fredag den 27. marts 2009

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

A few Friday notes...

I have finally entered long Bunds @ 123.50 ish with stop below yday close - see chart below...also as a indirect play vs. EEC being promised too much ahead of G-20 next week I have entered EURSEK long, both in cash- and options.... 11.30 call.

(Click to enlarge)

This mornings piece by Ambrose Evans-Pritchard got things in motion and then Medley apperently "confirmed" ECB going for 50 bps and if not QE - then certainly Q-easing.


Keep it light - Cash 75% - 15% allocated to short EURUSD in option & Gold, 5% in bunds, and now 5% long EURSEK..... been tough weak for sceptic like me... and I am sure the "hopers" will have another go at the upside.. I still wonder, how would a week without an interventio or plan look like? The more I study and read, the more it becomes clear the "fast money" buying this market is day traders and always bullish fund managers, while the seasoned Macro guys either stay close to cash or wait for better levels to sell...

Expensive March for this manager, but.....enjoy the week-end...

Safe trading,


Bunds, bunds, bunds.... makes the world go round...

QE Europe is finally coming according to commentators and internal sources in ECB
(Click on chart to enlarge) Bund on DeMark chart
Be long here: 123.50 with stop below yday's low....
More to come later..

torsdag den 26. marts 2009

The generation of random numbers is too important to be left to chance - Robert R. Coveyou

Dear Investor,

What would happen "if"..and that's if we had one full week where the Fed, Treasury or Obama did not give away or promise to give away yet another 1 trillion US Dollars?

This is becoming a farce - it seems the more money you print the better the world will be.... I guess the short-sighted quarter by quarter focus of the corporate world has moved into both politics and policy makers - however through this sceptical (objective ;-)) observers eyes this is merely an exercise of buying more... TIME -- the one thing which is running out for the policy makers....

They are now so addicted they MUST create a new plan a week to keep the illusion in place..... what does this remind me of ? Ah, yes..the Madoff Ponzi scheme..... We are today nowhere closer to dealing with the issue of global growth crisis than 12 month ago, if anything the noise coming from Governments has darkened the transperency and increased the morale hazards...

The US is now politically similar to Russia before Gorbachev came to power - the STATE is the all mighty ruler - no wonder Ayn Rands, Atlas Shrugged is selling better than ever.........

On the markets: felt good boarding my night flight from Stockholm, the market was performing as I thought it should with S&P below 800-00 - upon exiting there was a buy program in place.. catapulting the market back to plus for the day - confused? Join the club - however, true to form, I have had no change of hearts or plan... remain loaded in cash, and with some chips on the down-side in the next few days...

Tech.wise 840-850 may beg first... watch 45.76 ish VIX (now @ 42.25)....

Safe trading,

Steen Jakobsen

tirsdag den 24. marts 2009

Fear is in the air......

Dear Investors,

On my way to our Stockholm office, but driving to the airport it struck me what "feeling" or sense there is in the market: It smells FEAR.....

Fear that Geithner and his Communist Boss O will do anything and everything to break down big finance, one of only three industries earning the US income...

Fear that the hope placed in O and the one trillion US Dollar plan a week will not work...

Fear that we are facing the abyss....(which we are in my view....)

Fear this hope period is followed first by one of severe deflation/recession and then 1920s like hyperinflation

Fear that the G-20 is already doomed.. I duely note how the US and China now openly fighting the on the wires on new currency...I also note via my friend Yoshi that Yuan fwds clearly showing that China is DONE investing in the US......

Fear that Non Performing Loans will be next thing to hit market post Easter...

Yes, it is fear all around - yet not priced in the Fear Index VIX... but watch and check if it breaks th 50 ma, which for reasons beyond me has become the new black of technical indicators...$VIX,P&listNum=

The ECB looks likely to cut 50 bps, versus the 30 bps priced in as of yesterday night - there has been considerable 1.3000 EUR puts bying going on last 24hrs....1 month..exp....on this...

ECB is behind the curve - and both on a micro level (read: companies) but also macro wise the policy makers and CEO/CFO of the world starting to see TOTAL COLLAPSE in demand through the December-February month...... the newspapers full of people reversing positive to stable business outlooks to negative.... the margin are compressed and there is MAJOR cathcing up to do on the earnings forecast.. if S&P500 makes 40 US per share this year it would be surprised...

