Thursday, 25 June 2009

village idiot

Is this clown serious? an 80% tax rate for 1d capital gains, does he have a clue as to what that would do to a pension fund? or to an insurance fund? has he even heard of the word liquidity? imagine how much of a discount a fund would have to charge an investor to liquidate their portfolio? its worse than pig ignorant. In addition bozo the clown neglects that the asset in which the most speculation occured was in fact primary residences, no prizes for guessing what the capital gains tax on this "long term" investment was? effing ridiculous, its obviously show time at the village idiot fare.

stopped out

L: 27% S:36% G: 63% N: -9% ~ $D 0% $G 0% $V 0% $P 0%

The Raven is licking some wounds after yesterdays price action, he was certainley right about the correlation of assets rather than their direction, which helped to reduce some of the risk. He's still thinking about what yesterday's statement really means, the language and the analysis of Fed watchers indicates to the Raven that rates are going to stay low in the US for a long time, that there is little threat of inflation, etc. He got squeezed out of half of his MCO short, but will be looking to put that back on today if the price action is stable, his FX portfolio moved as expected, he's increased the GBP position as well at the NOK.

Wednesday, 24 June 2009

FOMC today...
An interesting piece today from the FT's Martin Wolf, pointing out that shareholder incentives and too big to fail increase systematic risk, not that he really has a solution, but at least he's more clear than others as to what the problem is.

Another "interesting" piece is the WSJ publishing their editorial from ?2004? saying that the Fed needed to raise rates to stop and inflation bubble, with the internal comment from Bernanke which says that inflation from input prices wasn't a concern at that time. They then go on to claim that they won the argument because of the asset price bubble that ensued. Frankly that shows them to be petulant and thick. Bernanke was precisely correct, we've not seen an inflation bubble!

L: 27% S:56% G: 83% N: -30% ~ $D 0% $G 0% $V 0% $P 0%

FOMC minutes tonight which the Raven is waiting for, he's getting long 10yr TNotes ahead of the meeting. The last couple of auctions have been well covered and he thinks that the market will have a favourable reaction to any comments of keeping rates lower for a longer period of time. By favourable here, he thinks UST rally as does SPX, but USD weaker, which isn't entirely logical.

Tuesday, 23 June 2009

too much summer sun for the green shoots?

L: 23% S:54% G: 77% N: -31% ~ $D 0% $G 0% $V 0% $P 0%

The Raven knows this is going to be an interesting week for Macro figures, the technical situation in the market has reversed, with things have a lot more of a negative tone as of yesterday, but without a big volume pickup (~+20% more volume than a normal Monday). Its alos interesting to note Director selling, usually a bearish signal, in addition FX moves that match those in the commodity space, perhaps indicating that the Chinese reflation trade has run out of steam. The Raven is therefore watching the RIO rights issue with interest, as well as the market reaction to XTA/AAL (Xstrata and AngloAmericans) merger talks. He's increased his shorts in PUB as well as adding a chunky short in MCO (a ratings agency), it looks technically to have run out of steam and going forwards one has to agree with Einhorn's excellent analysis, that the AAA rating 'ain't wot it used to be'. The Raven remains short the NOK, and long some T10yrs, as well as long the WYE/PFE deal.

Thursday, 18 June 2009


L: 23% S:91% G: 114% N: -68%

Basically Swervin' Mervyn wants to limit the size of banks and split investment banks from retail banks a la glass-stiegel type law. Although this is going to be popular with the public it really misses the real point. The problem of "too big to fail" isn't going to be addressed by this sort of finger wagging nonsense, frankly Mervyn suffers from Trichet-itus, he's arrogant and likes to preach, he failed to control the money supply in the UK, did nothing about the housing bubble, was happy to manipulate inflation, was blind to the systematic risk, ignored IMF warnings on wholesale funding in the UK, wants to blame bankers with big salaries and a bonus culture (coming from a man with a cadillac pension, 100% job security and a large salary its pretty rich), failed to take action when Bernanke was busy making a real difference, dithered with NR so that we saw a run on a bank (how much that shook consumer confidence is anyone's guess!), all of this even when Blanchflower was being cassandra'd.

Bubbles will form, regulators won't spot them, its part of a cycle. Blathering about moral hazard isn't going to change human nature and credit cycles. There are some sensible changes to be made however:
1) increased capital requirements AFTER, with subordinate reverse convertible debt
2) removal of all restrictions by institutions on assets held by ratings
3) public sector pension reform, closure of all final salary schemes immediately
4) increased market to market requirements, detailed publications of assumptions on tier3 assets and a sensitivity report
5) no off balance sheet vehicles, all potential liabilities and funding commitments detailed and brought on balance sheet
6) encouragement (rather than legislation) of a CDS exchange
7) give shareholders more teeth, make it easier to remove board members (ie TGT Akman) in proxy battles, give shareholders a vote on pay, where a majority need to approve the plan
8) pension funds should give a clear accounting of fees, public education and awareness of the agency problem
9) wholesale reform of the health service in the UK, partial privatisation just makes Doctors rich without improving service
10) abolish the 50% higher education target, introduce a real apprentice program, get rid of nonsense qualifications and all funding of them, get rid of nonsense GCSE qualifications and 'hybrids' like GNVQs etc.
11) Cut the number of MPs to 100, quadruple their pay and remove all expenses.
12) publically flog Bob Crow, sack every tube driver, and employ all of those on the 2yr waiting list for the position on market terms and extend service hours on the tube.
13) give the olympics to Paris
14) remove the need for the executive to be run directly by politicians, Mr Darling is no economist and clearly neither was Crash Gordon.

