected top-line growth too.'

Well, it is tough days to navigate the market, but.... at least something is going on...

Safe trading,

Steen Jakobsen

søndag den 4. oktober 2009

Sunday night quarterbacking...

I'm sitting here a Sunday night watching the Baltimore Ravens vs New England Patriot, so what is more relevant than some Sunday night quarterbacking:

Let me offer some direct thought on these markets - no apologies - only the gut-feeling - and let me stress that I'm a simple speculator with no predictive powers, but for now it seems the stars are lining up for further correction....

There is, as always, a big risk of ...bottom fishing tomorrow, and there may too much "consensus" on downside... but on the other hand... if we came down from Mars today - looked at correlations, the incoming data, vix, technincal levels, yields, .... .we wud probably objectively get a little concerned...

This could be time to forget the ........narrow trading ranges, the scalping move towards as a bare minimum to buy some volatility...

I "like" when several indicators points to the same conclusion - and I must say the additional "index" analysis I enclosed(see below in this blog) .. on the "end of recession" in my, obviously biased assumption, concludes that.... the "perception" of the new reality is much better/higher than the reality... which also confirms why unemployment keeps rising - why Obama is having political problems, why geopolitics is finally back in the frame (note: We have not discussed geo-risk for more than 18 mth!!!!)....).........

Also the rhetoric has changed.. there is a certain amount of complacency among policy makers - they feel vindicated - succesfull.....

My simple assumption remains... 60% chance of top in place - if this week is net down week, I think its time to add some chips to the table.. but there is long week ahead of us.... but...... the negative compounding is back biting at the bulls......and as long as water does not run up walls. there is a certain logic to the honeymoon of Obama, the stock markets, and the feel good factor being over...

A few charts: Break down in yield is NEGATIVE says John Murphy:

Volatility have seen a low..:

And finally.. .some "quant" analysis of the actual economy - as a anti-dote to the CNBC sensational driven data analysis:

Definition and background:

Strikes me as super interesting..

Night and safe trading,


lørdag den 3. oktober 2009

A consensus means that everyone agrees to say collectively what no one believes individually. Abba Eban

This morning I went through several "economic analysis" reports, and I must admit I got more confused the more I read.... an example on credit:

One respected analyst talks about how credit is not coming, probably never will: Meredith Whitney, then another senior and respected analyst talks about how the next cycle will be phase two: Credit cycle begins: Russell Napier, CLSA (It has to be added Mr. Napier does foresee it will end in tears) but they have opposite views of the credit:

Ms. Whitney argues that big corporates are ok, but small business, which constitutes more than 50% of the country's workforce & 38% of GDP, can't get credit and are unlike to get any.

In other words: The view of the credit market is pretty similar to the views held on the stock market.

There was two major take aways from me from the research:

US Yield curve is sending out small warning signals about Fed potential policy change

We need to watch the US yield curve 2-10 - this comes courtesy of my good friend: Andrew Baptiste over at Morgan Stanley: (click on chart for larger version)

What is major league interesting about this chart is the fact we have had tripe top around 260-ish three times, the most recent in September - the way this works is: The steeper the curve - the more stimulus/growth is priced in (I know this is slight simplification as I did small thesis on this when I studied economics some 300 years ago :-)..... but hang on: IF there is top in place around 260 - why would the curve come back down?

Well, if Fed started indicating/managing market expectations they would move short-term rates, it would mean 2-year bonds would be sold off - increasing the yield - everything being equal (I just so wanted to say that!).... I.e: inverting of curve would "signal" tightening - This is kind of interesting as Fed talks in the past two weeks have changed from being "accommodative" for the long-term to ... "when we move it will not be in small steps"....

So....bottom line: In my long, too long experience, if there was only one single "economic- indicator" I was allowed to watch it would be:.... Yes, the yield curve.

The yield curve is traded, arbitraged by people looking to scalp 1 bps, one basis point, nothing on the yield curve is left unintended - very much unlike stock valuation where at best we have a 50% correct picture of the corporate earnings and at worst simple lies!

I will be following the 2-10 yield curve for signs...... - and let me stress... IF 260 BPS goes on the upside I could mean we have avoided "recession" and recession light" and we are moving into new bull market, but one thing at the time.