Gold is flirting with its 50 ma.. .and I am VERY BEARISH.. on:

1. Market is too long position wise through QE rally...
2. US Dollar looks to strengthen...
3. IMF and other quasi public organisations will have to sell reserves... and so will CB's with stock left to finance Government bonds buying..
4. Technical .....Gold could be the Crude of 2009... wild upmove based on speculation only to fall down when deflation themes is back ... (note all central banks forecasted to raise rates by 50 bps inside one year - ARE YOU KIDDING ME!!!!!)....
5. Everyone is long and have the right arguments for being long.... store of value, only none fiat currency.... bla bla..

Also.... again short EURUSD..

The rate gap close..making 1.3500ish fair value.. .now the improving current accouint will play its as will the move by ECB further towards "Artificial" QE..... the world is global also in monetary policies... we just drive at different speeds..


I noted in my look through the market yesterday two "major issues" for me:

1. Freight rates been dropping most of March -- why ? Isnt the world getting back to normal?
2. Iron ore falling..... why? China is good, is it not?

Anyway.... allocation wise.....

Increased EURUSD downside considerably through options, and been adding to short in GOLD..also short DOW.... and Stoxx50 through options for directional trades.. rest is in cash/fixed income... (80% of NAV)......

Safe trading,


“A man who pays his bills on time is soon forgotten” Oscar Wilde

Dear Investors and Readers,

There has been considerable "time lack" in my updates and blog - this WILL be corrected starting tonight..... but the new job has meant considerable NON-INVESTMENT time ...but no excuses..!!!!

Some questions has been raised on the portfolio going from 90 pc cash to 55-60 pc mentioned in last week Investment Meeting - it calls for an explanation:

From my Pura Alpha Macro perspective I am, and continues to be 90 pc allocated to cash..mainly..and as of today I will be buying some bonds to take money out of cash.....however in my new role, which the Investment Meetings was taken from, we are born with minimum exposures of 25-30% at ALL TIMES, meaning to get "translation" that you deduct this "embedded" exposure to get old... but from now on.. I will on this page commit to my pure alpha not to confuse anyone.......and this is how I allocate both Alpha Macro and more importantly my PA money - even outside my own funds.


The Geithner + QE plan was another week with another couple of trillions spend.

My colleagues are ALL looking for momentum upside, I am FIRMLY remaining out of directional exposure till after the April 2nd meeting - Yes, I could have had 26% of the low with perfect timing, but its 26% of a very, very small number, having had an excellent 2008 I am not rushing into a market which to reminds me of Japan more and more... check this chart from (click to enlarge chart)

To me the future looks like the Nikkei in 1980s/1990s - lots of false starts, a low not in yet, and lack of tracktion.

Obama is less popular than Bush at similar time in the Presidentials cycle, bankers working in New York will soon pay 102 pc tax!!! - the 90 pc "jealousy tax" plus 12.5% NY State tax.

The Local states are bankrupt and finally, so much for tranperency in the new plan:

Do you know ANY bank willing to trade some "toxic material" in the 30s when it is on the book as 70s on the Dollar? I do not - then in April the Stress test will be in play.....which will show... what? Based on which price matrix? And finally, selling this plan as private/public where the private sector gets cheap financing, no downside but share upside does not strike me as being politically what the good Senators and Congressmen(women) wants to hear - but the usual suspects are out in force: Blackrock, Pimco, if it goes like the other times....then

Finally if this market is "bullish" ...then:

  1. Why is Gold coming off? I thought this was the "reflation" dynamo? - I see gold in 850 next week...
  2. US Dollar - why is it stronger?--- the correlation broken? No! It caught up to rate differentials..indicating need for +1.35s... now its back to massively improving US Current Account and home bias - US has the biggest home bias of all, their mutual funds having primarily invested overseas plus Obama threathning to tax overseas earnings... (I am again long US dollar... target: Sub 1.2000
  3. TD is getting set-up on(for top): S&P, NASDAQ, DJIA, RUT, DAX, TRAN, SOX, XBD, BKX, CRY (
  4. Earnings cycle... we are still way of low in cycle....
  5. Non performing private loans.. we have not even started, AMEX being the first to declare "nuclear waste" on private consumers even giving you money to close down your credit card.

