Tuesday, 31 March 2009


L: 8% S:52% G: 60% N: -43% ~ $D -32% $G 23% $V 0% $P 5%

Hilarious that Crash Grodon is going to be given a lecture on values at St. Paul's Cathedral, perhaps he was inspired by this lecture he recentley received? http://www.youtube.com/watch?v=94lW6Y4tBXs&eurl=http%3A%2F%2Ftimesnews%2Etypepad%2Ecom%2Fnews%2F2009%2F03%2Fdaniel%2Dhannan%2Dthe%2Damericans%2Djust%2Dlove%2Dhim%2Ehtml&feature=player_embedded
Perhaps nobody told GB that April fool's day is tomorrow? They certainley didn't Sarkozy, threatening to walk out of the summit if he didn't get what he wanted? what next, is he going to stamp his feet and cry if he doesn't get to talk force?
The Raven is also shocked at how much public support there is for increased hedge fund regulation, while he understands that this is guided by those bright and well informed politicians it should at least raise the eyebrow of public. How many hedgefunds have had to have government funding? insurance? equity investment? ahem. It is then somewhat incongruous that upon noticing that the part of the system with the least regulation survived the best and we would wish to extend regulation into that section and hold it somehow responsible?

The Raven closed his HSBC short. Increased his gamma by a smidge and remains cautiously short. It is quarter end today and year end for some Japanese banks so it might be an interesting afternoon trading.

Monday, 30 March 2009

follow through

L: 8% S:80% G: 89% N: -72% ~ $D -40% $G 12% $V 0% $P 4%

Its an interesting start to the week, and it appears that we are following through on the sell off we saw start on Friday. Its quite pleasing that the Raven is hearing this being called 'profit taking', those speculative longs and those that have covered their shorts are still in there so the pain trade might actually been a really quick sell off to retest the lows.

AT&T and HSBC is still a core short for the Raven. Its been said before but Barclays and the UK & US banks are really just trading like a call option on underlying assets, the % moves have been pretty wild, BARC last week is a cracking example.

Rick Wagoner is now a former CEO of GM, thats eight years of driving the business into the ground. The Raven has bemoaned unions before, but really wants to vent again. The notion that the unions would have a higher recovery rate on GMs liabilities to them than that of a senior debt holder is an insult and an utter disgrace. How on earth is it acceptable that they are still in such a strong negociating position? by bribing politicians ahem, sorry making political contributions. They successfully killed their own jobs, as is the inevitable conclusion of all unionisation, by insisting that they were paid over market rate and were recipients of outsized pension and health care benefits they weakened their own firm. The Raven can accept that unions were a necessary evil in the previous century due to the lack of mobility of both labour and capital, but they are now redundant. Any good that they can do in the process of worker protection (both financially and in terms of health and safety) can only work if it is applied on a global scale.

Soros was running his mouth again this weekend about the UK, perhaps he should write another book?

Friday, 27 March 2009

blue eyes?

L: 12% S:54% G: 66% N: -42% ~ $D -30% $G 15% $V 0% $P 3%

Brazillian President Lula looks like a bit of a fool after his comments, apparently the whole crisis was caused by "white skinned, blue eyed bankers" in the West, who thought they knew everything, but have shown the world they know nothing. It'd be funny if it wasn't coming from a Brazillian premiere, they've just got to thank their lucky stars they've got lots of cheap iron ore that China wants. Ironic that South America has lots of dollar denominated debt. Not that the Raven is at all suprised by the cool headed rationality of politicians.

The Raven hasn't had too much to trade, he's been caught a little short and wrong, he's not prepared to cover as he thinks most of the other shorts have been knocked out. On the other hand its a large macro bet to be making given the economic data has been slightly better than forecast (in reality just not as bad, rather than good) and perhaps this will come through in the next quarters earnings. It does seem odd that the market focussed on the Feb numbers and forgot that Jan had massive revisions down, it really does indicate the sentiment at the moment. It would be odd not to have a retest.

The G20 meeting next week could be a real negative for the banking industry. Each country seems to be coming up with new ideas for regulation, this heterogeneity of regulation is an appauling idea. The unintended consequences of having poorly thought up regulation will sow the seeds of the next crisis or shackle economic growth in the long term. After all there is a guaranteed way to stop busts, and that is stop all growth and economic activity.

The Raven has an eye on Vodafone, it looks cheap and defensive and just hasn't participated at all with this rally, he's put on a small position but would like to really increase it if it starts to move.

Oh and the buzz is that Barclays "passed" their stress test and won't need more capital. Perhaps, thats still going to be dependant on the actual path of asset prices. The Raven is playing around with it at the moment and the valuation range is huge.

