tirsdag den 30. juni 2009

The only thing that saves us from the bureaucracy is inefficiency. An efficient bureaucracy is the greatest threat to liberty. McCarthy

Dear Investors,

First half of 2009 is coming to close and it was much better than most people anticipated, but also more volatile with the 666 low in S&P in March being the low point for many people.

I have been wrestling with some medium- and long-term macro pointers to set against my daily trading and my friend Yoshi has put some excellent views on the table for me, but from my angle I am somewhat "concerned / sceptical" on the decoupling of Asia - although I do recognize the major power shift from the US to Asia which is on going - but can the world move back into non-Global capital flow? If so what precedes it?

One recent theme I saw from Arthur Kroeber of Dragonomics was on China trying to go from labour productivity to capital productivity........meaning more efficient and open capital markets, increased foreign ownership through IPO's and bonds issuances, relaxed currency control ..........relevant?

I do not know yet, but clearly China had a Plan A, but no Plan B, now plan B seems to become to use their capital more efficiently, in other words, until this crisis "capital was something they took for granted" - now that they are spending close to 15 pc of GDP on fiscal stimulus (which will run out in 2011) they clearly have set themselves up for using the capital differently and more efficiently.

The problem is the old physics theorem of: An action creates a reaction, in this case...if China wants to use capital more efficiently they need to open their markets - something which ALL of the emerging markets need to do to go the next "efficient frontier".....this is no easy task especially in Asia where Governments are still recovering politically from the Asian currency crisis of the 1990s - but I expect many of the deals being done behind the scenes to have been done in the "name of the above change" - if you from a game theory perspective look at being an Asian investor with the above goal, then a few things springs to mind:

  1. You need to align the regions currencies closer - something I have written about extensively and China is now actively and openly persuing this policy. This means more open access but also lower trade barriers - a net net positive for growth in Asia.
  2. Capital markets. In order to replace a US market you need to have bigger capital markets - this means increased IPO and debt issuances on the international market........
  3. Capitel efficiency. How effective long-term is it to maintain and pay for the US Consumer - if you are Labuor Efficient - then it makes ALL the sense in the world, but when your focus changes, you does you willingness and ability to recycle surplus' to the US - hence we will see less and less investment in the US, which will ultimately lead US Dollar much lower and US interest much higher - DO NOT IGNORE this natural gravity of the market as it may be the strongest "slow" theme going on in the market..........
  4. Demographics and real estate. Both are bid to the hill in Asia in this scenario - if international investors freely gets to convert their profit & investment - something totally controlled by governments right now, then real estate should take of in Asia - also the demographics are so strong that it is a book in itself (rising middle class, rising education level, increased meat consumption etc.. )
This is just the quick version, but the end game is one which my American friends in not going to like - the US share of global GDP will fall, year after year, as the bill for over-expansion created by both Bush and Obama needs to be paid through lower growth and higher taxes - The US is doomed from logical point of view - maybe it is time to look for the "Hail Marry" throw from the quarterback? http://www.youtube.com/watch?v=r-qkpsygNYo

The Hail Mary is ALSO the overall risk to above scenario - the US administration is not stupid, only wrong, so there is so many behind the scenes things going on trying to secure long-term debt financing.........

Well this became a bit long-haired - forgive me, but it may be the most important blog from me this year, as it certainly got myself thinking. I have enclosed a few charts which shows part- or the whole of this reasoning.

Table 1: Fed balance sheet has stabilized: Means now the administration can start looking at the above issues of long-term financing and what they believe is the "exit strategy" - I call it the Hail Marry project.

Table 2: Courtesy of my friends in BoA - this shows clearly how the potential
for de-coupling is happening - mainly in risk taking environment ...

Table 3: As the world normalize - the inflation expectactions dictates the US Dollars
future - right now it looks like our expected inflation is again coming in...

Table 4: From IMF latest report - this charts clearly shows how the US is lagging, and NOT coming back, while the rest of world and EMG performs again...


FX: Short EURUSD - as above inflation expectations down = stronger US Dollar - also there is almost competition from other central banks in the G-10 to tell the world their currencies are overvalued (NZD, GBP, AUD, partly EUR, CAD.....)

FI: Neutral - adding risk tomorrow..

