Monday, 26 October 2009

a few things

L: 172% S:176% G: 348% N: -4% ~ $D 88% $G -3% $V 0% $P -1.45%

The Raven has flown a little closer to the sidelines. The market has had a great run since it bottomed in March, risky assets have flown out the door, the dollar price of almost everything is much higher and its certainly been a case of the trend being your friend. That said things are beginning to feel weaker, with an inability to make higher highs over the last month. He’s also heard that systematic high frequency space has been a lot quieter with a lot less money to be made, this does make him think that some of the easy money flowing into the market has slowed down, as the market doesn’t tend to change its efficiency that quickly.

The other element that fits this hypothesis is the reaction to earnings announcements, companies that have surprised with much higher earnings than analyst estimates haven’t had the follow through that the Raven would normally expect, but perhaps that is sample bias.
The FT weekend headline last month (or perhaps the month before) that there were more ‘day traders’ in the market now that at the top of the tech peak is again a bit of negative news, as it goes hand in hand with a rather large earnings multiple expansion that we are seeing.
The Raven is having a look at JAVA again today, he’s been following the stock closely since it became an M&A name, its been pretty volatile given the fact that ORCL marketed the deal as being a good idea because it should have got through regulatory hurdles easily, that said who’d have thought the EU would be SUCH a pain.

The Raven has changed his mind on SNDK, he was actually long over the earnings because there has been so little anticipation of good numbers in the build up and their customers had been talking about good sales so it seemed pretty obvious that they’d beat, although he wasn’t expecting it to be by so much, or that they’d have so much pricing power. The stock looks pretty decent here and has reacted strongly, he’s been holding a small long.

MCO has been very pleasing for the Raven, he noticed when the stock really broke down how much retail chatter there was in the name and how much the short interest had popped, he’d made a lot of money and it appeared a lot of people had got on the bandwagon in a short space of time, so he took his profits ($1 too early mind!) and has enjoyed watching the inevitable short squeeze. He’s looked to get small short the last couple of days as it appears to be technically turning.

The Raven’s performance has been rather patchy this month he up 7.91% (especially in comparison to last month), but that really should be a lot higher given how right he’s been, he needs to really focus on monetising his good ideas and has been doing a little work on trying to squeeze more out of them with a more systematic position management approach.

He hopes that there is another Royal Mail strike this week as well, and he hopes that the union get shown up for what they are, greedy. His thoughts on the unions are just reinforced everytime he sees the way they behave, and he’d love for it to become a privately listed company, because he’d short it until the cows come home, especially with those ridiculous public sector style pensions, just look how much BT is enjoying having those.

Wednesday, 21 October 2009

bounce back wednesday..

Mervyn King’s Speech in Edinburgh to Scottish business organisations.:

The second approach rejects the idea that some institutions should be allowed to become
“too important to fail”. Instead of asking who should perform what regulation, it asks
why we regulate banks. It draws a clear distinction between different activities that
banks undertake. The banking system provides two crucial services to the rest of the
economy: providing companies and households a ready means by which they can make
payments for goods and services and intermediating flows of savings to finance
investment. Those are the utility aspects of banking where we all have a common interest
in ensuring continuity of service. And for this reason they are quite different in nature
from some of the riskier financial activities that banks undertake, such as proprietary
In other industries we separate those functions that are utility in nature – and are
regulated – from those that can safely be left to the discipline of the market. The second
approach adapts those insights to the regulation of banking. At one end of the spectrum
is the proposal for “narrow banks”, recently revived by John Kay, which would separate
totally the provision of payments services from the creation of risky assets. In that way
deposits are guaranteed. At the other is the proposal in the G30 report by Paul Volcker,
former Chairman of the Federal Reserve, to separate proprietary trading from retail
banking. The common element is the aim of restricting government guarantees to utility
There are those who claim that such proposals are impractical. It is hard to see why.
Existing prudential regulation makes distinctions between different types of banking
activities when determining capital requirements. What does seem impractical, however,
are the current arrangements. Anyone who proposed giving government guarantees to
retail depositors and other creditors, and then suggested that such funding could be used
to finance highly risky and speculative activities, would be thought rather unworldly. But
that is where we now are.

The whole of this “gem” is here:
The elements that this speech neglects and brushes over are precisely the counterpoint that such regulation would be impractical. It doesn’t address the potential side effects. It seem truly “unworldly” to believe that a separation of deposit taking and financial intermediation from propriety trading is possible. The distinction between prop trading and intermediation is totally artificial, ultimately banks make a profit from taking a risk, whether that risk is whether a borrower defaults on a mortgage or GBP/USD realized vol is lower than implied is irrelevant.
Utility Banks would still have to take deposits and invest them, so the question remains in WHAT? They’d clearly still be able to invest them in risky assets, after all there is no such thing as a riskless asset that earns a return, even government bonds have some degree of risk. Let us for a moment assume that all deposits are to be held in government bonds, where would borrowers source their capital from? Neglect the fact savers would receive a far lower interest rate on their savings (which would in turn reduce the savings ratio that Mr. King wishes to increase, now??), it would simply mean that the government took the role of deciding who to extend credit to and this pundit finds it even more “unworldly” that the government would optimally allocate capital without a hugely partisan agenda.
Does anyone for a minute believe that the government in the UK wouldn’t have made enormous sub-prime loans in the UK to first time buyers when the property market was at its peak?
His speech fails to really address the reason that the state guarantees retail deposits at all, after all the people that were taking risk that got rewarded for their failure were retail depositors in institutions such as Northern Rock. They went after 1% more interest rate and got a government guarantee, perhaps the politicians should asking for a claw back of interest payments above the BoE benchmark rate?
Other economists (real economists, not wannabe but failed idiots sitting at the central bank) make the case clearly that depositors have to be bailed out otherwise there is a total breakdown in the velocity of money, that people essentially hoard their capital, refusing to spend or lend it, which clearly kills demand and creates a depression. So the question should really be, who benefits from not having a depression? Generally that’s going to be the taxpayer...

Thursday, 17 September 2009

L: 135% S:79% G: 214% N: 57% ~ $D 0% $G 0% $V 0% $P 0.00%

The Raven has been relatively quiet this week, he's not traded around his positions too much, he covered some shorts earlier in the week, he's also collected his theta and watched as this market has really flown out of the door. Its hard not to get carried away with how easy its been to be long, which gives him the feeling its going to get pretty nasty pretty quickly on a pull back.

He's long some NRG again which has been very strong over the last week. He cut his SNDK short for the same reason.

Its also VERY interesting to see where commodity prices are.

The Raven also did a little bit of work on the Kraft bid for Cadbury, he thinks there are just too many moving parts to really make any money on the deal.

Tuesday, 8 September 2009

L: 125% S:126% G: 251% N: -1% ~ $D 0% $G 0% $V 0% $P 0.00%

So Cadbury's got bid for by KFT, the market is expecting a huge bump, which statistically doesn't look outlandish. The Raven is waiting however, he believes the stock will drift back towards 760p, where it'll be a better buy as enthuisasm runs its course.

He's also been buying a little more ETI over the last couple of days, it looks attractive versus PUB fundamentally, it looks good technically as well.

He also bought some Gold and some NZD on Friday night, just for the big number attractor play which seems to work relatively well. He's sold his gold already this morning and is now looking at the USD/JPY. Its interesting the that dollar is getting a hiding against everything including the JPY, hmmmm.

He's also spent the weekend looking at the SPX vol surface and thinks that some downside might not be a terrible play here, for both the gamma and the trading optionality, but thats far from conclusive.

He's also looking to increase his NRG position today and will be keeping a very close eye on MCO.

CYCL has rallied back yet remains at a very wide spread, he's happy with his position size now.

IPCR deal went through on Friday, so it'll be interesting to see how VR trades today.

Thursday, 3 September 2009

a choppy Thursday

Just when he thought it was safe to get back in the water, the short squeeze of a shark reappears. Its been a very choppy week given how tight the real range is and this has been particularly painful for intraday trading. The Raven gave back all his profits in the NZD, and then a little more as interest. However he did enjoy the intraday move in SNDK, which partial compensated.

He's getting murdered in PUB today with it squeezing back 5%, interesting to see that ETI isn't tracking it.

It'll be interesting to see how the US opens today and the way that the market reacts to the jobs numbers. He's got the feeling it'll be the same as it has been for the last 6months, ie bad number up small because that means interest rates are staying lower for longer, of and a good number well then that confirms the hypothesis that we're going to see great growth, in short the market has been clearly saying it wants to go higher and perhaps the Raven has been a little hard of hearing the last couple of months and missed a great opportunity.

He still likes his relative value positions and his M&A spreads so he's going to keep running a tight ship with a few tweaks tighter to hedges so that he spends more time on nailing the small details rather than worrying about how each trade reacts to each tick in the SPX. However this has been a relatively difficult strategy as "value" has clearly been lagging and getting hurt and specultive trades have outperformed ie. the market has been reacting to speculation in changes in earnings rather than caring to much about balance sheets and historic margins, sales volumes, etc. which does feel rather frothy. Perhaps we're in the middle of a large margin expansion where earnings fail to materialize? thats enough spec for one day...

Wednesday, 2 September 2009

L: 121% S:159% G: 280% N: -37% ~ $D 0% $G 0% $V 0% $P 0.00%

The Raven has been rather preoccupied with external requirements this week, however its been a pleasant trading week so far. He's been looking at FX a little and noticed the NZD has been a painful short for a lot of punters, he gets the fundamental story and agrees, he thinks its worth a twirl as the technicals look like their blowing in the right direction now.

