Trying to sugarcoat my loss (open and growing)

A few days ago I went long 1 lot of EURUSD at 1.3475 or so. Then I watched it tank by maybe 60pips. I then wrote on a piece of paper DO NOT BUY ANY MORE UNTILL TOMORROW. Not 30min later I bought some more when it was down around 100pips. Good old averaging right.

Since then it lost another 300 pips. And looks like it might extend down to 1.275 easily.

But I've taken a step back now and have turned it from a trading position into an investment. :D (Always a bad sign!) I try and tell myself: Hey, Europe is sorting out their problem in a way that doesn't seem to be hurting the EU economy. For a start the peripherals aren't very big producers or consumers. Actually they're really small. However sentiment because of them has whacked down EURUSD so badly, that exporting from Germany, France has become very attractive and is helping the whole EU.

So that's the pro EURUSD long position stance.

Then there's the emotional contagion fear feeding into my brain. Now Portugal looking worse, Portugal drags down Spain, Spain infects Italy. Spain will be in refi trouble as soon december, latest January. That's the con for being long EURUSD.

Miserable Sentiment in EURUSD / Equities

Well I'm long EURUSD and equities and I can tell you I'm pretty miserable.

This market is doing nothing to make my Xmas nicer. It's also not going to put me in the gift buying mood. The market is taking all my present-money!

So they sorted Ireland. Nice. What did we want them to do? Exactly, sort out Spain, Portugal and Italy. And now we can just wait.

Also completely useless that Spanish minister said they had no funding trouble at all for the next months. Then slid in: Or maybe 1.5 months.

Great! So we can expect January to really see hell break loose. And the markets are starting to discount that.

Close to hedging my clients position by short selling Index ETFs!

Reuters Eikon per month cost

So I notice Google is sending requests for people my way (well to this blog!) who want to know how expensive Reuters Eikon is per month.

I'll tell you:

Between USD 2'000-2'200.

So yearly cost of Reuters Eikon is USD 25'200 if you're a one-man shop (like myself).

Now I know from Bloomberg that their prices come down to USD 1'600 a month if you order two. Now that's no use to me at all, but if you're working for a company that already has Bloomberg or Reuters I'm sure they have quite some pricing room.

Also interesting: If you're sharing offices with other asset managers, traders etc who also use one of the services, there's a chance you'll get a discount. Of course you need to push and stretch the truth a bit.

And of course the best strategy is to get the salesperson to compete for your business and make new suggestions.

For example I was told by Reuters: If you want, I can push out the start of paying two months out. So you get Eikon on Dec 1 and only start paying on Feb 1.

They know once you've signed for one or the other it won't be easy to leave all your contacts and setups.

Which brings me to another point: If you're trading equities, the chances are high that the sales traders and bank has a preference for you using Bloomberg. I personally think that could change because Reuters has a nice product with Eikon. Plus they have good FX news, which is turning out to be pretty important these days with the whole sovereign debt situation!

So there's a little bit of my experience on the subject.

Other posts I've written on the issue;

http://eurusd-fx.blogspot.com/2010/11/cost-of-bloomberg-cost-of-reuters-eikon.html

http://eurusd-fx.blogspot.com/2010/11/breaking-reuters-bloomberg-duopoly.html

http://eurusd-fx.blogspot.com/2010/11/dear-google-please-make-your-own.html

Already Sick Of Korea-War Talk

There's just no way that that will escalate.

China will have every interest to stop any serious attacks.

I wonder if the South Koreans calculate:

Okay, they shelled and killed X of our citizens.

If we retaliate they'll kill Y and our economy will start contracting, costing MUCH MUCH more.

If there is a retaliation by South Korea which leads to a small war, China WILL step in. They should say that. It'n in their economy's interest!

So that problem keeps popping up on Bloomberg TV and newswires. But it's a non-economic event and would never turn into one without China stepping in a de-escalating the situation! I'm sure. :)

Second problem:

Ireland, Spain... That's where the real problem is. And specifically the banks in Ireland crashing on the equity markets PLUS the Spanish CDS spreads rising.