We are close to getting the answer to the critical question: Is this a new bull market or merely bear-market correction

To round of my first point let me introduce two charts or rather two likely paths - which I borrowed from Independent Strategy, David Roche's firm in the presentation: Lipsticking the pig: (click on chart for larger version)

The two points made above may be old news for all of you, but for this one-dimensional danish speculator it offers some new insights...

Other important headlines:

Strategy for coming week

We have bought some EUR.USD volatility as the risk-of mode did not, yet, impact downside in EURUSD - the Asia central banks are extremely busy buying EUR selling US Dollar - reflecting the falling current account surplus with the US (China will run C/A deficit in 2010/11 - meaning the end of supporting the US dollar - please do not tell Geithner/Bernanke this... :-) .. but either way.... there will major move in the coming week.. we own 20 delta strangle 1.4250 /1.4850..

We also did same exercise in STOXX50 - despite our "tendency" to favor the odds of further downside- but we respect the "plunge teams" which works around the clock: (click on chart for larger version) for my own long-term model - I am still:

Short S&P from 1063is

Short Wheat from 451-ish

Short EURUSD / long JPY....

Looking to seel 2-10 yield-curve....looking to buy EURSEK... an contemplating long-term negative position on Denmark - where the economic conditions is in free fall.

Safe trading and nice week-end


tirsdag den 29. september 2009

Chasing the end consumer....where is he? Have you seen him?

Todays investment meeting was short, but productive:

We ended up chasing the end consumer of all the "good" and goods that this fiscal stimulus has and will produce.

It is all well and good to analyse things getting better - it's even correct, from the stand-point of corporate earnings, but.... who is this end user? Where does he/she live?

Clearly the US consumer no longer wants to be part of the game of chicken, as their "balance sheet" is in such a bad state: lower house prices, eroded pension funds, and outlook to lower real earnings & potential unemployment

The money is on China and Japan to create more domestic demand - and I am sure it will produce more final demand, but the problem being... their saving rate is 40% or more, so it takes a lot of Chinese to replace just one US consumer.

Chart China - getting bigger GDP but spend less as percentage of GDP (source: David Rosenberg, Gluskin Sheff)

(Click on chart for larger version)

Fortunately China is factor rich on people, but I doubt the local peasants, celebrating the 60th year Anniversary of PROC ( this week is too concerned about these matters, but the cheerleaders of the world keeps talking about the amazing Chinese story....but may I ask again? Who is buying their stuff.

Looking at the incoming data it is becoming clear that the velocity of improvement is at best stagnant and at worst falling - the past two weeks has not done much good on the upside, except maybe for the 20K better jobless claims last week. The worst being the renewed slow homes sales...

It is also very interesting to note that the main benchmarks of bubble/euphoria/China: Copper, Gold and Crude are all "correcting" their up-move - this could be merely a small correction inside major cycle, but being the concerned chap I'm - I got feeling market is long, very long.....all of the above assets.

Chart 2: Copper, Crude & Shanghai

Our main conclusion remains this:

  • Market trades on momentum (nothing wrong with that per se..... although it is EXTREMELY tiresome for old man like me.....)

  • It's impossible to define top in place presently (You can do all sorts of analysis, but from technical and valuation perspective it remains a two sided story)

  • We note data & commodities does not like last two weeks(see chart)

In the equity space, our resident equity guy, Mr. Carsten Høgh, claims: Nothing is cheap any longer, and that caused some tactical talks on whether stock managers would move to "defend" their positions as we enter Q4?

The fact that most of their "profit" this year has come from low quality stocks with no or small earnings - and from increases in multiples (S&P has moved from P/E of 10 to 18 today.....) would indicate some willingness to scale-down their holdings based on Carsten premise: If it's not cheap, it's close to being expensive - We have expectation that there will be move away from cyclicals and into Big Cap again (Tesco, Wal-Mart, Colgate, Coke, H&M, Diago etc.).