He's reduced his CYCL position due to pain and rebalancing. That made room for a nice BJS long, which has performed well as he bought a large position in the pain that was Monday nights close. Additionally he's been adding to his MVL over the last couple of days and hedging with a little bit of DIS, on a slightly lighter ratio than theory would suggest.

The macro picture has been looking a little more interesting and he's definitely hearing a lot more chatter and perky voices amongst the bears of the world. He's been running things slightly with a short bias, although he'd look to start to get flat at the 980 level in the SPX, its a big technical level and he'd be rather shocked if we shot through it.

Monday, 31 August 2009

Marvellous m&a Monday

Two good sized M&A deals were announced today, which the Raven is going to be involved in, but for slightly different reasons;

1) BHI bidding BJS, paying 0.4shares + $2.69. BHI opens down 8% and BJS opens up 8% and you'd think there isn't much to do, however the Raven has put on a trading position. Although this doesn't look like a homerun in terms of annualised spread he just doesn't think that its enough of a premium, and neither does the market, its not like there aren't other potential buyers out there. He's doing his work on valuation etc, but he's happy enough to put a small clip on speculatively on the rough work he's done so far.

2) DIS buying MVL is perhaps a subtler trade, as DIS has said that their stock will make up no less than 40% of the merger agreement, hence will have to include more shares should they below $26.845, which gives the holder of the m&a spread a put option on DIS, which then gives a nice 20% IRR given a dec deal close (which is a little to optimisitc he thinks). So more work to do.

That means he's got to make a little room on the long side of the portfolio and hence is reducing a little of the CYCL to do so.

Friday, 28 August 2009

that updated house price p/e chart

some perspectives on long term yields

L: 74% S:85% G: 159% N: -11% ~ $D 0% $G 0% $V 0% $P 0.00%

Firstly a brief description of how the Raven came up with this chart. He uses a simplistic linear regression on log earnings to forecast future earnings applying this to historic data to come up with historic earnings forecasts, from this he calculates a quarterly earnings yield for the SPX500.

There are several interesting points for the Raven that come from this chart. First of all just looking at the most recent moves we can see that we've bounced off the lows in terms of both yields and equity prices. Secondly it appears that we might have turned a corner in terms of yields on financial assets, ie. that we might be starting to move towards a high yield environment, this would be associated with high inflation and a fall in asset prices. The Raven also notes that we're still at a relatively distended valuation gap between bonds and equity.

Inflation can have several causes, depending on your economic religion. The Raven fails to understand the monetarists that are arguing that quantitive easing is going to be the start of hyperinflation, QE is just a swapping of monetary aggregates hoping to increase the velocity of money, they also give zero weighting to the amount of wealth lost by households. He also fails to believe in wage inflation in Asia for some time yet, China has been adding capacity with its fiscal stimulus, there definitely is more capacity. For example the world's biggest shopping mall South China Mall in Dongguan is absolutely empty.

The way that he can imagine inflation coming about in the West would be to see a dramatic rise in Asian currencies. This would then increase import prices and perhaps trigger an increase in western wages, given the huge amount of public sector wages linked to inflation measures it wouldn't take much for that to increase dramatically. It certainley is the path of most pain for the world, the question is what would lead to that dramatic currency revaluation???

Now another question that is on the Raven's beak so to speak is why are UK houseprices rallying? Figures from the land registry show they have risen this month - that doesn't make a lot of sense to the Raven, but then that wouldn't be the first monthly price change in houseprices that he finds irrational and baffling in the UK. It would appear to the Raven that prices still have a decent amount to fall before we're looking at where house prices have bottomed before. The peak in the HBOS index of house prices was £199,612 a frankly insane price at a price to average earnings level of 5.8, house prices bottomed at a p/e of 3.1 after the comparatively small bubble of late 80s (which peaked at 5x). At that bottom multiple we'd see the index at £113,386 which is a peak to trough fall of 43%, or further 29% from here. Caveat Emptor!!!

Thursday, 27 August 2009

some new names

L: 91% S:77% G: 168% N: 13% ~ $D 0% $G 0% $V 0% $P 0.00%

The Raven has been looking at some more small caps and off the wall names, he's noticed that the worst value stocks have been really outperforming the last week, so he's been looking at the riskiest section of the investment universe for the most beat up names he can find, he's got a watch list to keep an eye on so far.

Of the riskier names that look interesting one which did catch his eye is SONG NO, Songa Offshore, now he's looked at this firm a long time ago and a firm that rejigs its capital structure as often as this always worries the Raven, however the last couple of quarters numbers look of, they managed to get some deleveraging done and they're not looking terrible value. Its also forming an interesting technical pattern on the chart so he's looking to start a small position.

He also looked over the M&A universe again, and looked particularly at a better estimate of risk/reward, sector adjusting his downside numbers for the deals he likes and then ranking them on this risk reward metric. He was initially surprised that WYE came out as the top contender given that the hedgefunds seem to be all over the name (Einhorn & Co), however its a huge deal and I doubt the arb community has the capital to close it to a fair level. A lot of the other names become very dependant on the time frame assumptions, a 12% IRR becomes a 6% IRR very quickly if a deal gets delayed by a month for the short end deals. Depending on what you think JAVA then looks pretty attractive, the Raven thinks the EU oks the deal when they are due to review it in September, and thinks the deal then gets wrapped up by the end of that month (there doesn't look like that much downside on a break given the sector performance). IPCR looks ok on that basis as well.

The Raven is now in full position size with CYCL, he'd have to adjust his risk limits to be able to take more and he doesn't think making that sort of exception for something will so little transparency is a wise idea. Especially as he gets the feeling that he's not going to be the first grape on the vine to hear if this deal breaks. The downside doesn't look that horrendous though.

He's tempted to sell out of his IP2IPO position as its small and takes up way too much time to monitor it given the potential upside. However at 50p he still thinks its pretty cheap and transaction costs make it silly to trade this actively. With 12p per share of cash and some residual values in the businesses they own you'd think there is limited downside below 40p, with a book value of 90p then it fits his risk reward preference.

Also "interesting" and by interesting he actually means totally effing insane that Turner at the FSA is proposing Tobin taxes, this guy is a chump, thats why he's working for the government. If the financial sector is destabilising the UK real economy he's been smoking crack, the Raven would love to see the Labour champagne twits balance the budget without 20% of their tax revenue contributed by a few hundred thousand workers, go figure. It does make one wonder where the FSA finds these idiots, after all if he proposes tax increases on trading of shares and bonds, who does he think is going to invest in UK businesses, how much are pension funds going to pay out in more taxes and who in their right mind is going to buy gilts? uhm the BOE can't finance that hole all by itself without THAT becoming a huge destabilising force. Truly some of the most foolish and populist posturing he's heard this year.

Wednesday, 26 August 2009

stopped out

Obama made a very good decision and the Raven applauds his non-partisan reappointment of Bernanke, there really isn't even a question in his mind that it was by FAR the best choice he could have made. Lets hope that Volker and Summers keep their lips buttoned from here.

Long: 74% Short:67% Gross: 141% Net: 7% ~ $Delta 0% $Gamma 0% $Vega 0% $Premium 0.00%

It certainley felt like a stop out yesterday, given that his SNDK short was stopped out and so was his PUB LN short almost immediately - both by the price action rather than hitting predetermined stop levels. He still doesn't like these businesses and their fundamentals, if the market is getting excited in Punch because the company says its going to be likely that it meets its targets for the year then he doesn't understand why it doesn't want to think about the probability that Punch has to come back to the market for some more fund raising? Its balance sheet is terrible and the Raven really doesn't think that commercial property is going anywhere other than south, he also doesn't feel that Punch's assets are marked at the correct level on their balance sheet, if they were marked at where he thinks they should be then perhaps we'd be talking about recovery levels on their debt rather than a p/e of the stock!

He's taken a little profit on AI/ LN, Aero Inventories, a small cap long that he put on last week, he's now 2/3s of what could be called full size in the position. On a valuation basis it still looks very attractive, at 0.6 x book and a p/e of 4.3 he thinks that you're compensated for the risk of such a small firm (he's yet to kick the tires on who their biggest customers are, etc. but the price action and valuation make it an interesting punt).

He's going to look to increase his position in IPCR - he likes the sector in general, this play has a deal spread that annualises to a rather small 12% however he's not shorting VR against it so is happy to accept that spread as a kicker to owning the player in the sector. Given the last three days price action however he's cautious that we may break the strong uptrend, in which case he's going to watch carefully today.

Chanos has made some interesting comments about the healthcare sector and if there is time this week the Raven would like to have a look and at least draw up a watch list of stocks he's like to short if they begin to break down.

He's also put a tiny long in Nedbank, it looks pretty attractive and looks to have broken out of a sideways range, he's still doing his work before potentially scaling in.

Tuesday, 25 August 2009

tinkering tuesday

L: 105% S:105% G: 210% N: 1% ~ $D 0% $G 0% $V 0% $P 0.00%

Some interesting comment today out of PUB LN that they are on course to hit year end targets caused the Raven to review his numbers on the company. He understands partially why its trading where it is, it does represet an option on the underlying assets. This doesn't mean however that the option is in the money or should be trading at anywhere near the level that it is. A 10% fall in the value of their property assets and writing off their goodwill and its book value is zero, its still very levered ~9x which doesn't given them too much comfort room if the EBITDA doesn't match up to their targets. The Raven had been in and out of this as a short, well with the 10% pop in the stock today, he's getting short again, looking to scale into the position on the close.

