fredag den 19. juni 2009

Let the games begin! There are NO RESET buttons on an economy!

Dear Investors,

We are now entering the "high alert" zone for this market - the concept which most business people and media prescribe to: The Reset button or the CTRL + ALT + DEL on your pc is not working for this economy. (The principle: if you buy some time the economy will be back....)

One does not create a new economy, a new approach by printing money - ultimately a process like that runs out of time, money, and velocity.... my friend Trey send me great piece on how this does and does not work:

It is the month of August, on the shores of the Black Sea.

It is raining, and the little town looks totally deserted. It is tough times, everybody is in debt, and everybody lives on credit.

Suddenly, a rich tourist comes to town.He enters the only hotel, lays a 100 Euro note on the reception counter, and goes to inspect the rooms upstairs in order to pick one.

The hotel proprietor takes the 100 Euro note and runs to pay his debt to the butcher.

The Butcher takes the 100 Euro note and runs to pay his debt to the pig grower.

The pig grower takes the 100 Euro note and runs to pay his debt to the supplier of his feed and fuel.

The supplier of feed and fuel takes the 100 Euro note and runs to pay his debt to the town's prostitute who, in these hard times, gave her "services" on credit.

The hooker runs to the hotel and pays off her debt with the 100 Euro note to the hotel proprietor to pay for the rooms that she rented when she brought her clients there.

The hotel proprietor then lays the 100 Euro note back on the counter so that the rich tourist will not suspect anything.

At that moment, the rich tourist comes down after inspecting the rooms and takes his 100 Euro note, after saying that he did not like any of the rooms, and leaves town.

No one earned anything. However, the whole town is now without debt and looks to the future with a lot of optimism..And that, ladies and gentlemen, is how the United States Government is doing business today.


It makes you think does it not? Well anyway I have nothing much to add ....except..
Took profit on the long EURUSD in high 1.39s - sold the S and P around here 918.00 - bought some August 870.00 puts - looking to incrase this size, but I am realistic enough to know the "best set-up" for this market going down will be for the S&P to try higher before failing into the cycle turning point coming up on July 5/7 th....

I also added to long JPY exposure spicing the long JPY option with some cash short (from 96.85)....

Basiscally Ladies and the few Gentlemen, the game is in its 9th inning - the bases are not loaded and this market is tired, tired of talk - there is too much talk -

The down-side will be led by.... banks again - the fact being - the regulators went soft in 2H 2008 -You almost hear them talk to each other: "Let's no rock the boat - if Management says the asset and collateral is worth 99 cents on the Dollar we will have to believe them - the consequences of "true valuation is too frightning......"

Now going into 2H 2009, the "time buying" is running out..... - the moratorium on foreclosures is ending, the fiscal boosting is hard to continue for "morale reason" - the tax revenue is not coming back, the credit is not flowing as the whole construction of help merely made the banks avoid the Socialist US short, the Exit Strategy was never "enabled" ...

Feel free to try to fix your computer (i.e: the economy) by pressing the CTRL + ALT + DEL buttons on your keyboard - it is not only the favourite operative procedure by IT staff, but also for politicians and for the vast majority of people who thought they could make money without working (read: getting free leverage)...

This simple man is now preparing the "disaster equipment" - this 2H could be worse than the March down turn - as the scenario we just lived through was the worst possible - a short covering rally, a major shift in sentiment from the worst in my trading career to the an euphoria only matched by the IT bubble in 1999/2000 - soon Greenspan & Bernanke will be known as the people who thought we world was flat.......

With this positive, upbeat note, you are now forewarned... :-)

Happy week-end,


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