IF anyone can get the CDS spreads down for Spain then we can have our X-Mas rally I was hoping & positioned for!

IF they keep widening I'M FUCKED :)

For 2 days I've been long EURUSD at 1.3425 :S

Ergotron DS100 - Quad Monitor Stand

Well, the Ergotron DS100 might also be a good choice! This baby retails for USD350-450 I believe.

I wonder if it's worth it, well if it's worth having 4 screens vs the current 2 I have... maybe if I get to USD 50mn under management and can trade more actively.

Wanted: Kensington Dual Monitor Arm

Next on my X-Mas gift list to myself -

- and after the scratched IPC IQ/Max Turrett :(

- is this Kensington Dual Monitor Arm! Retailing at around $ 230 in my neck of the woods.

Price to buy it from B2B plattform is $153 excluding VAT...

I'm really surprised they are not easier to get hold of! Who doesn't have 2 screens or more! at the 100-300$ they now retail for! It's so much cooler and easier to keep an eye on everything with more screens. I need to keep my youtube and private email on a screen all by itself already!!! ;)

How Ironic: Bloomberg TV More Interesting Today Than Usual

They showed a documentary about KKR.

Some interesting comments by Donald Trump and John Mack and others on the legends....

Then they showed a re-run of Charlie Rose....

Basically more interesting showing such shows, without the

"okay, I have to cut you off there, we need to go to commercial...."

"we'll be back in 2"

Really annoying. I'm surprised more people don't tape the shows and upload them without the commercials! Like with US hit shows "Big Bang Theory" , "Two And A Half Men" etc... then again, what's the point if you only get 2min worth of airtime from analysts, economists etc... and if they do have 10minutes, it's cut 3 times by commercials :)

AND the biggest JOKE!

You pay for bloomberg!!!! You pay him (his company) to annoy you!

(Well I have the satellite feed, but still)

Breaking The Reuters - Bloomberg Duopoly

My opinions and views are based on using Bloomberg and Reuters for more than 5 years in an EQUITIES or OFF BALANCE SHEET DERIVATIVES environment.

At my last employer (a broker) I was told: Listen, you can have a Bloomberg - no problem - but YOU need to make the bro to finance it. So from the start, I need to make USD 20-25'000 (depending on data-feeds subscribed and discount offered by Bloomberg) EXTRA just to pay for that. Considering most individual brokers make somewhere between USD 400'000-3'000'000 in bro from their clients I guess Bloomberg/Reuters are taking a 5% to 0.5-1% cut of earnings. 5% is totally unreasonable I think. (see post on cost of Reuters Eikon and Bloomberg)

Q: Why did I personally need Bloomberg or Reuters?

A: So that I can chat to my clients, show them prices in a more convenient way than calling them. (Always remember I don't use much analysis, risk management or anything like that. )

Q: Why couldn't I just tell my clients to install messenger (AOL, MSN, etc)?

A: They don't have a good reputation it seems, aren't secure etc....

That brings me to my point yesterday that someone powerful like Google needs to start an OpenSource standard for IM that is secure and attractive for banks and brokers to install on their trading floors.

I believe some banks/brokers offer their clients different messengers. But it's very fragmented. A standard would be great to have and promote OpenSource efforts. (I love OpenSource.)

Another very useful feature that I loved in Bloomberg:

When you send a message you can check to see if it has been read in real time. That is very nice when showing prices and being given executions.

In summary:

If you can have secure messages and secure instant messaging you really cover a lot more users needs than you may think. Especially in the mid and back-office sections of banks. Many banks use sub-licensed chat systems like MindAlign (which I loved but is expensive!) or similar.

****

Another post on the subject of cost for Reuters per month etc

Insider or insight information?

Nice point by a guy from Citi on Bloomberg telly earlier I happen to agree with;

An analyst or investor who takes the time and trouble to have a chat with a CEO or CFO of a company and/or its competitors is probably gaining insight in more than 9/10 cases, NOT INSIDER information.

An insider is someone who has information about specific numbers, when the numbers will be published and what the consensus is expecting. That kind of person is an insider.

However if someone gains insight through in-the-field research, that product or service XYZ could bring trouble or large profits, then it's okay. I think anyway.