COM: Short crude and Gold.... http://www.marketwatch.com/story/iea-revises-down-global-oil-demand-forecast

EQUITY: Short S and P...

Safe trading,


mandag den 29. juni 2009

The greatest penalty of evildoing - namely, to grow into the likeness of bad men. Plato (427 BC - 347 BC), Dialogues, Theate

Dear Investors,

It is only appropriate to quote the great Plato on the morning Madoff gets gets 150 years in prison: http://tinyurl.com/lcfozs

If it was not for all the victims of Madoff - I would not get why we even bother to give the limelight to the one person who makes Charles Ponzi look like an amateur?

On the subject of Ponzi Schemes and Amateurs: Geithner and Obama is up to no good. I am increasingly getting information about deals behind closed doors in China, Japan and the Middle East - no wonder trading Macro is full-time agony these days.

The point being - there is no doubt the US administration is very concerned about the "low delta probability" of their great revival plan not working - Maybe deep down even they doubt the modern day version of Alchemy being produced in front us - hence their need to secure some long-term commitments from overseas lenders - and here China and Japan comes to mind.

Let us not forget the game has changed - until very recently the US and its capital markets (read: Banks) where the only game in town - You want leverage ? I got special offer only for you my friend.... - you know the song.... but now with global trade flows down, GDP down and the outlook for higher taxes being an almost certainty China mainly, but also Japan is looking to spend along the lines of: Think local, buy local ...

Simple mathematics dictates that demographics, growth and savings are higher in Asia than anywhere and the impact long-term will be Asia "charging" higher and higher rates to recycle their capital......and the rightful political power... something very few people seems concerned about.....this is TRUE paradigm shift - this is the end of US hegomonic powers....

For the deals behind the scene orchestrated by Geithner, Bernanke and Summers it looks increasingly like they are using play-books from the early 1980s(Volcker time...) - but more on this when I got some more research done - but clue for you: This last happened in front of major US dollar bull period ending in 1984 - (Yes, I know most of you were not even born then ....but I paid top dollar for shopping groceries in New York as a visitor- I clearly remember the 3,45 USD/DEM back then).....

The position and strategy is unchanged - it is a game of awaiting July 2/3 - or the end half-year and quarter-end which seems to gravitate markets higher - the price is to paid in July and August, at least according to my and others models for cyclical changed...

I am short EURUSD, S&P, and Crude.... none of it really working MTD back to +5 bps .....

More tomorrow.....safe trading ...


torsdag den 25. juni 2009

America is a country that doesn't know where it is going but is determined to set a speed record getting there. Laurence Peter

Dear Investor,

Seems like Bernanke is loosing his memory during the Congress grilling today - being the "inventive" type I found this url which may help the poor guy: http://tinyurl.com/kjbfne

I never liked to the "public show casing" but for someone with so much smoothness that he is only 2nd to Obama - Bernanke deserves the treatment he got, if only because he more and more feels, similar to Greenspan, that he is on top of things - soon I am sure, he like Greenspan, will have 200 economist weigh the US GDP, only to double check if Greenie dit it correctly the first time.

I must admit to being slightly out of sync with this market - my approach recently has been one of reading the "big research pieces" and staying away from the "slot machine", but the market refuses to move outside it's Summer range for now:

S&P likes: 880- 950, EURUSD: 1,3800 - 1,4300, 10 yr notes want to stay below 4.00 but not below 3.50%(..for now..).....so the right strategy for whose who can wait will be to out-wait the suspense of this market.

Today I read Bill Miller Q1 newsletter (http://tinyurl.com/lqwhzk) in the desperate hope of understanding my "opponents" - however it was disappointing reading, it read more like a plea and prayer for better days than a investor letter........
  • We had six week of straight gains (all of 2008 we only had three)
  • China is up 30 pc, Korea 20 pc, India 17 pc - the breadth of global rally is a good sign.
  • Financials remains the greatest controversy, and in my opinion (i.e: Bill Millers), the greatest opportunity in the market.
Then he threathens me and the fellow sceptics with potentially ending up like Pyrrhus (http://tinyurl.com/l42w83) - he forgot I am the generation who DID DO Latin in school - I do not forget: Italia terra est, Sicilia insula est and the PPP :-)

Anyway ...

