Suffering is one very long moment. We cannot divide it by seasons. Oscar Wilde (1854 - 1900),

Dear Investor,

I have always appreciated straight talk and I do not think it comes more straight than from Mr. Charles Nenner, who I was introduced to through my friend Sam.
Make sure you check his interview with CNBC and the common sense he talks....

Also the ECB and the FED are busy preparing all their tricks - and I note how Club Med is busy talking about not taking away the fiscal stimulus, while the financeminister
overall this week proclaimed "Green shoots" everywhere.... Seems not only the American politicians getting afraid of the feeding frenzy given to banks, who will probably
have their best earnings in many years for Q1+Q2, but who will still fail to make money in 2009 overall....

Read on: http://steenjakobsen.blogspot.com/


Safe trading,

Steen

Let the games begin! There are NO RESET buttons on an economy!

Dear Investors,

This rally is now entering an extremely dangerous phase - the cyclial turning point July 5/7th is near, plus the believe in a magic reset button for the economy is failing....in other words: I am going net short and looking to built maximum short exposure between now and end of first week of July.

www.steenjakobsen.blogspot.com

Nice week-end,

Steen Jakobsen

The undermining of the US Dollar is under way....

Dear Investors,

Todays macro blog is on how the the Think Local- Buy Local strategy of Asia(China) and Russia could have material impact on natural unemployment rate - i.e: higher - in Europe and the US.

Also Fed is leaking their intent on not hiking rates ... read on:

www.steenjakobsen.blogspot.com

safe trading,

Steen Jakobsen

S&P should be at 750-00! What is it doing here?

Dear Investors,

Sometimes you read something which makes you think again - my friend Yoshi often does this to me, so I have asked Yoshi for permission to print this e-mail he sent me today. Yoshi is an independent trader in Singapore and one of the true warriors of trading. Enjoy - Steen -

Link: http://steenjakobsen.blogspot.com/

Safe trading,

Steen

PS: I fixed the final problem with the RSS feed - which is now working on the new blog-site.

New markets? New blog?

Dear Investors,

Sorry for small delay in my updates, but shortly - I hope from Friday I will be fully back into the game of commenting and analyzing the market with the promised "models" but also with the usual angle of macro thoughts.

I am constructing a new blog as the old one was started and kept from my former Saxo Bank life. I am desperately trying to mitigate the issue of not bothering my subscribers with having to register yet again - but being the primitive type I am - I may have to do so anyway... the new blog URL is:
http://steenjakobsen.blogspot.com/

Give me a few days to complete it but rest assure starting next week things are back to normal.

On the market I'm 100 pct non-committed in every single market - I find the price action close to random, and despite the "200day moving average" breaks in commodity and stock markets.. I find all thoughts, valuations inflated and without merit - actually I would love you all to read Peter Thiel piece on long-term lack of productivity as it to me is one of the missing links in the present analysis of the market.

When I grew up (Yes, just after the war I know....) I remember how the bright future would be "paperless" - everything would be easier and productivity would rise forever - hmmm... we use more paper than ever and despite the fascination with internet and its ability to make us all "smarter" - one has to ask "are we really smarter"? Better ? Than we were 2o years ago? Alot of the smartness is really convenience - people are not less busy now - en-contraire - there is so little time to be reflective and thoughtfull today than ever before .....with the consquent loss of new frontiers, imagnition running wild - every thing is "priced control" - Resource allocation... we have mini-maxed everything into atoms - atoms which have not independent life or drift....

