lørdag den 28. februar 2009

Dear Mr. President with all due respect..

Sometimes you read something and wish it was you who had printed it - this Saturday blog will be link sent to my by Vladimir Pajkovski .......from: Mike "Mish" Shedlock http://www.globaleconomicanalysis.blogspot.com/

Dear Mr. President, With All Due Respect ....

Dear Mr. President,

I read your New Era $3.6 Trillion Budget Proposal. I also listened to your speech Tuesday night. You made a great campaign speech. However, the campaign is over. You won. And the reason you won is you offered hope as well as a promise of change.

With all due respect Mr. President, Tim Geithner and Ben Bernanke are offering the same policies as President Bush and Secretary Paulson. Those policies are to bail out banks regardless of cost to taxpayers. Mr. President, it's hard enough to overlook Geithner's tax indiscretions. Mr. President, it is harder still. if not impossible, to ignore the fact that neither Geithner nor Bernanke saw this coming. Yet amazingly they are both cock sure of the solution. Even more amazing is the fact that solution changes every day.

With all due respect Mr. President, Geithner and Bernanke are a huge part of the problem, and no part of the solution and the sooner you realize that the better off this nation will be.

With all due respect Mr. President, your budget proposal is the same big government spending as we saw under President Bush. The only difference is you promised more spending and bigger government, while President Bush promised less government and less spending and failed to deliver on either count.

With all due respect Mr. President, it is impossible to spend one's way out of a problem, when the problem is reckless spending.

With all due respect Mr. President, you and Congress want to force banks to lend when banks (by not lending) are acting responsibly for the first time in a decade. Mr, President can you please tell us who banks are supposed to lend to? Do we need any more Home Depots? Pizza Huts? Strip malls? Nail salons? Auto dealerships? What Mr. President? What? And why should banks be lending when unemployment is rising and lending risks right along with it?

With all due respect Mr. President, we were hoping your administration would not carry on the war mongering policies of your predecessor. Instead we see amazingly that you Seek $75.5 Billion More for Wars in 2009. Mr. President, do we really need another $75 billion for wars? Was there nothing in the military budget that could be cut?

With all due respect Mr. President, The United States spends more on its military budget than the next 45 highest spending countries in the world combined; The United States accounts for 48 percent of the world's total military spending; The United States spends on its military 5.8 times more than China, 10.2 times more than Russia, and 98.6 times more than Iran. Isn't that enough Mr. President?

With all due respect Mr. President, the downfall of every great nation in history has been unsustainable military expansion. Mr. President, the US can no longer afford to be the world's policeman. You act as if we can. Mr. President, can you please tell us how we can afford this spending?

With all due respect Mr. President, Fannie Mae Reported A Fourth Quarter Loss Of $25.2 Billion. Can you please tell us where you draw the line on taxpayer bailouts of Fannie Mae? Freddie Mac? AIG? Mr. President is there a line anywhere, on anything? If there is, we would appreciate knowing where it is.

With all due respect Mr. President, how can you talk about reducing the budget deficit while proposing the biggest budget in history?

With all due respect Mr. President, how is it possible to talk about reducing health care costs while proposing to increase the health care budget?

With all due respect Mr. President, you have talked about "hard choices". Can you please tell us what hard choices you have made other than to throw money at every problem? Sure a few programs have changed but Bush orchestrated the biggest Medicaid/Medicare package in history and you upped it. You upped military spending. You criticized McCain for cutting programs that amount to peanuts, and all you can find to cut out of the budget is peanuts.

With all due respect Mr. President, your "Era of New Responsibility" is nothing more than a continuation of the Bush administration Era of Irresponsibility. Mr. President, we hoped for more and deserved more. Yet, behind the charade of campaign messages of hope and change, we essentially see the same fiscal irresponsibility and misguided policies as before.

Oh sure Mr. President, your budget priorities have shifted a bit, sadly the irresponsible spending did not.

Mike "Mish" Shedlockhttp://globaleconomicanalysis.blogspot.comClick Here To Scroll Thru My Recent Post List



Absolutely NO CHANGE in plans - still cash/fixed income (75%) - and still VERY NEGATIVE on the 25% invested.