My focus remain for "cyclical" turning dates in early July - untill then I am trying to keep the powder dry...


Short EURUSD, short NZDUSD, Short Crude, Long 870 Puts August - and JPY calls long...

Safe trading,

Steen Jakobsen

onsdag den 24. juni 2009


Dear Investors,

Nothing much to add to the equation - positions remains the same - I used the spike in EURUSD to add some put 1,3900 mid-July (from 1.4080 ish spot level)

Some of the leaks pre FOMC remains that they will not move, on the other hand it seems clear that the economic data prepared by Fed staffers believe in "Green shoots" - the same message is carried by OECD latest report: http://news.xinhuanet.com/english/2009-06/17/content_11556269.htm

I remain with my firm believe that July+ August will be extremely nasty for the equity markets, but for the next 48 hours "anything can happen" as the Socialist State of America rolls out all of it PR-machinery to make the world believe the US is doing fine, if not great......

I will leave for Hamburg for business meeting shortly - reporting back tomorrow post FOMC and pre ECB.

Stay lucky,


søndag den 21. juni 2009

Suffering is one very long moment. We cannot divide it by seasons. Oscar Wilde (1854 - 1900),

Dear Investors,

Took profit on the cash USD/JPY short - MTD: +55 bps ....

Still same scenario - week-end press mostly about Iran and how things there is going wrong:


The key focus' this week being the ECB and FOMC meetings...

There was more "leaking" and "faking" ahead of the FOMC meet - The Fed to stamp out early hikes : http://tinyurl.com/nblbj5

On the ECB will focus will be how much demand there is for liquidity - some Inv. bank names sees big demand as indication of "risk appetetite"...(http://www.ft.com/cms/s/0/c1e03e28-5f4e-11de-93d1-00144feabdc0.html?ftcamp=rss).on the other hand more and more of the good cyclical trend predictors is turning down - my friend Sam sent me this interesting Gentleman:

Charles Nenner: http://www.cnbc.com/id/15840232?video=1155616343&play=1

Nenner is my kind of man and investor... ;-)

Still got all the same positions.

Safe trading,

Steen Jakobsen

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 Government.......in 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,


onsdag den 17. juni 2009

Fake the "fade" before the Fed ........Macro

Dear Investors,

Had a great evening with my now former associates and my partner Jesper tonight - we went to watch my old soccer club B.93 (http://www.b93.dk/) fight for promotion to 1. division only to see them draw a boring 0-0, but the away game is our to win on Saturday!

Then a nice dinner in one of my favourite restaurants in Copenhagen, Pierre Andre: http://www.aerislifestyle.com/0632, but during the dinner conversation we agreed on three major things (or rather Jesper and I agreed)...

  1. Zlatan Ibrahmimovic is the most overrated player in soccer....http://www.youtube.com/watch?v=yObIYDOv1Qc
  2. Obama is the most overrated President (http://www.gallup.com/poll/113980/Gallup-Daily-Obama-Job-Approval.aspx)
  3. ...and finally.... Fed credibility or lack of it means: You have to fade the "fake" from Fed....

The meaning of # 3 being: The Fed has a tendency to "leak" certain things to the press ahead of the FOMC, this time they are telling market on the quiet: "....listen do not tell anyone, but we are NOT interested in raising rates now..."...

Then Paul McCulley of Pimco sees right through FOMC- arguing Fed can hikes rates but keep the quantative easing in place.... (http://europe.pimco.com/LeftNav/Featured+Market+Commentary/FF/2009/Global+Central+Bank+Focus+June+2009+Exit+Strategy.htm)

Hence the need to "fade the fake before the Fed" - or in other words - Fed has been known to use Medley and other "reliable" sources to manage expectations, our feeling is this time, they may be doing more of the same... Fed knows asking for more help for the banks right now is impossible considering the morale hazard already in place, but also more importantly six month on "artiticial life support" is enough by any political standard, hence the need to "fund" other projects..... like engineering lower mortgage rates - again - for mainstreet Americans.

On the strategy side I remain focused on hitting some singles.... went long EURUSD this a.m @ 1.3855 ish.... and long S&P @ 904.50 ... Puma Macro MTD: +37 bps for now.... small in number of trades and size for now..