He's also been playing around with simple valuations for the market as whole, on a mid p/e and using his earnings model the market does look fair, however if one does take into consideration the low treasury yield then its pretty easy to come up with a much higher valuation. Obviously QE and investor risk aversion make government bonds overvalued to stocks; the question that is still to be answered is what is going to happen to inflation/deflation, to answer that is far more tricky given how opaque chinese figures are and the amount of capacity that they have potentially added. In very simple terms the Raven belives that China has added a large amount of capacity and stock piled a lot of commodities, this should be a large deflationary force, he also doesn't believe that the monetary and fiscal stimilus are sufficient to create inflation given the vast reduction in money supply and velocity in general from the crisis. The curious question is what effect will deflation have on stock prices? and what about the USD?

The Raven has been keeping pretty close to shore and still taken a fairly heavy beating on his MCO short, he'd been covering it slowly over the last week, eating a lot of the pain on the way up, last nights price action indicated that perhaps its due a reversal and so he put a unit of risk back on the table, although he does remain cautious. He also put a unit of risk back in the EMC/SNDK pair trade - yes he does know that they're not really a hedge, but at least they're in the same index and have a reasonable correlation.

He's also looking a lot more at the M&A universe again, he reviewed the bottlers PAS and PBG, no dice.
JAVA - no dice there either, although he's hoping for a french exotics firm head if this deal does close before year end - in fact there would be nothing sweeter than picking off a 'granny robber' trying to make clever fat prices on exotics.

He also increased his CYCL position and is yet to understand why its trading where it is, even though it appears to be drifiting more like a true deal spread these days.

The Raven has also cast his eye back to MIR and NRG as they've drifted lower in this rally, they could get very interesting if they fall back a bit further.

Thursday, 20 August 2009

back from a break.

Its been a while since the Raven felt in need of posting, however yesterday's market action reminded him of the need for the discipline that marshalling of thoughts in a daily post brings.

He's increased his MCO short position, technically it appears the stock is bouncing off the 23's level for the third time, but rallying by smaller amounts, usually this is a good indicator that the stock will break that resistance level. He's felt a bit of pain from being too agressive too early and fighting the trend, which he's been really trying to avoid with his other trades. He's also a bit annoyed at that mistake with MCO, hence the public confession for making that stupid mistake and a resolve to correct it and be more rational going forward.

On the long side of the book he put on a new position in CYCL, which is being aquired by AT&T. It appears that the stock has sold off on the belief that this deal takes even longer to complete or that T decides it wants to renegociate for a lower deal price - which he doesn't think they'd get away with doing. He bought the stock down ~10% from its deal price, which would give a 20% IRR in a 6month deal completion (which he'd wager will happen, or it'll at least have broken).

He's added a couple of UK small caps to the watch list but is pretty far away from being able to pull the trigger.

Other longs in the book are some of the catastrophy reinsurers, they look to be pretty cheaply priced vs other financials, they've also been looking to consolidate as an added kicker, hence the Raven adding IPCR. (small positions in PTP and Aspen as well). He's also looking at some of the emerging market banks - specifically Turkey, although he's done a comp. with SA banks, which are pretty tightly priced given all their risks.

Macro thoughts otherwise remain limited, FX momentum continues to be a weak trade. He still thinks we'll see deflationary forces for a long time to come due to the huge excess capacity that is left in the system and the rebuilding of the consumer balance sheet constraining any bounce back in consumption - hence the feeling that the huge bounce in China is perhaps a little overdone. He's placing a small bet that libor spreads rise in the UK while remaining in the long US 10yr treasuries, although thats a micro sized trade.

L: 150% S:145% G: 295% N: 5% ~ $D 25% $G -7% $V 0% $P -1.09%

He's also sold some short term downside puts, the 1000 level seems to be a magnet for the market, he doesn't expect it to go anywhere for a while and is happy to try and make some money collecting theta, he also thinks that his longs will have very little beta on the downside whereas the beta on his shorts could very well explode if there is a sell off.

Tuesday, 4 August 2009

taking some profit

L: 24% S:99% G: 124% N: -75% ~ $D -4% $P 0.35%

The Raven sold out of most of his long positions yesterday, it was just too tempting and too much of an easy trade to take profits. NRG has had a great little run and its sitting at the top of its channel, he still thinks its massively undervalued but it runs a much larger risk of a pull back from the 28.6 level he sold at.

He increased his short substantially in MCO during the day, only to have to cover that increased size at a higher price unfortunately, even after that its now the biggest position in the portfolio.

The Raven's still in catch-up mode but also trying to open his eyes to some new ideas, themes and trends. He also looked backed at his 10 predictions from the start of the year, well lets just say he's pleased he doesn't have to trade on a 6 monthly time frame as 3.5/10 is something he'd almost bet against.

Monday, 3 August 2009

3% well spent

well not really, the Raven's 'oliday was relaxed and profitable even after spunking 3% of the portfolio on insurance. Good moves in NRG and a nice drop in MCO meant another good week. He closed his MCO position on Thursday night to lock in a gain until he was back in the office to do some proper work, he'd also broken a fundamental rule earlier in the week increasing that short position.

He's rejigged a few positions today and is busy updating models with last weeks data, plenty of reading and looking at a few results, its been a good first day back even if he feels he's not achieved too much.

L: 134% S:129% G: 263% N: 6% ~ $D -3% $G xx% $V xx% $P 0.04%

Thursday, 23 July 2009

better than a pich from president Obama

L: 146% S:93% G: 239% N: 52% ~ $D -51% $G 74% $V 2% $P 2%

Well that SNDK ECM 'spread' worked an effing blinder, even if the Raven does say so himself - SNDK fell >10% and EMC rose more than 5%, I think the septics would call that knocking the cover off the ball, thats enough yanky hubris for one day. It has put the Raven in a very good mood for his holiday as he plans to leave the crow's nest tomorrow. Historically there has been a spooky correlation with the Raven's planned holidays and a general market meltdown, 8 out of 8, none the less its for more sanguine reasons that his portfolio greeks have come back to life. We've had a big melt up today in stocks, with people also buying vol that means there isn't that much confidence out there (which could be taken as a positive if you read the chicken entrails that way). The Raven doesn't like to sleep badly on holiday and he feels that he might given the 146% long in his portfolio is pretty concentrated and so he's going to pay away some theta rather than sell a core long, he did the numbers and its cheaper to trade the vol and pay the theta than pay for the transaction costs of getting in and out and losing a weeks worth of alpha potential.

He also has one little thing to add before he flies off, MCO - so even the sage of Omaha has turned seller aka Warren Buffet. It makes sense to the Raven and quite pleases him to have chucked back on a cheeky little short at the days highs today. There is plenty more downside for this stock especially given the negative press S&P managed to generate with their MBS downgrade then upgrade when the heavies turned up from "the squid". Ratings agencies are a dead business model, structured finance is not going to be done for ratings and capital adequacy arb in the long term. MCO should never have been putting ratings on correlation rather than corporate credit and in so doing lost any credibility they do have, especially when they seem to watch market prices of corporate spreads as an input into their decision, it makes a whole mockery of the idea that they can add value.

its definitely the anglo-saxon model of capitalism thats at fault!


its absolutely laughable that its banks in the USA and the UK and all those nasty hedgefunds that are to blame for everything. This is a perfect example of a management that took huge risks, shafted shareholders and very little skin in the game, at least Jimmy Cayne and Dick Fuld lost everything, these clowns got paid out in cold hard cash and a fixed percentage on a one year profit, wow talking about writing free calls. The Raven has ZERO sympathy, Porsche manipulated and cornered the market in VOW shares. He didn't feel sorry for the hedgies that got stiffed as it was a pretty obvious play however that doesn't justify the ridiculous schadenfreude in the media or the hypocracy of the act. Had the newspaper headlines been reversed the German government would have jumped in, ripped up the rule book and had a tantrum.

He also saw this and did have to chuckle:
That really is a terrible throw, lets just say you'd have got beaten up at school for throwing like that.

L: 174% S:49% G: 223% N: 125% ~ $D 0% $G 0% $V 0% $P 0%
The Raven sold a sliver of NRG, but that was more of an intraday trade.
He also added a new spread position, he's long EMC and short SNDK, they're not technically a pair as they are in very different sectors, however they are both in the growth universe and certainley looked at by similar analysts and tech investors, however SNDK is far more commoditized and consumer dependant. EMC on the other hand is far more of a b2b (business to business) play, its also wrapping up its market position by overpaying for its latest aquisition - perhaps the 'value' guys would like this moat building move. He also thinks that its a better business with much higher quality earnings. SNDK reported numbers last night, it beats 09Q2 expectations, actually making a profit! it did bring down forecast for H2 revenue. Its made a profit by cost cutting and an improvement in pricing: he can't see much more room on that front to drive profitability and he doesn't see the pricing getting much better, in which case the huge run up in the stock in the last couple of weeks seems overdone.

The Raven is in a nicely pessimistic cynical move today so he's going to have a look at the airlines Continental and United just to cheer him up...

Wednesday, 22 July 2009

what a difference a day makes....

L: 151% S:11% G: 162% N: 140% ~ $D 0% $G 0% $V 0% $P 0%

thats a huge swing in net and gross exposure for the Raven since yesterdays post. NRG traded down hard on the open of the US market, the Raven took this as an opportunity to dramatically increase his position. At the same time MCO opened up slightly, whereas the Raven's charts said it was a screaming sell so he dramatically increased his short position. Both of these events were remarkably fortunate given the price action which followed; NRG trading up 7% from the Raven's purchase price in the matter of an hour and MCO falling 5%, which put a nice chunk of profit on the table for the day, month and year for that matter. In response to this the Raven covered his short in MCO and will look to scale back into a small short if it opens up today. On the other hand he decided to let his bet ride with NRG, technicals look good and the stock still looks cheap, its a good thing that the vulture like bid from EXC was rejected by shareholders. There are some worries in the back of his head with some counter arguments; management don't have their feet to the fire so perhaps won't feel the pressure to perform, or perhaps they've been distracted and now have the opportunity to refocus on operations. The Raven thinks managements been focussed so perhaps there is room for them to slip. Its still in the mixer.

