Thursday, 12 February 2009

thursday thoughts

L: 26% S:24% G: 50% N: 2% ~ $D 2% $G 6% $V 0% $P 0%

The Raven has been relatively uncertain and has been putting on trades and cutting them half an hour later, paying the b/o spread and commish and thats about it.

The portfolio is theoretically net 2% long, Raven thinks its more like 10-15% as he's long JPM after the 4% fall this morning, against this is his favourite short. Jamie came across very well yesterday and it appears that the memembers of the house were a little more careful when questioning him, especially when you compare his q&a with that of Ken Lewis. Given transparency for the small investor remains opaque the Raven likes JPM vs the rest of the market because:
1) Dimon seems in control, respected, determined and made good decisions going into this crisis. The purchase of BSC with the FED backstop doesn't look that bad, the FED take the risk of losses from the assets and JPM get the building, the PB business and some useful IB desks, thats not a bad trade.
2) I think they have one of the stronger balance sheets in the USA
3) They seem to be truly diversified rather than Citi.

Oil's taken a beating and the Raven has been lucky to avoid the oil majors and E&P companies, they have been flashing up as the cheapest stocks in his non-financials universe. The reason for avoiding them has been simple, the trend in oil has been very negative and there is no need to be a hero, its not like he's going to need to buy $bns of stocks, so he can be nimble (sometimes he wishes he'd remember this lesson for all stocks a little better!), but also that oil has tracked Chinese demand and the real US economy very closely, whereas the stock market has been a leading indicator oil has been concurrent. Thus the Raven feels the point to buy oil stocks will come when the market as a whole really starts to rally and they get left behind somewhat.

The Raven has missed out a couple of good shorts this last week because he's been nervous of a strong rally or exogenous news flow. This has been irrational as he's bought his upside 'protection' and should treat is as such. In general he thinks that vol is probably a touch too low given where stocks are.

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