The next big trend shift comes in October- It will be political driven.. this is the 9th inning...

Thousands Rally in Capital to Protest Big Government :

http://www.nytimes.com/2009/09/13/us/politics/13protestweb.html

Seems the Americans finally feels hurt enough to start protesting....

The political headwinds of Obama seems to increase - haven't check the databases but this kind of rating can not be good for markets medium term!-

With the desperate Obama back from holiday(he increasingly looks more and more like a ONE-TERM President)....... this could one very interesting autumn.... looks to me like we could see more upside in September (past the G-20 in Pittsburgh which will follow up on the April text...)....before the topsometime in October with major volatility and trend reversals going on...

G-20 is all in on "talking markets back up). Read this status report on London G20 meeting ahead of this months.....(http://www.g20.org/Documents/20090905_G20_progress_update_London_Fin_Mins_final.pdf) and understand how committed they are to do exactly this in the order mentioned:

• Restore confidence, growth and job - ticked.... they feel its done
• Repair the financial system to restore spending - ticked - although Options ARM's and write downs still only 1 trl. US vs the IMF suggested 2.5 trl peak next year
• Strengthen financial regulations to rebuild trust - THIS IS NEW 1stpriority..... (note also Germany's new over this week-end: http://www.ft.com/cms/s/0/4038e1fe-9f09-11de-8013-00144feabdc0.html?nclick_check=1)
• Fund and reform our intern. financial institution to overcome thiscrisis and prevent future ones.... blabla.

The US consumer has been announced dead - the world global governments have decided to take their place on the demand, but now national budgets are close to exploding and Spain(with Ireland) has shown early lead by increasing tax by a full 1,5% of GDP (http://www.eyeonspain.com/blogs/SpanishBusinessNews/2229/spain-raises-taxes-as-budget-crisis-deepens.aspx)... more is coming to all of us...

Now... with Options ARM recast ( look at the word it explains itself -something needs to re-classified (Please, please read this link...: http://www.realtytrac.com/ContentManagement/RealtyTracLibrary.aspx?channelid=8&ItemID=5159)), the fiscal inbalance stretched, the politicians losing the game despite giving voters (read: bankers) everything they asked - the game is in its 9th innning, but where is the new trend / the break away ?

I have always thought and learned that MARKET TRENDS are dictated by POLICY CHANGES (always for the worse) .... so with Pittsburgh G-20 coming up, we are to be alert, flexible to where the next MEGA TREND comes from...

Personal feeling is that the DEMAND FUNCTION of resetting loans can ignite higher rates, that the Japanese talking about independent foreign policy from the US this week-end, could mean that we have come full circle:

This latest boom was based on the US consuming goods, and ASIA consuming BONDS to store the surplus - now we know the US consumer is gone, so why is rates still so low ?

Next move is to see Asian and Middle East selling bonds - it has
started as it can clearly be seen by the accelerating weak US Dollar
...

Finally, please read this excellent piece on my good friend Daniel Arbess of Perella Weinberg - a well deserved praise of him - not only a good trader but a perfect Gentleman...

http://www.absolutereturn-alpha.com/Article/2280854/Profiles/Dan-Arbess-to-Chrysler-from-Skoda.html

Safe trading,

Steen

Labor day - the cheerleaders been busy...

Back in Copenhagen and over the week-end the G-10 financeminster met and the cheerleaders immediately concluded: This is good - RISK ON.....

However the only worthwhile comment I probably read over the week-end and this morning was from my old collegues in Saxo Bank Research David Karsbøl and Christian Blaabjerg who when asked why they saw market down 20-30% while other saw it up by the same amount replied: Because we are "Austrians" and they are Keynesian.

They could have added - and the investment banks are whatever it takes to paint the world bright and appealing.

The conclusion is correct.....but the mere exercise of trying to predict this market is utterly futile. Even the best "futurists" - only get 10% correct....so why keep trying ....

I do not prescribe to any school, partly due to my lack of intellect, partly because it really does not matter...... as a speculator.... the main ingredients is the amount of stomach pain you can take - and right now there is plenty of acid for the same......

The move off the high in S&P was classic divergence + high sentiment indicators, but even record high unemployment on Friday did not stop the plunge team from getting in line and buying into the close..... then this morning quarterbacking by the investment banks has taken the market yet higher..the incoming data keeps the momentum going on the bull side - and there is some light as seen in this "record of industrial production":
http://www.voxeu.org/index.php?q=node/3421

So... here we are: The Austrians vs the Keysian, the Investment bank vs. the Hedge Funds, the naive vs realistic ? :-)

Well I'm not taking side yet... our base scenario remains one off:

Down in September/October (Probably more likely in October than September due to the overfocus on how "baaaaaadddddd" September seasonal does - so expect range in September down in October.....

