Wednesday, March 25, 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... http://www.msnbc.msn.com/id/29847658/

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...

http://stockcharts.com/def/servlet/SC.pnf?c=$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..

http://stockcharts.com/h-sc/ui?s=GLD&p=D&b=5&g=0&id=0


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..

Finally,

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,

Steen

1 comment:

Lukas said...

Hi steen, with respect to freight rates, the drop is explained as follows:

1. Long term contracts start expiring, new charter contracts are of course closed way bellow old prices, this pushes average prices down and will continue to do so until there is a real rise in demand.
2. Supply is increasing as new ships ordered some years ago are being delivered and this will continue.
3. (unrelated to the above but still worth mentioning) Because of the above, a lot of shipping companies will go bust, even "market leaders". For this reason Greek banks that are over exposed to shipping loans (mostly BoPiraeus, Eurobank) might end up broke. The thing is that Greek shippers (which represent around 1/8th of world supply) have a nice tradition which is not used so much anymore but i find it clever and funny: They create a different company to manage each of their ships, so if they decide they don't want a ship they ordered they simply let that one company fail. Then the bank is stuck with the loan written off and a ship they can't sell :)

Cheers!