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.

Wednesday, 29 April 2009

FOMC thoughts

a big nothing done, if GDP numbers make no difference the Raven doubts the FED is going to do anything to rock the boat, especially on Obama's 100th day in office; in addition this market seems to have had shock fatigue, its all a big mehhhh. However this level of complacency is a little worrying given the potential for a W shaped recovery. That and the feeling that the second order effects of unemployment in the double digits doesn't seem to be priced in. All the chat is about thin inventories and robust consumer demand. The Raven could easily imagine a world of over capacity, where unemployment remained relatively high and demand remained sluggish. A positive second derivative is not the same as a recovery.

Are the EU mad? what a bunch of tools, they couldn't organise a piss up in Belgium so why do they think that anything they could achieve in HF regulation would be a positive? In addition the biggest failure in the crisis was an insurer, again how many HFs have taken state aid? uhm it rhymes with Robert De Niro...

GDP figures and revisions

L: 66% S:12% G: 78% N: 54% ~ $D -12% $G 152% $V 2% $P 0%

Its an interesting to see the market reaction to US GDP figures, even though they were worse than expected the fact that consumer spending was better than expected seems to have shored up the market. Its also interesting to see Germany revising down its GDP, it makes the UK Treasury forecasts seem even more ridiculous!

The Raven is long EUR now, and hoping that we eventually breakout of the 200d resistance trend, however long term he's very bearish the EUR, the ECB have been behind the curve, France and Germany seem to prefer preaching to ploughing the fields.

More dripping of news about the stress tests, it appears that 6 banks out of 19 will need capital, although this appears to be a conversion of pref to common shares, this doesn't make a huge amount of sense to the Raven, and the market seems non plussed.

Tuesday, 28 April 2009


L: 54% S:32% G: 86% N: 22% ~ $D -14% $G 124% $V 1% $P 1%

This appears to be a very slow end to the month this week to the Raven, with little in terms of corporate news flow thats been that interesting, but more importantly little market reaction to old news stories. The results of the stress test appear more interesting, given that Citi and BoA are going to need more capital. Now this isn't really that much of a surprise given where their stocks are trading, but its definitely not positive news as its not entirely clear how much, or where they are going to find this capital.

The market appears to have had a magnet placed under 860 in the SPX and the Raven is reluctant to do anything other than churn his portfolio around intraday to try and clip some returns. Vol will continue to grind lower and the Raven is looking forward to picking up some more downside options, how he loves to pay those theta bills as the market grinds higher. Its interesting to think about how much spare capacity there now is in the system and how much of a lid this will keep on inflation in the coming years. The Raven is keeping a close eye on gold as a potential short, as well as monitoring this interesting technical area in the EUR.

Monday, 27 April 2009

Buiter's interview:

Perhaps I'm not understanding what Buiter is actually saying, but in his CNBC interview his implication is that we don't need the current banks as institutions all we need is the capacity of the system to lend. He makes the valid point that the stress tests aren't of much use if they don't stress the conventional loan books (60% of assets) rather than listed securities, however the implication that tax payers won't be able to fund the require cash injections and hence unsecured lenders to the banks should pay 'the pound of flesh' instead is systemically dangerous, naive and illogical as it contradicts the first point that he is making. Given the opaque nature of most banks loan books and the assets that they carry on their balance sheet it is only really possible for lenders to partially estimate the idiosyncratic risk that they are taking in lending to a regulated bank, hence they really are taking systematic risk. The threat of taking steps that would increase potential losses would reduce the capacity of the system to lend, schhhimples.

Monday, the day of the pig?

L: 54% S:32% G: 87% N: 22% ~ $D -15% $G 118% $V 1% $P 1%

The Raven is impressed with the market reaction to swine flu. Its always going to initially panic and open down given the weekend media, however the opening trades in NYC have been a relatively rational reaction, both differenciation and rallying back to unchanged. Its also interesting to see that only one bank will need more capital from the stress test in the US, The Raven thinks thats perhaps the most bullish outcome, ie. a failure to give the test some sort of validity, but not multiple failures so as to panic the market. There will be speculation as to who that is until those details are released next week. Its also very interesting to see that there is almost zero market chatter about it?

The Raven picked up some XOM at the end of last week at a decent level, it remains a very cheap stock and has lagged both spot and the service companies, he's speculating that its lagged due to its defencesive status, size and lack of beta, so has been shifted out of in the last couple of weeks, much like VOD in the UK, which is up nicely today.

