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: http://tinyurl.com/cl574h

Safe trading,

Steen

A leader is a dealer in hope. Bonaparte

Hope, hope and more hope. The readers of this blog knows what I think about hope - it belongs in Church on Sundays with the other prayers, but sometimes there is so much "pain" that it creates a psychological need for hope.

This is such a time - the frustrations in the US have reached levels which have made the Americans even more irrational than normal. Every single meeting I walked into in New York talked about the "choices being analog" - Analog? It was almost so indoctrinated that I started to believe they all had been brainwashed.

The consensus US story goes like this: (The score 12/13 meetings ):

1. The political and economic choices are analog - there is no downside to fiscal stimulus and massive printing of momoney... its eithers ZERO or "something"......and it will be something... (bad?)
2. Obama is a fine young man, who has the abilility to unite the US, and taking them through this crisis. He is rumoured to be more afraid of Speaker Pelosi than the GOP!
3. The good news is that we are 50% through this crisis (apperently all recessions lasts exactly two years) and stock market always starts to go higher six month before recession is over - ergo: we are one year into the recesison, leaving between now and the next six month to be major rally point.
4. Fed lies about the outlook (and denies reality) - they are saying unemployment peaks at 7.0% ish, but really believe its 9.0%+ -
5. The closed circles of Treasury and Fed rallies behind each other like hangers on - or entrourages - there seems lots of room for Larry Summers( 'The women are less intelligent than men' former Harvard President....a former Clinitonite official) and the ever present Mr. Rubin, who despite taking Cititbank to the brink of bankruptcy is still called upon to help the US again - and unfortunately for me, and you, Volcker is merely seen as figurehead - a Statesman not to be heard.
6. One day, soon, greed will return and the banks will stop asking the Fed or Treasury for more money and start taking risk on themselves.(I did not get how they in the meantime recapitalized the balancesheets?...but I am not one to let facts get in the way).. The only thing missing is the 4.5 mio. unsold homes - but with the printing press working overtime this is only matter of months before the inventory is gone.....
7. 2009 is a lost year, but do not worry it will only make 2010 a much better year......
8. The corporates in the US is doing great, hence there is no need for worry, it is "only"" the banks and the consumers which are toast ... but hang on.... aren't the corporations selling to those exact two audiences ? Apperently not.....and here I am being told US consumers is 70% of GDP- but it seems that's only when there is tailwind!
9. The US consumers will never net safe - and here I must agree - they will move from spending more than they have to spending what they earn.... but they will not net safe... I agree, consider the average US smaller to medium sized cities ... they are built for people to consume.The US is built to spend money, it's a Ponzi scheme, where we continue to extract dimes in order to save on service, products and quality. Think about US cars, US food, design..........The US has given up on itself... it has lowered its standard to levels which is really only comparative to an emerging economy. In the middle of its biggest economic crisis I had the worst service EVER in New York, somebody needs to wake up!
10. Pensions are now down so much it's impacting peoples work, life and future. I met several people seriously concerned about their future - their jobs.. and this is everybody from school teachers to Wall Street types.. they all live like they are going to lose their job...which to me indicated this economy will contract even further.

Friend of mine claims Wall Street will only be 50% of what it is today in one years time - I am sad to say I hope so, there is nothing to be had on Wall Street anymore - business is closed, and the IC, Intellectual Capital, remains focused on creating the consensus' scenarios like the above... maybe it is a good thing Obama creates hope, because if Bonaparte is right he may get the chance to be a leader.

Strategy

Market continues to behave like it thinks this will work. Be my guest - I remain with 910/920 top in S&P which should be used to be maximum short. The sentiment will not change in six or twelve month. I was here in May, now in December its 50% worse.......

Finally, a personal note: My childhood friend Jens Christiansen, 44, passed away on Saturday all to soon.... Jens was my closest friend growing up....I will miss him, and my prayers goes out to his family...

Safe trading,

Steen

Notes on Wednesday...

First the important stuff: Happy Thanksgiving to all my friends in the U.S - I wish I was in the US this week........

Friend of mine sent me these clips with our old friend Jim Rogers - he talks common sense, probably does not make him a lot of friends, but his thought process is crystal clear. Enjoy it: http://tinyurl.com/65r8wd

I must say I am more tired than at anytime this year - hopefully it is the travelling but the market goes on my nerves.

The policians keeps doing the same mistakes, the media keeps drumming the same drum, and it is all going in a big circle ..and leading us nowhere.

I am on the record saying I personally felt Obama at least would mean change - however it seems I was wrong, again, all his appointments smell of establisment and his policy indications feels like protectionisme and Dirigisme... in other words ..I will have to keep my negative outlook something I have come to fear as being "realistic" carries too much pain as everyone rather get the free option than face reality.

Talking inability to face reality looks like Bernanke is "dead in the water" post 2010 - maybe Princeton will take him back after all ? http://tinyurl.com/6427og

Maybe what's really bugging me is the fact I have spent far too little time on the market and thinking about them..... something I will change from next week.... but doing some small research this evening some things seems obvious to me:

S&P - consolidation and hope the main drivers - we had "patriotic call higher" into Thanksgiving (Am I the only noticing markets tends to go up on National days?) ..... 900/920 begs for perfect 4th wave correction before the 5th final wave down.... in other words.. neutral into 900/920.. watch if momemtum can carry us above if not... then full short......

Forward earnings still major league unclear as Ticker Sense indicates below (Thank you Jesper):
http://tinyurl.com/5cpol4

US dollar (EURUSD)- we may have seen the high in place for this 4th correction - inflation being called lower in Europe and Stark from the ECB even talked some common sense this morning......but Europe is on the verge of serious slow-down which will take all Euro-rates to ZERO...and fast....

Market is also dealing with Investment Bank year-end - or rather state owned Investment banks - sometimes in the past this had an effects - but for now US dollar got some fundamental potentials from waning Current Account Deficit and deleveraging of balance sheets - both of which makes short EURUSD the only real worthwhile deal to carry into month end.

Fixed Income- If I ever was in doubt I should listen my asset allocation model guys now is the wake-up call - despite US Yield being hysterically low - I still do not want to lend the US Government ..below 4 pct in 10 years - there simply is not any alternatives into year-end - more of the same - low after low in yields as "quantative easing" happens.....

Finally, we are, or rather my excellent team doing some research on our Outragous Prediction (into todays lingo: Our Black Swans)... without giving away the positions I note the calls themes are:

1. Hardly any US calls ... 1 of 10 - with Chinese calls having 3-4 of 10 - this to me indicates the clear paradigm shift - when looking into 2009 ... my analysts not really that concerned/bothered with the US - the policy lead will come from what happens and get done in Asia/China.

2. Dirigisme - Anywhere we look there is more State/public sector intervention in the markets - from Sarkozy to Obama- they all embrace the "hidden hand" of Keysianisme ---this time undercover as the 3rd way....and named: For the sake of greater goods (It will die as much as Tony Blair failed to find the 3rd way..) - Fiscal expansion will follow.

3. Social/political unrest - if commodities continues to fall there could be both political tension in some regions but also social unrest.... The impact too harsh to imagine, but in a Black Swane exercise this "mental mapping" could safe the investors a lot of money...

4. More of the same-- -as much as they want to find some sunshine - it quickly becomes as grey as a summer day in London...

On this positive note - I wish you safe trading and nice week-end

Steen