Commodities Bubble

I'm just brainstorming myself below, and know I'm probably missing a few things... but

I recently caught myself thinking that maybe I really do need to increase my clients Gold position or buy other commodities to hedge the risk of turmoil created by sovereign debts escalating.

But if I think out 10 years from now and ask myself :

How much will these commodities have returned and also what will their outlook be?

I come to the conclusion that they will likely have returned nothing.

Equities on the other hand, companies will still be around and earning dividends.

The only way the commodities prices can be justified at these lofty levels is:

1. the world runs out of them

2. companies traded publicly go bust en masse in a Bear Stearns/ Lehman fashion

I can imagine number two if debt restructuring by the US involved a haircut. I don't think the system can support a haircut.

It's very possible that number 2 happens. Not today, not tomorrow, but the direction is so, that rational people can nearly only come to such a conclusion. But those people have been buying Gold for years. (They'll probably sell the day panic breaks out, equities crash. They'll invest the paper money in new or merged companies, private equity placements etc, where they know there's no risk from a debt point of view)

So number 2 happens and new currencies and dominant players come to power. Paper money will still be around, and you'll invest as during the last 200 years in companies/equities and their debt.

And that's why Gold will go out of fashion. You just don't want to be holding Gold the day the debt situation is cleared and new&growing companies appear.

Might only be in 2-5 years though. But if you're not speculating, but investing for the future, I think Gold must be overvalued. And I've thought that since before USD 1200. Probably wont stop us going to 2-3'000 though. Especially if margin trading Gold is made easier.

Dear Google, please make your own Reuters Eikon or Bloomberg Terminal equivalent!

**

see this post for background

**

Dear Google,

I'm an honest, small asset manager with just a handful of clients. I have a problem though. I have used and know Bloomberg and Reuters products in the past and think the FEATURES they offer are very helpfull. However: I really can NOT pay USD 2'000 a month for some software that is glorified instant messaging and charting system with quotes thrown in.

I do however NEED and WANT to talk to my brokers over instant messenger.

I do NEED and WANT to send my different brokers orders from one centralized trading plattform.

Please help me, by offering such a software application.

I know for a fact that

- newswires cost less than USD 150 (dow jones)

- charting systems are very cheap

- real time exchange prices are very cheap! USD 12 maybe - depending on exchange...

So why would I pay USD 2'000 a month?! Do you know what a nice appartement I can get for that cash? Or office space? Or a nice expensive car on leasing?

It's just crazy. I swear.

Are Hedge Funds Evil By Default Vs Mutual & Pension Funds?

Couple of things go through my mind when looking at this graph and thinking of yesterdays headlines (FBI probe into insider trading).

1. Are mututal funds and pension funds not prone to insider trading like hedge funds seem to be even though they manage much more money?

a. because their managers don't have incentives (performance fees) to try and get information that pays off.

b. because those managers and the pension&mutual funds they manage are raping their investors as banks help them

i. by buying structured products (with high fees inbuilt)

ii. by getting hidden kick backs (invitations to sporting events, cash envelopes)

ASSETS MANAGED

2. This graph misrepresents who is active in the market. Hedge funds would probably lead turnover by a large margin.

Maybe those who trade often are more likely to look for short cuts...

3. I guess you can look at it another way: Hedge funds will go the extra mile to get good performance for you as an investor. And sometimes they tend to cross a certain line when going that extra mile :D

I Need An IPC IQ/Max Turret Phone!

Well, need, not really NEEED... It's like a sexy car or a sexy woman. You just WANT IT.

I definitely want one of these... :)

What a beautiful phone!

Hm. A bit of price issue though. USD 2k is a bit steap for the front end, then you need backoffice servers where it really gets expensive!

I think I may get a similiarly good setup by acquiring two regular SNOM 300 IP phones....

