Quick Friday S&P chart for perspective..

Silence is Golden

The market is now slightly oversold on my model - the top seems to be firmly in place and now we will await end-of-month-buying or not.

No doubt many fund managers are 'screen watching' over the next 48 hrs, potentially having to act on Monday should we take out 1050 in earnest.

It's not easy being a fund manager these days, actually never is, but 2009 the story very quickly became one of:

In 2008 we had the worst financial crisis, probably ever, and as expected 2009 became the worst year on the real economy. The numbers, the long line of unemployed confirms it.

Then the different governments decided to spend 5%-6% of GDP to 'safe the world from breaking down' but all they really did was to circle the wagons on their croonie friends in Wall Street - that's not a political statement, merely a matter of fact.

Now at the end of 2009 the banks - the major banks- are making billions on tax subsidized trading revenue (borrowing at zero with Geithner/Bernanke and placing them in...... Bernanke/Geithner long bonds) - you could say the its look very much like what a certain Madoff was doing recently, but do not let the facts come in your way.

Along the way, there was a public apology from Mr. Greenspan, effectively renouncing his Ayn Rand - Objectisvim and 'Efficient Market Hyphothesis' along the way. For many of you this may be relatively irrelevant if not for the fact that the whole principle idea of letting the market rule themselves came out of these two central "theories" - which Greenspan wholeheartdly subscribed to.

http://www.disclose.tv/action/viewvideo/10908/Alan_Greenspan__I_was__terribly__wrong/

The only real issue with Ayn Rand and EMH being it leaves "morale" to the markets - and I must say: I have wrestled with the "morale" issue for a long time, but as its often the case in practical life, the answer came through observing the nature - in this case the banks, the politicians and the bureaucrats.

The conclusion: There is NO MORALE limit for people when they spend, invest, use other people money - I will even offer the preposition that man/woman generally have a lack of morale when it comes to dealing with money (and a lot of other stuff - which I will leave for your psychiatrist) but this old trader has lost all faith in the market place - the key issue remaining is the one of: What do you put in its place? I do not know - but 90% of financial people are talking non-sense, and 98% of what is produced in banks are waste not only time but also the paper its printed on - this a reality people needs to deal with, as the new world order in finance is not one where the government will come to rescue - ironic that the "free market system" most likely will be replaced by one where 'accountability' is the true measurement of success - lets see how is prepared for this down the line.

On the markets I have not traded for over a week really - got all the same positions as of last investment meeting - I'm surprised in two things:

The high level of GBP and oil keeping its bid tone - the rest is as expected and I will now await the month-end before putting further chips on the table (For those in doubt of my positions - follow the Twitters)

Safe trading,

Steen

When the fire breaks out the door will be to small for everyone to get out..

Dear Friends,

Above picture courtesy of my old friend: Ole Riis...

This is EXACTLY what I am talking about and today there is further evidence which needs to 'ADDED'

1. George Soros - like him or not he is the 'Champ' and probably the only person I ALWAYS listen to: http://www.investmentpostcards.com/2009/10/26/face-to-face-with-george-soros/


2. Bank of America breaking ALL support - this could be key.... http://www.freestockcharts.com/tweets/?chart=a3f16fa5-7e8d-4a38-a4e8-3168158165f5&refURL=http%3a%2f%2ffsc.bz%3a81%2f1NK


3. Dow Theory..continues.: http://stockcharts.com/scripts/php/candleglance.php?$TRAN,$INDU

Safe trading,

Steen Jakobsen

Red alert is warranted...

Now I will do something which very few in todays world dare to do: Offer an opinion - one which statistically has zero value - but one which I feel I must share with you - if nothing else because in investing it is better to be on the safe-side / taking profit than believing in this miracle.

I believe it was JP Morgan who said when asked: 'How did you become rich?" - 'I took my profit too early' - wise talk.

Two major issues:

Issue 1:

Dow Theory is trying to warn us and what surprises me is the lack of focus on this - my partner Jesper got his CNBC going all day and they keep talking about Microsoft beating expectations - no talk of guidance being lower - and ABSOLUTELY no talk on how Transport stocks are tanking - it does not get more ironic than this -as a few weeks back everyone talked about Warren Buffet's favourite economic indicator: Rail road freight - This market is UTTER JOKE - and if you did not yet watch the Frontline prgoram I linked yesterday then NOW IS TIME. The defense rest.

Dow & Dow Transport (click to enlarge)

Issue 2:

Cable(GBPUSD) volatility is a concern. This morning Cable made cycle high - and now leaving the office it has made a 'key-reversal' - traditionally an indication of weakness to come. I may be wrong, but as an experienced FX trader the up-down-up-down moves where speculators 'chase' momentum is sign we are going to see some major reversals soon. You be the judge:

GBPUSD Chart (Click to enlarge)

Safe trading,

Steen Jakobsen

Frontline on the go-go 90s....

Been watching this tonight: http://www.pbs.org/wgbh/pages/frontline/warning/etc/synopsis.html



You have to admire the quality, the pictures, the directing of this 55 min program from PBS (my favourite TV when living in the US - actually 2nd after Yankees/Giants) - and it is a lesson in what an idiot Greenspan was.......

Brew a cup of coffee and sit down and enjoy, please!

Then a comment from a young student lecturing me on why Philosophy is no better than economics as an education - what a talented writer!