Looking for some more consolidation inside 1.3830 - 1.4100 ish top - before break-down based on Eastern Europe and the "fade the fake before Fed" arguments above...

Like SGD, JPY(long) - feel nervous about ALL EMG as risk appetite is changing....to the negative in my eyes..


Can't get excited but two of the smartest guys I know wants me to buy short-end G-7, and look for curve steepners... I'm in on that trade but will not execute before FOMC is out of the way...


Considering the amont of "exit strategy" & reflation talk going around Gold have performed miserably - (yes I know I advocated long @ 930.00)...... Looking for net short, same goes for crude - the world is in denial on unemployment, growth and true state of the economy - Crude will trade sub 40 US Dollar THIS YEAR...


From technical point of view - I wish that we could test higher levels like 935.00 ish.... as good "top formations" normally have one or two retest before caving in and falling..

Much smarter people than me are pointing out:

  • We have had a 90% down day - i.e: 90% of all stocks in Dow has been down the same - normally sign of top...or in this case reversal
  • Both volume and the fact the leaders has been "poor quality stocks" indicates this was COVER RALLY more than based on sound economic policies..
  • Sentiment has become almost euphoric - even Cramer is feeling on top again.....We moved from most negative sentiment in my career to the most bullish in less than four month - Hip, hip, hurrah...
  • We have some interesting cycle dates coming up: Early July (around Non-farm)....
  • Divergence is in place in almost all stock markets.....
  • Obama disapproval rating is on the rise- (click link above)...
  • Time is not working for the Administration in the sense the moratorium on foreclosures is running out, Obama can only do so many public speeches telling us to "feel" better, the TALF not working, we are getting closer to mid-term campaigns - meaning the Washington Senator' and Congressmen, God forbid, will need to go talk to their actual "voters" - and explain my Main Street got Royally burned while the "greedy bankers" were bailed out... hard one for even smooth talking "tosser" like myself..
  • 880 my 1st target - AND - I still believe in new lows this year...


Looking for SQUARE positions into Fed meeting - but trigger happy on options on down-side in stock markets- also looking for FX to lead the break of range... shortly.....

Safe trading,

Steen Jakobsen

tirsdag den 16. juni 2009

The game of undermining the US Dollar is under way...

I note, through friends of mine, how the Shanghai Group backed Russian proposal on using national currencies in mutual settlements and introducing a commen currency. Mededev own wording: "The current set of reserve currencies and the main currency - the US Dollar - have failed to function as they should" ... http://en.rian.ru/business/20090616/155268544.html

The meeting included China - so the China/Russia link is showing up more and more, and it again goes to my point on how Asian and EMG countries overall are focused on getting their proper share of political and economic power - they want to keep the flow "local" - which will have material impact on unemployment levels in Europe and the US. (Increasing "natural unemployment").....

The more short-term critical aspect becomes one of how this "Think Local - Buy Local" will derail all the global intiatives in G-7, G-10, G-20 as the economic impact will be one of less recycling of current account surpluses, meaning less financing for the indebted US and Europeans......

The growth rates in Asia, EMG will outperform G-7 by more than the norm going forward, although I suspect the REAL DATA will be that Asia + EMG will barely grow while the USA+ EUROPE will be in recesison for far longer if this game Think Local- Buy Local continues.

The other topic is again one of the FED trying to "talk to/leak to" the market that they are not even close to raising rates....

FED weighs FOMC statement: http://www.bloomberg.com/apps/news?pid=20670001&sid=arWqPRMOr14A

This combined environment of Fed "not" going to hike - surprise, surprise, plus continued talk of diversification away from US dollar- got me long: EURUSD and S&P again .... (took profit yesterday on short S&P and short EURUSD).....

Puma Macro MTD: + 27 bps (3 trading days).

Safe trading

Steen Jakobsen

Changes to portfolio

Changed the position around based on today modus operandi.....

Net short EURUSD  1.5 x original @ 1.3865.....
Net short S&P @ 926.00

Safe trading,

Steen Jakobsen

A fanatic is one who can't change his mind and won't change the subject. Sir Winston Churchill (1874 - 1965)

Dear Investors,

I know a few of you got a "scare" seeing me go long EUR.USD and S&P yesterday ;-) but I will remind you I am doing this as a trader who needs to make money, not as medium term fund manager (That's why we got Puma Beta and Puma L-T).... The alpha model is flexible and recalibrates daily....)

