3/05/09

I am using this blog as a way to incoherently record my predictions on the market. Too bad I am not wealthy enough to actually put money in these positions. (I am not really going to quantify exposure to some hypothetical portfolio) I just wanted a way I could pretend to be George Soros or a global macro hedge fund manager.


Currency:
getting out of CAD/EUR and would reduce the NOK/EUR exposure. SEK still seems oversold, although it current has bad technicals. Lost on SEK/EUR although I love SEK, or maybe I only love their welfare state.


like AUD/CAD in addition to AUD/EUR

USD/GBP seems good medium term, although at $1.40 does not seem to be a good entry point. I do not think it is going up to $1.50. It might go to dollar parity so it seems to have a good risk/reward.

USD/JPY seems to have a symmetry risk reward profile now, but I would keep the position.

Still bearish in EUR.

I like the positive carry from the interest rate differentials and AUD fundamentals.

Equity:
(I would use equity indices to hedge the long positions, but in my previous blog, I wanted to make it clear that I didn't feel any need have speculative short positions on indices although there was a large sell-off recently. I was not calling bottom as I did believe that US and European equities had further to fall; it was a defensive short term position to protect against a possible rally.) Equties are expected to become sort of like junk bonds; investors expect an increasing risk premium which would be reflected by higher dividend yields (to compensate from the preceived negative sortino ratio [fear of negative volatility] from equities over the last two years). Furthermore, the market should price in less growth or no growth in a deflationary environment. An increased discount parameter for many investors would be expected because of demographic changes (older people cannot "invest in the long run" so short term gains and losses would be stressed) and also the empirical fact that equities indices are lower now than in 1997. This falsifies the conception that one should invest in an equity index for the long run

I do not think the risk/reward for the reverse arbitrage on Wyeth is no longer compelling. (I was bearish on Pfizer as opposed to more "research" based pharmas such as Merck).

Merck, Petrobras, and now I like OIH since it hit a support at $67 would be hedged with short US equity indices.


Commodities:

Getting out of gold today. Techs and especially fundamentals do not justfying any reason for holding it. I knew it was a bubble when I read that increased investor demand was increasing its price. No one will lever up to buy gold now, and again people have increased discount rates. Paying bills and debt with fiat currency is much more important that protecting "wealth" for the retail investor. Of course some wealthy people will buy it to protect their "wealth."

Fear might drive up gold in the short term, and during that rally, the risk/reward for entering a short position would be better after a rally.

The NAV of USO is low now at $400 million... doesn't seem to be many retail investors pushing up oil prices. I guess it is not a good position to short it anymore.


Debt:
A slight loss for shorting US 10 year bonds. Like fundamentals on aussie economy is doing well relative to others. Maybe short 2 year bonds (at 2.51% yield)... I think further interest rate cuts are priced in, and I do not have any reason to expect them to be cut further.