The overriding strong argument for buying stocks remains: cheap funding (read: liquidity), cheap US Dollar and cheap talk in Washington (Obama promises alto - but have much of the items on the G-20 can he ACTUALLY get through Congress?).....which are all good arguments, we have some idea, still, that the next two weeks will be the peak (Read old blog:

We are getting close to this END DATE.... and our cyclical model indicated going in to Monday that the markets was slightly oversold, but the key for the next two weeks becomes how much further we can move up before the market finally puts in medium-term top........ We look at Fridays number as as a potential "game breaker" - but as always... it's not a science but more of guess.


We remain light in risk and we will be looking to increase negative play as is out........for now... the momentum rules..

Safe trading,

Steen Jakobsen

fredag den 25. september 2009

Politics is war without bloodshed while war is politics with bloodshed.Mao

The week-end macro blog today with guest commentary by my friend Yoshi.

Yoshi wrote me nice e-mail last night and the content is the first real "new" research/analysis I have seen in years - you can always trust Yoshi for clear and concise thinking, but first to the order of G-20 communique:

Full text:


The statement was longer than normal and full of promises... the headlines was as expected but the sub-text left me with feeling that the exit strategy is further ahead than market presently perceive it to be...

The financeminister was instructed to work on a transparent plan for exit strategies in their November meeting - and the world "leader" (sorry I can't write it without putting " " around it as it's joke to call them world leaders....) believes growth is back at 3% plus - and certainly the year-on-year numbers vs last year looks good......

Which way to play this? I don't know but.....good friend of mine commented: "... the only way for this to be done in good order would be to let all of the programs run out of time.....".. so the way to monitor this will be to make table of "initiatives" and watch last "sell-date".. if this is THE PLAN, then we are losing a lot of stimulus over the next 3-6 month, and this I think is main point to take away..

Enough about my thought here is Yoshi e-mail to me (which I took the liberty of making public before getting Yoshi's approval - but I deemed the email to be in the interest of the national security :-)

Nice week-end and safe trading,



Hi Steen,

I'm fine and amazed at how foolish this mkt is. We are on the verge of
protectionism and in the beginning of the end to the foreign capital
to the US (the Asians are serious about developing their domestic
consumer mkts, which will be far less open than the US).

I really think Obama will go down as even more corrupt than Bush and
his biggest mistake is Geithner who is closer to the powerfuls since
Summers will not pass any confirmation hearing in the Congress.

Right now, my biggest immediate concern is the CFTC's position
restriction on the futures when the interest rate differentials (one
of the major reasons the Asians would hold the USD) are gone. The USD
denominated commodities were acting as the balance to offset the
declining interest income and weaker USD. When the US increases tax to
eliminate the tax rate difference, then fait accompli to the USD.

I am amazed they are even talking about Tobin tax as if someone is
making sure the USD will be dead unless the US wants a new currency to
fraud its way out of the impossible USD liability.

Now, the Europeans are joining in on the protectionism (tariffs on the
Chinese aluminum foil and seamless steel pipes). There is a real
chance the Japanese (they have been quietly reducing the UST holding
for the last ten years) will sell the UST since their trade surplus
with the US is declining and Japan will need any available capital
including its reserve to pay for their domestic needs: free high
school education, the serious pension shortfall for the fastest aging
population and the DPJ's "Welfare Economy" policies.

The serious point regarding China and Japan is they are shifting their
economic models to more domestic oriented economies because they've
given up on the US consumers. If Japan, with the only 10% of the
Chinese population and much smaller land and even smaller natural
resources, would say they accept a strong yen, more domestic
consumption and Asian Economic Comunity, it would only mean one thing.
The US is becoming a liability to them. Look around in Asia, the
Chinese yuan & the Japanese yen swap lines with other central banks
are being extended like a spider web and they are talking about
establishing the Asian Monetary Fund.

As soon as Japan accepts China should take the leading role in the
Asian Economic Comunity and Asian Monetary Fund, I believe they will
becme a reality. It is natural that China leads Asia and would be more
acceptable to other Asian nations because of the stigma atached to
Japan like Germany in the EU.

These developments in Asia are not a part of the Team America. It's a defence mechanism to prepare for the harsh world to come. That's why I think we are near the flexion point in this mkt.


The golden rule is that there are no golden rules. Bernard Shaw

Short blog today as I waste my time waiting for the mighty policy makers utter their final communique nonsense.