There is a few themes growing on me:

  1. Asia leads this rally - sign of new times in financial market ? I.e: Increased need to allocate relative to GDP rather than the MSCI? Impact is massive - as EMG Asia will outperform through this process, also by product the Chinese "anchoring" of currencies- Good or bad?
  2. Financial system feels under pain again - the easy money of Q1 is gone - Obama and the central banks are turning the volume down on the "free lunch" money for the bank - and banks now trail in performance relative to overall market? What's next for banks to safe the day? Disclosures still behind the curve and the "true value" of commercial lending, mortgages, and speculative lending is far, far from real value.
  3. Yields are high, too high for comfort for the FED - risk is they will try to engineer a flattening of the yield curve, and that the consumer will be left behind still unable to fund himself and his business. Unemployment going to remain high for a long, long time
  4. Eastern Europe noise will continue. Business model no good - looks too much like the one taken in Dubai for my liking.
I will try to fine tune this macro theme list as my reading/research goes back to norm.....

Equity market

Today is Super Tuesday, the market presently have rhythm of down Monday', up Tuesday' a pattern I will follow taking my profit, if any, at the close of business tonights.... looking over the chart yesterday there is a few concerning issues for the Obama and Happy-go-lucky camp, which believes whatever happens is good.

The Above chart points out the obvious "divergence pattern" between the RSI and Price, this could be sign of summer top in place, but in classic scenario we would like to see another test on high, only to fail, and then turn down.

Data & macro news

News overnight is tempered but ZEW was strong - in the words of my friend Stephan Collet from CS, Zurich:
German ZEW expectations further recovered to a three-year high of 44.8 in June from 31.1 in May, firmer than the consensus forecast of 35.0.

The recovery in the ZEW expectation is strong and persistent, with the series rising and exceeding consensus forecasts for eight consecutive months.

Our work suggests that the path and magnitude of ZEW changesserve as a guide to the coming PMI and Ifo data, albeit an imperfect one. Today's strong ZEW reading supports our bullish EURUSD forecast of 1.43 in three months, with the better global environment continuing to trump more local concerns in Germany.

This is exactly was ECB do not want, but in life you do not always get what you want, and increasingly the game seems to be one of:

Taking things to the boundries plus VAT and then reverse - always respecting the mean-reversion with or without drift. Facts is neither the US or Europe wants a strong currency - there is no inflation to contain, only the game of competitive devaluations - and no one, but Zimbabwe, does this better than Obama and his new administation.

Foreign exchange...& Commodities...

Still long EURUSD......Commodities looks ugly again..... RJI (Rogers Int. Com. Index- Total return) have made clear toppish pattern: http://stockcharts.com/charts/gallery.html?RJI

Puma macra MTD: + 13 BPS (start June 14th, 2009)

Safe trading,

Steen Jakobsen

mandag den 15. juni 2009

Mean... Mean Reversion is my name......

Dear Investors,

Triggered a few short dated trades this morning:
  • Bought EURUSD @ 1.3840 and
  • Bought S&P mini June @ 930.00 -
It is Monday and market does not like Monday's as the news flow is rich and big..... the "Plunge team" will be in later do not worry at all:...Obama is there to safe us all with his "smooth talking " which mostly reminds me of Sade' early hits ;-)


The FED meeting this week is kind of interesting as market it trying to focus on how Bernanke will talk down those long-term rates - not long ago ALL OF THE SUCCESS of Bernanke was based on his ability to maintain and keep 10 year rates low - now when the rates are trading close to 4 pc I guess the success is something else, little do I know....

Is it me or does the eternal talk of "exit strategy" which dominates CNBC, Bloomberg and other media annoys you much as it does me?

Exit strategy from what?

The biggest manipulated "demand-pull" in history? Or the biggest "cheap talk" about improvements ever in history? Or the 50 ways to cone the investor and electorates?

You make your choise - the problem is that the "dumb" money - read: pensions funds, government agencies, SWF and the like are ALL desperately chasing the return of MSCI, their glory benchmark, which they will trail forever as the MAIN DRIVER right now is China, China and then some more China.