Thursday, 26 March 2009

L: 5% S:58% G: 63% N: -53% ~ $D -34% $G 13% $V 0% $P 4%

The rally in oil continues with spot looking like its going to hold above $50. Its got a long way to go before it catches up with gold's inflation and risk premium. The E&P firms still look like the "cheapest" (its highly sensitive to the long term average price of oil) firms in the market, although they've not moved up anywhere near as much as the financials have in this rally.

As any readers who watch his risk numbers will note, the Raven has bought some options (1month upside calls and some 2m downside puts). Again this is more of an action hedge so that he doesn't chase the market, the upside calls look far too cheap given the nature of bear market rallies, in addition the downside puts like he's buying them at cost, for sure he's going to be spunking some cash on theta in the next few days, but its better than doing it over trading and then being reluctant to get into a real move.

The Raven has also taken off the majority of the HSBC spread on yesterday's close, it might well have more to go, but the risk reward just doesn't look as cracking as it did. He's also added to his Ladbrokes position, the stock has held up well when the markets tanked and participated mildly in the rally, its ratio of idiosyncratic risk to market risk is also a bonus. Its also dirt cheap, its sales bullet proof and its been trading well.

EUR/USD really looks stuck at this resistance level, the chart looks like its going to make another big move higher, but its pretty hard to see what the catalyst will be.

The Raven has to admit to having read the evening standard yesterday and was quite disgusted with one story in particular. It was a two page spread about some crackpot called Knight, who was planning protest for Wednesday with slogans like 'eat a banker', he'd been making guy fawkes type figures to hang from lamposts. He was also quoted as saying that he doesn't have any problem with forcing their way into buildings and that damage to property was acceptable.

This comes after yesterday's news that Fred the Shred's home had been vandalised. I'd like Gordon Brown and Obama to make a public apology for whipping up this maelstrom of confusion and hate. While the Raven acknowlegdes that when something effects a large number of people they will always look for a "cause" and somebody to blame, he would have hoped (however naively and idealistically) that politicians would look to calm this, rather than encourage it and point it in a direction.

Economic cycles happen, recession are a natural consequence of growth, we are all equally culpable, from the speculative buyers of houses, to the business without enough working capital or poor inventory management, to the credit card company, BUT especially the consumer. Financial intermediation didn't make people have two holidays a year, it didn't make them buy a huge plasma telly, it didn't make them buy expensive clothes and go out for dinner twice a week, it didn't make them buy a car. No politicians or public figures have the balls to stand up and say it though. If anyone is to blame in the financial world its shareholders short termism, and those looking for retribution and punishment should perhaps look at the return on investment those shareholders have been given. I'd say loosing your entire investment is better than a public flogging.

Oh and a 40yr gilt auction failed yesterday, yawn! anyone that has a 40yr liability and some cash sitting around? uhm no, perhaps thats the reason. It reminds the Raven of a great phrase he heard the other day. "The world ends only once, so its probably best not to trade or live like its always going to happen tomorrow".

Tuesday, 24 March 2009


L: 8% S:28% G: 36% N: -20% ~ $D 0% $G 0% $V 0% $P 0%

Its interesting to see the difference in the RPI and CPI in the UK today and how much of that is caused by increasing food prices. This is surprising given the inputs to food pricing. It was also interesting to listen to Swervin' Mervyn today explain how they came up with the £75bn QE number from, in that they were just looking to increase the money supply by 5%, also interesting to note that he wasn't sure what multiplier should be attached to this injection of money, he even implied that it may be <1. Its interesting to see where EUR/GBP is trading given that. He also reiterated how much global trade had fallen. He did make the Raven laugh though when responding to a question from the committee : "what's the difference between QE buying assets and printing money and throwing it out of a helicopter?" (paraphrased). with a look of shock "uhmmm because you get the ASSETS????"

The Raven is cautiously short, he knows that its too early, but a 7% rally seemed a far too large a reaction to a plan that most market participants had already heard of?

EUR/USD looks like an interesting level again and the Raven is keeping involved short term which has been profitable.

Its also nice to hear that GS wants to return governments money ASAP, and they are outperforming today. You've got to think getting the government out of the running of their business is a real positive given the quality of intellect in the US congress.

Monday, 23 March 2009

L: 1% S:14% G: 16% N: -13% ~ $D 0% $G 0% $V 0% $P 0%

The Raven is currently rather confused about the price action we are seeing this morning. He's happy to sit back and wait.

