The gathering of policy makers in Pittsburgh (http://blog.pittsburghsummit.gov/index.php/blog/entry/sustainable_growth/) as of tonight reminded me of the "classic discussion" of whether pigs can fly or not? (http://tinyurl.com/ycfzb43)
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 (http://www.guardian.co.uk/politics/blog/2009/sep/24/brown-obama-snub-michael-white) - 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.. (http://en.wikipedia.org/wiki/Tobin_tax) . 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 (http://en.wikipedia.org/wiki/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.