The Raven is also looking at other EXC targets and power generation assets, at the moment he's looking at MIR, he doesn't think its a fit for EXC - but it looks optically cheap so is worth a poke at least.

Tuesday, 21 July 2009

"if you don't know where you going, any road will take you there"
Should be the focus today. Bernanke has done a great job in very difficult circumstances, he's been responsive to the situation in the early stages of the crisis and now appears to be on the front foot treading a tight rope from here; making clear how and that he will remove the monetary stimulus measures but also that he's not going to do it too early and only when the threat of deflation is clearly been avoided. He doesn't get any of the media and political backing that he deserves, perhaps that because he doesn't spend so much time posturing like those lurking the the wings in Washington or that tool in the ECB, JCT.

L: 72% S:268% G: 340% N: -195% ~ $D 0% $G 0% $V 0% $P 0%
The Raven has increased his short positions and cut some longs. Yesterday was interesting, his longs lagged the market down 14bps on the day, yet his shorts took a relative beating down 180bps. He's looking at the way the different sectors are trading and trying to read something from it, but struggling to take much away from it other than a big punt on China and the system being restarted.

The Raven thinks NRG shareholders vote on EXC today, he's been a bit surprised and hurt by the sell off into this vote, but he thinks thats a lot more to do with the natural gas market and how important that is to demand for NRG. He's going to look to put another couple of clips on at these levels with the view that the stock is oversold, that shareholders will see more value than in the EXC deal and hence reject it (this isn't the best short term outcome as the uncertainty on what EXC comes back and does will weigh on the stock as nobody likes uncertainty) or they'll accept it and push NRG's board into talking - in which case the wide spread should close. Either way there's a short road and a long road, although both head in the right direction.

Monday, 20 July 2009

some more thoughts

The Raven has noted that other market participants have poured cold water on the idea that CIT averting bankrupcy proceedings is really a positive given that it hardly shook the market at all when there were fears they'd go into chapter 11. The Raven thinks thats a little disingenuous, the reason to cheer this piece of news is the fact that its a private solution and doesn't involve government intervention and taxpayer capital. That's positive on two fronts; firstly that private capital is prepared to take risk again of this sort and scale (not huge really but still it wouldn't have been there six months ago) and secondly because it means that private capital is not being crowded out by government intervention.


L: 111% S:181% G: 292% N: -70% ~ $D 0% $G 0% $V 0% $P 0%

It looks like we're in a classic short squeeze as the melt down failed to materialize last week. There is still a lot of talk of the failed head and shoulders sell off. That really increases the probability that we follow the path of maximum pain after that failure, a rapid spike up hitting stops and getting shorts covered, some panic buying, etc. Then we grind lower back to original levels, hence the current large amount of risk in the Raven's portfolio. He's also looking at VIX and the skew in general, it does appear that insurance seems a bit cheap given the amount of pain and potential pain out there.

Oh and purely on a customer satisfaction point of view he's looking at shorting toshiba, nokia and france telecom.

He's also quite surprised again by the Economist's discussion of the efficient market hypothesis, maybe he's been reading the wrong textbooks but surely they see that the EMH hasn't ever been that the current market price is a perfect predictor of the future value of cashflows, but it is a reflection on average of the whole markets knowledge and assumptions, ie. we shouldn't be able to make a better predicition a priori. He really doesn't understand why this principle is so difficult for journos to get? He thinks its a common misconception to compare a prediction with reality and not take into account the information held before hand, the range and probability of the outcomes before deciding whether we should have been able to do any better. He fails to see how a bunch of academics and failed businessmen will increase forecasting accuracy.

Wednesday, 15 July 2009

small changes

After this mornings rant the Raven has few constructive points to add. Yes we're in earnings week now, yes we've rallied , but it still feels very much like summer time.

L: 60% S:35% G: 95% N: 25% ~ $D 0% $G 0% $V 0% $P 0%

The Raven covered his Moody short yesterday, but put it back on right at the close to hedge out his increased position in NRG, he thinks there is upside risk with us approaching the 252dma. He also covered/got stopped out of his pubs shorts to some extent yesterday, but is putting them back on again today at better levels - although trying to stay beta neutral-ish.

He did some more work on the miners yesterday and has started to change his views a little. BHP Bilitons looks better and better to him, its not particularly sexy though, he's kicking the tires at the moment, before he gets to price target as management seems to be a strong differentiating factor between the stocks, thats before he looks at the technicals.

The Raven continues to be baffled as to why GB isn't doing more about this. There seems to be a fundamental question that remains largely unasked and definitely unanswered: "What benefit will this regulation bring?". The French and German thrust for regulation seems predicated on a notion that anything not controlled by the state is both dangerous and a threat to 'stability', from the bankrupcy proceedings of Eurotunnel and their "champagne quaffing" investors to the German's "locust" private equity investors we see arguments thick with rhetorical yet no substance. The Raven will make the same point he's made many times before, but how many hedgefunds have been bailed out? How many have required emergency funding? ZERO. Which institutions are the most regulated in the US, ah insurers like AIG.

If politicians and the popular press weren't so pig ignorant when it came to hedgefunds, private equity, derivates and short selling (or any other buzz word they like to chuck into a conversation to try and sound like they have a clue what they're talking about) they wouldn't spend so much time point fingers with their knickers in a twist. Company CEOs who blamed short sellers should be ashamed of themselves, they're either so thick they believe that drivel or they're cynical coke-bottle-shouldered buck-passers, neither of which deserve to be looking after shareholders capital. The cash flows don't lie in the long term, RBS was buggered and its shareprice was reflecting that, rather than the shareprice buggering up RBS. The Raven fails to see how shorting homebuilders and CDOs like John Paulson did caused the subprime problem? surely his actions would have made mortgages more expensive and hence reduced the scale of the problem. The facts are pretty clear unregulated capital has nothing to do with the crisis.

Now the Raven imagines a stammering politico would point to the Madoff scandal as a reason that HFs should be regulated. Sorry to disappoint but this is a case of an investment advisor, technically different, but lets ignore that for the moment, lets just ask who suffered - wealthy private investors were defrauded. 'Sophisticated' investors are supposed to be capable of doing their own due diligence, he fails to see how a limit on leverage, a limit on which funds can operate where or having a register of names and strategies would do to prevent a Madoff type case?! He finds it incredible that dim witted EU politicians think that the private investors just handed over their cash to a US investment advisor without knowing their name, what leverage they were running, what strategy they were using, etc??? What protection will these rules provide? about as much as a cocktail umbrella in a hurricane.

So why propose such a stupid idea? Well for the politician it isn't such a silly idea when their own sly motives are taken into account - expanding government departments and independant regulators is seen as action - and we've all seen how much people like GB like to wear their underpants over the trousers, whack on a cape and pose like they're a grinning demented half brother to Wonder Woman. All these independant regulators also provide a useful excuse when things do go wrong, after all its always useful to have someone else to blame. Then you have the kicker that an expanded state gives you as a politician more power and you're not the sucker that has to pay for it. So, who's the mug? The Raven is clearly in the wrong game.

Tuesday, 14 July 2009

tick, tick, tick, tick....

and the Anglo-Saxon capitalist model is the one that's broken?? FFS! French workers threatened to blow up a plant unless each of the works were given EUR33k each in redundancy? riiight, sack them on the spot and then charge them.

The markets ripped higher yesterday, it appeared as if the rally was driven by Ms. Whitney's "BUY" note on Goldman, the Raven heard quite a few funny comments to the effect that she was a one hit wonder by a few bears licking their wounds, he's waiting for the announcement today that her new firm is getting bought out by GS in an all stock deal.

On that move the Raven quickly reduced his short positions, although he's still hurting from his PUB and ETI shorts today as some of his longs lagged the market rally.

The Raven covered his Northgate short yesterday, its a dog of a company that clearly is in need of some cash, he's just more shocked that shareholders are prepaired to respond to this cash calls, he know's he wouldn't double down on this business model.

Plenty of earnings this week so hard hats all round...

L: 49% S:17% G: 66% N: 32% ~ $D 0% $G 0% $V 0% $P 0%

Monday, 13 July 2009

tinfoil hat time?

The Raven is nothing short of amazed at the press coverage of this open letter to Paul Volker. He is inclined to think that the media attention has something to do with the renewal of Bernanke's tenure at the Fed pretty soon and the positioning of Volker as a replacement. The characterisation of QE as money printing by the media has been reckless and far from the truth, sound bite journalism prevails, even at the FT.

The letter calls for the Fed to mint gold coins for every bond holder that would want to redeem their bonds for gold has received in some unlimited fashion (uhm how?). The arguments in the letter are motivated by the fact that the gold forward price is lower than the current spot price, this apparently is evidence for there not being enough "paper gold" ie physical in the current market for end investor needs, harking back to the paradice lost that was the 70s halycon days when he was young and senile perhaps coinciding with the peak in the gold basis.

The Raven knows not a jot as to the long term trend in the cost of carrying gold, he does know storage is going to be relatively expensive as its going to need insurance from theft, security, etc. which would all other things being equal raise the forward price, he also knows that interest rates are pretty low and that too would be a good reason for forward prices to be lower. The biggest unknown for the Raven is the question of how much an institution could get for lending their gold out like a stock holder does with their equity. The higher this lending rate the lower the forward. The Raven would point out however that the spread on secured lending might be higher over the last year because of fear of counterparty and systematic risk, rather than any specific demand for physical gold.

The Raven is also a little intrigued as to where the Fed is going to get these gold reserves from to mint an unlimited amount of coins, he thought the thing that attracted goldbugs was that it was strictly limited?