It was excellent week for the portfolio - even the contrarian view on Gold worked well - I remain EXTREMELY sceptical on the rally in gold which more and more reminds me of the crude spike-and-burn story of 2008......


Short EURUSD (it is only matter of time before we trade sub 1.2000 -and probably 1.1000 / short S&P, short Stoxx50, long USD/CEER, long bunds (yes.. tought one).....long options on more downside in stock market.

Target minimum on stocks remains 690 with 625 being perfect target - the panic is getting closer.

Monday AIG will be facing break-up and the implications of AIG break-up from legal and market performance point of view is SUBSTANTIAL BIGGER than the mess LEHMAN left behind...

Mark my words!


This will be critical week - and I am starting my new job on this very Monday by going to London and doing the "Analyze that" fund manager interview with Bloomberg.....ouch...

Otherwise - cheer up, there has never been better deals to be had... if..and that's if you have been conservative in the last two years.......it is now time to load up on: debt facilitation, bridge-financing, selective real estate deals, yes this chronic BEAR is getting ready for the blood in the street - and moving at least the PA money into new deals - too early ? Could be, but as J.P Morgan once answered being asked how he became so rich: "I take my profit too early" .....http://www.geocities.com/bstateob/jpmorgan.jpg

Finally, may I kindly ask you to listen to Barry Schwartz: The real crisis? We stopped being wise, this could be best positive minutes you have spent in a long, long time: http://www.ted.com/talks/barry_schwartz_on_our_loss_of_wisdom.html

Safe trading,

Steen Jakobsen

onsdag den 25. februar 2009

2 is not equal to 3, not even for large values of 2. Grabel's Law

Dear Investor,

We are in that dangerous phase where most people either wants to buy because its "cheap" relative to where it was - like this article: 10 stocks ready to rebound: http://tinyurl.com/d7c4qu or where we give-up on the downside due to ad-hoc events as I will call Bernanke & Obama speaking.....

Bernanke thinks they got all the right tool already: http://tinyurl.com/bmdosq -

May I ask why haven't they use it yet then? Read the article and if it does not make you want to throw-upI do not what will - Stress test apperently is really an academic exercise as Mr. Bernanke does not see any of 19-20 banks being "failed" on this test - It is probably similar to a few of the other calls he has made, mistakenly, over the time like: We do not see any spill-over from the Sub-prime market http://tinyurl.com/dhujl8
Anyway it is too easy to pick on Bernanke, he is irrelevant as his own tool box is totally empty and with ZIRP his ability to do anything is toast.
In strategy land we are contemplating this whole scenario in the light of prior bear markets (the prime reason why most people "wants" to buy the market being "hope" of bear market rally:
Click on charts for larger versions

The conclusion as always remains - this is different, this is deeper and this is not yet over, unfortnately, there is clearly pain in the economies, but there is also considerable "hope" - and as you know I "preach" - hope belongs in church on Sundays...and if in doubt read about home sales here: http://www.breitbart.com/article.php?id=D96IRKGG0&show_article=1
Short EURUSD, long USDMXN, short USDJPY (from today), short Gold, short Stoxx50, short S&P, long bunds....and still 75% in cash/fixed income. Very "geared" portfolio right now....let's see where it takes us.
Normal working pattern resumes from Monday, where I will start by doing Bloomberg interview in London on "Analyze that".......
Safe trading,

mandag den 23. februar 2009

My Karma ran over your dogma. Unknown

It's kind of dramatic that Obama did not even manage to get himself 100 days of honeymoon - his administration has been mirred in mistakes and major policy confusion, but what must really hurt is the stock market reaction to him and his merry men.....- Obama speaks --- market waits -- then sell off --- Geithner speaks market sells of before, while and after.....

Change? The only change is the change left in the tax payers pockets after Obama have spend their money.... and this week is Budget Forum week - how UN-Keynesian!