Thursday, 23 April 2009

another day in the trenches

L: 2% S:44% G: 45% N: -42% ~ $D -26% $G 64% $V 1% $P 1%

The Raven hasn't really changed his positions around too much, he covered his AT&T before their results to reduce risk and was quite pleased that he had after their results. It was interesting to see MS disappoint, on the whole though results have been beating expectations, but guidance has been a bit weak across the board. The Raven remains short and really thinks we'll see a good retest.

Yesterday's UK budget just guarantees the Labour party losing the next election. The 50% tax rate is both disgusting and populist, especially given the analysis that at 45% they thought they loose over £100mm on the idea, so at 50% I'm sure it'll be more, well done. Oh car scrapping, why not pay farmers to dig their crops into the ground and builders to knock down some houses?

Tuesday, 21 April 2009

stress tests

L: 2% S:58% G: 60% N: -57% ~ $D -40% $G 42% $V 1% $P 2%

Its interesting to note how the market chatter has been a lot more negative today, no result from the US stress tests appear to be a satisfactory outcome; they all pass, then the test was meaningless and too soft, they fail and its a sign of weakness.

The Raven also has heard the resurfacing of two ugly rumours that he truly hopes have no foundation, further nationalisations in the US and that Bernanke wouldn't get reappointed. This is based on comments from Volker, the fact he's trying to back seat drive after being so far removed for so long is pretty disappointing. There cannot be a shadow of a doubt that Bernanke is the man for the job, I don't see how Volkers high interest rates to kill inflation knowledge would be of any use, or that he has any particular insight into the structure and stresses of either the economy or the financial system.

First thing this morning the Raven took profits on his longs, he thinks there is enough uncertainty for another sell off and his gut feels that we've run out of steam, if today confirms yesterdays very negative price action (finishing down 4.2% and on the days lows). Its also interesting to see that oil has taken a pounding in the last couple of days as well. The Raven thinks the EUR should trade down to its years lows.

Monday, 20 April 2009


L: 13% S:25% G: 38% N: -13% ~ $D -10% $G 31% $V 0% $P 1%

The Raven is probably going to be selling out of his Sun Micro (JAVA) position today after Oracle have come in an made a decent offer for the firm, he doesn't think IBM can really compete due to the anti-trust issues. Apparently Oracle only sat down on Thursday to start discussions and hammered the deal out over the weekend.

Its interesting to note however that the deals being announced at the moment are cash deals, which has historically been a bullish sign for the market. Pepsico annoucing they're looking to buy their bottling plant.

The Raven is slightly short, but would like to increase his down side option positions at a level if it gets interesting today.

Tuesday, 14 April 2009

glittering goldman

L: 27% S:20% G: 47% N: 6% ~ $D -5% $G 26% $V 0% $P 1%

GS beat "expectations", well perhaps not mine, if ever bank has been banging on about how good Q1 has been its pretty hard to be surprised that GS had a good start to the year. Its interesting to note thought that they'd be looking to sell $5bn of stock, the Raven presumes that its due to it wanting to hand back TARP funds (a rational desire). There has been commentary when some of the 'smartest guys on the street want to sell you something that recentley doubled' you should be cautious. The Raven isn't convinced as he can see an argument that holders are going to make that this is a positive event and demonstrates the convidence of the market in the firm and a step away from the government, especially if its the first firm to do so.

Its also interesting to see HSBC is looking to sell its office space and lease it out again, as far as the Raven remembers they sold it at the peak to some lucky punters and then bought it back from them at a much lower price. Perhaps they're looking to repeat the trade?

The Raven has picked up some of the defensive stocks that the market is throwing away today, like TSCO and VOD. He's also looking to pick up some more downside puts on the SPX, 750-700 strikes in MAY look pretty reasonable, although he realizes he's going to be bleeding carry away its mentally a lot easier than being short and covering the whole way up, if it doesn't crack it makes it easier to throw in the towel, and if it does then he doesn't have to chase it.

Friday, 10 April 2009

a quiet week and some thoughts from friday...

L: 20% S:19% G: 39% N: 2% ~ $D -3% $G 23% $V 0% $P 1%

The Raven has paid the price for being short this week, although thankfully in not too huge a size. He's paid his theta for this view and now its a bit of a question of where to next? The media coverage is unrelenting in its bullish call that everything is all gravy now. Wells came out with some good news on Thursday at it put the financials in a frothy storm. Although the Raven has said before that they were priced to move and if good news did start to come through we'd have a rally he's not participated as much as he should have because of his overally view on the whole market, alas he's feeling slightly frustrated with this situation and its stopped him from increasing his exposure in fear of chasing the market.