Friday, 20 March 2009

L: 16% S:35% G: 51% N: -19% ~ $D 15% $G 1% $V 0% $P 1%

Even though its triple witching today, the Raven doesn't expect too much to happen today, he's still going to be interested on the action on the close though as its not a bad indicator of how the quick money is positioned, ie. move up into the close and the market is short, or vice versa. Its been a good week for short term trading and the Raven has been slightly lucky to have caught the big move in EUR/USD and a couple of large short term spx shorts which took the beta in the portfolio to -250% yesterday. With the Raven's growing confidence he's scaled back as it always seems to be the time you take the biggest whack.

Obama came across as a complete fool and showed his lack of knowledge and grasp of the detail. He implied that their were individuals at AIG that expected to be paid $100mm each? how on earth can he claim to be on top of the detail? Geithner was the regulator of AIG, he's skating on thin ice with his grandstanding, he signed off on the deal. The fact that the US is looking to pass retroactive laws to undo contractual obligations is nothing short of disgusting, slimy and shakes my confidence in the US legal system. With a president going on chat shows and congress responding to mob rule the Raven can only hope that the supreme court remains the check and balance in this sorry story.

Thursday, 19 March 2009

sorry i didn't include the key to that chart, ie. the green line is the 30s depression, the red line is the current recession and the other two are the bursting of the tech bubble and the 74 recession.

a bit of context

Its interesting to notice how much we have rallied here and market exposure now appears to be a gamble on whether QE works or not. There is a lot of commentary that QE has never worked in "200 years of policy history", the Raven doesn't think that historical comparisons really are that valid given how rapid the FED's reaction have been, or the size of this action. Ben's Big Bazooka may well have the capacity to unblock the U-bend, we are still going to be reliant on consumers to change their risk appetite, be they in Asia or in the US, we are going to need to see a change in demand. With unemployment already ~8% its a hard call. Given all of that of course the market is going to lead. Its also interesting to think that this Bazooka is $1trn, given that China's was $2trn over the boom.

The Raven is also pretty sick of people calling this 'printing money', ultimately its an asset swap, the Fed pays out $1trn but gets $1trn of assets onto its balance sheet, yes its improving liquidity and repricing risk, both of which are really second order effects.

The Raven remains short of HSBC, although he covered a little clip first thing this morning as it traded lower on weaker demand in Hong Kong. BARC and JPM have massively outperformed.

Jobless numbers could be interesting, although the Raven doubts it, especially given the noise and adjustment in them.

The Raven is keeping his beady eye on the EUR/USD given its proximity to the 200d ma.

Oh - and what the hell is Obama doing going on Jay Leno tomorrow night? It is disrespectful to the office and a real shame that he is prepared to devalue the status of the President of the USA in order for a small boost in the polls given his already high approval rating.

L: 28% S:45% G: 73% N: -16% ~ $D 27% $G 2% $V 0% $P 2% (just in case you thought that the Raven might not be keeping himself honest)

Wednesday, 18 March 2009


L: 34% S:41% G: 76% N: -7% ~ $D 33% $G 2% $V 0% $P 3%

The Raven had a relatively good day given his large equity short pre-Bernanke. The size of which was enough to get the bulls excited again. There hasn't been a negative voice on TV for the last week, with plenty of talk about new buyers coming into the market, and the need not to miss this opportunity. The other point of interest is the number of comments on the valuation of the market and increasingley bullish expectations for Q1 earnings. This relative euphoria makes the Raven bearish BUT yes valuations are cheap, especially vs 10y treasuries, yes Bernanke is chopper Ben and he's going to save the day therefore the Raven is going to stay close to shore and keep the outright risk balanced or appropriately small/short term.

Oracle came out with .35 eps vs the streets .31 estimate, they noted that if it wasn't for FX moves they believe they'd have done .40 for the quarter. They've also started to pay a .05 div for the first time ever, stock was up ~6% after market.

Rather fortunately the EUR/USD positions paid off more than enough to cover the loss on his stocks today. We are now back at the 200d ma and the Raven has taken the position off, as well as flattening his delta. There could well be some follow through, especially after the move in 10yr rates ~ 3% -> 2.5% is huge, but its not like QE is a surprise, or something the Raven wasn't expecting from chopper Ben.

too early

L: 28% S:72% G: 100% N: -44% ~ $D 27% $G 2% $V 0% $P 2%

On balance the Raven is pretty bearish short term so has taken some pot shots at his favourite shorts, 776 has been a decent resistance level with the top of the bear market rally being 800 if the Dow in the depression is any sort of guide. Currently he's hedging this with some upside calls in the EUR/USD (more on that later today), although he must say he realizes how crowded this trade is right now it does balance the short beta a little bit.