Remember the long term yield of stock market will have to be: Growth of the economy plus productivity gains and inflation ... Thiel argues there has not been any REAL PRODUCTIVITY gains since the late 1960s.. if so.. we have equation where long-term stock market gain = 0 (zero)inflation + o (zero) productivity + low growth... hmm... not my favourite cocktail, but then again I am simple, agnostic and uneducated independent trader :-)

http://www.scribd.com/doc/14468282/Clarium-Investment-Commentary-The-Wonderful-Wizard-of-Oz

Finally one of my favourite people of 2008 - David Einhorn were back this past week at the Ira W. Sohn Research Investment Conference, the annual hedge-fund conference where just last year he held forth with his now-famous takedown of Lehman Brothers, and Einhorn had a new target: The most over-rated politician in history: The O'- administration.... read on my friends: http://nymag.com/daily/intel/2009/05/david_einhorn_strikes_again.html

See you in the new format Friday or over the weekend.

Safe trading,

Steen Jakobsen

jakobsst@gmail.com

There is no such thing as an underestimate of average intelligence. Henry Adams

This morning you will find yours truely deeply concerned - there is too much optimisme in the stock market now - let me give you a few pointers:

80% of all stocks in DOW trades above their 50 Moving Average... this has indicated crust in the past.

(Click on chart to enlarge)



and the Bull/Bear in same risk.....


The past week action must have been disappointing for the bulls:

• The G-20 was MAJOR SUCCESS --- right ?
• FASB - will help the banks--- right?
• Breaking 825.00 was key -- right ?
• Banks are back - right ?

On the other hand I note, as yesterday, that Switzerland going into DEFLATION is the worst news at all in this cycle - the mere idea that Europe/G-20 will face the Japanese disease is simply scary.

People forget DEFLATION will make credit even less available - as in an environment of DEFLATION the "real price" of lending goes up as deflation increases your debt burden- hence the low leverage of Japanese corporates.

Deflation is a tax on borrowing money, and the present model of VALUATION needs to be ditched as "free cash flow" analysis no longer works - this will make companies with debt even less worth and it will "contain" an expansion of successfull business' as their REAL COST of funding expansion is rising.

Even Greenspan & Trichet, the two people most in denial in this major crisis, realise if the end game becomes DEFLATION its over - and we will see 400 in S&P.... So... monitor Switzerland fight against deflation - if their policy tool becomes competitive devaluation it will merely export the problem......

All in all it the above indicators have made me slightly negative again, and I have initiated short S&P and DOW Futures.....as midday yesterday..... also still short EURUSD & Gold... while I took minor loss on the EURCHF..... I also reentered long EURSEK.....

Safe trading,

Steen

Meetings are indispensable when you don't want to do anything. Gailbraith

Back! Had one week on the sidelines from the economic epic centre of Marbella, Spain - and being an observer of the markets and Summits last week was probably the right way to play the markets.

Clearly there is a "crisis fatique" which somehow means anything and everything which comes out from central banks & policy makers makes the market goes higher. No problem with me - although I am "intellectually hurt" by the rise, it does however make for excellent time to construct and contemplate the next move in this market.

The noise factor hit maximum with the G-20 meeting last week - we have now had weeks upon weeks with hearings, plan, revised plans, and summits since low in early March.... basically one week equals 1 trl. US Dollar spend of your tax payer money, but do not worry, it will all work out fine........

I have very few positions (85% cash), the only one working being my short gold, which this morning is touching 875.00 - I must be the only bear on GOLD in the world, but this printing of money, and a total believe in FIAT economies will make government sell their stock of gold, likewise will international institutions be forced to do the same, but most importantly, my leading indicator on the gold, the Indian local market, is now NET EXPORTING gold for the first time in history...
http://tinyurl.com/dl3jst

I remain short EURUSD, I was even profitable for one day last week ;-), I simply do not buy that delaying the process of goin to QE or the like should be good for Europe. The Europe I know is falling apart as final demand is nowhere to be seen......in 2009 and in 2010....

Taking about falling apart, Switzerland!