This morning we had a "heated" argument in the office, the resident GOLD BUG Carsten was soooooo keen for me to read part of speech given by the mighty hedge fund manager John Paulson on gold.

The sentence which was supposed to get me excited read: "...and he observed that if one thinks about gold in a three or five-year time horizon (instead of hour-to-hour/day-to-day/week-to-week), the probability increases of gold being higher over time (most likely, much higher)"

What total load of nonsense! The probability of gold going up in 1 min, 30 min, 1 hours, 1 day, 1 month or 1 year is EXACTLY the same - there is no carry rates in Gold so even the Hold-and-keep argument is nonsense, but as this was said by the billionaire Paulson it be must right ????

This type of argument typifies all of us - we are arguing circular : There are NO.. and I mean NO real new analysis coming to the market, so instead we rank the quotes from the investment gurus according to their latest position bias. Makes sense. If its higher buy more. End of argument.

I think it is time for people to find the annual survey from Barron's on mutual funds - the one that states: Always sell the best performing managers in a quarter and buy the bottom performing manager - It's a mean-reverting game when it comes to "guessing" correctly - Even futurist miss 99% of all their calls......

On the note of Gold I will issue STERN warning on potential for all of you/them being disappointed:

CHART 1: Gold daily (XAUUSD).. Trend line - 10 days exit comes in a 990.00 - so does old top from other words be forewarned - should gold close below 889.00 we could see some stops get started on the down-side. (Click on chart to enlarge)

Also, one of the top players in commodity trading: Larry Williams, whom I am lucky enough to share information with, he has a stern warning in his latest update video:


There is clearly a consensus in the world presently that 50% of the world's GDP is in an inflationary paradigm(US, UK, China and Japan), while other 50% of will use "deflation" as the path to normality. This being mainly ECB and Europe.

The argument makes sense: Europe has the worst demographics and needs to increase competitiveness this will happen in deflationary environment as low growth enforces lower salaries, redundant industries disappear.......

The problem though remains: Who will buy the worlds goods?

Last a link with my very own top ranked guru: Julian Robertson (listen please)

Safe trading,

Steen Jakobsen

torsdag den 24. september 2009

Pigs can't fly or can they?

The gathering of policy makers in Pittsburgh ( as of tonight reminded me of the "classic discussion" of whether pigs can fly or not? (

Flying pigs aside - I'm being told from some reliable sources that today the S&P is up in 101% of the time, when S&P has been down on Fed day.... Yes, the counting rules in this world of arcane nonsense. I also note that Premier Brown is getting seriously "dumped" by his American sweetheart ( - which is for me quite interesting as if..... Brown calls an election the opposition has promised to test the Lisbon Accord with voters - With Ireland voting on October 2nd the EU could be much closer to ...serious crisis than presently priced in..

Well on to the matter at hand the G-20 - here is my two cents, and it's two cents worth:

  • The mere fact Merkel says there will no deal on Tobin tax at this G-20 meeting disgust me more than I can even tell you.. ( . We are much closer to having the policy makers do a serious mistake than at any time in my trading life. Policy makers are high on their "success" (Creating articificial growth via expansion in public sector demand and state supported free trading regimes for banks..) - Any trader will tell you the most dangerous time to trade is when you feel invincible - statistically you have biggest chance of losing big after winning big. We are, in my simple and obscure thinking, very close to see a live experiment of "the law of unintended consequences"..... Odds: 75% of something "stupid" to happen

  • US dollar risk - do not ignore the French "sources" calling for weaker EUR/USD - anything north of 1.3000 in EUR/USD is a total joke and merely pushes European growth behind the rest of world quarter-by-quarter cyclically. You may not want to own US Dollar, but owning EUR will for the balance of this year could be worse...... G-20 needs to address - or rather return - to the "strong US dollar policy" - Summers/Geithner must understand that to continue to be competitive creating demand for US asset you need stronger/stable currency - otherwise the US dollar soon becomes the G-20 equivalent of Zimbabwe. If any surprises comes out of the G-20 the most likely candidate will be "clearer" views on the levels of currency in my opinion. Odds: Less than 20 pct.