Fiat currencies have value as citizens are able to pay their taxes, does this mean we will see a return of tax collectors with large Robin Hood style purses collecting gold coins?

BAC cheek

Ken Lewis is doing BAC shareholders absolutely no favours. Firstly he does the CFC deal looking to be an empire building hero, then he doubles down with MER, then he implies that the Fed stopped him telling his shareholders the truth and now this? Just because you don't claim on an insurance policy doesn't mean you don't have to pay for it. This guy is just a liability, he's intellectually lazy and appears to be more than a little liberal with the truth, I wouldn't let him use scissors on his own, let alone look after a balance sheet the size of BAC.

a slow start

L: 66% S:59% G: 125% N: 8% ~ $D 0% $G 0% $V 0% $P 0%

The Raven has a small trading long this morning, however remains very cautious given the amount of company numbers reporting this week. Interesting to see Ms. Whitney aka BankSlayer has stuck a BUY rating on GS, he's not seen the note, but he's sure that GS numbers will be pretty good, he's however looked at the stock and can't get comfortable with sticking a value on it.

The Economist this week seems to be on a similar track to the Raven with regard to public sector pensions, it tosses a 30% of salary figure into the ring. They also mention the rise in quangos and the real functionality they bring to the party, ie. shouldering responsibility for decisions rather than politicians. They also bring up the SDR issue and China's attempts to encourage Yuan usuage for trade; again just nonsensical noise.

The Raven has been looking at EMC again over the weekend. Its in an interesting sector and it really does have the potential for some massive growth, however he's no tech trader and its not entirely clear how much "cloud computing" solutions could come to be seen as competition for EMC type products in the long term, althought this may just indicate his fundamental lack of understanding of the whole sector.

He's increased his shorts in the UK pubs, shorting some more PUB and Enterprise, their assets still look overvalued, they still have tough operating environments and the balance sheet doesn't look too sexy in either case.

XTA/AAL looks interesting from all the chatter of the weekend. The Raven fails to see what a new chairman really brings to the table for AAL, he's heard rumours today of XTA bumping in a cash term to the deal as a sweetner, however he's not entirely sure how much sense that would really make. On the other hand AAL does look absolutely cheap even on a risk adjusted basis, he's less convinced and still working on XTA.

Northgate is another short - but more on that later...

Friday, 10 July 2009

more dollar drivel
China wanting someone else to eat the currency risk that they've built up, well pull the other one, they've dominated manufacturing and protected their economy, manipulated their currency, restricted capital flows, had a dubious track record of investment in Africa and they still want the West to bear the financial risk of their dollar assets? wtf?

Looking at the vol surface a bit closer today, the Raven has completely changed his mind, he'd like to sell 1by2 put spreads and maybe buy some back months selling front month - but more work on this today.

He's also looking at EMC again, they've won their M&A battle, the whole segment is very *HOT* at the moment, he also notes that Bill Ackman likes EMC and he's seen other hedgies getting involved, which means its too late. Saying that the stock has been technically a dog recently.

The Raven also refreshed his Enterprise Inns model, still doesn't like the stock, its a buy at 30p and then only maybe, its currently at 125p ish and he's going to short it on weakness.

L: 141% S:182% G: 323% N: -40% ~ $D 0% $G 0% $V 0% $P 0%

As you can see the leverage has been chocked up yesterday, this reflects greater intraday trading thats being carried overnight.

Thursday, 9 July 2009

public sector final salary pension schemes

As its been a little quiet this afternoon and the Raven has been short of things to model recently he decided to look at the real cost of Public Sector final salary pension schemes. He's used current market RPI linked annuity rates to price the final salary side of the deal, historical real (as in nominal - inflation) rates and a typical public sector pay scale, with reasonable promotion and career path assumptions based on government statistics. Given this he was truly shocked to see that the value of this final salary scheme was worth about 40% of salary. Looking at ONS data the median level of full time pay in the public sector was £523 pw in April 2008 whereas in private sector it was £460 pw. Once we then add in this 40% pay kicker we get to annual figures of ~ £38k for the public sector compared to £23k for the private sector, WOW, a 65% difference!

It doesn't take a genius to work out that the UK government needs to massively slash spending, it would appear that there is plenty of room to do this!! The Government should immediately close all final salary schemes, and stop workers purchasing further years through work, switching to a defined contribution scheme, it could even increase wages by 10% to grease the unions, with the aim to holding them flat for the next 10yrs, it could also start by chopping funding for every quango and dramatically reducing government on every level.


L: 30% S:33% G: 63% N: -4% ~ $D 0% $G 0% $V 0% $P 0%

Brown and Sarkozy the Socialist (or whatever's currently appears to be a popular trend in politics) come the the rescue. What a bunch of useless w*nkers, they truly don't seem to know their arse from their elbow. Do they honestly think that more "co-ordination between OPEC and other energy agencies" to develop "a shared analysis of future demand and supply trends" is going to make a jot of difference. Perhaps these great institutions would have been able to forecast the huge demand destruction the global economy faced over the last 6 months? or the demand surge in the years before that?

Its typical Brown politics (in more way than one) - ah lets throw more beaurocrats and organisations at the problem, that way we can employ more failed civil servants to sit around and talk about things they know nothing about, write papers and advice for the government which Mr Darling will then proudly ignore. They should stop pretending to have any real power and influence and control the things upon which they do, ie. the huge liabilty of public sector pensions! rather than trying to stamp out natural volatility. (no amount of regulation will stop natural economic cycles, and percieved uncertainty as to forward demand and supply). Why don't they try some Nixon price fixing - we saw how well that worked out, then they can just print money to pay off their union paymasters; perhaps Obama is truly leading the way, they can just steal money from secured bondholders and give companies away like they did at Government Motors, sorrry ahem General Motors. Just had a few thoughts after reading this article. These SDRs are nothing special, its just like making a market in a basket of currencies, but it just made the Raven twig, the Chinese are angling to make the US take the FX risk on these, he's speachless, truly gobsmacked, how does that work?!?! That's like buying a house and renting it out and then asking the former owners to make up any value in the price falls in the house.

The Raven has been doing some more work on NRG, he thinks its really too cheap and is dramatically increasing his size in this position. The management seem pretty keen on avoiding EXC and are making a good case for it. They've increased the share buyback from 5% to ~9% of the market cap (he's not too keen on the leverage increase - but that should at least provide some kicker to the stock short term). Its trading at a decent discount to EXC's offer, it looks cheap, its leveraged to natural gas prices in Texas long term, its held its technical levels in the up channel, its not being talked about too much by his fellow traders, oh and it cheap like a cage of discount canaries. Its also got funding for only one of four nuclear deals, EXC didn't get this. The stocks ~$23, he thinks fair value is more like $40, EXC is offering ~$27 - pfffffff. Anyway its obviously got some risks fundamentally to the business from the macro picture and its geographical position, however at this level its risk reward looks good enough for a swing of the bat.

Wednesday, 8 July 2009

earnings season

L: 53% S:73% G: 126% N: -20% ~ $D 0% $G 0% $V 0% $P 0%

The VIX still looks like its at an interesting level, the Raven is looking at perhaps picking up some put spreads and then pushing the rest of the book to flat delta.

Interesting article in the Times today from Vince Cable, he's basically saying that because we now own RBS, NR, etc we should be making them increase lending to help the economy and for some reason his implication is that by being state owned these banks are now safe and that these loans would be riskless? He's also very populist and doesn't mention any of the real causes of the crises, but then he is a politician so the Raven doesn't really expect any more.

Interesting to see that we didn't hold the support levels in the SPX, however we've failed to see any real follow through and the volume picture remains puzzling, it is "summer" after all. (just look at the weather in London). Its also the first day of the Ashes, which the Raven still thinks the Aussies have a great chance of holding on to, its also the start of the US earnings season; and where they'll be is anyone's guess, as to how the market will read them, well the Raven feels that investors are more likely to be disappointed that positively surprised, so he's happy to remain short with the price action backing him up. He's also happy to be long USD right now.

Tuesday, 7 July 2009


L: 18% S:36% G: 54% N: -17% ~ $D 0% $G 0% $V 0% $P 0%

The Raven has been relatively quiet (on the posting front), but relatively busy on the short term trading front. The 888 level in the SPX looks like a pretty key resistance level, the Raven is betting on it not holding. He's mainly short MCO, as going forward the business model doesn't make sense, the stocks been all over the place today, is still up on the day, but thanks to short term vol he's still up a decent amount.

EXC has sweetened it terms for NRG. The Raven notes that NRG has government backing and cash for nuclear participation, whereas EXC doesn't, he thinks that NRG is very undervalued, whereas EXC is marginally cheap, he's long NRG and looking to increase his position if it comes to his level, he definitely wouldn't be accepting the EXC deal, even though its offering an ok-ish merger arb spread. He thinks management have done a pretty decent job, hopes they keep their eyes on business execution and smart shareholders value the business correctly.

He covered the majority of his PUB short yesterday, thats just trading around the position, he was tempted to put it back on as it was up 4% today, which is a dead cat bounce in the Raven's eyes. He's still in the double dip camp, and all this talk about property bouncing is just nonsense, its still overvalued and no amount of rah rah rubbish from Foxton branded tits is going to change how expensive property still is, how much rents could still fall from unemployment.

PFE/WYE still looks interesting, especially the PFE leg as a long, he's sniffing.

He also traded some miners last night, liquidity provision as such, flipping them today. They're interesting and certainley worth picking over, perhaps for some relative value.

He's also doing a lot of work on optimal positioning and balance sheet optionality in a "quiet" summer time...