Not only pressure due to the G-20 communique on tax havens, but also now sliding into DEFLATION, the very thing Trichet can not imagine (hence it will happen).... http://tinyurl.com/c77rk8 -

I bought some EURCHF this am, if for nothing else as hedge versus my negative outlook in everything else.. (long 1.5270 with stop 1.5150 (fwd points - 8))

The Swiss economic data simply terrifying making it a good old game of competitive devaluation ? Looking at this chart there is plenty of weakening possible: (Click on chart to enlarge)


Finally running through my daily charts I note, again, Credits improving, Sentiments bull/bear at very high (contrarian high even), 75% of all stocks above their 50 MA....but..... Why is freight rates continuing to drop? Mystery....... but enough from this old, grey, simple trader...cash is king.......still.... Safe trading,

Steen

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 http://tinyurl.com/c9k58x got things in motion and then Medley apperently "confirmed" ECB going for 50 bps and if not QE - then certainly Q-easing.

Strategy:

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,

Steen

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.........http://www.economist.com/finance/displaystory.cfm?story_id=13185404

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

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:

http://snurl.com/dx3ik

This will SAFE Eastern Europe - so I am sure Russia will immediately roll-back their plans to put missiles and planes in Cuba http://snurl.com/dx3jr

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: http://stockcharts.com/scripts/php/candleglance.php?$SPX,XLF,GS,UUP,skf,GLD,$NDX,QID,UYG,fasBI14,3

NASDAQ

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...

Strategy:

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,

Steen

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 http://snurl.com/dbxwo ....

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: http://snurl.com/dby0f

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 time....to 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 http://snurl.com/dbz0k
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 (http://snurl.com/dbz4y) 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: http://snurl.com/dbzai) 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...

=======================================================
Targets:
=======================================================

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.
Steen

2 is not equal to 3, not even for large values of 2. Grabel's Law

Dear Investor,

We are in that dangerous phase where most people either wants to buy because its "cheap" relative to where it was - like this article: 10 stocks ready to rebound: http://tinyurl.com/d7c4qu or where we give-up on the downside due to ad-hoc events as I will call Bernanke & Obama speaking.....

Bernanke thinks they got all the right tool already: http://tinyurl.com/bmdosq -

May I ask why haven't they use it yet then? Read the article and if it does not make you want to throw-upI do not what will - Stress test apperently is really an academic exercise as Mr. Bernanke does not see any of 19-20 banks being "failed" on this test - It is probably similar to a few of the other calls he has made, mistakenly, over the time like: We do not see any spill-over from the Sub-prime market http://tinyurl.com/dhujl8

Anyway it is too easy to pick on Bernanke, he is irrelevant as his own tool box is totally empty and with ZIRP his ability to do anything is toast.

In strategy land we are contemplating this whole scenario in the light of prior bear markets (the prime reason why most people "wants" to buy the market being "hope" of bear market rally:

Click on charts for larger versions

The conclusion as always remains - this is different, this is deeper and this is not yet over, unfortnately, there is clearly pain in the economies, but there is also considerable "hope" - and as you know I "preach" - hope belongs in church on Sundays...and if in doubt read about home sales here: http://www.breitbart.com/article.php?id=D96IRKGG0&show_article=1

Positions:

Short EURUSD, long USDMXN, short USDJPY (from today), short Gold, short Stoxx50, short S&P, long bunds....and still 75% in cash/fixed income. Very "geared" portfolio right now....let's see where it takes us.

Normal working pattern resumes from Monday, where I will start by doing Bloomberg interview in London on "Analyze that".......

Safe trading,

Steen

But all endings are also beginnings. We just don't know it at the time.

Dear Investors,

I do not want to make to much fuzz about it all, but it has now be announced where I will start March 1st, I am so sorry for the "secrecy" but due to stock market regulations it was needed (I was told).. but here we go: http://tinyurl.com/dfunyq

For the full press release go to: http://drop.io/j4kkrol# password: steen

This blog will recommence shortly - and I will continue to write this if for no one else then myself.....

It is strange to be off the market, not having my funds anymore, but being a trader I have some personal stakes in the market and right now true to form I am:

Short the EURUSD (from 1.2800 again)

Short EURJPY from around here...

