If two men agree on everything, you may be sure that one of them is doing the thinking (Lyndon Johnson)

A quick Saturday blog from me: I have finally figuered out what Obama/Geithner/Bernanke modus operandi is based on: http://en.wikipedia.org/wiki/2012_phenomenon  or more dramatic: http://survive2012.com/

The only way to explain their actions and policies must be based on knowing its futile anyway!

I found the Mayan prophecy when reading a thriller and it struck me as the only sensible explanation for the comment/actions/policies enacted under what surprisingly to me now look an even more incompetent administration than that of W. Bush!

Another far more elegant commentator who is having a hard time not only with Geither et al, but also the never ending praise of China is Hugh Hendry: http://scribd.com/doc/22520780

His latest monthly report is so well written had there been a Nobel Price for financial market commentaries he surely would have won it for 2009 - unless obviously Obama runs away with it as he has once considered writing a commentary, which these days seems enough to win a Nobel price, but PLEASE READ IT. It is concise and raises several issues which I myself agree with:

• The non-demise of the US Dollar
• The non-believe in the Chinese miracle (where is the consumer for their production?)
• Deflation - double-dip

Last week was big range trading - there was some "noises" that the "too big to fail means to big to live" could see regulation next week as the lobbyist fails to make their voice heard: http://www.bloomberg.com/apps/news?pid=20601087&sid=az7AcisnxsCA&pos=6

It seems Dimon agrees (or playing the game?): http://wallstreetpit.com/12093-jamie-dimon-too-big-to-fail-must-be-excised-from-our-vocabulary

The charts for banks should cause some concern:



Meanwhie the good old Dow Theory still not decided whether to confirm Primary & Secondary Bull Market or to make divergence indicating top in place for now....:



On the markets I have increased LONG US dollar exposure - and added slightly to option downsides - the odds of "see no evil - hear no evil " long environment is rising ... Even the bears now embrace this line of thinking as Goldman Sachs and others are now proclaiming more incoming STIMULUS is coming with the Job Summit in December -

Intentions are good - action better (Steen Jakobsen)... It seems to me that the last Deficit Summit brought nothing - I expect Job Summit will bring... Nothing ... The Obama policies are the worst nightmare this world have seen - when the Chinese engine have filled the last few storage facilities with useless products no one wants to buy - the day of reckoning is in ........This is 1999 all over - no values, no metrics for fair-value.....maybe the Mayan Calander is right ? :-)

Safe trading,

Steen Jakobsen

PS: I will be in London for most of next week, but will try to update... nice week-end...

There is no atheist in a fox hole - Weekly Investment Meeting

We had our weekly investment meeting and to say the least there is a matter of different opinions. In the blue corner we got the resident equity bull Mr. Lars Thørs, who sees no evil, hear no evil(but highly profitable) -and in the red corner we got yours sincerely who is on the verge of committing public Harakiri in frustration over how much B.S there is flying around on a daily basis.....


The gist of the conversation goes as follow:


There are really three if not four different scenarios for balance of 2009 and 2010:








Note: The X-axis is time, and Y- the return(yield)....


(Click on diagrams to enlarge)



Note: The different scenario's with impact on macro and asset allocation.
(Click on diagrams to enlarge)


In our opinion there will be a movement from presently: Sweet-spot through Double-dip into Crisis 2.0 over the next 6-9 month, but we could be wrong a below we have assigned our consensus vs. the market in terms of odds.

Note: Limus Capital view relative to consensus


The conclusion on the outlook is: It's either going to work or not, we do not see how a V-shaped recovery can be established - but oddly enough here we are at odds with some of the major players in the macro world, who all seems to think the bubble in US Treasury is the biggest, but while we agree on the overvaluation we feel that if we move out of the Sweet-spot then it will be due to increased concern about rising yields on Treasuries - in other words - a starting crisis of confidence.


This scenario is based on several key points:


Maturity of both banks and government debt has shortened considerably making the next 24 month the biggest issuance period in monetary history


There are simply not enough demand to take the supply in our opinion, which in turn will force the rates higher. The US Government has shortened the average maturity from 70 month in 2000 to less than 50 month early this year (http://tinyurl.com/ydbnnqj) - this happens as the public debt reaches 8.000.000.000.000 USD (8 trillion US Dollars), but more importantly almost 50% of that debt expires in the next year! 