Thursday, 25 June 2009

village idiot

Is this clown serious? an 80% tax rate for 1d capital gains, does he have a clue as to what that would do to a pension fund? or to an insurance fund? has he even heard of the word liquidity? imagine how much of a discount a fund would have to charge an investor to liquidate their portfolio? its worse than pig ignorant. In addition bozo the clown neglects that the asset in which the most speculation occured was in fact primary residences, no prizes for guessing what the capital gains tax on this "long term" investment was? effing ridiculous, its obviously show time at the village idiot fare.

stopped out

L: 27% S:36% G: 63% N: -9% ~ $D 0% $G 0% $V 0% $P 0%

The Raven is licking some wounds after yesterdays price action, he was certainley right about the correlation of assets rather than their direction, which helped to reduce some of the risk. He's still thinking about what yesterday's statement really means, the language and the analysis of Fed watchers indicates to the Raven that rates are going to stay low in the US for a long time, that there is little threat of inflation, etc. He got squeezed out of half of his MCO short, but will be looking to put that back on today if the price action is stable, his FX portfolio moved as expected, he's increased the GBP position as well at the NOK.

Wednesday, 24 June 2009

FOMC today...
An interesting piece today from the FT's Martin Wolf, pointing out that shareholder incentives and too big to fail increase systematic risk, not that he really has a solution, but at least he's more clear than others as to what the problem is.

Another "interesting" piece is the WSJ publishing their editorial from ?2004? saying that the Fed needed to raise rates to stop and inflation bubble, with the internal comment from Bernanke which says that inflation from input prices wasn't a concern at that time. They then go on to claim that they won the argument because of the asset price bubble that ensued. Frankly that shows them to be petulant and thick. Bernanke was precisely correct, we've not seen an inflation bubble!

L: 27% S:56% G: 83% N: -30% ~ $D 0% $G 0% $V 0% $P 0%

FOMC minutes tonight which the Raven is waiting for, he's getting long 10yr TNotes ahead of the meeting. The last couple of auctions have been well covered and he thinks that the market will have a favourable reaction to any comments of keeping rates lower for a longer period of time. By favourable here, he thinks UST rally as does SPX, but USD weaker, which isn't entirely logical.

Tuesday, 23 June 2009

too much summer sun for the green shoots?

L: 23% S:54% G: 77% N: -31% ~ $D 0% $G 0% $V 0% $P 0%

The Raven knows this is going to be an interesting week for Macro figures, the technical situation in the market has reversed, with things have a lot more of a negative tone as of yesterday, but without a big volume pickup (~+20% more volume than a normal Monday). Its alos interesting to note Director selling, usually a bearish signal, in addition FX moves that match those in the commodity space, perhaps indicating that the Chinese reflation trade has run out of steam. The Raven is therefore watching the RIO rights issue with interest, as well as the market reaction to XTA/AAL (Xstrata and AngloAmericans) merger talks. He's increased his shorts in PUB as well as adding a chunky short in MCO (a ratings agency), it looks technically to have run out of steam and going forwards one has to agree with Einhorn's excellent analysis, that the AAA rating 'ain't wot it used to be'. The Raven remains short the NOK, and long some T10yrs, as well as long the WYE/PFE deal.

Thursday, 18 June 2009


L: 23% S:91% G: 114% N: -68%

Basically Swervin' Mervyn wants to limit the size of banks and split investment banks from retail banks a la glass-stiegel type law. Although this is going to be popular with the public it really misses the real point. The problem of "too big to fail" isn't going to be addressed by this sort of finger wagging nonsense, frankly Mervyn suffers from Trichet-itus, he's arrogant and likes to preach, he failed to control the money supply in the UK, did nothing about the housing bubble, was happy to manipulate inflation, was blind to the systematic risk, ignored IMF warnings on wholesale funding in the UK, wants to blame bankers with big salaries and a bonus culture (coming from a man with a cadillac pension, 100% job security and a large salary its pretty rich), failed to take action when Bernanke was busy making a real difference, dithered with NR so that we saw a run on a bank (how much that shook consumer confidence is anyone's guess!), all of this even when Blanchflower was being cassandra'd.

Bubbles will form, regulators won't spot them, its part of a cycle. Blathering about moral hazard isn't going to change human nature and credit cycles. There are some sensible changes to be made however:
1) increased capital requirements AFTER, with subordinate reverse convertible debt
2) removal of all restrictions by institutions on assets held by ratings
3) public sector pension reform, closure of all final salary schemes immediately
4) increased market to market requirements, detailed publications of assumptions on tier3 assets and a sensitivity report
5) no off balance sheet vehicles, all potential liabilities and funding commitments detailed and brought on balance sheet
6) encouragement (rather than legislation) of a CDS exchange
7) give shareholders more teeth, make it easier to remove board members (ie TGT Akman) in proxy battles, give shareholders a vote on pay, where a majority need to approve the plan
8) pension funds should give a clear accounting of fees, public education and awareness of the agency problem
9) wholesale reform of the health service in the UK, partial privatisation just makes Doctors rich without improving service
10) abolish the 50% higher education target, introduce a real apprentice program, get rid of nonsense qualifications and all funding of them, get rid of nonsense GCSE qualifications and 'hybrids' like GNVQs etc.
11) Cut the number of MPs to 100, quadruple their pay and remove all expenses.
12) publically flog Bob Crow, sack every tube driver, and employ all of those on the 2yr waiting list for the position on market terms and extend service hours on the tube.
13) give the olympics to Paris
14) remove the need for the executive to be run directly by politicians, Mr Darling is no economist and clearly neither was Crash Gordon.

Of more interest however is the change in the portfolio numbers for the Raven. He's become a lot more bearish, its summer and quiet in the market and the price of assets doesn't compensate the investor for the illiquidity risk. He's also done a little work on Punch Taverns (PUB LN), it raised ~£375mm in a share placement, knocking the shares down to ~107p, this is three legged dog with flees, and the more he looks at the business it appears the flees have flees. Just looking at a liquidation value of the business and marking the assets to a Raven estimate of fair market price means the stock is worthless, on an omptimistic valuation perhaps worth 10p for the optionality. The underlying business also faces a secular headwind in the decline of the public house, and this trend shows no sign of reversing any time soon.

The Raven likes RIO as a business, the BHP deal looks smart for both of them, although it removes the ability of any other party to come in and take them out. The rights issue should/could knock the shares off a little further, so its beady eye time rather than foot on the floor time.

He got nailed in the TNote10yr position yesterday from some not too clever trading, he's still long, with a chunky position but not feeling quite as clever.

Wednesday, 17 June 2009

L: 28% S:0% G: 28% N: 28% ~ $P 0%

Alistair Darling is supposed to be giving a speech this week where he intends to warn the BBA about speaking out against regulation apparently, he wants to make a point about 'sloppy board room practices'. 'tis a bit rich for a man incapable of correctly filing his own expense claim forms, 'tis a bit rich from a government unable to look after data, unable to constrain spending, that buys its own claptrap hubris. What would be welcome, rather than this "pitchfork populism" would be make boards and company management more accountable to shareholders. Companies and savers face two 'agent problems', ie. the saver hands over his money to a pension fund and pays a fixed non performance fee, this fund then hands this money over to a company management who again puts this to work for taking a semi performance related fee. For all the critism of bank renumeration strategies the media fail to see the wood from the trees, the biggest agency problem was with those investing in bank shares with savers money, the relative performance of hedge funds says it all. To cure this problem though is more than a matter of trying to regulate pension funds (a VERY bad idea, they're slow and rules based enough) but to get savers to wake up and smell the coffee themselves.

Tuesday, 16 June 2009


L: 66% S:1% G: 66% N: 65% ~ $D -1% $G 1380% $V 4% $P 0%

The Raven has been relatively quiet over the last week or so, the market has needed some careful attention, with lots of opportunities for short term trading (more short term than usualy for the Raven, several times intraday). He's also reduced some profitable trades taking some money off the table in some long risk long term positions.

He's found the 10yr Treasuries particularly interesting and has been jobbing these agressively from the long side, yielding a good level of risk reward pnl. The interesting change in sentiment this week has occured, commodities and the short USD trade is starting to smell like a stale trade. long SPX as well; looking to have limited upside and trading in a tight range, the Raven has a feeling the next move will be lower, although doesn't want to pay theta for this position (hence long the 10yr position).

On the macro front the economist was interesting this week with a special section on government debt, which the Raven is still yet to properly digest. Funny that the BRIC meeting today has been nothing but posturing, funny that given the fact they can't decide whether they want to talk the dollar up or down. The Raven understands the predicament, a stronger USD means more exports, it also means a positive MTM on their 'investments' of $3trn, however this just builds up a longer term problem. China really can't have it both ways, its got to have a free floating currency if it wants the US to borrow in it.

The NRG deal looks to be trading for a bump, whereas the WYE deal looks good value to the Raven at this level still.

He's also looking at RIO quite carefully.

Thursday, 4 June 2009

chart fodder

L: 88% S:12% G: 100% N: 76% ~ $D -12% $G 44% $V 1% $P 0%

This chart makes interesting viewing, given the long period of sideways movement between years 6 to 14. The Raven would also be interested to know what inflation was over this period and what the real returns would have been over that period of time. Politically it certainley smells similar with an increase in union power and political influence. It certainley makes the point very clearly that one should not be investing in such a way that he risk government theft, exposure to legacy costs, union demands, etc.

DDUP is trading above EMC's offer by 10%, thats a pretty heavy premium and implies a big comeback big from NTAP. The Raven has no idea at all what a rational price for such a business.

The Raven also notes the price action on the 200dma for the SPX, he expect it to trade rather technically in this region and it will certainley be interesting to see any reaction that pushes it away from this pivot on tomorrows jobs data.

Tuesday, 2 June 2009

well they did it...