The Q4 overall should be positive: Looks like the exit from the stimulus has been postponed after the US forced other G-10 members to rein in the "urge" to normalise....and the Prez O needs to regain the political focus at home - what he does not need is a second leg of this crisis....

He has plenty on the plate with: Health care (note he is speaking this Wednesday to Congres, Aghanistan and Iran... http://tinyurl.com/nfckbm

So... the best "deal" right now is wait for further confirmation and accept the market is in "positive" spin if for nothing else due to lack of new information......

Strategy:

We remain short GBP into the Bank of England meeting this week...http://tinyurl.com/mlag6s

We are short USDJPY from today @ 93.01 - stop 93.55

Long Bunds on strong performance.....

Small short S&P and DAX - low conviction...... (Research shows day after Labor weak in 9 out 10 days with two positive closings preceding it...)

Short Crude.. still....

Short Gold... mean reversion..

Safe trading,

Steen

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..

FX:

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..

FI:

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...

COMMODITIES:

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...

EQUITY:

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...
  

OVERALL:

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

Idealism is what precedes experience; cynicism is what follows.

Dear Investor,

First week almost gone in the new job - lots of stuff to do among them I did long interview with Bloomberg John Dawson which explains my take right now, which for some would be surprisingly neutral: http://tinyurl.com/cl574h

Safe trading,

Steen

A leader is a dealer in hope. Bonaparte

Hope, hope and more hope. The readers of this blog knows what I think about hope - it belongs in Church on Sundays with the other prayers, but sometimes there is so much "pain" that it creates a psychological need for hope.

This is such a time - the frustrations in the US have reached levels which have made the Americans even more irrational than normal. Every single meeting I walked into in New York talked about the "choices being analog" - Analog? It was almost so indoctrinated that I started to believe they all had been brainwashed.

The consensus US story goes like this: (The score 12/13 meetings ):

1. The political and economic choices are analog - there is no downside to fiscal stimulus and massive printing of momoney... its eithers ZERO or "something"......and it will be something... (bad?)
2. Obama is a fine young man, who has the abilility to unite the US, and taking them through this crisis. He is rumoured to be more afraid of Speaker Pelosi than the GOP!
3. The good news is that we are 50% through this crisis (apperently all recessions lasts exactly two years) and stock market always starts to go higher six month before recession is over - ergo: we are one year into the recesison, leaving between now and the next six month to be major rally point.
4. Fed lies about the outlook (and denies reality) - they are saying unemployment peaks at 7.0% ish, but really believe its 9.0%+ -
5. The closed circles of Treasury and Fed rallies behind each other like hangers on - or entrourages - there seems lots of room for Larry Summers( 'The women are less intelligent than men' former Harvard President....a former Clinitonite official) and the ever present Mr. Rubin, who despite taking Cititbank to the brink of bankruptcy is still called upon to help the US again - and unfortunately for me, and you, Volcker is merely seen as figurehead - a Statesman not to be heard.
6. One day, soon, greed will return and the banks will stop asking the Fed or Treasury for more money and start taking risk on themselves.(I did not get how they in the meantime recapitalized the balancesheets?...but I am not one to let facts get in the way).. The only thing missing is the 4.5 mio. unsold homes - but with the printing press working overtime this is only matter of months before the inventory is gone.....
7. 2009 is a lost year, but do not worry it will only make 2010 a much better year......
8. The corporates in the US is doing great, hence there is no need for worry, it is "only"" the banks and the consumers which are toast ... but hang on.... aren't the corporations selling to those exact two audiences ? Apperently not.....and here I am being told US consumers is 70% of GDP- but it seems that's only when there is tailwind!
9. The US consumers will never net safe - and here I must agree - they will move from spending more than they have to spending what they earn.... but they will not net safe... I agree, consider the average US smaller to medium sized cities ... they are built for people to consume.The US is built to spend money, it's a Ponzi scheme, where we continue to extract dimes in order to save on service, products and quality. Think about US cars, US food, design..........The US has given up on itself... it has lowered its standard to levels which is really only comparative to an emerging economy. In the middle of its biggest economic crisis I had the worst service EVER in New York, somebody needs to wake up!
10. Pensions are now down so much it's impacting peoples work, life and future. I met several people seriously concerned about their future - their jobs.. and this is everybody from school teachers to Wall Street types.. they all live like they are going to lose their job...which to me indicated this economy will contract even further.