This should on its own create some concern, but at the same time the banking system has done exactly the same exercise according to Moody's report out this week: http://tinyurl.com/yhf2nm4


The average maturities of new debt issuance by Moody's rated-banks around the world fell from 7,2 years to 4,7 years over the last five years! This constitutes the shortest average maturity in history. Practically it means the banks will face maturing debt of 10.000.000.000.000 (10 trillion US dollars) between now and 2015 - or 7.000.000.000.000 between now and 2012.


Let us not kid ourselves, there is always some debt maturing - T-bill normally constitutes 30-35% of funding, but the point being that even the slightest crack in confidence could have a snowball effect on confidence and catapult  rates higher, as the shortened maturity increases the demand for higher yield and in a world of falling disposable income (due to higher unemployment) - the private sector savings will be in great demand across all assets not just funding the mighty US of A.


More stimulus & how Obama could be forced for more to 'print money again despite a political lack of will to do so


The recent talk of town among Obama's clones is to not only keep up the spending but even to increase it as he did too little to start with! Lately former Labour Secretary Robert Reich and Paul Krugman have called for such measures. The philosophy was reflected in my 'analysis' on earlier blog this week.


From Monday morning quarterbacking, Nov. 9, 2009: Geithner said it best this weekend: "If we put the brakes on too quickly, we will weaken the economy and the financial system, unemployment will rise, more businesses will fail, budget deficits will rise, and the ultimate cost of the crisis will be greater," he told reporters in Scotland. "It is too early to start to lean against recovery."

Ok, let me get this straight: So if we continue spending tax payers money then: we will have smaller deficit, lower unemployment, less business failures, and smaller ultimate bill for resurrecting the world? If that does happen I will be playing for Denmark upfront in the next World Cup in soccer in South Africa next year (despite my 45 yrs and less than fit fitness level)


My friend Daniel Arbess, who runs the Xerion Hedge Fund inside Perella, Weinberg Partners had some excellent point on how US and Europe is mired in deflationary forces for two out of three macro themes working presently:

• Consumer deleveraging. Rising unemployment ==> Deflation
• Improving earnings via cost reductions and cheaper finished product imports from China ==> Deflation
• Zero rate policy drives investors to speculative investments ==> Inflationary....

Dan has several others good observations among them that such a "global imbalance" is continuing leading to some sort of confrontation.


But all of the above really talks about is a double-dip, the fact that post the biggest stimulus in world history, the result was not even back to trend growth, and in 2010 without more stimulus then Crisis 2.0 will come back to haunt.


In order to make this more operational this our expected returns in the different scenarios:



Click to enlarge

It is worth noting that the key in Crisis 2.0 is the LACK OF POSITIVE RETURN from government bonds - this is the main driver of the worst to come scenario.


In normal markets long Government bonds would perform in times of crisis, in this one we have -3,9% expected return and the only positive being a much smaller volatility relative to Sweet-spot.


The way we use this is not as a way to make money, but these three basic possible scenario's are the ones we need to navigate. (The above is very much work in progress)


Right now we are in the sweet-spot for better or worse, and the expected return on this is close to 16%! 


Something which will please the market, but we(Limus) have a much smaller 1 in 4 odds vs. 2 in 5 odds among the consensus investors for this - again we stand almost alone with our projections, but as Groucho Marx said in wire to his club wanting him as a member : "PLEASE ACCEPT MY RESIGNATION. I DON'T WANT TO BELONG TO ANY CLUB THAT WILL ACCEPT PEOPLE LIKE ME AS A MEMBER"


Investment outlook conclusion:


There is nothing on the horizon indicating the see-no-evil-hear-no-evil lose monetary policy will end - on contraire - the central banks, the pundits, the politicians all firmly believe spending more money will create smaller deficits, higher long term growth, in this environment keeping to your Beta exposure is the only option. Our Beta model is very simple and can be executed through ETF's:




Strategy:


We continue to hold a negative outlook on the market in Limus Capital Partners, but our outside partners are either neutral or major bullish on the market. 


The correct allocation presently is to benchmark everything (the exercise of Beta-chasing) - in our case: Beta model long plus some down-side protection through our Alpha plays (which is the ones we describe mostly here on the blog)


The charts and most of the work done for this presentation was courtesy of my partner Mr. Jesper Christiansen.