First they spend the money, then they make plans for cutting back - not even good old Keynes can they get right !
Either you put the invisible hand (animal spirit) to work or not - Not even you Obama can have it both ways! - I find it extremely frightning that Obama seems so driven by spin doctors and bad advice He is for EVERYTHING the voters wants...but "believes in ?"...- my advice to you O and let us not forget I am merely a simple Europea hedge fund manager but:
  • Take the loss on Geithner - cut him, not even his own Fed supports him!!!!!!!
  • Take your loss on Summers - anyone who thinks aloud that women are inferior to men needs their head examined - plus he is so outdated he is almost fashionable
  • Finally "pay Volcker" - the only voice of reason in your cabinet and someone whom the market will listen to.....

The rumours of Jamie Dimon in the wings is a joke - who with a job would want to join US Politics - and become colleagues with people like Barney Franks?

Meanwhile in "Fantasy Policy- Land" - i.e Fed,the US Treasury, US Government, UK Government and ECB there are plenty of plans, but as someone more clever than me wrote this morning:

"There is no way you can rebuild the financial system from top down....there are plenty of architects but we really need plumbers"....so true, so true...

  1. Trichet, my "favourite" central banker in-denial: want to regulate some more: Well done Mr. President that will work: http://online.wsj.com/article/SB123538521116847221.html
  2. Citibank is closed to being "nationalised" - what happens to sub-debt? Default clauses? Ouch, this could get worse than Lehman http://online.wsj.com/article/SB123535148618845005.html?mod=article-outset-box

  3. In WSJ article headlined: Red Light flasing again we are told: a) LIBOR- Swap spread which reached high of 366 last year - saw 90 in January is now rising above 100 again b) Markit LCDX (100 leveraged loans) at close to record lows again (@ 72,5% of face) and swap pay-out now based on 40% recovery vs 20 y avg of 81% pay-back c) CMBX (25 Commercial mortgage backed securities) at new record highs - with Moodys looking to downgrade 320 bln. of securities.....nice....in other words: It aint over yet....
  4. Government bail-outs doesn't work! Don't trust me but do read Ela Glowicka on IDEAS on http://ideas.repec.org/p/trf/wpaper/176.html - less than 40% of companies receiving aid exists 10 years later --- C'mon lets spend some more money......!
  5. Gold - being told, mainly by my friend Antonio Savoca of UBS, that I should think of GOLD as an currency - and that it will go to 1500 and then 2000 US Dollar - You know me, not one to shy away from an outragous prediction but this is a little rich.....but I could be wrong not having exposure...but the true contrarian is flat.....
  6. EU/EEC - let them try to sort of the mess in Eastern Europe....but with NO TREASURY the task is several fold harder than in the US - who will print the money?

Enough from me, only getting back into the research game... I am still looking for:

EURUSD in 1.0000 - the game will commence soon.....be ready to watch the "Trichet Horror Show".......The trailer talks of: All the mistakes which can be done will be done, no one has ever been more dogmatic when faced with REAL FACTS, see how central banking was 20 years ago, and with performers like Barroso wanting to export the European "Social economic model" we are in for a real treat not seen since Hitchcock....

S&P getting close to my minimum target of 690 - my friend Drew wants 620 minimum to be happy, and I know Drew is not one to change his mind (fortunately!)......

10 years yield in the US will flirt with 2.00% - by the way ? How are the "Bubble in fixed income" Ivory Tower people doing ?


75% cash/fixed income

25% applied aggessively negatively..

Long 1800 Stoxx50 March, short EURUSD; short S&P, long EUR/EEC - looking to increase JPY exposure...

Safe trading


PS: Did I tell you this smells like it did before LEHMAN tanked? Check this link: http://carolan.org/ Something is rotten.....

onsdag den 18. februar 2009

I have left orders to be awakened at any time in case of national emergency, even if I'm in a cabinet meeting. Ronal Reagan

Good friend of mine gave me "Reagan's path to Victory" (http://tinyurl.com/cena6b) as parting gift. Never have Reagan been more relevant:

1. We have a President O who publicly have said he wants to mold his Presidency after Reagan. (But unlike Reagan all he does is talk, talk and more talk)

2. Reagan was always belittled intellectually, where as Obama probably gets more credit than he deserves. (Where is he on ANY key issues - except on the "voters" side?)