Short S&P

Long Gold.

It is a pitty that while I am on garden leave finally Europe caves in and tanks.... -

Obama meanwhile is making mistake after mistake .... let me say again: Obama is all about hope, not substance...watching the Geithner "show" last week reminded me why I have a sincere and deep distrust in bureaucrats - they have never had a "REAL JOB", the have never lost money, and they all seem to cheat either on their wifes or on taxes..... Want me to name the "cheats" in International top jobs ?

No, it is time for Volcker to get into action if Obama needs saving - Geithner lost Fed support, East Europe and indirectly Scandinavian banks going into tail spin - It is winter Ladies and the few gents - in season and in the economic cycle... it is time to bring out the warm cloth and get ready for the Icewinter.

On that happy note - safe trading and be...careful out there..

Steen

Change in life....

Dear Investors, Readers, Friends and Blogers,

Sorry for this being a personal note, but I have today resigned from my job as Chief Investment Officer for Saxo Bank after almost nine amazing years with the organisation. It was time for me to move on and I will later share with you where I will move next.

Now it is time for say Thank You and Goodbye to my many colleagues and friends inside- and outside Saxo Bank. It has been an honor to serve with and for you all. We have been part of a fairytale taking Saxo from less than 50 people when I joined to where it is today.

Today as it was leaked I was leaving I received so many incredible nice and personal e-mails. Thank you for all of them, it has been an absolute pleasure to work with you all and I am touched that you all took time to express your feelings and views on me, our time together and the future. This but one of the many personal notes I received:

O Captain, my Captain!
our fearful trip is done,
The ship has weathered every rack
the prize we sought is won....

Thank you!

I leave Saxo Bank on excellent terms with the new management and the two owners Kim and Lars, and I wish Saxo Bank all the best in the future.

I will continue to write my blog, but you will hopefully allow me a couple of weeks for comtemplation before I return in full force March 1st.

The unemployment data today only shows how the market is firmly anchored in "hope & faith" as the bad number was being taken as guarantee for more fiscal stimulus.

In the UK meanwhile the FSA will not allow ANY short-sales - nice one England - congratulation you are now back to the 1970s with intervention, big government - I have neutralised short EURGBP as GBP will now go 1.000 vs the US Dollar if there is any justice in the world of trading.
It may be very opportune time for me to close the books and recharge - everything is now based on randomness not trading markets....

Best wishes to you all.

My personal e-mail: jakobsst@gmail.com

Safe trading and good luck to all of you,

Steen

The secret of politics? Make a good treaty with Russia.” Otto Von Bismack

Just back from minus 20 degrees celcius in Russia and an quick 24 hrs on the ground. There is no way 24 hrs can do any justice to such a large and complicated country, but I must say I was impressed by the investors and journalists I met on the ground, the bad news being I got strong feeling Russia is going to get a serious dose of almost hyper inflation through the weak Ruble, but the Russians are used to boom-and-bust cycles so do not count them out, so here Jim Roger and I will have to disagree http://tinyurl.com/cog8z6

It is clear, also in Russia, that defending the Ruble @ 41 in the basket vs EUR & USD is not going to be the end game, but one has to remember the devaluation in Russia is no bigger than what we have seen in the UK.

Don't count on me as your new Russia expert, but writing off whole nations in an environment which is hostile to one and everyone due to credit constraints and general downsizing is a mistake in my opinion. When we move into to the reflationary side of this business cycle (not likely before 2011-ish) countries like Russia, India, China will do well.

Back in the "land of hope" the freight rates has been rising and created a lot of noise about market having turned, growth is coming back... but I'm sorry to be carrier of bad news, but using Baltic exchanges as gauge/indicator is simply wrong.