Safe trading,


Steen

FED's biggest problem is that the economic data is improving too fast - Macro Blog

On the eve of the FOMC meeting I will dare to suggest that the 'real issue' for FED is the fact that the data is better than expected!

Yes, lending is still weak, yes all in all housing is still dismal, and most of the improvement is in sentiment index', but... that the whole plan of Obama or the Harvard School of Economics as some people with tendencies for compartmental disorders.

Yes(again), you are reading this correct!

Obama has been successfull in creating the illusion of doing something, not unlike him winning the Nobel Prize on intentions alone!

He has now succeed in getting everyone to buy-into his 'hope' (Do not worry - it is ALL hope - no substance).

This leads me directly to todays FOMC meeting - the mere talk of EXIT STRATEGY gets people nervous, but it is hard for Fed to not change their communication:

1. Because its too tempting, always, for politicians and bureaucrats to take claim for something they nothing to do with (See chart below where US PMI surges past China and Europe)



Source: Societe General Cross Asset Research

2. It is paramount for Fed to create another illusion, the illusion that they have a plan for how to take the easy monetary policy back, for how to sell their old bikes, ladies hats on their balance sheet in the future.

This should be tied in with the massive shortening of term debt-structure which has been happening in the US: (see link below)

• Maturity of outstanding US Debt is down to 50 mth from 70 month
• Almost 50% of debt is due in the next 12 month (Will Fed hike making it more expensive for themselves to refinance?

http://fabiusmaximus.wordpress.com/2009/10/30/maturity/

It seems that the thinking in Fed is to 'pre-alert'the market, to communicate is the tool. Some observers Financial Times, and other insiders feels this meeting is too early - but that is it imminent.

http://blogs.ft.com/money-supply/2009/11/04/the-fed-and-its-extended-period-language/
 

Another interesting aspect as pointed out by the excellent research done by Societe Generale Cross Asset Research is the fact the world has a potential for a "decoupling"  (See PMI chart above)

Where early on it seemed the US was lagging China and Europe, it is now clearly the US which is in the lead as seen by recent surge in PMI data!

This would be major game changer - as the US Dollar has become the funding currency of choice.

Imagine if the market would/should/could starts repricing a rising rate structure in the US (it sort of makes sense the US needs to pay more...) while Europe lags - that seems to call more for 1.10 EURUSD than 1.70/1.80 which the consensus in the market.?

At the end of the day the market is in my opinion unprepared for the next move(s) in monetary policy, fiscal stimulus & geo-events.

In other words: Across all products VOLATILITY IS TOO LOW relative the uncertainty of path, which is the true volatility curve.

FOMC tonight I have no clue about - the way the market is setting itself up indicates to me there is 60/40 chance of major disappointment for the RISK-ON people, but as it is always the case with central banks, politicians and people in general: It is not what they say but what they ACTUALLY do do which decides......

Strategy:

Still same positions - massive P&L swings - but will await tonight & most likely Friday Non-farm before moving from aggressively short this market back to neutral. Justice will prevail! :-)

Safe trading,

Steen

The revaluation of the banks on life-lines?

...and C gets the RBS-disease(http://tinyurl.com/yzcaazv) - there is clearly some new valuation of the major banks on life-lines going on! -

It kick-started last weekend with the too big to fail discussion (http://tinyurl.com/ykezcmd)

Then ING(http://tinyurl.com/yfl3hlm) was forced by the EU commission to downsize balance sheet by 40% and sell their insurance business....

This morning RBS announced that the EU deal will mean divestment beyond their core-strategy - AND - Darling - yes it is a name - will tomorrow announce his plan for "dealing" with new banks, branches, competition - but will end up with 85% of RBS - what a joke. C under pressure tonight:

http://www.freestockcharts.com?emailChartID=1ec46577-cc11-4bb8-9703-2a259e9126cd


Fed not helping but for once talking common sense:

Comments from Fed's Greenlee:

U.S. banks face risks from souring loans, particularly for commercial
property, and some banks may face capital adequacy problems, a Federal
Reserve official said on Monday.
  "Credit losses at banking organizations continued to rise (in the
second quarter), and banks face risks of sizeable additional credit
losses given the outlook for production and employment," said Jon
Greenlee, associate director of the Fed's Division of Banking
Supervision and Regulation.
  Greenlee's comments were in testimony prepared for delivery to a
House of Representatives Oversight and Government Reform subcommittee.
  "Poor loan quality, subpar earnings, and uncertainty about future
conditions raise questions about capital adequacy for some
institutions," he said.