3. I have left orders to be awakened at any time in case of national emergency, even if I'm in a cabinet meeting. If there is one time where the new "Reagan" (Prez O) needs to awakened its now! He is getting bad advice, old advice and his hangers on in Cabinet is fast asleep at the wheel and even formed NY Fed Governor Geithner has managed to lose Fed's support - Great work!

Less than two month ago the Motor City said they only needed 15 bln. US Dollar to safe their bacon - now they are back with cap in hand and asking for longer pay-back time plus more money - nice one - who did not see this coming ? Let me see? All of the always bullish crowd and ALL of Washington.

The politicians in Washington should be ashamed of themselves - they sit a tirade and parades bank CEO's in front of them as if they themselves had divine intervention on how to solve these issues, meanwhile in REAL TRADING LAND, we are close to breaking day-low-close and even intra-day-low cyclical lows in DOW and shortly in S&P.....

It is really working well for Washington and Obama, is it not?

Reminds me of my favourite qoute about this financial crisis: "The definiton of Insanity: Doing the same experiment over-and-over again expecting different results"

(* That quote about doing the same thing over and over and expecting different results is variously attributed to Albert Einstein (who I always believed was its author), Benjamin Franklin (AlterNet boss Don Hazen's pick), Rudyard Kipling, Rita Mae Brown and an ancient Chinese proverb)


S&P: Short - waiting for confirmation break down..... the new scandale in Texas shows us how naive we all are, and how this is FAR,FAR,FAR from over.... target minimum: 620/690....

Wrong: if we trade above 852.00......on close..

EURUSD: Breaking down as we speak.... Europe is falling apart and the dogmatic Trichet and his Merry Men will GUARANTEE we get ZERO pct interest rate (despite him denying it!)....

Looking for 1.2000 minimum - outragous call remains for 1.0000 - East Europe is heavy price to pay......Look for Basis-swaps in EURUSD, European banks NEEDS US dollar funding again...

TIPS: What a joke-- break-even @ 115 bps! (Inflation built-in)
I want some of that "crack" they are smoking --- There is NO INFLATION this year... the printing of the money only goes to displace some of the massive net wealth lost in the market.

We are 50% down on investors peak asset valuation!!!! That's a tidy 25-30 trln. US dollar of less wealth addv to this another 20 trln. US dollar of less credit (Average balance sheet leverage times loss provisions by banks (2 trln. conservatively..)

SELL TIPS!!!!!!! Especially as Gross and his happy campers in the yield-bubble-camp is long inflation and wrong....

OVERALL: Still got 75% in cash - 25% aggressively placed negatively in the market..

Took profit in Gold.. never liked momentum/consensus trades... could be wrong... but..square..

Off to sushi dinner..

Safe trading,


tirsdag den 17. februar 2009

But all endings are also beginnings. We just don't know it at the time.

Dear Investors,

I do not want to make to much fuzz about it all, but it has now be announced where I will start March 1st, I am so sorry for the "secrecy" but due to stock market regulations it was needed (I was told).. but here we go: http://tinyurl.com/dfunyq

For the full press release go to: http://drop.io/j4kkrol# password: steen

This blog will recommence shortly - and I will continue to write this if for no one else then myself.....

It is strange to be off the market, not having my funds anymore, but being a trader I have some personal stakes in the market and right now true to form I am:

Short the EURUSD (from 1.2800 again)

Short EURJPY from around here...

Short S&P

Long Gold.

It is a pitty that while I am on garden leave finally Europe caves in and tanks.... -

Obama meanwhile is making mistake after mistake .... let me say again: Obama is all about hope, not substance...watching the Geithner "show" last week reminded me why I have a sincere and deep distrust in bureaucrats - they have never had a "REAL JOB", the have never lost money, and they all seem to cheat either on their wifes or on taxes..... Want me to name the "cheats" in International top jobs ?

No, it is time for Volcker to get into action if Obama needs saving - Geithner lost Fed support, East Europe and indirectly Scandinavian banks going into tail spin - It is winter Ladies and the few gents - in season and in the economic cycle... it is time to bring out the warm cloth and get ready for the Icewinter.