1. You need to look at individual routes

2. The supply/demand function of the pricing is skewed in favor of demand, as it takes very small additional demand to move the markets. There is fixed supply (the amount of ships) where as demand is ORDER DRIVEN. Hence making long-term conclusions based on small "bleeps on the radar" is clearly a hazardous policy.. but as always be my guest to live dangerously.

Strategy wise some investment ideas starting to formualte themselves medium term:

EUR.GBP: SELLLLLLLLLLLLLLL

The GBP is now oversold and the EUR is the most overvalued currency around, Eastern Europe is slowly indicating more pain in Europe(due to the high investments by core European countries) than most people of willing to accept for now including it seems Mr. Trichet....

(Link: Fitch sees more E.Europe downgrades after Russia http://tinyurl.com/aswpot). John Hardy my expert chartist agrees .....be short w. stop above .9050 for now.

(click on chart for larger version)



On the stock market we have been caught in 800-850 range for quite some time - for now there is hope of break to upside despite the continued erosion of capital in the banking sector across the world, but.. I will leave it to the market going into the Non-farm tomorrow, but will maintain the overall target of 600-690 for the S&P...

Still keeping an eye of 3.00 in 10y US notes - there continues to be issuance and noise about potential "buying stop" from overseas investors but ..........I like to be in opposition.

Going on winter holiday from tomorrow night will do one more post tomorrow....

Safe trading,

Steen

All you need in this life is ignorance and confidence; then success is sure. Mark Twain

This week-end I "wasted" some time reading Bill Gross' (I like the double meaning of Gross!) newest writing on why we should bail him and his investors out: http://tinyurl.com/cjqxya

I will have to warn you its waste of time, but its kind of interesting to see how a well paid, "well respected" investor like Mr. Pimco seems to think that the solution to all the problems in the world is for the US Government to buy asset he is long - there is no talk of the small matter of funding this small exercise- only then notion that spending money is good.

I guess its the financial equivalent of "The boy with the Golden trousers (http://tinyurl.com/dnhqz3).......

I find its perplexing that in a time where we need everyone to think positively about solutions then Wall Street and its derivatives continues to look for ways of lining their pockets with state subsidised money. For the record Gross is even intellectually wrong: In order to stop the rot in the financial markets we need to reduce debt to equity not increase Mr. Gross.....

Only by governments taking the ultimate loss' on their plans/packages will we get the economy flowing again.....but do not let facts disturb your arguments.

I am just back from longer business trip to: France, Switzerland, UK and Dubai. Different parts of the business cycle obviously but everywhere there is now clear indication that the word CRISIS is well established, in the UK so much that in the local bookstore, they now have whole sections titled: Dealing with the Financial Crisis..sign of the times I guess.

From Davos I get same reports; everyone is reporting how negative everyone is but they are all taking this as an indication the low is in ? I never really understood these types of arguments: Why get the supposely smartest people in the world to meet up and talk openly about the economic affairs only to dismiss them ?

Anyway I am with Soros (as always). Read this great FT piece please, pretty please: http://tinyurl.com/cyq7rr - explains a lot of things even for simple people like me.

David Karsbøl, my Chief Economist, have updated his excellent leading indicator model for World GDP Growth per Capita and the result is NOT GOOD.. it looks like we could see - 2.0% this year - first time in history- so in other words - be my guest fade the facts and the smart guys, I hope it works - but as always hope belongs in Church.


(Click on chart for bigger version)

Why there may not be "bubble" in yields

Everyone and his brother is subscribing to the concept that yields are too low, especially in government bonds. (http://tinyurl.com/calo3u)

....but it's all based on the concepts off:

1. Fiscal & Monetary policy works


2. Inflation

My firm believe remains that in times of rising unemployment levels everything becomes binary: its all ZERO and ONES.

If you lose your job you do not care where interest are going, what Bernanke thinks, What Obama does - No you want your job back and now!