The Raven hasn't posted for the last couple of days because frankly there hasn't been much to say, his portfolio hasn't changed, and the news flow is as expected, as is the markets reaction.
L: 86% S:13% G: 99% N: 72% ~ $D -13% $G 38% $V 1% $P 0%

Interesting stuff happening in M&A space, EMC has come in and bid $30 for Data Domain, which is ~20% premium to the previous bid by NetApp, more work and comment to come on this. To note though was that Data Domain was trading through the bid terms before EMC announced, so this was expected by the market, in addition its trading now through the EMC bid ~$30.5, indicating the markets looking for NetApp to come back with a counter. The Raven wonders where the top bid is and what makes sense for each of them, also the potential for antitrust?

On a similar flavour NRG is trading throught the EXC bid, perhaps the market is epxecting a bump, the Raven is long and will continue to hold the position as NRG looks like a pretty cheap asset.

and what did 'they' do? well they is the UAW, and yes they destroyed all shareholder value at GM, bondholder value and tax payer value. round of applause....

Thursday, 28 May 2009


The Raven very much agrees with Einhorn about WYE and PFE, the Raven has his largest position in WYE, its a cheap version of PFE given the merger. PFE looks cheap given EPS of $2 and a stock of $15 for a good quality company. Not sure what the catalyst is for owning PFE so the Raven prefers WYE as its going to carry better.

is this the same as a UK prepackaged bankrupcy?

If its anything like that then the Raven really isn't very impressed. How will the asset prices be determined? will there be an open auction? (doubt it!!!) how will the proceeds of the sale be handled by the bankrupcy court? what does that mean for the union contracts? who will own the new equity capital and provide financing? to the Raven this stinks, it sounds like a way to bend over the bondholders and sidestep contract law, funny what was it that the President Obama studied?

Intraday vol is pretty interesting here, the Raven feels like his performance is well hedged even though the greeks look like he's long.

Einhorn likes buying gold, he's a smart cookie and the Raven will probably be eating his words, but he doesn't buy the inflation story. The amount of wealth and capital sucked out of the system added to the excess capacity that's been build over the last couple of years and is still coming on line just doesn't make an inflationary environment. Saying this the Raven believes that the dollar vs RMB does have to revalue, so consumer price inflation may well rise in the US as chinese goods become more expensive and US exports become cheaper. If its a backdoor short of the USD then it makes sense. It adds a little more to the EUR/USD story.

Wednesday, 27 May 2009

some interesting numbers

L: 83% S:37% G: 120% N: 46% ~ $D -37% $G 16% $V 0% $P 2%
In this article the Raven thought it was particularly interesting to look at the size and scale of the medicare and social security nettles that future tax payers will have to grasp. These numbers are enormous, as are the pension liabilities that the public sector has built up in the UK, there needs to be radical reform ASAP. These numbers look even more worrying given that ~100% debt to GDP ratio in the UK and the worry as to what an increasing tax burden will do to long term growth rates in the West.

Interesting to watch the turnaround from yesterday's consumer confidence numbers continue today. As expected with the rally vol has come off a little and some of the higher beta names have outperformed. The Raven remains cautiously invested at this point and is again paying away theta, with the risks in the portfolio minimal at present, in fact the Raven thinks the portfolio doesn't have enough money making potential and so is looking for new ideas today.

The Raven would make a bet that its Fiat that ends up with Opel, but not in a particular rush, the German's don't really want to deal with this issue before the election, especially if there are any ugly job cut details that would have to be public. Shock! GM bondholders didn't accept a 10% stake in the company, funny that!

On the world political stage its important not to overplay the importance of N. Korea, they are isolated and the Raven is sure that the Chinese won't let them throw their toys out of the cot too much right now. Ok the threat is scary and very real within the region, but it shouldn't be too much of a demand shock for the rest of the world to deal with given the export driven nature of the SK economy.

Tuesday, 26 May 2009

turnaround tuesday

L: 78% S:43% G: 121% N: 34% ~ $D -43% $G 14% $V 0% $P 2%

Very interesting to watch the markets complete turn around on the back of the consumer confidence numbers, going from being down 1% to up 1% today in very short order.

Interesting as well to see the EUR SPX correlation return today, although still at a distended level.

The Raven bought some VOD today, although a boring defensive and with a reduction in revenue going forward because of roaming charges, it still looks cheap enough and at a decent technical level to make it a small trading position.

Friday, 22 May 2009

they cannot be serious

The Raven really shouldn't be shocked at this, but he is. Does the Treasury honestly believe their own bullshit? Saying that you won't release stress test results because they'll increase instability is perhaps the stupidest thing he's ever heard!! A statement like that is panic enducing at the very least, perhaps these idiots should be honest with themselves and the public. We don't want to release the results because we're afraid that it would show exactly what state the UK banks are in (the Raven thinks that the results would show that the banks are in an ok position *pure speculation*), but would also make it chrystal clear that the Goverment has lost a bucket load on their "investments" and would be a rod for the opposition to beat their raw backsides with.

The bond sell off yesterday should really increase the demand for the USD not decrease it, there's something wrong with the Raven's thinking. hmmm.

EUR/USD and SPX correlation

The Raven is looking for reasons for a breakdown in this correlation, more on that later.

Interesting to see the UK moved to watch negative for its government debt rating yesterday and speculation that it could lose its AAA status as debt/GDP approaches 100%, this has triggered speculationt that the US would lose its AAA status at some undefined point in the future (big effing deal - of course one day the US will lose that status, but if thats in 1000 or 200yrs makes little difference to us today).
what a surprise, Geitner and the muppet show couldn't value or trade against a tiny bank even though they have the ability to retroactively change the law.

Thursday, 21 May 2009

unintended consequences

L: 78% S:49% G: 126% N: 29% ~ $D -49% $G 12% $V 0% $P 3%

The Raven has to very much agree with the sentiments expressed in this piece by Schultze. The Obama administration in its lust for "change" has crossed the line and set a dangerous precedent, much as the UK government did in calling for Goodwin to give back his pension, the congress in the US did with asking AIG employees to give back their bonuses, etc. Politicians have to respect the rules of the game, just because their jobs are pathetically reliant on short term populism and the lowest common denominator of the electorates intelligence does not mean that they can tear up the law whenever they chose and impose retrospective measures.

The cost for this sort of action is much higher than their inability to honestly file expense claims. It is simple game theory and rational expectations, if a player doesn't know what the rules of the game are going to be, but realizes that when special interests are threatened then their private property will be stolen to bribe and payback favours then they will have to have a much higher investment threshhold. Additionally they will appropriately have to reduce their lending to reflect the much higher loss potential from each loan. Its disgusting that the unions who have no capital to lose, who's unreasonable demands and legacy costs have destroyed so much value, who were offered equity in the firm the LAST time it was restructured and bailed out by the government are going to be the main beneficiary again?!?! WTF!! The electorate moans and castigates private capital when it attempts to influence the political process, yet unions that destroy firms and jobs in the long term enjoy a priveledged status?

The Raven is never going to invest long term in any business with legacy costs or any rotten union, not even in terms of liquidity provision, arb trades, etc.

Wednesday, 20 May 2009

some new positions

L: 92% S:0% G: 92% N: 92% ~ $D 0% $G 0% $V 0% $P 0%

based on some of the work that the Raven did yesterday, he's put on some new positions that he likes, although this is skewing the portfolio rather heavily to the long side, especially as we appear to be approaching the top of the SPXs trading range. Given that vol has crunched so much on this slowing rally, he's going to look at some put spreads as a way to increase his protection on the downside as its more than plausible that we have a retest. The optionality and liquidity that the downside puts give the portfolio, although costly over the last month enable the Raven to trade around the portfolio without losing too much focus on overall market direction.

He's annoyed that he didn't put on his PG vs JNJ spread that he looked at on Monday as its moved back towards fair value on his technical model.

Still more work to do in terms of research and he'd also like to have a quick review of his start of year predictions, as well as making some new ones.

Its also interesting to have heard Jack Welch's comments with regard to the Chrystler bankrupcy. The Raven has said this before, but he'll say it again, its clear that the Obama administration don't understand fiduciary duty at all. Secured creditors didn't get funded by the unions in a presidential election, so why should they give up 55% of the company when they are SECURED CREDITORS? Joe Biden even said 'we owe you' to the unions, and boy!! have they paid them back. If this was any special interest group representing a business interest the liberal media would be calling for a march on Washinton with pitch forks.

Tuesday, 19 May 2009

start of the summer?

The Raven's not made a trade since the last post, apart from being stopped out on the EUR position as it had a very tight stop.

He's been working on a couple of things although he's nowhere close to pulling the trigger;
1) Mastercard and Visa are interesting businesses, but the Raven really isn't sure what's a fair multiple, especially in this market
2) AYE looks very interesting from a fundamental view point - but he's really behind on the news flow in this situation
3) NRG-EXC, a very interesting situation, he's now on top of the deal news, management dynamics and that score, he's not so down with the valuations of the firms and the fundamentals of the business
4) TGT - he gets BAs (Bill Akman's) ideas i)management haven't done a great job ii)RE (real estate) doesn't look like its valued iii) TGT management ballsed up the credit card part of the business, however, he's not sure how well his proposals will actually be received. He's spot on in terms on incentives and his letter is very persuasive when he compares his 5 independant board nominees to the encumbents ie a) 30yrs of grocery experience vs marketing b) 30yrs of building a credit card business to banker who botched managing firms funding risk c) commercial real estate manager vs aussy telco exec??? d) 7% owner of the firm vs 0.1% LBO chap e)Prof of Law and Business at Stanford and Columbia. Saying that RiskMetrics came out in support of BA. The Raven still wants to do some more work himself, but it does look interesting.
5) IGT looks ok as well so far.