The FSA banking "revolution" today is just going to be hot air, he doesn't expect that much new news from Bernanke either.

Tuesday, 17 March 2009


Interesting little article today (the Raven thinks it was in the FT), in short it was highly critical of how much whining coming from the Aviva CEO with regards to short selling. He had almost suggested that the 30% fall in his stock on results day was due to the evil HedgeFunds. Funny that the short interest the day before in the stock was 1% of the market cap, the day after it was ~2%, hardly the reason for a large cap stock to fall 30% now is it! He's also apparently been approaching other firms to suggest that they no longer lend out their stock. This is a very bearish sign to the Raven, if the guys running the firm are busy chasing their shadows then they don't have their eye on the ball. He's not done any work on the firm so has no real long term view though.

There has also been some chatter about the effect of suspending market to market FASB rules in the US, now that is frothy, there is no way that should be helping the market!

time to put the jack back in the box?

L: 19% S:25% G: 45% N: -6% ~ $D 19% $G 2% $V 0% $P 1%

A couple of things have caught the Raven's eye this morning. It appears that the SPX didn't manage to break the 776 level last night and got whacked into the close. Thats a really really ugly technical signal and was the top level the Raven was looking for in this rally. Interesting that the UK financials are a little lower at the start of the day. The Raven is tempted to climb in there and pile on some HSBC shorts, but he'd like to see the price move a little more as the borrow is quite high so the timing has to be spot on.

Interesting to note though the amount of fuss over AIG FPs bonus payments, funny that this becomes the political scrutiny rather than the payments made to states, or those to European banks. Obviously they were the point of the rescue, but the $100bn payoff is a lot more important than the $0.1bn retention bonus. This is not to say that the Raven thinks that this cash wasn't necessary as $100bn of counterparty risk could have really damaged the system.

There is talk about Geithner announcing a 'systematic risk' regulator, sounds like a complete load of nonsense. The G-20 grandstanding was a complete waste of time, the world's political elite have stood by and failed to grasp that Paulson's initial plan was the best idea we've had and we are going to return to it now. Obama's first 50 days have been wasted, the fact there are something like 17 (the Raven thinks it might be 19) full time posts unfilled at the Treasury, that the UK have complained that their calls to the Treasury have remained literally unanswered is an absolute disgrace. Especially after making the economy the central issue upon which he campained, its not like he had to take power the day after winning a shock victory. Far better to kick up a public storm over retention bonuses, stuffing the stimulus full of pork and spend the time wagging his finger at the previous administration than actually get down to business.

Monday, 16 March 2009

sprung springs

L: 31% S:16% G: 48% N: 15% ~ $D 21% $G 2% $V 0% $P 1%

What a strong rally we've seen with a huge move in BARC today ~ +20%

The Raven has reduced his beta and his risk and really is a bit confused as he expected he would be if the market traded up here, hence his preference for optionality. He continues to like his core positions and using this low risk time to look for some new ideas...

more to come later.

Thursday, 12 March 2009

the end of the beginning or the beginning of the end...

L: 68% S:17% G: 85% N: 51% ~ $D 33% $G 7% $V 0% $P 2% (the $G on the last few posts has been way off as my cut and paste macro was messing up, apologies)

Yesterday didn't show a lot of market conviction, although it was noted that there was decend up volume compared to down volume at the start of the day, and the chatter the Raven heard on the street was about new buyers coming into the market rather than about short covering. The talking heads on TV still seem to be calling this a bear market rally, which is a bullish sign if ever there was one.

The Raven has been working on trying to position himself with asymmetric bets on both massive inflation and deflation as it seems impossible that we hit a goldilocks scenario of just right. The trade data from China is very ugly and there does seem to be a large build up in excess capacity with annecdotal evidence of a corresponding build up of inventory. HH yesterday very openly said that he didn't believe that QE and fiscal stimulus would be enough to overcome this (citing the weak performance of Japanese attempts to do so in the early 90s). Its a convincing position, although the 'real return' from owning government bonds just doesn't look that exciting even in a deflationary environment.

So you might ask why does the Raven have such a long beta right now? The Raven doesn't think that the statistical beta's of his longs as reflected above are really that high, ie LAD, etc are not trading as high beta stocks. Secondly his beta is largely due to his delta, which remains in upside calls, which as he's said before he's comfortable owning for two strategic reasons, if this is the bottom and we rally then great, if its not we can't go down in a straight line and we'll have squeezes, far better to have an increasing delta in that position so that you don't start to panic buy and get involved in the panic/mania. Ok so its chucking away premium if we crash from here but the Raven doesn't feel that is the most likely scenario, plus the payout in that scenario isn't going to give him sleepless nights.