Effectively right now we are in the path of the cycle where everything is ZERO's:

• Consumer confidence - 0


• Unemployment - 0


• Business margins -0


• Faith in banking system - 0


• Ability to maintain your job - 0


• Interest in Fed - 0


• Faith in Fed - 0

I think you get the picture - we got excess capacity in all business sectors, we got government busy printing & spending money not dealing with the problem, but getting reelected .......this is the true ingredients for deflation large -... meaning inflation will be ZERO at best minus 1% at worst(?).......

So now if monetary & fiscal policy have less tracktion plus DEFLATION....... a yield of 2.5% becomes 3.5% after inflation - I think it will compete very nicely with the return on the stock markets will considerable less volatility.

This picture is even confirmed technically. Below is the 10y notes yield in the US - it looks to me like we are in the 4th wave - looking for 300 bps roughtly before we make it into new lows for bonds... this also finally matches the theory of Q1 being excessive in issuance. I have been wrong before and carry no predictability but for now I will keep most of my money in fixed income as the alternative cost analysis (i.e being long stocks...) still costs me money.

(Click on chart for bigger version)

Strategy:

85% in cash/FI - short eurusd and eurjpy.... looking for break of 800-ish to sell S&P... still target for S&P @ 650-690.

Safe trading,

Steen

Back to basics....

Finally back from a busy travelling schedule ....... lots of ideas and thoughts... but for now I will once again do the easy thing and give you my interview done w. Bloomberg this week......

More here tomorrow/Monday.....


http://www.truveo.com/Investment-Strategy/id/229188125

Safe trading,

Steen

Denial is the new black....

I'm in Paris, Zurich and Geneva and there is one common theme: Denial.... financial crisis does not happen here, its somebody elses problem.... shopping is good, no pain.......

Meanwhile in Washington Geithner is also in denial.... I am so sorry I "forgot" to pay tax for 5 years........

The outgoing President Bush also claims..... He did a few mistakes but he left the US a better and safer place...

I must be from the moon...... I have travelled pretty much the whole world in the last three month and the only two places where denial is prevalent is Paris & Geneva/Zurich....

Another theme I found again and again was the morale hazard many company CEOs have created for themselves..... annoucing 2008 was a great year, no incoming crisis in sight...and now they are forced to not only cut marketing spending, expansion plan but most importantly making serious lay-offs..... the world is in the "winter phase", globalisation works, and it's time to face reality and move away from everything being based on hope....... (ands the non-change Obama stands for)


Position wise.. I still keep 75% in cash/bonds.... 25% applied negatively.....net short dax, s&p and eurusd mainly.... 650-690 the goal......both from technical perspective but also from bottom up analysis.... ( 50 US Dollar expected earnings in the S&P ...13 P/E (recession lows) equals.....650....)

I look forward to the market moving to more realisme as it would indicate conditions should be improving.. for now my key indicator remains unemployment as long as the velocity of lay-offs are accelerating.. I wil remain short.......

Safe trading,

Steen

It feels, smell & look like the week of the Lehman break down...

Short note as I am in Management meetings all day - the week-end packages have ZERO impact except crystalizing how insolvent the banks are and how they "underestimated" - another word for lying? the pressure of their credit facilitation.
In short: In smells, feel, and looks like the week that ended with Lehman bankruptcy....

Three banks involved in the bank bail-outs.. looks at their performance today!

http://biz.yahoo.com/rb/090119/business_us_financial.html?.v=20

(Click on chart for bigger version)

Barclays...


Danske Bank, Copenhagen


RBS - down 65% !!!!



Still same positions:

• 75% long cash & short-term fixed income
• 25% deployed negatively: S&P + Dax.......

Short EURUSD......

Safe trading

Steen

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? http://tinyurl.com/9mvknv

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: http://tinyurl.com/ytn8ru

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---- http://tinyurl.com/693pla

(Click on chart for larger version)

My friend Jesper Christiansen (http://mrtitrading.blogspot.com/) 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(http://tinyurl.com/2xxsj2)

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....

Strategy

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



Steen