MSCI is simply constructed wrongly for this type of Asia biased rally

The new agenda, which I have written about a few times from the road in Asia is one of China trying to use this crisis to link other countries and currencies to their currency band - creating a "domestic Asian" market which they ultimately channel more and more of their excess saving towards securing excess growth relative to Europe and the US, but also use politically to call more shots - which is the bigger macro issue: Asia is on the road to establish a stronger, deserved role - one of the by product will be one major adjustment of MSCI weights which is so out of touch with the reality that it makes fund managers almost scream......

The Chinese seems to believe, not unlike Obama, that they alone can pull the world out of recession - maybe one day, when they get to understand the true meaning of Say's Law: Supply creates its own demand -- or in Wiki version: http://en.wikipedia.org/wiki/Say%27s_law - they will understand the consumer of the US of A and Europe are toast and I mean toast.....

Did you notice how Russia almost single handedly today made sure the US Dollar saw some strength by virtue of Kudrin comments. It is a joke..... http://www.bloomberg.com/apps/news?pid=20601085&sid=aEVT7Gx4jFpI - and hence my buying of EURUSD this pm....

I had lunch with my good friend Andreas Junge, who I rate for his expertise on freight - he says pretty much ALL of the improvement in freight presently comes from China and dominantly in Iron Ore and in the lines supplying China, whereas many other lines are running with excess capacity ..... in other words: There is presently in freight, as in the financial markets ONE forceful demand factor and plenty of suppliers......

Bottom line - as little as I know, I still "hang with" the program of chance of 1050 only because Asia (China) is determined to give Obama a run for his money on being the most INTERVENTIONIST adminstrations around and unlike Obama, the "rulers" of Asia actually got some money to burn!!!! Hence my conservative expectations of a "good summer" only to be substituted for nasty, nasty Q3 and Q4, but as always I will keep my "postive" attitude in tact.


All markets: Day trade the range - using the most general concept of mean reversion - without drift.

FX: Like weak US Dollar despite Russia saving them today.... Obama is playing with matches and as the old nanny rule goes: Playing with fire makes you pants wet.....

Like SGD and JPY longs.... and own them both....


60 pc chance of FED hiking? Are you kidding me? FED will ANYTHING to take yield of 10 year notes down - I'm soon buyer of 10y on mean-reversion...

Major buyer of Euro-dollar December.....


Like gold here @ 930.00
Will short Crude soon..
Love grains


Long S&P - with no firm believe but accept the randomness

Safe trading,

Steen Jakobsen

onsdag den 10. juni 2009

S&P should be at 750-00! What is it doing here?

Dear Investors,

Sometimes you read something which makes you think again - my friend Yoshi often does this to me, so I have asked Yoshi for permission to print this e-mail he sent me today. Yoshi is an independent trader in Singapore and one of the true warriors of trading. Enjoy - Steen -


Dear friends,

We have now arrived at S&P 950 and my model is flashing its short-term upside risk to 1050 while the current fair value is at $43 x 15-17 (S&P at 750). Well, that's what my head says, but my heart is saying the Japanese style long-term decline will eventually lead S&P to $35 operating ESP at 15x multiple assuming the positive correlation between Obama's approval rating and S&P. So forget about any quick killings in the mkt!

The Bilderberg Group, the plunge protection team, the Japanese PKO and the European something, validity of their existence is irrelevant. In the new world of Tarp, the Fed and the rape of tax payers, I have no problem believing anything. But, even putting these old bones together still would not make a big enough dinosaurs to make troubles for the emotionally sane equity and USD bears.

So I came across a FT article by Sundeep Tucker: (http://www.ft.com/cms/s/0/a7d56c18-5505-11de-b5d4-00144feabdc0.html)

Summary of the article: Early last year CIC picked two or three fund management groups for each of six investment mandates with an aggregate sum of $12bn. CIC has also earmarked a further $30bn of its liquid assets for global portfolio managers over the next 6 to 12 months. CIC and SAFE will hand additional monies to hedge funds and private equity firms, neither of whom typically need to declare the source of their financing. The collapse of the Chinalco/Rio deal will spark soul searching in Beijing. The irony is that it will hasten China’s push to hand bucket loads of money to foreign fund managers.