Friend of mine claims Wall Street will only be 50% of what it is today in one years time - I am sad to say I hope so, there is nothing to be had on Wall Street anymore - business is closed, and the IC, Intellectual Capital, remains focused on creating the consensus' scenarios like the above... maybe it is a good thing Obama creates hope, because if Bonaparte is right he may get the chance to be a leader.

Strategy

Market continues to behave like it thinks this will work. Be my guest - I remain with 910/920 top in S&P which should be used to be maximum short. The sentiment will not change in six or twelve month. I was here in May, now in December its 50% worse.......

Finally, a personal note: My childhood friend Jens Christiansen, 44, passed away on Saturday all to soon.... Jens was my closest friend growing up....I will miss him, and my prayers goes out to his family...

Safe trading,

Steen

Notes on Wednesday...

First the important stuff: Happy Thanksgiving to all my friends in the U.S - I wish I was in the US this week........

Friend of mine sent me these clips with our old friend Jim Rogers - he talks common sense, probably does not make him a lot of friends, but his thought process is crystal clear. Enjoy it: http://tinyurl.com/65r8wd

I must say I am more tired than at anytime this year - hopefully it is the travelling but the market goes on my nerves.

The policians keeps doing the same mistakes, the media keeps drumming the same drum, and it is all going in a big circle ..and leading us nowhere.

I am on the record saying I personally felt Obama at least would mean change - however it seems I was wrong, again, all his appointments smell of establisment and his policy indications feels like protectionisme and Dirigisme... in other words ..I will have to keep my negative outlook something I have come to fear as being "realistic" carries too much pain as everyone rather get the free option than face reality.

Talking inability to face reality looks like Bernanke is "dead in the water" post 2010 - maybe Princeton will take him back after all ? http://tinyurl.com/6427og

Maybe what's really bugging me is the fact I have spent far too little time on the market and thinking about them..... something I will change from next week.... but doing some small research this evening some things seems obvious to me:

S&P - consolidation and hope the main drivers - we had "patriotic call higher" into Thanksgiving (Am I the only noticing markets tends to go up on National days?) ..... 900/920 begs for perfect 4th wave correction before the 5th final wave down.... in other words.. neutral into 900/920.. watch if momemtum can carry us above if not... then full short......

Forward earnings still major league unclear as Ticker Sense indicates below (Thank you Jesper):
http://tinyurl.com/5cpol4

US dollar (EURUSD)- we may have seen the high in place for this 4th correction - inflation being called lower in Europe and Stark from the ECB even talked some common sense this morning......but Europe is on the verge of serious slow-down which will take all Euro-rates to ZERO...and fast....

Market is also dealing with Investment Bank year-end - or rather state owned Investment banks - sometimes in the past this had an effects - but for now US dollar got some fundamental potentials from waning Current Account Deficit and deleveraging of balance sheets - both of which makes short EURUSD the only real worthwhile deal to carry into month end.

Fixed Income- If I ever was in doubt I should listen my asset allocation model guys now is the wake-up call - despite US Yield being hysterically low - I still do not want to lend the US Government ..below 4 pct in 10 years - there simply is not any alternatives into year-end - more of the same - low after low in yields as "quantative easing" happens.....

Finally, we are, or rather my excellent team doing some research on our Outragous Prediction (into todays lingo: Our Black Swans)... without giving away the positions I note the calls themes are:

1. Hardly any US calls ... 1 of 10 - with Chinese calls having 3-4 of 10 - this to me indicates the clear paradigm shift - when looking into 2009 ... my analysts not really that concerned/bothered with the US - the policy lead will come from what happens and get done in Asia/China.

2. Dirigisme - Anywhere we look there is more State/public sector intervention in the markets - from Sarkozy to Obama- they all embrace the "hidden hand" of Keysianisme ---this time undercover as the 3rd way....and named: For the sake of greater goods (It will die as much as Tony Blair failed to find the 3rd way..) - Fiscal expansion will follow.

3. Social/political unrest - if commodities continues to fall there could be both political tension in some regions but also social unrest.... The impact too harsh to imagine, but in a Black Swane exercise this "mental mapping" could safe the investors a lot of money...

4. More of the same-- -as much as they want to find some sunshine - it quickly becomes as grey as a summer day in London...

On this positive note - I wish you safe trading and nice week-end

Steen