No, it's still cautious for me, I am however pretty much left alone, maybe with the exception of the parma bears like Robini et al, but as Grouch Marx once supposely said: "I will belong to no club that wants me as a member"....

Safe trading,


tirsdag den 17. marts 2009

The measure of who we are is what we do with what we have. Vince Lombardi

Investment meeting


The incoming data has stabilised in velocity but the expected improvement is not coming. Yesterday "worse than expected".... Industrial Production, Empire State Index, and Net long-term TIC flows once again raises our alert to the lack of tracktion for what can only be described as the Mother-of-all-fiscal stimulus' in the US and abroad.

The same pattern emerges from Europe - and we are left wondering if the AMEX announcement of February deliquent loans rise to 5.3% is the first sign of the financial industry now having to pay the final price of this cycle, namely the loss on their private clients? Still to early to judge, but not imcompasing this final loss into the rallying financial sector stocks could be grave mistake.

Conclusion: Stabilised but economic data impact on overall market direction relatively benign.....

Technical levels:

Looking at our quick-and-dirty scan of the market: ...It could seems the momentum if somewhat going out of the market (It could also merely be pre-FOMC and G-20 meeting profit taking....)...

We also note, if nothing else, that the VIX volatility has not follow through on the downside creating "Noise divergence", but it was also noted the VIX failed to rise significantly with the new low 666.00 ish - is this sign of VIX losing its "powers"?$VIX

The internal expected reference remains 805.00 ish ..... we opted for keeping the exposure in place awaiting the FOMC announcement tomorrow. (To QE or not to QE - that's the question)

In currency-land, as I touched yesterday we are at a cross road - taking out 1.3100 on London close would make me go flat again, untill then I remain with 1.2000 target, although the Investment Committee at at large was more "open" to downside of the US Dollar.

The month-end effect should not be ignored... where the "benchmarkers" generally needs to buy US Dollar, but the end game of "competitive devaluation of the US Dollar" has in many peoples mind moved forward in particular if the FOMC tomorrow openly embrace the QE or more correct to launch the biggest helicopter in their fleet and start printing money in earnest, which QE end of is and always will be.


Disappointment with the lack of EMG follow considering the "positive IMF noise".... EURUSD @ 1.3100 on close the key reversal point, Scandies looks good, but firm close below 10.90 EURSEK and USDSEK below 8.5000 would help.....

Macro themes

  • G-20: Not much to add- the hope factor is high, and I remind myself it is not what they say they will do, but what they ACTUALLY do do which is important. Many fortunes has been lost on promises delivered by policy makers.

  • China: We note China market was down while rest of G-20 was up, and now overnight it was up while G-20 was down? Coincidence? Probably - what I am hearing from China is surprisingly that the Politburo uses the stock market as GAUGE for their policies.. and once again... as domestic chinese investors you are offered two products: 1. Saving in state owned banks with NEGATIVE REAL RATES of 3-5% OR....2. play the markets? Which one will you chose?

  • Quantative Easing in the US and ECB(FOMC meeting)..... Our FI manager had strong feeling for potential for ECB lead qualitative-easing (note the difference)... i.e buying of selective papers which is deemed too cheap - an analogy to off-the-runs in the US..... This could very well happen, although from DOGMATIC POLICY point of views it will be hard for BUBA to swallow... the argument certainly both qualified and correct for risk purposes... Why buy Corp Credit at 5.00-7.00% when you can get Ireland, Greece et al at LIBOR +400 ? At least these countries can TAX themselves out of trouble not so for corporates... so really we are saying is that SOVEREIGN offer better value than both corporate spreads and short-term equities (We agreed QE impact on stocks depended more on the mood of the day than a rational reaction, although creating more debt should mean widening credit-spreads, CDS-levels, and weaker US Dollar). Ultimately whether they move to QE or similar drastic action tomorrow (as insiders indicate) at best a guess at worst a hope...

  • EEC. IMF is coming - and if so, market feels vindicated to thinking Eastern Europe is saved, maybe, just maybe the truth is a little more complexed...but watch the IMF development closely...