Well, CIC & SAFE/$2 trillion China plus the old bones may be enough to bully the mkt in the equity, govies, commodities and FX mkts to adjust their reserve portfolio without affecting the USD peg. Greenspan had kept quiet about China's UST purchase with his "Conundrum" bluff. The UST kept going up regardless of the Fed fund rate for sometime.
Now, are we seeing a Chinese Texas hedge after they got burned in their 2007-2008 equity debut? I am guessing their average S&P break-even is around 1100-1200. Considering their concerns over the UST, high priority on energy & commodities security and their determination to keep the peg, their indirect equity investments could make sense if they get their hedge ratios vs. UST right. They could well have decided to readjust their reserve portfolio when S&P happened to be around 650.

S&P M09 emini is now at 928 as I write my letter, but I just think the next bear mkt to the initial target of S&P 750 (and ultimately to 350-450) will be a long process with a few more false rallies.

Remember the African proverb? "When a man threatens you when you are asleep, stay asleep. But when a women curses you, stay awake." So then, what should we be looking out for to time for the next sustainable reversal in S&P and UST? It will be tax and rate hikes as we saw PM Hashimoto's 98 consumption tax increase and Hayami's 2000 premature ending of ZIRP had killed off the feeble recovery and all came to its head during the Japanese banking crisis.

Before the real black swan (geopolitical risk) will finally have landed upon us, I see tax and rate hikes as the precursors however improbable they may seem right now. Once Geithner, Summers and Bernanke fall from their grace, the political repercussion will dictate the fiscal and monetary policies and I sure will feel sorry for Volcker to take over the Fed to tarnish his good reputation by having to raise the Fed fund rate.

Well, with these current long term macro views of mine, I will get some sleep so I can make it to the Asian open this morning to trade short term in the mess of futures roll overs.


RSS is NOW...fixed..again

Thank you all for telling me again it did not work - I have finally completed the ugly task of setting it correctly....

In 5 min I will post todays blog which is my friend Yoshi recent piece - which is not only excellent but extremely relevant..


RSS feed is now fixed..

Dear All,

I have already several times admitted I am no "geek" in IT - but I think the issues with RSS feeds are now fixed - if not let me know....again....

Normal blog later today...

Best wishes,


tirsdag den 9. juni 2009

The function of socialism is to raise suffering to a higher level.John Mailer

Dear Investors,

Back into the game- the trading account is getting activated and I even signed on to my CNBC-TV online today - miss the old markets - being without a real position since March 1st has been a true nightmare, but now its time to deliver on my blogs et al.

The best advice I seem to be getting from my true friends is to wait out most of 2009 and start trading in 2010.

The market is "killing" people with its randomness and I guess I can understand why when Obama sees todays repaying of TARP money as something "positive" and not for what it is: A financial market which is livid scared of the Socialist Administration who believes in intervention, higher taxes and destruction of private initiatives.

Often the most simplistic way to look at the market is to check on the "technical patterns" - here to my surprise I find myself starting to believe the 950/1050 top - may actually really be a 1050 top - the momemtum of the "dumb" money - i.e: the long only managers chasing their tails as their clients wants The Full Monty of risk allocation will wag the market higher through a quiet summer where no one really wants to deal with the crisis.

A while back, seems like a long time ago, I wrote about how markets tends to get "fatiques".. they simply start to move in different direction because its "time" to do so... I really believe in this concept - or in other words: The only unknown quantifiable parameter we continue to ignore is time and its impact on trading decisions.

Someone who takes time extremely seriously is Terry Landry - his T-theory became a household concept when Marty Schwartz mentioned T-theory in the first Market Wizard book.

I note how Terry recently is starting to look for a serious break-up - his target if I am not wrong is a mighty 1340 in the S&P ?

Check his website: http://www.ttheory.com/ and more specifically check his latest chart: http://ttheory.typepad.com/files/srt20090605.pdf
Terry is not a trader known for high frequency and I love his time dimension plus the logic of his concept.

Click on chart for bigger version

As seen from above chart - I start to believe that 1050 is a real possibility, and the early running of my model in Beta-world is clearly long and happy to be so (I will start the models next week)....

The concern obviously being the rising yield which is hurting and counteracting the dominant theme and action by Fed - reducing the GROSS PAYMENT done by consumers in everything from credit card to the main deal: mortgages.