Interesting to watch Hank Greenberg talking on NBC yesterday, well not really interesting as shameful. I don't understand how the man comes out with the majority of his spiel with a straight face. He seems to believe that AIG's counterparties should have faced a haircut and that the government should reduce its stake giving it up to shareholders. You can't bitch about losing a fortune in a stock when you ran the company for 40yrs, who gives a toss if it was huge 3years ago, it had way too much risk and it blew up, your $$s are gone Hank and if you fail to grasp that equity holders come last in a liquidation then you deserve even less than zero back! The irony was that he thought it appropriate to comment on the mismanagement and the poor business model, ahem... the Raven has two letters for Hank, FP. oh and deal with it, its not like you were going to get to spend it anyway, oh and before the Raven forgets, why did you leave the company again?

EUR/USD is at a very interesting level and could provide some short term alpha at the start of the week. It appears to be struggling to break the 200d resistance line and one would naturally presume we'd retest the 1.24 bottom, saying all of that, we're right back to the level were Big Ben Bernanke Bazooka'd the dollar. The USD also seems to have lost its 1:1 correlation with the SPX at the moment.

The Raven is looking at the oil majors as XOM looks very cheap given the current rally in risk assets, that oil looks to be averaging $50 and if the 'buy risk' trade is really a signal we are through the woods then he'd imagine it shouldn't be too long before the demand for oil increased. Saying that there seems to have been a decent inventory build up (although the Raven needs to put some numbers and historical context on that), the OPEC wild card, etc. Its interesting that OXY has rallied far more, as has CVX and the biggest perhaps defensive stock looks cheap. This fits with the trend of sector rotation that he's witnessed over the last couple of weeks, VOD, TSCO have got panned on a relative basis, even though they look pretty decent.

We shall see how far this rally monkey goes, although his trader's gut says we should at least have another retest, just for japes at least, saying that the risk rally has rather winded that trader's gut.

Thursday, 2 April 2009


L: 12% S:27% G: 40% N: -15% ~ $D -15% $G 15% $V 0% $P 2%

The Raven was short and really felt the squeeze, both on the US reversal and the overnight exuberance. He picked up a little more gamma and delta from his upside calls, although has reduced that. He also closed some of his US shorts in the midst of the squeeze. Given the beating his portfolio should have taken some short term speculation in the EUR/USD was just the medicine this morning as it seemed to have lagged the equity fizz. It'll be interesting to see what the Yanks do as they come in this morning as we seem to be at a short term critical point in the market.

What is confusing the Raven is that he can't believe that this froth is all due to the economic data yesterday or the UK housing market 80bps rise (given the error and strong trend he's more than skeptical), thus he's gobsmacked that this is purely optimism that there will be some magic silver bullet to come out of the G20? He fails to see how regulation is going to be the tonic that ends the recession, or that seeing more pictures of Crash Gordon flashing that hideous smile with a world leader on his arm at every opportunity is going to fix the drop in demand and trade that the global economy is facing (yes, the Raven chose to use the word global, even though old Gordo seems to think he has a monopoly on it when talking about problems). Perhaps the market is behaving as it has before any anticipated announcement of a plan in the US, ie trade up as the shorts cover and spec longs, then once the news is out crater? We'll find out how much the market likes a tantrum from little Sarkozy or a wave of airy fairy plans for regulation? oh and doubling the IMF, hmmm thats going to help....

So the plan today is to watch and increase shorts if we start to fade this rally, after all the Raven remains short term bearish, even if the trend is against him, and to punt the EUR to try and ease the pain of this squeeze.

Wednesday, 1 April 2009

justice to their cause?

L: 8% S:36% G: 45% N: -28% ~ $D -25% $G 22% $V 0% $P 4%

Trouble makers that turn up wearing masks have zero intention of making a statement or supporting any 'cause' and are purely interested in smashing property and fighting with the Police. The Raven is sure that if it wasn't school holidays then this would be a lot quieter, he also supposes that its easy to rebel against the state and all it provides when you're an Eton school boy who never intends to work or use public services.

The Raven thought it would be a quiet European morning as he doubted that the majority of workers would be out today, although the US could yield a little more action. He closed his VOD long as it popped up this morning and he wants to get the portfolio a little more short, but doesn't have any particular targets at the moment.