Hello Steen,

You don't know me but I have been following your blog pretty closely and we also shared the same roof for a year in saxo bank (where I still work as a sales trader while studying economics in the lovely tiny town of lund). The reason i am writting to you has nothing to do with economics it's just a warning to NOT waste your second life studying philosophy. At least not in a university. Having been to school in a country where philosophy is force fed to every student (something like finnish kids having to learn swedish) i have a few words of advice for you. Typical philosophy class goes like this:

- Teacher tells you to read text (say plato's republic, or socrates' apology if the teacher is kinky) and then write an essey about it. Then the possibilities are:

1. You don't understand it and he does not understand as well. But nietzche did understand and wrote something about it so the teacher knows how to rationalize the bad grade you will get.
2. You don't understand it but he does. He is a genious and of course he is bitter because nobody else in the world understands him, he is still virgin even though he teaches classes with 1/10 Male/Female ratios (the reason i took philosophy classes back in the old days) and worst of all he has financial problems. He fails your paper and you are not even in the mood to ask him why, just repeat the class and hope that next year it's being taught by a less clever teacher. Eventualy you get disapointed, drop out of class and study economics instead.
3. You understand it but the teacher doesn't. He pushes the button, the floor below you opens and you find yourself in a pit of crocodiles, snakes and piranhas. So long sucker, better luck in your third life!

Above all, if you decide to study philosophy anyway, do NOT do it in Greece (and preferably not in UK, sweden or germany either). Try some country that doesn't try to teach it like it's math. If you really really can't find one do this: Study MATH but only socialize with philosophy teachers. They will speak to you without seeing you as a person retarded/severely retarded/too clever to be kept alive.

by the way, very nice presentation, unfortunately in lund 90% of the time we have to hear the swedish (my correction) idiots speaking... But hey, we were founded in 1666, so all our clever guys are long dead, or retired and moved to an island house in greece which they bought back when SEK could still buy stuff.

Best regards,
Lukas

He talked with more claret than clarity.

Dear Friends,

Not that I want to impose on you my views, but often when having to do a speech you need to clarify/project your thinking more clearly..

This presentation was done with help of my good friend Olof Lindgren and my two partners Jesper Christiansen and Carsten Høgh.

The presentation took place last night at the Copenhagen Business School and hence the CV and other 'crap'... but some key take aways:

Denmark - for those of you mainly interested in out Danish view go to the back-end of the presentation.... u will find some food for thought.

Yield - for those w. mortgages... rate exposure ... the core-inflation discussion could be of interest... as it seems we will continue twds lower yields...

Stock - our 'gut' feeling and tech. model tells us.. there may be breather in this rally...around now ....whether its merely correction before higher.....will need to be seen....but 930.00 in S&P is our target for now (1100 now)

Macro - the global imbalances... are now worse than before the crisis -.. as china reserves keep rising.....

Bottom line: the world feels good.. lots of hope.. but we are afraid..this is ....the calm before the storm.. but we(I) have been wrong before..

Enjoy at least there is some good pictures in this presentation...

Download the presentation from this link: http://drop.io/5jdmmbn

Safe trading

Steen Jakobsen

Ceteris Paribus - Investment Meeting...

Tuesday means Investment Meeting .....The conclusion became:

There is 60/40 chance of more of the same - market is committed to upside now, the standard protocol says:

• Recession is over
• Fed will remain on the sideline at least through 2010
• Earnings will be coming back after Q2/Q3 - was cost reduction, inventory build - Outlook upgrades relative to downgrades: +20% - setting a very 'high bar' for Q4.... Market will be good in Q4 - it's final. (says consensus)
  

We are however slightly concerned about this chart:

Gold, US Dollar(Inversed) and Crude(click to enlarge)

The fact Bernanke mentioned: An Asian Bubble in his speech yesterday could mean some slight distress with the "bubble" in Gold, US Dollar and Crude. (Created by reserves accumulation in China)

Crude going above 80$ historically been negative, and above 100 $ key concern.

The old rule of thumb on oil vs. growht goes:

For every 10 $ price increase in Crude - GDP loss is 0.4% in OECD - going from 40 $ to 80 $ means loss of 1.6% growth....Ceteris Paribus.....

But.. the real interesting discussion was based on the discussion "core-inflation" / Taylor-gap which led us to following conclusion:

There is no way the "traditional" rates will go up - but how about TRADING MARGINS ?

Core-inflation never moves - 35% of the index is "rents" - it's the equivalent of having a stock market index where 35% of the index is in bonds!!!! Joke as a policy measurement.....but it's yet another of the Alan-I-will-cut-rates-as-soon-as-I-can-to-become-the oldest-most-incompetent-central-banker-in-history-Greenspan.......

PCE - Core inflation -mean around 1.8/2.0% for 15 years!

A hike in trading margin would serve the right political masters plus its an effective way of short-cutting the never ending global imbalances going on again.......

More on this tomorrow as I will submit on this web a speech I am giving at The Finance Lab on Copenhagen Business School: http://tinyurl.com/yg3tpom with plenty of charts and fun. Link will be posted tomorrow night.

For now:

We still believe top is in place - but the BULLS not going to walk away without a fight - the fact remains: It would be suicide not to be long this market for fund managers, but it could, very likely, also be suicide to be long the market now.. :-)Safe trading,

Steen