Monday, 20 July 2009


L: 111% S:181% G: 292% N: -70% ~ $D 0% $G 0% $V 0% $P 0%

It looks like we're in a classic short squeeze as the melt down failed to materialize last week. There is still a lot of talk of the failed head and shoulders sell off. That really increases the probability that we follow the path of maximum pain after that failure, a rapid spike up hitting stops and getting shorts covered, some panic buying, etc. Then we grind lower back to original levels, hence the current large amount of risk in the Raven's portfolio. He's also looking at VIX and the skew in general, it does appear that insurance seems a bit cheap given the amount of pain and potential pain out there.

Oh and purely on a customer satisfaction point of view he's looking at shorting toshiba, nokia and france telecom.

He's also quite surprised again by the Economist's discussion of the efficient market hypothesis, maybe he's been reading the wrong textbooks but surely they see that the EMH hasn't ever been that the current market price is a perfect predictor of the future value of cashflows, but it is a reflection on average of the whole markets knowledge and assumptions, ie. we shouldn't be able to make a better predicition a priori. He really doesn't understand why this principle is so difficult for journos to get? He thinks its a common misconception to compare a prediction with reality and not take into account the information held before hand, the range and probability of the outcomes before deciding whether we should have been able to do any better. He fails to see how a bunch of academics and failed businessmen will increase forecasting accuracy.

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