Friday, January 16, 2009

If in doubt tell the truth - Mark Twain

BoA now more owned by Government than private shareholders - what is wrong in the State of Boa?

Doesn't the American tax payer have the right to know where the money goes? Apperently not according to Fed! This is scary....scary... please spend six minutes on this:

C - as in Citigroup begins to look, smell and feel like LEH did - an arrogant management, a business model which has never worked, a board full of incompetence - and now they release their numbers today - look at the chart----

(Click on chart for larger version)

My friend Jesper Christiansen ( and I spend some time this morning over coffee trying for once to be constructive - at least on the crisis ;-)...

Let us put the overall economy and investment cycle into a perspective:

(Click on chart for larger version)

We are in the "Winter" mode of the Kondradratiev cycle(

You know I am no believer in any specific model, but this model shows a few key things:

1. Where we are in the business cycle
2. How we will find bottom in economy
3. The impact on policies

We are moving into: plant closings, unemployment, debt defaults, beggar thy neighbor, competitive devaluations - in other words:

The "fundamental" problem for the world is that the consumer is INSOLVENT (there is no pend up demand with negative saving rates and a massive debt mountain to service) - to remedy this issue we need to see serious write-down of debt........making the debt mountain smaller.

How do we achieve this?

Firstly, the investors owning the debt needs to take a loss - there is a reason why they have been paid a high interest (yes, this includes the "articially safe havens" of mortgage bond as well) and hereby taking away the uncertainty which end of the day is probably the worst negative factor on every single decision big and small.

Secondly, the total debt burden needs to reduced - someone has to pay - and it should not be the future generations as every single "recovery plan" dictates right now

Thirdly, we need to stop Government & Policy makers from spending money on unproductive projects like keeping Detroit a live, paving roads, subsidising this and that - remember one US Dollar spend in public regime goes from one being spend in private.

Fourthly, the resolution to Detroit and similar problems is to make it go into Chap. 7 or 11 - then buy out the best most productive component reapply them somewhere else - guarantee mimimum social standards and then critically give 3-5 year tax reduction to start-ups, make funding capital available for new business, short-term subsidise redeployment of laid-off works... this way you support the actual tax payers directly through security, potential job growth...and not through roads, and keeping jobs which ultimately will disappear.

Evolutions dictates that "destruction of capital" will happen for us to see a new better world, rest assure I am VERY positive on long-term growth, employment and market returns, but first the world needs to own up to the fact we are in the "Winter phase" ... then we need to apply our IC, interlectual capital, to solve this crisis.

The beauty being the very reason we survive is our always positive outlook, and I am 100 pct certain if "people" & investors where told the REAL TRUTH, i.e. how bad things are - they would adjust accordingly and we would be out of this crisis very quickly, but unfortunately we need to take serious detour due to policy makers and politicians which must rank the most incompetent in history....


We have restarted our negative equity market outlook by bying some out-the-money DAX puts on S&P equivalent rate of 850.00. I feel too nakes with no downside on, but this is small position and I stand by my overall view that into Obama Inaugaration market will be volatile both ways....

We are still short EURUSD - we saw 1.3020 low post ECB meeting - Trichet talks rubbish - as per usual, EUR rates is going to zero.. he knows, I know, and you should certainly know....

I am slightly concerned about fixed income (Europe) - Bunds - the high yesterday had both divergence and "spinning top" making for excellent risk reward selling here @ 125.90 with stop above high yesterday plus margin of error. (High: 126.53 - suggest stop 126.70)

Otherwise we are sticking to low exposure due to upcoming event risk...............

Safe trading,

Nice weekend


1 comment:

Anonymous said...

Hi Steen, great post. I am wondering what the diverence is that you referred to in the last paragraph.