Strategy: Still the same - we believe mid-October was top - target: 930/40 minimu in S&P

Safe trading

Steen Jakobsen

The golden rule is that there are no golden rules. Bernard Shaw

Short blog today as I waste my time waiting for the mighty policy makers utter their final communique nonsense. http://www.guardian.co.uk/world/2009/sep/25/g20-communique-Pittsburgh

This morning we had a "heated" argument in the office, the resident GOLD BUG Carsten was soooooo keen for me to read part of speech given by the mighty hedge fund manager John Paulson on gold.

The sentence which was supposed to get me excited read: "...and he observed that if one thinks about gold in a three or five-year time horizon (instead of hour-to-hour/day-to-day/week-to-week), the probability increases of gold being higher over time (most likely, much higher)"

What total load of nonsense! The probability of gold going up in 1 min, 30 min, 1 hours, 1 day, 1 month or 1 year is EXACTLY the same - there is no carry rates in Gold so even the Hold-and-keep argument is nonsense, but as this was said by the billionaire Paulson it be must right ????

This type of argument typifies all of us - we are arguing circular : There are NO.. and I mean NO real new analysis coming to the market, so instead we rank the quotes from the investment gurus according to their latest position bias. Makes sense. If its higher buy more. End of argument.

I think it is time for people to find the annual survey from Barron's on mutual funds - the one that states: Always sell the best performing managers in a quarter and buy the bottom performing manager - It's a mean-reverting game when it comes to "guessing" correctly - Even futurist miss 99% of all their calls......

On the note of Gold I will issue STERN warning on potential for all of you/them being disappointed:

CHART 1: Gold daily (XAUUSD).. Trend line - 10 days exit comes in a 990.00 - so does old top from June...in other words be forewarned - should gold close below 889.00 we could see some stops get started on the down-side. (Click on chart to enlarge)

Also, one of the top players in commodity trading: Larry Williams, whom I am lucky enough to share information with, he has a stern warning in his latest update video: http://www.ireallytrade.com/TVStation/LarryTV.html

Finally,

There is clearly a consensus in the world presently that 50% of the world's GDP is in an inflationary paradigm(US, UK, China and Japan), while other 50% of will use "deflation" as the path to normality. This being mainly ECB and Europe.

The argument makes sense: Europe has the worst demographics and needs to increase competitiveness this will happen in deflationary environment as low growth enforces lower salaries, redundant industries disappear.......

The problem though remains: Who will buy the worlds goods?

Last a link with my very own top ranked guru: Julian Robertson (listen please)

http://www.fundmymutualfund.com/2009/09/julian-robertson-us-may-face-armageddon.html

Safe trading,

Steen Jakobsen

Pigs can't fly or can they?

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)

Strategy:

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.

Safe trading,

Steen

It's all circular.. Mini macro note

Short note leading to "exciting" end to the week with FOMC (tonight), G-20 from tomorrow onwards, and Sundays German Election. We had our weekly investment yesterday and it was not much of an event to be honest - I will write the usual log for it later tomorrow, but bottom line

There are no signs of this "liquidity driven" market stopping for now..

Going into Fed and G-20 we note with some surprise a couple of central bank moves: Bank of Canada announced yesterday on their web-site:

BANK OF CANADA TO END TERM LOAN FACILITY OCTOBER 28
BANK OF CANADA TO END PRIVATE SECTOR PRA PROGRAM OCTOBER 27
BANK OF CANADA MAKES LIQUIDITY PROGRAM ANNOUNCEMENT ON WEB SITE
BANK OF CANADA TO END TERM LOAN FACILITY OCTOBER 2
BANK OF CANADA TO END PRIVATE SECTOR PRA PROGRAM OCTOBER
BANK OF CANADA SIGNALS END TO SOME EMERGENCY LIQUIDITY PROGRAM

Bank of Norway the today announced they were considering hiking rate

These are early leaders but it is clear indication that most centralbanks are now at least considering their exit strategy. This is ONE MAJOR MACRO change which needs to be monitored into-FOMC and G-20 - the consensus is for all meetings to "promote and confirm the bias for no-exit and loose monetary policy". Risk is for less "bearish comments" than expected...