He had a look at TNU FP yesterday, its just too expensive for the Raven to get excited about, especially when you consider the overhang from the NRS and warrants that are still kicking around.

IP raised their div and might be worth a look today, plus its interesting to think how this might serve as an inflationary hedge depending on the structure of their debt.

Back to the coal face, more thoughts later...

Wednesday, 11 March 2009

some people should be banned from talking

John McFall, Chairman of the Treasury Select Committee, is definitely top of the list today, what a clueless tool.

So what happens now?

L: 50% S:7% G: 58% N: 43% ~ $D 19% $G 49% $V 0% $P 1%

The Raven has trimmed a lot of his long exposure that he accumulated yesterday from his rather for fortuitous purchase of some upside calls and intraday momentum trading with JPM, which he sold on the close because he's a real sissy.

He also shorted some HSBC and bought some more BARC, this trade makes sense to him on a valuation perspective and the massive cash call that HSBC has just made. The company itself has said that it would be volatile. HSBC still remains a rock solid credit in the Raven's eyes and this capital raising will bolster the balance sheet. His view is that longer term they will suffer excess cautiousness in any potential rebound and are still going to be hurt by household, there also remains the potential for a much sharper downturn in Asia than is currently being anticipated and this will definitely hurt future profits.

The Raven topped up on some LAD yesterday as it lagged the surge, although its not been dragged down with the rest of the market. He really does think its a cracking firm as its core income remains relatively stable through this recession, its only the highly volatile high-roller spend thats been hit, puting a value of zero on this part of the business it still looks very cheap. The worry for the Raven has been that they would struggle to refinance their debt, as this hasn't been a problem so far and they've kept a nice chunky dividend. Long term it does face some risks from a move to greater internet betting and that they fail to migrate their franchise effectively online and there is always the government that could screw things up (but then when isn't that the case in life!).

He's still doing his work on Eurotunnel, he was all over this badbody when it was going through restructuring but its popped up on his screen again as its just initiated a dividend which is always a positive sign.

The Raven heard a great quote this morning that did make him chuckle : "trading against the trend isn't contrarian", its a very pithy and illuminating quote.

1) Does QE stop deflation?
2) How much excess capacity is really out there?
3) What is a true measure of the money supply in the economy when all the linkages don't work?

hmmmmm - coffee time.

Tuesday, 10 March 2009

a sobering chart...

with thanks to dshort.com

L: 49% S:0% G: 49% N: 49% ~ $D 40% $G 100% $V 0% $P 2%
There was a very interesting point made by Macroman who’s excellent blog is read on a daily basis, essentially to paraphrase poorly it might make sense for China to weaken the RMB versus the EUR rather than the dollar. This would help their deflation fighting measures, perhaps explaining some of the EUR/USD move that we have been seeing.
The Raven has been lucky this morning picking up some BARC and flipping it. He also bought some upside calls, which he’s happy to hang on to.
Another piece of interesting chatter over the last couple of weeks has been the conspicuous lack of praise from Obama for Bernanke and this has led to speculation that he would be replaced, crazy talk if you ask the Raven!?
Indeed there has been a lot of speculation over the last couple of weeks, another interesting tid-bit that this is insurance driven flow and a large worry about their solvency. This doesn’t square with the volumes that the Raven has been seeing in the market.
The gold/oil spread has been moving in the ‘right’ direction again, ie reduction in risk premium in gold going down and oil rising hinting at rising economic demand.
The Raven is going to do some work on the tech space ex-IBM, which has been a retail darling of late (after the Raven sold it unfortunately).

Monday, 9 March 2009

0% all round.
The Raven has been very quiet for the last couple of weeks, its been a definite case of keeping his head well clear of the parapet. He's spent a lot of time looking at company balance sheets and income statements. On a valuation basis this market still appears to be very cheap, although the Raven is very aware that we're making fresh lows. He would really like to see some capitulation in the market, as such he believes the vix remains too low, he'd also like to see very heavy volume on a bad day. Last week he closed his remaining short positions as the valuation levels makes it feel like you potentially going to make a small amount very slowly or lose a lot very quickly if the market rallies or if it throws in the towel and you don't manage to cover at the bottom.

Interesting to see though that oil and gold are reversing their trends somewhat, to the Raven that is odd that we're seeing positive signals from the commodity markets when there are none in the equity market.

Some single stock thoughts tomorrow...