Monday, December 15, 2008

Monday morning quarterbacking..again...

Watched some good old American football yesterday and Monday morning quaterbacking was certainly part of the speakers "game".......anyway kind of interesting how Bernie Madoff all of the sudden becomes front-line news, not as much because of the size, big as it is at 50 bln. $, but due to the fact no one seemed willing to "call the bluff".....It sad to see "innocent" people getting hurt, but this is really the part of cycle we are.... where EVERYONE who could/should pay pays...

Why did Madoff' game got called? Redemptions! It was not due diligence, it was not financial oversight, it was not even the SEC!

No, everyone thought this was cleaner than clean, despite the performance being a serious anormally not even copied by the great George Soros ......I believe the side-effects from this will be much bigger than market willing to acknowledge as it is another blow to the confidence of ANY FINANCIAL institution - if there is not any any confidence left, what is the "goodwill" on their balance then?

EUR is flying, of course, but we took profit too early as the game continues - I see the weaker US Dollar as the market call on the Ponzi-scheme directed by Bush, Paulson & Bernanke - some nice gentleman from Barclays sales-team claimed today they were doing a good job! I do not know if this was based on him being nervous about keeping his job or his firm believe that offering "public money" for private would work wonders.. ????

EUR is going to get US disease on growth..or lack of it.. but for now we are in a December EUR rally which could easily see 1.3700 and 1.4000 on-route to our tactical call change as of last week....... of 1.5000

Stock market - in broad based consolidation - got feeling with the US Dollar starting to weaken that post FOMC, there could be a price to paid for the stock market, but as some of you have commented maybe I am tooooo negative for my own good. Investment meeting tomorrow... we start @ 90% cash, rest in negative markets positions.....full disclosure tomorrow.


Keep powder dry to post FOMC - our indicator/model shows increased risk of sell-off as credit spreads continues to expand, short-term fixed income remains bid, US Dollar weakens, and foreign press officers throw shoes after the Prez Bush.........Calling him "a dog" would be considered a compliment for him in the US I guess... ? ;-)

Valuation hard to figure out.....but I am looking forward to the investment meeting and to measure our conservative stance vs. the alternative "normal allocation" in the last week, month and quarter.

Main concern remains the turn-of-the-year in the money markets, and into Q1 my counterpart risk. I got nasty feeling Lehman will not be last major institution to "die"........if the hope connected to Obama does not materilalise soon....this could get ugly....

Safe trading till tomorrow,



Anonymous said...

I don't like EURUSD right now - you're right about what is supposed to happen and the writing is there. BUT the political risk in the Eurozone is rising and a likely hick-up in one of the weaker financial systems will have everyone run for cover. All currencies seem to be in a race to the bottom for one reason or the other. Is there a "strong" currency left?


Sometimes the markets action needs to be respected- I though like you but learning from my loss' in P&L it strikes me..too many people are fading the inevitable weakness of the US Dollar - however much I think that Europe needs a serious wake-up it could be 1.5000 then 1.0000 then 2.0000...only certainty for next year in my opinion is more volatility...not less..unfortunately

MLP said...

I guess Pres. Bush saw it coming - notice how fast he could get his head down... :o)

With respect to "strong currencies" - what is your view on CHF after Hildebrand last week said that the CB deliberately was keeping the currency weak (and saw no reason to change this policy) and that Asia is supposedly "affraid" of the Swiss banking industry removing their assets from the economy moving them into stronger economies(EUR?!)?