On that happy note - safe trading and be...careful out there..


fredag den 6. februar 2009

Change in life....

Dear Investors, Readers, Friends and Blogers,

Sorry for this being a personal note, but I have today resigned from my job as Chief Investment Officer for Saxo Bank after almost nine amazing years with the organisation. It was time for me to move on and I will later share with you where I will move next.

Now it is time for say Thank You and Goodbye to my many colleagues and friends inside- and outside Saxo Bank. It has been an honor to serve with and for you all. We have been part of a fairytale taking Saxo from less than 50 people when I joined to where it is today.

Today as it was leaked I was leaving I received so many incredible nice and personal e-mails. Thank you for all of them, it has been an absolute pleasure to work with you all and I am touched that you all took time to express your feelings and views on me, our time together and the future. This but one of the many personal notes I received:

O Captain, my Captain!
our fearful trip is done,
The ship has weathered every rack
the prize we sought is won....

Thank you!

I leave Saxo Bank on excellent terms with the new management and the two owners Kim and Lars, and I wish Saxo Bank all the best in the future.

I will continue to write my blog, but you will hopefully allow me a couple of weeks for comtemplation before I return in full force March 1st.

The unemployment data today only shows how the market is firmly anchored in "hope & faith" as the bad number was being taken as guarantee for more fiscal stimulus.

In the UK meanwhile the FSA will not allow ANY short-sales - nice one England - congratulation you are now back to the 1970s with intervention, big government - I have neutralised short EURGBP as GBP will now go 1.000 vs the US Dollar if there is any justice in the world of trading.
It may be very opportune time for me to close the books and recharge - everything is now based on randomness not trading markets....

Best wishes to you all.

My personal e-mail: jakobsst@gmail.com

Safe trading and good luck to all of you,


torsdag den 5. februar 2009

The secret of politics? Make a good treaty with Russia.” Otto Von Bismack

Just back from minus 20 degrees celcius in Russia and an quick 24 hrs on the ground. There is no way 24 hrs can do any justice to such a large and complicated country, but I must say I was impressed by the investors and journalists I met on the ground, the bad news being I got strong feeling Russia is going to get a serious dose of almost hyper inflation through the weak Ruble, but the Russians are used to boom-and-bust cycles so do not count them out, so here Jim Roger and I will have to disagree http://tinyurl.com/cog8z6

It is clear, also in Russia, that defending the Ruble @ 41 in the basket vs EUR & USD is not going to be the end game, but one has to remember the devaluation in Russia is no bigger than what we have seen in the UK.

Don't count on me as your new Russia expert, but writing off whole nations in an environment which is hostile to one and everyone due to credit constraints and general downsizing is a mistake in my opinion. When we move into to the reflationary side of this business cycle (not likely before 2011-ish) countries like Russia, India, China will do well.

Back in the "land of hope" the freight rates has been rising and created a lot of noise about market having turned, growth is coming back... but I'm sorry to be carrier of bad news, but using Baltic exchanges as gauge/indicator is simply wrong.

1. You need to look at individual routes

2. The supply/demand function of the pricing is skewed in favor of demand, as it takes very small additional demand to move the markets. There is fixed supply (the amount of ships) where as demand is ORDER DRIVEN. Hence making long-term conclusions based on small "bleeps on the radar" is clearly a hazardous policy.. but as always be my guest to live dangerously.

Strategy wise some investment ideas starting to formualte themselves medium term:

The GBP is now oversold and the EUR is the most overvalued currency around, Eastern Europe is slowly indicating more pain in Europe(due to the high investments by core European countries) than most people of willing to accept for now including it seems Mr. Trichet....

(Link: Fitch sees more E.Europe downgrades after Russia http://tinyurl.com/aswpot). John Hardy my expert chartist agrees .....be short w. stop above .9050 for now.

(click on chart for larger version)

On the stock market we have been caught in 800-850 range for quite some time - for now there is hope of break to upside despite the continued erosion of capital in the banking sector across the world, but.. I will leave it to the market going into the Non-farm tomorrow, but will maintain the overall target of 600-690 for the S&P...