Oh and he wouldn't mind an general election being called in the UK. He's got a small punt on that there'll be one called before the end of the year at pretty decent odds, even though he thinks its only a small chance. He can see several ways that this comes about, Labour get smashed in the EU elections, the party chuck out Brown, new leader comes in and he's got to call an election as two PMs not elected in a row would just be unbelievable. He also thinks that the speaker resigning has taken a little bit of the sting out of the expenses scandal but not enough to make this go away - he still thinks this could just fester on to the point where it becomes essential for the government to call an election.

Other than that and the mountain of research he's trying to do the Raven has been very quiet, he can't see the macro picture changing too much with the bank holiday weekend coming up in the UK and the US, vol's getting crushed and thats probably fair as we've entered a bit of a range trading market, although he's noticed a pick up in his residuals momentums.

Monday, 18 May 2009

L: 58% S:0% G: 58% N: 58% ~ $D 0% $G 0% $V 0% $P 0%

Very little change in positioning of the portfolio, the Raven has increased the short EUR position, but is also keeping an eye on JAVA and WYE as they look at attractive levels still and he'd be happy to increase his position if market risk got sold off aggressively.

Its also interesting to see this: which is not only embarressing but also makes one wonder about the independance of the organisation?

Oh and the Raven would like to add one to the current forecast for unemployment by the end of the week as Michael Martin joins the queue at job centre plus.

Wednesday, 13 May 2009

L: 58% S:0% G: 58% N: 58% ~ $D 0% $P 0%

The Raven has trimmed some of his positions and had a decent day being rather short EUR/USD, he's increased the WYE/PFE spread to a 42% position for the portfolio, but with a hard stop of 10% max loss on the position so a portfolio loss of 4.2%, which remains below the max 5% loss on a single position hard limit. The portfolio numbers above don't represent real beta as the portfolio is almost exclusively in M&A cash deals and special sits with little to zero beta, given the EUR/USD correlation to the SPX and the way the portfolio is 'quacking' right now the Raven believes he's slightly short but by his own stats approx net 10%. The market feels soft, there doesn't seem to be too much talk of a reversal and the financials seem to be leading the move lower so the Raven might look to put on some beta shorts if this move picks up momentum given his natural conviction that we'll have a retest of the lows. And to be fair, 'tis May, sell and go away and all that...

It was good to see that the Ford stock sale got done yesterday, although at a lower price $4.75 vs what the $6 target, the stocks trading up today (to be expected given the size and profile of the deal).

Cameron just made himself the Prime Minister of the next government in the UK yesterday, it represents a real change in perception by the public, from being a 'caring conservative' who's a bit too wet and wants to hug hoodies they can now picture him as a leader taking action rather than asking for another committee and year long enquiry, blaiming the system and trying to say the expense were a global crisis, oh sorry they've used that excuse for something else already.

Tuesday, 12 May 2009

life jackets

oh what a shock, GM board selling all the stock their own. schimples. 10% for bond holders? gee thanks guys...

EU stress tests?

L: 58% S:0% G: 58% N: 58% ~ $D 0% $P 0%

The IMF is looking to the EU to stress test the whole of the banking system, rather than individuals. This sounds like a VERY stupid idea to the Raven, its the opposite of the US idea and would only have a negative result. The US at least structured this as an idea not to pass or fail banks, but to work out how much each bank needed in capital to top it up and already had a back stop plan as to the fact that the government would do it if it wasn't done with private capital. Who would play this back stop role in the EU, politcally that just doesn't fly in Germany and the French don't look like they're going to play that role either, the UK can't, etc.

The Raven has put on the JAVA m&a spread at this level, it looks pretty decent at 24% pa, although it might soften up some more, he's still got powder dry to triple the position if it gets more juicy.

He's taken off a little risk in DB1 after it outperformed on numbers.

Interesting that Ford is selling stock today, it'll be interesting to see how that trades going forward, they're still in a good relative position, its also good to see the UAW not getting a chunk of stock as well.

TGT is on the Raven's focus list and he's been picking over Bill Ackman's comments.

Macro wise he's bearish the EUR, but is waiting for price action before he puts the trade on. Interesting to see the SPX correl as well.

Monday, 11 May 2009


Interesting to watch the JAVA m&a spread trade. Friday JAVA opened down big time on because they'd 'may have broken a law prohibiting US companies from bribing foreign officials', Oracle came out and said that they knew this before they agreed to the merger, so Friday the stock opened as low as 8.77 (annualized spread of ~35%), then traded all the way back up to close at 9.14 ~15% a.s. Its interesting to the Raven as the price action looks a little weak this morning in early trading. Its at 9.06ish now, which is at the return threshold for the Raven, given that JAVA picked ORCL because of their ability to move quickly, get the deal done because they knew the firm, this would indicate that its not really new news as such and perhaps the price action and rumour knocked out a few weak hands that stuffed the rest of the market with a chunk of paper? it'd be nice to have a look at the merger agreement in more detail and see whether this is explicitly excluded from the MAC clause, particularly if one thinks that the market could well have a sell off from here and that a spiv might want to renegociate the price down (the Raven doesn't think that's really Larry Ellison's form though).
L: 49% S:0% G: 49% N: 49% ~ $D 0% $P 0%

The Raven has a couple of interesting price points, it looks as if the EUR has run out of steam and could have a decent reversal, with a similar price action developing in the SPX.

Its rather ridiculous that banks are raising money to pay back TARP funds, given the FDIC insurance that they will still receive for their debt, they should forgoe those guarantees if they are paying back TARP. To be fair to these banks, if it wasn't for the retrospective action of the Geithner and chums then it'd be a much clearer stable situation.

Happy Birthday Bill Ackman, he was on CNBC today talking about TGT, he came across as very reasonable and his proposal to put up 5 new board directors seems sensible and in the interest of the shareholder. His proposal for Fannie and Freddie also seemed like a really good idea, all in all the Raven rated him as sharp cookie.

Wednesday, 6 May 2009

back in the saddle

L: 98% S:7% G: 106% N: 91% ~ $D -7% $P 0%

The Raven is back in the saddle after the long weekend, with a quick update to the portfolio, he's added some risk in the form of Deutsche Boerse, EMC, Ladbrokes and IP2IPO. He's not added to his collection of worthless downside puts as he's 'invested' enough premium in those for the last couple of weeks. It does however feel as if at least the market has run out of a little steam.

He's also been picking over the M&A space, the Wyeth deal looks attractive enough at a 20% IRR for the position, he's put on a small position and is doing some more work on the deal, but at first glance it looks attractive enough. He's also sure that he's making some sort of mistake with the PepsiCo bottling deals, they seem to be trading for a bump? not sure how that one works, given the size of the stake that PEP already owns and that the company is doing this opportunistically it doesn't make sense that they would entertain raising their offer or being strong armed? he's not got the stones to short the deal as the upside isn't there given the kind of event risk & he's got a feeling that he must have the deal terms wrong.

Thursday, 30 April 2009


Does the US Federal government really think this statement is an acceptable way of doing business? The Hedgefund lenders that are holding out have absolutely no reason to play ball, if this deal is anything like the deal that the Treasury expects GM bondholders to take then why on earth would they? How can Union's liabilities be paid at almost twice the recovery rate of a senior bondholder?

"failing to act in their own economic interest and that of the nation"???? they have a fiduciary duty their investors, they have zero responsibility for employment and politicians approval ratings, they are legally bound to act in the interest of their investors and if that requires going through chapter 11 restructuring then thats the way the cookie crumbles. The whole point about being a lender and not having equity like returns and optionality is that you are first in the queue when it comes to bankrupcy, why is it that politicians believe we can chuck legal procedures, property rights etc. out of the window??

au revoir Mr Lewis

L: 4% S:5% G: 9% N: -1% ~ $D -5% $G 357% $V 3% $P 0%

The Raven did have to chuckle, how the mighty have fallen, and rightly so! Ken Lewis made a very poor decision to buy MER last year, the price he paid, the lack of due diligence and the sneaking suspicion that he was trying to keep up with the Dimons make it all the worse, its not like CFC looks like a great trade now either. To try and cry off saying that he wanted to invoke the MAC (material adverse change) but got bullied by Bernanke and Paulson just doesn't wash. If it was damaging for the shareholders of BoA he should have used the clause, regardless of the the potential for Paulson to sack him, he has a fiduciary duty to shareholders above that of keeping his own job. He also had another potential path where he could have told shareholders of the Q4 loss at MER and insisted on completing the deal. He also could have renegociated, frankly the price he offered at the time was madness and represented an enormous and undeserved coup for Thain. He attempted to claim the glory for the income MER brought in for Q1, the Raven is pretty sure with this selective responsibilty and shameful self interest he has a long career in politics ahead of him.

The Raven is pretty sure Crash Gordon would find a place for him in his cabinet if he were British. Its funny that nobody questioned GB's cost of the Gurkhas? £350k per head? eh? did he get the treasury to make up the number, sorry ahem "forecast" that number? The Raven finds it absolutely shocking, shameful and baffling to understand GBs attitude and behaviour on this matter, it frankly shows how out of touch he is to think that there is any public support for his behaviour. It appears that there is only space for the pencil pushers, scroungers, lazy civil servants and MPs at the state teet, rather than honourable men that served the country.

As readers can see the Raven has dumped his portfolio as he's away for a long weekend, this rally also looks like its gone way too far. There was a brilliant point made by Macroman's blog, stating that we've moved from pricing a depression (since Nov) to going back to pricing a recession, the Raven thinks he's spot on, the charts agree. He's still long EUR, but thats technical, long term he'd be short EUR as he finds it impossible that rates in the EU will pick up any time soon.