The second and more relevant issue is the US Dollar: There is NO sentiment or positions supporting the US Dollar.... but with Gold above 1.000 US dollars and US Dollar falling each and every day the central bankers can not IGNORE the warning signals.

The risk from here is that the central bankers realise that a strong US dollar will be in the interest of the US. The only way to hold down the 10 year yield (as proxy for funding price of US deficit) will be to make the US dollar stronger in order for foreign investor to at least make money on the currency. Clinton understood this - and so did Summers who has major role in the new joke of an administation

I expect some periphael changes in US willingness to accept continued weaker US Dollar - if not at the G-20 then in Fed official comments...

Buy some 3 month USD c EUR p.. here - Europe is toast @ 1.4800, but as Jesper correctly says: Who cares? The politicians are afraid to do the right things as waning growth and rising unemployment are more "tangible" issues to deal with..

Strategy:

Remains the same - looking to exit long and go short...but I'm alone

Safe trading

Some links for you:

Fed said to start talks with dealers on using reverse repos

http://www.bloomberg.com/apps/news?pid=20601087&sid=ax.FBWNLB5_o

Stock rally will end within six months, Tice says:

http://bloomberg.com/apps/news?pid=20601087&sid=a5viQG5nbLkg

FX Concepts: S&P has 2 weeks 'til tumble starts'

http://www.reuters.com/article/reutersEdge/idUSTRE58L2D020090922?sp=true

The Fed's dollar conundrum

http://money.cnn.com/2009/09/22/news/economy/fed.financing.fortune/index.htm?postversion=2009092217

Safe trading,

Steen

Where the telescope ends the microscope begins, and who can say which has the wider vision? Victor Hugo

This is note which starts a new investment phase for me - for most of the year I have been willing to trade intra-day and with the momentum, but now it is the time to move back into medium-term macro and respect the laws of economics/mean-reversion.

There is some evidence of the this week or next two weeks being the cyclical tops - which will be followed by a "correction" of 10-15% before we again goes into the year-end high for the year. The market is now driven by small investors and "late-to-the-party" types throwing everything they got to join the euphoria of how well things are going..... (Ignoring the queue of people joining the jobless ranks day-in-and-day out.......)

All of this is "sponsored" by:

• Low interest rates and outlook for further 6-12 month of loose monetary policies courtesy of the politicians/central bankers
• Out gap & rising unemployment across the world anchoring inflation
• The cheerleader group consisting of politicians, central bankers and investment bank economist's every day supporting the idea things are not only improving, but they are all smarter than God.
• An expected significant upside surprise in earnings based on this recovery "surprising" the consensus according to... the consensus (I know the sentence on it own does not make sense, but trust me that is the whole argument!)
• A need to allocate to from ZERO income interest products to 100% allocation to stocks.
• Sentiment which reminds me of 1999/2000 - there are more "smart" people telling me how much money they made in stocks last few month than you can fit into the new Wembley Stadium.

On the other hand there is absolutely some truth to the fact the Doom-sayers has been pronouncing the end of the world forever and we are all, the macro managers, guilty of projecting to Armageddon, much similar to this "dissing" of Zerohedge: http://www.zerohedge.net/ at hand in this link.

I have for the longest time been a "fan" of Terry Landry @ www.ttheory.com after reading the book: Pit Bull by Martin "Buzzy" Schwartz (http://www.amazon.com/Pit-Bull-Lessons-Streets-Champion/dp/0887309569) but to the point:

Terry is looking for top in Mid-October, and I have to add Terry is not prone to sentimental involvement in his trades! Presently there are two suggested dates: This week and next or slightly overshoot into Mid-October - we reached the overbought area Friday....but with G-20 this week-end in Pittsburgh it will be low volatility week, followed by in my opinion serious INCREASE in all VOLATILITIES going into month-end post G-20.

(click on chart to larger version)

Another of my favourite "friends" Mr. Fintag: http://fintag.com/archive/2009/09/21/ states today: "Today we reach the top of the equity markets, the top of the so called W and slowly but surely the overvalued fake market will crumble. In the meantime we look at some sensible news reporting from newspapers than may soon be non-profit organisations [Editor: They already are ...]"

The key advice for this will be: Buy VOLATILITY in any product this week...........