Also threathing is the potential weaker US Dollar - I think we all have to agree that the weaker US Dollar is fact not a question, but the timing is extrmely difficult as the European Banks are still shaky and the turmoil in Latvia indicates more write-downs are not only needed but called for.

The banking sector in Scandinavia is extremely poor - I expect Swedish and Danish banks to be down-graded later this year- Is it becoming more and more clear to me that the modus operandi used in Scandinavia and probably else where is one of: "Hands off " and "No reason to rock the boat" - so we, the shareholders, have to live with results being announced which at best is fiction and at worst is science-fiction.

Yes, I am saying this: The regulation may "conceptually" be stronger, but everyone has a vested interest in "containing" and "buying some time" the true fact is that Socialism in its present form in the UK and in the US is making sure we will have a lost decade of lower growth, low productivity and increased spending on pension, health care through MUCH HIGHER TAXES.

I find it ironic that despite what can now only described as a MASSIVE rally in stocks and a cheerleading by Prez O only matched by Greenspan's stupidity in the 1980s, and 1990s (or was it 1880s?) the ACTUAL fundamental situation is not improving ...

I have talked to 100s of business people and NO ONE is seeing any improvement at all - if anything people are seeing a negative acceleration to the downside.

Point: Enjoy this party: The booze is cheap, the music outdated and the hang-over have no cure..!


For now I will venture into small long on the stock market - respecting the "dumb"- money ....data is improving according to plan, but market over-interpret all events economic as well as ad-hoc ones...

Higher yield is a summer thing - I will look to go long Fixed Income in July - not before - I like commodities - and I need to revisit my old REFLATION basket -which seems to be doing well recently.

US Dollar - still awaiting the trigger point - decision is now taken - execution is different story...

Beta model is 80 pc long stocks - 10 pct in FI (mainly Credit ETF's) and 10 pct long commodities
Alpha model is small long stocks, short US dollar, short FI, long Commodities, short CREDIT.

Safe trading,

Steen Jakobsen

onsdag den 3. juni 2009

New markets, new blog?

Dear Investors,

Sorry for small delay in my updates, but shortly - I hope from Friday I will be fully back into the game of commenting and analyzing the market with the promised "models" but also with the usual angle of macro thoughts.

I am constructing a new blog as the old one was started and kept from my former Saxo Bank life. I am desperately trying to mitigate the issue of not bothering my subscribers with having to register yet again - but being the primitive type I am - I may have to do so anyway... the new blog URL is:

Give me a few days to complete it but rest assure starting next week things are back to normal.

On the market I'm 100 pct non-committed in every single market - I find the price action close to random, and despite the "200day moving average" breaks in commodity and stock markets.. I find all thoughts, valuations inflated and without merit - actually I would love you all to read Peter Thiel piece on long-term lack of productivity as it to me is one of the missing links in the present analysis of the market.

When I grew up (Yes, just after the war I know....) I remember how the bright future would be "paperless" - everything would be easier and productivity would rise forever - hmmm... we use more paper than ever and despite the fascination with internet and its ability to make us all "smarter" - one has to ask "are we really smarter"? Better ? Than we were 2o years ago? Alot of the smartness is really convenience - people are not less busy now - en-contraire - there is so little time to be reflective and thoughtfull today than ever before .....with the consquent loss of new frontiers, imagnition running wild - every thing is "priced control" - Resource allocation... we have mini-maxed everything into atoms - atoms which have not independent life or drift....

Remember the long term yield of stock market will have to be: Growth of the economy plus productivity gains and inflation ... Thiel argues there has not been any REAL PRODUCTIVITY gains since the late 1960s.. if so.. we have equation where long-term stock market gain = 0 (zero)inflation + o (zero) productivity + low growth... hmm... not my favourite cocktail, but then again I am simple, agnostic and uneducated independent trader :-)


Finally one of my favourite people of 2008 - David Einhorn were back this past week at the Ira W. Sohn Research Investment Conference, the annual hedge-fund conference where just last year he held forth with his now-famous takedown of Lehman Brothers, and Einhorn had a new target: The most over-rated politician in history: The O'- administration.... read on my friends: http://nymag.com/daily/intel/2009/05/david_einhorn_strikes_again.html

See you in the new format Friday or over the weekend.

Safe trading,

Steen Jakobsen