Still keeping an eye of 3.00 in 10y US notes - there continues to be issuance and noise about potential "buying stop" from overseas investors but ..........I like to be in opposition.

Going on winter holiday from tomorrow night will do one more post tomorrow....

Safe trading,


mandag den 2. februar 2009

All you need in this life is ignorance and confidence; then success is sure. Mark Twain

This week-end I "wasted" some time reading Bill Gross' (I like the double meaning of Gross!) newest writing on why we should bail him and his investors out: http://tinyurl.com/cjqxya

I will have to warn you its waste of time, but its kind of interesting to see how a well paid, "well respected" investor like Mr. Pimco seems to think that the solution to all the problems in the world is for the US Government to buy asset he is long - there is no talk of the small matter of funding this small exercise- only then notion that spending money is good.

I guess its the financial equivalent of "The boy with the Golden trousers (http://tinyurl.com/dnhqz3).......

I find its perplexing that in a time where we need everyone to think positively about solutions then Wall Street and its derivatives continues to look for ways of lining their pockets with state subsidised money. For the record Gross is even intellectually wrong: In order to stop the rot in the financial markets we need to reduce debt to equity not increase Mr. Gross.....

Only by governments taking the ultimate loss' on their plans/packages will we get the economy flowing again.....but do not let facts disturb your arguments.

I am just back from longer business trip to: France, Switzerland, UK and Dubai. Different parts of the business cycle obviously but everywhere there is now clear indication that the word CRISIS is well established, in the UK so much that in the local bookstore, they now have whole sections titled: Dealing with the Financial Crisis..sign of the times I guess.

From Davos I get same reports; everyone is reporting how negative everyone is but they are all taking this as an indication the low is in ? I never really understood these types of arguments: Why get the supposely smartest people in the world to meet up and talk openly about the economic affairs only to dismiss them ?

Anyway I am with Soros (as always). Read this great FT piece please, pretty please: http://tinyurl.com/cyq7rr - explains a lot of things even for simple people like me.

David Karsbøl, my Chief Economist, have updated his excellent leading indicator model for World GDP Growth per Capita and the result is NOT GOOD.. it looks like we could see - 2.0% this year - first time in history- so in other words - be my guest fade the facts and the smart guys, I hope it works - but as always hope belongs in Church.

(Click on chart for bigger version)

Why there may not be "bubble" in yields

Everyone and his brother is subscribing to the concept that yields are too low, especially in government bonds. (http://tinyurl.com/calo3u)

....but it's all based on the concepts off:

  1. Fiscal & Monetary policy works

  2. Inflation

My firm believe remains that in times of rising unemployment levels everything becomes binary: its all ZERO and ONES.

If you lose your job you do not care where interest are going, what Bernanke thinks, What Obama does - No you want your job back and now!

Effectively right now we are in the path of the cycle where everything is ZERO's:

  • Consumer confidence - 0

  • Unemployment - 0

  • Business margins -0

  • Faith in banking system - 0

  • Ability to maintain your job - 0

  • Interest in Fed - 0

  • Faith in Fed - 0

I think you get the picture - we got excess capacity in all business sectors, we got government busy printing & spending money not dealing with the problem, but getting reelected .......this is the true ingredients for deflation large -... meaning inflation will be ZERO at best minus 1% at worst(?).......

So now if monetary & fiscal policy have less tracktion plus DEFLATION....... a yield of 2.5% becomes 3.5% after inflation - I think it will compete very nicely with the return on the stock markets will considerable less volatility.

This picture is even confirmed technically. Below is the 10y notes yield in the US - it looks to me like we are in the 4th wave - looking for 300 bps roughtly before we make it into new lows for bonds... this also finally matches the theory of Q1 being excessive in issuance. I have been wrong before and carry no predictability but for now I will keep most of my money in fixed income as the alternative cost analysis (i.e being long stocks...) still costs me money.

(Click on chart for bigger version)


85% in cash/FI - short eurusd and eurjpy.... looking for break of 800-ish to sell S&P... still target for S&P @ 650-690.

Safe trading,