Conclusion: We deemed doing anything before FOMC would be too risky, but also agreed on contigency plans for should FOMC come out and play ball with the hopers - then some serious rebalancing could be in order....for now its awaiting more inteligence but watching several key indicators break or fail.


We remain very conservative with cash/fixed income representing approx. 55-60% of exposure, we have some direct- and indirect exposure in equity.....for our benchmark we have moved slightly out of risk aversion, but by small steps - transperency a need.....

Safe trading,

Steen Jakobsen

mandag den 16. marts 2009

I have heard your views. They do not harmonize with mine. The decision is taken unanimously. Charles De Gaulle

Dear Investors,

Well, as the title shows I am perplexed at the new state of Euphoria going through the markets - Do I have to be excited about C being up 65% from the low? Or should I try to put things in perspective and realise the stocks is down - what 95% still?

(click on chart to enlarge)

The main topic remains G-20 and this past week-end summit which on the surface did not produce any result, however in Euphoria-land, there was much more between the lines, as the US is indicating a will to increase the qoutas on GAB and NAB - yes this is the year of short-names I got this link from my friend Tim - which explains the mechanics:

This will SAFE Eastern Europe - so I am sure Russia will immediately roll-back their plans to put missiles and planes in Cuba

The EURUSD broke a key level 1.3000-ish this morning, and makes me not only look wrong, but also losing some money, both of which I rather dislikes, but more to the point:

The Euphoria has apparently gotten everyone to turn their forecast higher in EURUSD, several are now calling for 1.4000 before 1.2000 - I was slow on the football pitch, and I am slow in changing my investment outlook - for now I will remain extremely sceptical of the HOPE of resolution.......and focus on the fact that:

  1. US Current Account is improving day-by-day through trade & higher savings
  2. Europe via the dogmatic ECB is behind on the economic cycle - and will have to see much more pain, a rising unemployment, and the unwillingness to increase German spending a critical point even for the always happy crowd
  3. The break today "faded" for now - I believe in hope, but only when used for keeping us alive.....
  4. Citibanks surprise index continues to show EUR should fall, likewise the real rates difference indicates more pain in Europe than in the US for now..

Otherwise I am very neutral, but this evenings close indicates to me some "top" could be in place, I watched in particular NASDAQ rather forcefull reversal - some charts..

Check this VERY nice feature:$SPX,XLF,GS,UUP,skf,GLD,$NDX,QID,UYG,fasBI14,3


Top in place for now?

XLF- The financial ETF looked like it would break now spinning top ?

US Dollar bullish index.....weekly... under threath? We will know soon...


G-20 stakes increased by the minute, dont see why I should be invested - had good start to the year no point in risking it - meanwhile I will accumulate yield on my cash......... 90% cash, rest invested selectively in short EURUSD, some options on downside in Stoxx50, and looking once again to short GOLD, if not GLD.....(break below 890-00 confirms)...

Safe trading,


lørdag den 7. marts 2009

A bank is a place that will lend you money if you can prove that you don't need it. Bob Hope

Dear Investor,

Admitted! I could not help using the above qoute from Bob Hope. ;-)

This is a Saturday afternoon mental cleaning for me, this week proved to me - and it seems also the market that this crisis will be here for a while. Losing more than 500.000 jobs have only happend eight time since the series began in 1940 and we have had four of them now!

31 mio. Americans needs food stamps ....

The AIG story continues and it seems as per usual the more you look into this failure the more it becomes clear that the administration is pursuing a policy which at best can be called: "keeping financial system a live at all cost", and at worst: "incompetence and action on the fringe of corruption"...I will let you be the judge, but do read this link:

I had long conversation with my hedge fund friend from the US the other day, let's call him E.....and during the conversation it became clear that small part of information we had gathered over the last quarter are coming together into a relatively intimidating outlook for the world economy between now and April 2nd. (Why April 2nd I will come back to...)

This is the be long cash

Time is running out for the policy makers and the politicians. They have now again and again tried to get the confidence and the economy going by printing more money and making promises.
Too high debt to equity ratio's was the reason for us being in trouble in the first place, so using more debt to deal with debt is hardly going to work!