  • Bonus regulation. Who cares to be honest? My trading presently does not exactly create expectations of a bonus. Seriously though, up-and-to the financial crisis the bonus culture could be rationalised(Close system with shareholders sharing risk/reward), but now.... with pretty much all the banks being public owned - it is, us, the tax payers who pay for dealers taking risk which is pre-guaranteed to work (The Central Bank lends the banks @ 0% - then they turn around and by leveraged Government Bonds @ 3-4 pct... if there ever was a FREE LUNCH this is it - and it constitutes a MAJOR MORAL RISK. There will be strong wording and it will ruin the bonus culture for better or worse. The bankers got too greedy - and all of the sudden the whole reason we have this recession is bonus!!!!!!! AW.. OCFGG##¤¤¤¤¤ - What a load of rubbish! - This nightmare we are in is based on: wrong policy decisions (Read: Alan-I-will-lower-rates-at-any-sign of trouble-Greenspan)

  • Volatility -promise me one thing, please! DO-NOT-GO-HOME-SHORT-VOLATILITY(gamma) over the G-20. There is only one way for rest of the year - serious elevated levels of volatility - Volatility is uncertainty of paths - This week-end could become the financial market equivalent of Churchill's: The darkest hour (


This simple, humiliated, trader is still in strategic mode: short 1 unit S&P, 1 unit EURUSD and looking for volatility plays for next month.

Safe trading,


onsdag den 23. september 2009

It's all circular.. Mini macro note

Short note leading to "exciting" end to the week with FOMC (tonight), G-20 from tomorrow onwards, and Sundays German Election. We had our weekly investment yesterday and it was not much of an event to be honest - I will write the usual log for it later tomorrow, but bottom line

There are no signs of this "liquidity driven" market stopping for now..

Going into Fed and G-20 we note with some surprise a couple of central bank moves: Bank of Canada announced yesterday on their web-site:


Bank of Norway the today announced they were considering hiking rate

These are early leaders but it is clear indication that most centralbanks are now at least considering their exit strategy. This is ONE MAJOR MACRO change which needs to be monitored into-FOMC and G-20 - the consensus is for all meetings to "promote and confirm the bias for no-exit and loose monetary policy". Risk is for less "bearish comments" than expected...

The second and more relevant issue is the US Dollar: There is NO sentiment or positions supporting the US Dollar.... but with Gold above 1.000 US dollars and US Dollar falling each and every day the central bankers can not IGNORE the warning signals.

The risk from here is that the central bankers realise that a strong US dollar will be in the interest of the US. The only way to hold down the 10 year yield (as proxy for funding price of US deficit) will be to make the US dollar stronger in order for foreign investor to at least make money on the currency. Clinton understood this - and so did Summers who has major role in the new joke of an administation

I expect some periphael changes in US willingness to accept continued weaker US Dollar - if not at the G-20 then in Fed official comments...

Buy some 3 month USD c EUR p.. here - Europe is toast @ 1.4800, but as Jesper correctly says: Who cares? The politicians are afraid to do the right things as waning growth and rising unemployment are more "tangible" issues to deal with..


Remains the same - looking to exit long and go short...but I'm alone

Safe trading

Some links for you:

Fed said to start talks with dealers on using reverse repos

Stock rally will end within six months, Tice says:

FX Concepts: S&P has 2 weeks 'til tumble starts'

The Fed's dollar conundrum

Safe trading,


mandag den 21. september 2009

Where the telescope ends the microscope begins, and who can say which has the wider vision? Victor Hugo

This is note which starts a new investment phase for me - for most of the year I have been willing to trade intra-day and with the momentum, but now it is the time to move back into medium-term macro and respect the laws of economics/mean-reversion.

There is some evidence of the this week or next two weeks being the cyclical tops - which will be followed by a "correction" of 10-15% before we again goes into the year-end high for the year. The market is now driven by small investors and "late-to-the-party" types throwing everything they got to join the euphoria of how well things are going..... (Ignoring the queue of people joining the jobless ranks day-in-and-day out.......)

