Tuesday, 3 February 2009

Snowed under

Its been an interesting week with a lot of volatility, consequentley there are a lot of random thoughts bouncing around with plenty of work to be done:

1) Great article in the Economist last week mentioning that the change in US accounting rules that means companies have to make changes to goodwill impairments fits well with my hatred for acquisative companies and has been a one of my favourite trading themes (ie. looking for leveraged firms with lots of goodwill on their balance sheets that have seen high growth in ebitda enable >7x leverage).

2) Protectionism is on the rise, frankly the 'xenophobic undertones' to the current strikes in the UK are frightening and deeply disturbing.

3) The Raven thinks that buying some upside vol on the SPX looks to be a very decent risk reward trade at this vol and spot level, the market feels relatively calm with decreasing intraday ranges - this sort of ghostly silence puts the Raven off buying the market outright. Downside put spreads also look like a potentially good place to insure.

4) Gold - ugh. 920 being the current high has been painful to the portfolio, the Raven still doesn't get it; the market seems to be pricing this instrument as both the inflation and deflation hedge, wtf?

5) Interesting to see MSFT lead techs higher, after terrible results this looked cheap all of last week and consequentley the Raven took a large trading positiong that was trimmed a little into the close, the Raven still remains long. Interesting that on the same methodology CVX looks cheap, although after BP's numbers today it seems far more of a gamble, the risk reward ratio just looks all wrong.

6) The Raven has to crow over flipping his short JPM to a long, although he's trimmed it right back he thinks that it remains a decent long term play, although its always nice to have room to play the range. There appear to be a few big winners that emerge from this banking crisis and he believes the market is now starting to price this in; GS, JPM and WFC (not exactly in the same space), HSBC, Barclays, LLoyds should come out this with a higher market share, sure the pie is a lot smaller - but its about the absolute slice of the long term pie. The risk of over regulation also appears a bit more remote as we have seen how slow the governments appear to be to actually do anything positive in terms of bailouts, it doesn't appear feasible that they'll react in a hurry on regulation. Oh and Jamie Dimmon bought a boat load of stock ~$22...

7) DOW chemicals, shock horror, after dumping its M&A deal, with the hint of them not being able to get the financing done. est eps was -.06 actual was -0.66, now that ain't got no alibi...

8) The Raven currently looking to find some smart ways to express the central macro theme of declining trade, he tried and made a pig's ear of RIO last week, so its back to the drawing board.

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