The development I expect this week will be.... some selling of today as we had massive option expiry this past Friday with gigantic volume going through - last time we had: option expiry/explosive volume the S&P fell 27 points! This is short note I wrote internally this week-end:

http://www.reuters.com/article/GCA-Economy/idUSTRE5842HG20090905

Nice run down ahead of Pittsburgh by Reuters - the market is looking for confirmation of V-shaped recovery, the improvement in earnings & political will to sustain the fiscal stimulus - the price? Politically: some sort of tough stance on bonus's and obviously
higher taxes for years to come.

There is growing believe in the market this will continue and I note the MASSIVE volume registered on Friday with no real effect yet indicating alot of money went to work.......

Adv. volume* 1,117,340,240
Decl. volume* 1,134,669,814
Total volume* 2,275,042,754
Closing tick +204
Closing Arms (TRIN)† 1.40 ...

http://online.wsj.com/mdc/public/page/2_3021-tradingdiary.html?mod=mdc_t

Then the lead into G-20 meeting - there will comments upon comments on how the bonus's should be cut and every single politician will try to make his mark on the agenda. I noted one very positive comment over the week, watching the BBC World service, they said India now willing to discuss climate goals - this is a first and probably merely playing for the gallery......

Finally, we need address the issue of EVENT RISK presently at stake:

Last week Israel Premier all of the sudden disappear of to Russia? He was MIA for a while according to Jerusalem Post: http://www.jpost.com/servlet/Satellite?cid=1251804532464&pagename=JPost%2FJPArticle%2FShowFull - then later last week Iran get booted out Caspian Sea meeting by....Russia? http://www.televisionwashington.com/floater_article1.aspx?lang=en&t=1&id=13856 . This could be conspiracy thinking, but you can not ignore that the timing for potential strike by Israel into Iran is running out of time - was Israel seeking "indirect" approval ? This is something we need to monitor - impact on gold, crude, us dollar etc at stake.

Unfortunately history tells us in times of RECESSION is the time of increased risk for wars/conflicts....

Strategy:

Sold 1 unit of EURUSD @ 1.4717 outright - 1.47! EUR - think about it - unemployment only just starting to rise in Europe - full impact from recession will be felt in Q4 and Q1-4 2010 - I wish you all good luck if you are planning expansions presently - and EURO at 1.4700 is at least 17 figures too high, considering the biggest FX game in town remains one of: COMPETITIVE DEVALUATIONS (which presently has GBP(UK) in the lead......

Sold 2 units of S&P (1063 & 1059) - will buy some volatility when markets opens today.....

Bought 1 unit of BUNDS... 120.34.

No stops for now.. these are positions I expect to hold for minimum 30 days.....

Conclusion:

Not only is the weather "peaking" this week-end so will the markets...it is time to look at your "emergency" plans...they could come handy..

Safe trading,

Steen Jakobsen

Twitter: http://twitter.com/SteenJakobsen

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

Ireland, a two speed Europe and October 2nd new EVENT risk day

I will not claim to be an expert on Ireland...more so on EU ... but as macro manager the October 2nd Irish Lisbon Referendum has EVENT RISK written all over it..

I have in my primitive way tried to do a few links which could help out forbackground (Bottom of the blog)

Market risk:

• EUR currency risk clearly,
• Government Fixed Income spreads could expand & CDS the sam
  

----------------------------------------------------------------------------------

Presently travelling in Ireland - and I found to my own surprise that the upcoming poll (October 2nd) on the Lisbon II agreement is in serious danger of being derailed despite ALL of the special deals done by the EU to get this through...

Below there is series of links with the last one - the new website by Irish Times being the most up to date... the issue here:

IF ---- Ireland votes NO again Europe is effectively in a position where it needs to move to a two speed set-up, as the Lisbon agreement is ratification of serious of changes... among them EU President ....

A two speed Europe.. is one step closer to... my ultimate call of a Europe being broken up... although thisi s 20 years from now.. ---- DO NOT forget that even the most simple monetary unions in history ultimately ALWAY breaks up as the economic headwinds comes in....

but.. it also a serious blow to a more competitite Europe etc..

This is NOT yet on anyone radar - to be honest it was not on mine,
before coming to Ireland yesterday...

Otherwise:

Took profit on most positions on the lows yesterday... but now in the process of reselling...GBPUSD, S&P, DAX, and buying fixed income... yday was 90% down day, so either we get strong Friday rebound or there is imminent test of 980 critical support coming....

