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...

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