Now they pursue a policy which my friend E likened to a beautiful analogy: It is like putting a parachute on a rock going towards earth! - in other words.. gravity will work - you can slow the process but not the ultimate result.....

Everyone, no longer not only me, is disappointed in Obama, and more to the point about the economic/business "dynamic duo" of Geithner/Summers.

Geithner is having such a bad karma, that even showing his face on TV makes the market go down immediately - one has to think this is either engineered by Summers, i.e making Geithner fall-guy, or we will see rotation around mid-term election..both ways Geithner has lost not only Wall Street's trust, the politicians but also it seems Federal Reserves, his old neighbourhood.

The new "hope" in town is the Chinese miracle - China is now pumping money into commodities and strategic alliances in order to maintain their job levels- what is the point of being Planned Economy if not to create jobs, however futile some of them are ?.....but people forget that this is no real plan B.

China set themselves up as the world factory - the US was the world consumer - now the "customer", the US consumer is bankrupt - this means production capacity will have to go down in China - China simply did not have a plan B.

They are now drawing down their SAVINGS creating infrastructure jobs - which coincides with US stimulus, leaving the impression something good is happening to global demand - but.....this is a pocket of momentum only to be replaced by the rock making a landing.....

The US saving rate is rising and fast - this means the US current account is improving at quickest pace in decades, but on the other side of the US deficit sits the Chinese equivalent surplus, so...the US consumer having gone bankrupt means China will have less export growth.......

This is one of the main reason for my outright bullishness of the US dollar - yes it is FIAT based but so are all the other major currencies, but the velocity of US current account disminishing is a very constructive component on its external value....

Now to April 2nd - the London/Gordon Brown G-20 meeting
Combining almost 10% unemployment in the US, with a Europe where the P.I.G.S (Portugal, Italy, Greece & Spain) but also EEC countries are having problems rolling over their debt makes for one interesting meeting where everyone NEED TO FIND A SOLUTION.

I, for one, do not ever expect anything from these kind of summits, but for once the stakes of NOT MAKING - Plaza Accord ( like solutions will be dramtic (minus 25% on the market and total break-down in EEC currencies)....
The CDS market plus Lehman have crystalized the failure of the EU system, where its biggest flaw being the lack of a European Treasury to coordinate fiscal- and monetary implimentations of policies.

The sovereign CDS market have increased the funding cost of the PIGS, which takes away the "only" real advantage of being in the EU (For everyone to have pretty much same credit rating, and hence funding cost)

So.... where does this leave me, my funds and the world? Well, there is NO REASON in the world to do anything ahead of April 2nd

Either they finally get some real decisions which is focused on not slowing the rocks path to earth but for blowing up the rock (Merton out with some rather "controversial ideas: or we will have "blood in the streets".....the final melt-down before markets find a new better equilibrium.

I recommend maintaining the 75% cash (if not more)- and to deploy the rest in optionality - risk reversal on equities-- (Im short STOXX50 & S&P) selling equivalent of 650 puts buying zero cost upside just in case...)

Shorting EUR seems almost a certainty to me - but buying some short-term proctection around April 2nd makes sense...


EURUSD: 1.2000, then 1.1000 and if April 2nd failed then sub 1.000

S&P: Our revised target of 690 now reached - new target remain insisde 625/650.....for cyclical low.....

10 Y notes: Below 2.000 still

Central banks: All going to ZERO and Quantative Easing.

Europe will feel the worst pain, and the EEC currencies without April 2nd solution is doomed, and could be followed by PIGS.....

Yes, it is not a nice note this one, but in a time where all we have had is HOPE, HOPE and more HOPE I wish to explain why this is bad and could get worse, but then again trading around 690 this week-end another 100 points of downside is not big.......

There are great deals to be done on the back of this crisis, but they are ad-hoc in nature and not based on a market generally offering value.....

We are fairly priced for the first time in years, if not decades, but we need to get to the FIRE SALE levels for the money to leave the safe place of state guarenteed saving accounts.

Time remains the great healer...but for now.. cash is king...and I will bet you safe trading and a nice week-end.

torsdag den 5. marts 2009

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:

Safe trading,