Safe trading,

Steen


http://www.irishtimes.com/newspaper/ireland/2009/0903/1224253745004.html

http://en.wikipedia.org/wiki/Treaty_of_Lisbon

http://www.ireland.com/home/Latest_opinion_poll_shows_FF_support_record_low/maxi/fast/news/irnews/237610

http://www.independent.ie/national-news/lisbon-poll-reveals-growing-optimism-on-economic-crisis-1873250.html

http://www.irishtimes.com/indepth/lisbon2009/

Time flies like an arrow. Fruit flies like a banana. Groucho Marx (1890 - 1977)

Well it's now September...and market is busy trying to figure out which is more important:

The negative falling Chinese market (down more than 20% from peak...Chart: http://tinyurl.com/n784hw Hang Seng divergence vs. S&P ...

or the rising FEEL-GOOD-FACTORS as seen in the economic data....

Now let's start with the "improving data" :

First, data is late, very late relative to the decision making of a macro speculator - so late that they are largely uninteresting, this does not mean there is not people and investors looking over each and every data point - but let's face it: if you inflate an economy with TRILLIONS of US dollars the data will improve - the surprise is to some extent that they are not even better - the fact sentiment indicators now shows the economy is out of recession, is...at best useless - at worst confusing.

Bank lending and housing market is still falling, yes the fall is slowing, but there is NO CAPITAL incentive to neither increase balance sheet of the banks or.....for the home buyers to increase their bids - even 1-timers tax credit is hard sell, and when the first level of sales is done, the banks have plenty of homes on their books to sell.... please do NOT let yourself get carried away with this nonsense.

The sentiment data is now the most bullish in years..... my friends, neighbours and their dogs are all telling me how much money they are making in the markets (you seem to have forgotten the fact they lost 70% last year...but short-term memories are good for "investors"....)

Check this blog on the very issue: HTTP://www.tradersnarrative.com/will-september-kill-the-rally-2912.html

I can't say we are printing money, but somehow we are keeping an even keel in this market, waiting, waiting and waiting for some final direction to play out.........The fixed income market is stubbornly bid - and lately we have noticed FI carries more weight than other markets... we also

note how Crude is leading forex/equity: HTTP://twitpic.com/fz41k/full

The commitment is relatively low, but here is the present positioning:

Short S&P, Short DAX, short shipping, short Norway Index... - all with medium conviction. Entry levels relatively ok - leaving room for......stop loss --- Stop Loss.. two closings above high..

Short GBP/USD - short since 1.65ish - target 1.35/1.40 minimum - The UK is falling out of bed - as confirmed by PMI today..... also long DXY (US Dollar index)

Commodities: Short Crude since 64ish....

Fixed income: Long 90% of cash in short-term Danish Government bonds and small long Bunds...

August performance was small down......The Puma Macro and other funds will launch later this month with daily pricing...

Safe trading,

Steen

Friday, Friday....

What a week! The biggest "incident" was the massive USD/CHF trade someone pulled last night after Europe went home - it was week of NO CHANGE in stocks markets and there is...little or no additional money coming from the cash side... even the put/call ratio is clearly indicating the market has finally given up on the downside - and that my friend is THE time to be alert:

This Friday close - and a Japanese election which will probably see increased focus on domestic demand and doing everything OPPOSITE of what the LDP has done in the last 50 years could be sign of change - change to the better for Japan, but also for less EXCESS saving being sent overseas - Mr. and Mrs. Tokyo no longer "attack" their own currency by doing FX deals blindly......maybe... we will finally see Japanese buy their own stock market? I will look to go long small cap. Japan next week........

We faired ok for the week overall, but only really due to two core positions:

Long Fixed Income Europe and despite last 24 hrs - the continued negative bias on GBP....the rest was no fun - and shorting S&P daily is absolutely presently the best way to spend your hard saved earnings.... but again.. that is a sign.....

I will follow up with further S&P talk this week-end, but some house-keeping on the Puma Modus model sees it stopped in several positions although with good profit: GBP was one (although I maintain the Macro short overall....), T-bonds another - and Bunds came awfully close to stop @ -08 only to close on the high for the week... talk about a strong trend...