Of more interest however is the change in the portfolio numbers for the Raven. He's become a lot more bearish, its summer and quiet in the market and the price of assets doesn't compensate the investor for the illiquidity risk. He's also done a little work on Punch Taverns (PUB LN), it raised ~£375mm in a share placement, knocking the shares down to ~107p, this is three legged dog with flees, and the more he looks at the business it appears the flees have flees. Just looking at a liquidation value of the business and marking the assets to a Raven estimate of fair market price means the stock is worthless, on an omptimistic valuation perhaps worth 10p for the optionality. The underlying business also faces a secular headwind in the decline of the public house, and this trend shows no sign of reversing any time soon.

The Raven likes RIO as a business, the BHP deal looks smart for both of them, although it removes the ability of any other party to come in and take them out. The rights issue should/could knock the shares off a little further, so its beady eye time rather than foot on the floor time.

He got nailed in the TNote10yr position yesterday from some not too clever trading, he's still long, with a chunky position but not feeling quite as clever.

Wednesday, 17 June 2009

L: 28% S:0% G: 28% N: 28% ~ $P 0%

Alistair Darling is supposed to be giving a speech this week where he intends to warn the BBA about speaking out against regulation apparently, he wants to make a point about 'sloppy board room practices'. 'tis a bit rich for a man incapable of correctly filing his own expense claim forms, 'tis a bit rich from a government unable to look after data, unable to constrain spending, that buys its own claptrap hubris. What would be welcome, rather than this "pitchfork populism" would be make boards and company management more accountable to shareholders. Companies and savers face two 'agent problems', ie. the saver hands over his money to a pension fund and pays a fixed non performance fee, this fund then hands this money over to a company management who again puts this to work for taking a semi performance related fee. For all the critism of bank renumeration strategies the media fail to see the wood from the trees, the biggest agency problem was with those investing in bank shares with savers money, the relative performance of hedge funds says it all. To cure this problem though is more than a matter of trying to regulate pension funds (a VERY bad idea, they're slow and rules based enough) but to get savers to wake up and smell the coffee themselves.

Tuesday, 16 June 2009


L: 66% S:1% G: 66% N: 65% ~ $D -1% $G 1380% $V 4% $P 0%

The Raven has been relatively quiet over the last week or so, the market has needed some careful attention, with lots of opportunities for short term trading (more short term than usualy for the Raven, several times intraday). He's also reduced some profitable trades taking some money off the table in some long risk long term positions.

He's found the 10yr Treasuries particularly interesting and has been jobbing these agressively from the long side, yielding a good level of risk reward pnl. The interesting change in sentiment this week has occured, commodities and the short USD trade is starting to smell like a stale trade. long SPX as well; looking to have limited upside and trading in a tight range, the Raven has a feeling the next move will be lower, although doesn't want to pay theta for this position (hence long the 10yr position).

On the macro front the economist was interesting this week with a special section on government debt, which the Raven is still yet to properly digest. Funny that the BRIC meeting today has been nothing but posturing, funny that given the fact they can't decide whether they want to talk the dollar up or down. The Raven understands the predicament, a stronger USD means more exports, it also means a positive MTM on their 'investments' of $3trn, however this just builds up a longer term problem. China really can't have it both ways, its got to have a free floating currency if it wants the US to borrow in it.

The NRG deal looks to be trading for a bump, whereas the WYE deal looks good value to the Raven at this level still.

He's also looking at RIO quite carefully.

Thursday, 4 June 2009

chart fodder

L: 88% S:12% G: 100% N: 76% ~ $D -12% $G 44% $V 1% $P 0%

This chart makes interesting viewing, given the long period of sideways movement between years 6 to 14. The Raven would also be interested to know what inflation was over this period and what the real returns would have been over that period of time. Politically it certainley smells similar with an increase in union power and political influence. It certainley makes the point very clearly that one should not be investing in such a way that he risk government theft, exposure to legacy costs, union demands, etc.

DDUP is trading above EMC's offer by 10%, thats a pretty heavy premium and implies a big comeback big from NTAP. The Raven has no idea at all what a rational price for such a business.

The Raven also notes the price action on the 200dma for the SPX, he expect it to trade rather technically in this region and it will certainley be interesting to see any reaction that pushes it away from this pivot on tomorrows jobs data.

Tuesday, 2 June 2009

well they did it...

The Raven hasn't posted for the last couple of days because frankly there hasn't been much to say, his portfolio hasn't changed, and the news flow is as expected, as is the markets reaction.
L: 86% S:13% G: 99% N: 72% ~ $D -13% $G 38% $V 1% $P 0%

Interesting stuff happening in M&A space, EMC has come in and bid $30 for Data Domain, which is ~20% premium to the previous bid by NetApp, more work and comment to come on this. To note though was that Data Domain was trading through the bid terms before EMC announced, so this was expected by the market, in addition its trading now through the EMC bid ~$30.5, indicating the markets looking for NetApp to come back with a counter. The Raven wonders where the top bid is and what makes sense for each of them, also the potential for antitrust?

On a similar flavour NRG is trading throught the EXC bid, perhaps the market is epxecting a bump, the Raven is long and will continue to hold the position as NRG looks like a pretty cheap asset.

and what did 'they' do? well they is the UAW, and yes they destroyed all shareholder value at GM, bondholder value and tax payer value. round of applause....