All of this is "sponsored" by:

  • Low interest rates and outlook for further 6-12 month of loose monetary policies courtesy of the politicians/central bankers
  • Out gap & rising unemployment across the world anchoring inflation
  • The cheerleader group consisting of politicians, central bankers and investment bank economist's every day supporting the idea things are not only improving, but they are all smarter than God.
  • An expected significant upside surprise in earnings based on this recovery "surprising" the consensus according to... the consensus (I know the sentence on it own does not make sense, but trust me that is the whole argument!)
  • A need to allocate to from ZERO income interest products to 100% allocation to stocks.
  • Sentiment which reminds me of 1999/2000 - there are more "smart" people telling me how much money they made in stocks last few month than you can fit into the new Wembley Stadium.

On the other hand there is absolutely some truth to the fact the Doom-sayers has been pronouncing the end of the world forever and we are all, the macro managers, guilty of projecting to Armageddon, much similar to this "dissing" of Zerohedge: at hand in this link.

I have for the longest time been a "fan" of Terry Landry @ after reading the book: Pit Bull by Martin "Buzzy" Schwartz ( but to the point:

Terry is looking for top in Mid-October, and I have to add Terry is not prone to sentimental involvement in his trades! Presently there are two suggested dates: This week and next or slightly overshoot into Mid-October - we reached the overbought area Friday....but with G-20 this week-end in Pittsburgh it will be low volatility week, followed by in my opinion serious INCREASE in all VOLATILITIES going into month-end post G-20.

(click on chart to larger version)

Another of my favourite "friends" Mr. Fintag: states today: "Today we reach the top of the equity markets, the top of the so called W and slowly but surely the overvalued fake market will crumble. In the meantime we look at some sensible news reporting from newspapers than may soon be non-profit organisations [Editor: They already are ...]"

The key advice for this will be: Buy VOLATILITY in any product this week...........

The development I expect this week will be.... some selling of today as we had massive option expiry this past Friday with gigantic volume going through - last time we had: option expiry/explosive volume the S&P fell 27 points! This is short note I wrote internally this week-end:

Nice run down ahead of Pittsburgh by Reuters - the market is looking for confirmation of V-shaped recovery, the improvement in earnings & political will to sustain the fiscal stimulus - the price? Politically: some sort of tough stance on bonus's and obviously
higher taxes for years to come.

There is growing believe in the market this will continue and I note the MASSIVE volume registered on Friday with no real effect yet indicating alot of money went to work.......

Adv. volume* 1,117,340,240
Decl. volume* 1,134,669,814
Total volume* 2,275,042,754
Closing tick +204
Closing Arms (TRIN)† 1.40 ...

Then the lead into G-20 meeting - there will comments upon comments on how the bonus's should be cut and every single politician will try to make his mark on the agenda. I noted one very positive comment over the week, watching the BBC World service, they said India now willing to discuss climate goals - this is a first and probably merely playing for the gallery......

Finally, we need address the issue of EVENT RISK presently at stake:

Last week Israel Premier all of the sudden disappear of to Russia? He was MIA for a while according to Jerusalem Post: - then later last week Iran get booted out Caspian Sea meeting by....Russia? . This could be conspiracy thinking, but you can not ignore that the timing for potential strike by Israel into Iran is running out of time - was Israel seeking "indirect" approval ? This is something we need to monitor - impact on gold, crude, us dollar etc at stake.

Unfortunately history tells us in times of RECESSION is the time of increased risk for wars/conflicts....


Sold 1 unit of EURUSD @ 1.4717 outright - 1.47! EUR - think about it - unemployment only just starting to rise in Europe - full impact from recession will be felt in Q4 and Q1-4 2010 - I wish you all good luck if you are planning expansions presently - and EURO at 1.4700 is at least 17 figures too high, considering the biggest FX game in town remains one of: COMPETITIVE DEVALUATIONS (which presently has GBP(UK) in the lead......

Sold 2 units of S&P (1063 & 1059) - will buy some volatility when markets opens today.....

Bought 1 unit of BUNDS... 120.34.

No stops for now.. these are positions I expect to hold for minimum 30 days.....


Not only is the weather "peaking" this week-end so will the is time to look at your "emergency" plans...they could come handy..

Safe trading,

Steen Jakobsen