The present environment reminds me, again, of 1999/2000, where I was Prop. trading in UBS, Stamford - everyone and I mean everyone around me was raking in more money from their private trading in stocks and shares than from doing their overpaid day job - several people even left to..only manage their own stock portfolio ... greed at its best and worst - Check Yahoo stock from 1999- 2001: http://tinyurl.com/lg8atn

Well,

Safe trading

Steen

FOMC, FOMC and FOMC

The issue as an investor right now is between.......

The need for intervention to work

The world needs a good close to 2009 - the time buying and excessive public spending is a project which can not be seen as failing (that it will fail.... is different agenda all together..)...

This entails the "smart money" is betting that the O-team will do ANYTHING to keep the momentum going into mid-term election and the agenda being one of FIGHTING BUSINESS - which mimicks the F.D.R - New Deal version 2.0 (do yourself favor and read F.D.R's inauguration speech)....

This could mean sell-off post FOMC today, but "quality buying" below ---- then rally into close of 2009 ....and then in 2010/2011 we will resume NEGATIVE tractions and new lows in the market...

The need for gravity to work

The buying of time is running out, the gap betwen "presumed" impact and realised is still huge and growing ... unemployment is rising.. everywhere, credit not reaching the consumers, and the new new growth is sub 2.0% looking 5-10 years forward. My favourite economist, John Makin, goes as far as saying 1% 2nd half 2009 growth is unrealistic, and that -2% is likely. http://www.aei.org/docLib/08-EO-Aug-2009g.pdf

The critical level of 1000-1050 reached and many "guru's" now looking for top in place..

We will focus on FOMC for now - and keeping things light... but here as few thoughts:


Agriculture:

We like it again, both from momentum but also fundamental value. China's growth is tax on farming prices - expect steep rise in autumn. Long DBA.

Fixed Income:

Still long Danish Fixed Income...

Foreign Exchange:

Strongest view: Short GBP - into quantative easing .... also long DXY (US Dollar index over FOMC for break - or stop out if FED goes further into QE)....

Like NOK - looking to short AUD....

Commodities:

Can not buy GOLD when we now world is entering long-term negative growth cycle, with excess capacity everywhere.... risk of crude like long pain..... was short took it back pre- FOMC

Crude: Short... for now.. .cyclical - but likes long-term prices action...

OVERALL:

Cold as ice, slowing getting into market, but it is hard to restart the engines ...also as we were so wrong during the summer months.....

Safe trading,

Steen

Frustration....in the hammock.....Macro note

(The Danish summer this morning!!!!!! - feels like gr8 analogy to markets)

Back from Tour De France - thkx to my friend Kevin Connors( & Alex) for hosting me for a gr8 week-end in Verbier. I tip my hat - again - to the TdF riders... they are some of the greatest atlethes around and most of them perfect Gentlemans to....and Verbier remains one of the coolest places to hang out.... period!

In the markets I have been losing, losing and then losing some more - all I got left is small optionality and the frustrated trader in me......

The more I think about this market, the more "untradeable" it becomes - take this link:

48% of investors unwinding sec lending program:

http://globalpensions.com/showPage.html?page=gp_display_news&tempPageId=866222

So... there are simply less stocks to short - obvisiously major part of this "drift higher" in stocks, one would argue the pension funds are serving self-interest, but long term they are merely helping bidding up stocks to unrealistic valuations based on "scarcity" of short base.....making the whole valuation "articificial" and increasing the event risk when the "mini Ponzi" scheme breaks down.

The trend of the market becoming more and more driven by technical factors, rather than valuation metrics, is one major concern for me as macro manager, although I trade high frequency and hence have better flexibility.

Short- and long-term managers have to "adapt" to political non-sense and crazy central bankers trying to "buy even more time" - where it in early July looked like the 5th leg (down) had started, we are now back to the neutral zone of 950-1050, which still remains my "Maximum valuation" range considering the odds of higher unemployment, output gap and lack on "real credit"

This macro guy is going to wait out balance of July for more signs - but I remains extremely sceptical on this market, as nothing seems to happen except market going up 5 pbs every day.....

so.... it's back to the hammock for me, althoug the weather here in "Summerland" is dire........

Macro program: Down 150 bps for YTD (Since Mid-June)

Safe trading,

Steen

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...

Positions:

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

Safe trading,

Steen Jakobsen

Pre FOMC

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,

Steen

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,

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

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

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.

Yoshi