Just a shame that you can't have lines to certain brokers blink up :(

FBI Strategy To Make US Equity Market Go Up

Plan A

1. Find out which large hedge funds are negative on stocks, short stocks.

2. Send the FBI to these hedge funds to do a "investigation".

3. Investors will run for the exit at those hedge funds

4. That will mean hedge funds need to close out their shorts.

5. Markets go up. Everybody happy. ;)

Plan B

1. Find out which large investment banks are short equities

2. Ask these banks for much more capital

3. Other banks will cut their credit lines to those banks.

4. Long only lives happily ever after.

Cost Of Bloomberg, Cost Of Reuters Eikon - SICKENING!

***

also see this post for background

Another post on the subject of cost for Reuters per month etc

***

I just don't get it. Why can't I as a small asset manager get a discount or a light version of Bloomberg or Reuters!?

Bloomberg: Why do I have to pay USD 1'900 a month, or 1'975 from December for something that I need in such a simple way. (It goes down 20-25% if you buy 2 terminals)

- I want to chat

--> I can download several different instant messengers for nothing. They have all the messaging functions I need.

- I want to trade equities

--> Any broker offers me free software and tools to trade equities.

- Newswires incorporated into application

--> Many brokers offer apps with news in them. Especially the FX plattforms. (It's interesting how strong FX is regarding being at the forefront of technology and margin trading.)

Why am I even considering paying the Reuters USD 2'000 want for their Eikon product?!

I want to use several brokers when trading equities for example

I want to chat with brokers over IM, different sales at different banks (How many banks install regular IM clients on there sales desks?!)

Bloombergs FX is weaker than what my current brokers offers me: My current brokers connects to Currenex liquidity which in turn has over 70 banks plugged in. Try getting credit lines to 70 banks setup via Bloomberg. <-- In this case Bloomberg has a service that is below the "free" service from my broker!

What could remedies be?

1. Brokers allow their traders and sales traders to install regular IM (security issue - so unlikely to happen until that's sorted)

2. Newsfeeds should be provided directly and standalone by companies like Dow Jones...

I think Bloomberg and Reuters are a rip off for a small trader. :( Why don't they give me their software for 500 USD a month. I only need such a small portion of it, that even that is pushing it!

Why Eric Cantonas Idea Of A Bank Run Would Backfire

Eric Cantona, actually one of my favorite football players of the last decade, has expressed an interesting idea.

http://www.youtube.com/watch?v=-Uop5R7E314

He says the best way to change the system is to pressure (maybe destroy?) banks, as they are the system. His idea: Go to your bank and clean out your account. That way the state will have to take more notice than if people are demonstrating in the streets.

I reckon such a plan would backfire bigtime for several reasons:

1. Crime, robberies would suddenly increase if people horded money at home.

2. Central banks and then banks would increase interest rates for deposits, trying to attract back the cash.

3. Retail amounts of silver, gold etc demanded would explode and the price for them would aswell. That in turn would lead to a bubble in those commodities with the investors getting screwed.

4. A law could quickly be created - like in the US with Gold back in 1933 - prohibiting keeping either gold, silver or cash in specific quantities.

Probably a good way to fight against the "bonus-culture" would be to move all ones assets to banks that follow better ethical standards. But trying to bring the monetary system to a halt would be counter-productive I reckon, personally.

Probability of debt restructuring in Europe has increased

Dexia yesterday wrote:

From a long term perspective, the probability of debt restructuring in Europe has increased and the new debt mechanism could put peripherals under renewed pressure. Also, due to the high cost of funding for the peripheral bonds, it cannot be excluded that the rating agencies will start a new round of downgrades. If this were the case, the peripheral bond markets will remain under pressure due to some forced selling.

If Sovereign Debt *A-Bomb* Detonates

Theres must be some companies that will prosper in those conditions aswell (If Sovereign Debt *A-Bomb* Detonates). Just as the '29 crash and following depression saw some companies grow.

The company I would feel comfortable owning would have:

1. Cash reserves

2. Not have Cash with banks at risk of going bust (that's a tough one!)

3. Non-Substitutable/Best-in-class products (or just difficult to substitute)

4. No Sovereign Debt (I remember industrial co's announcing losses when Lehman went bust, when you'd expect them to have Zero exposure to such an event really?!) - as I think Sovereign Debt is the single largest risk out there.

5. Sells and produces with little or no currency risk

My list of such companies is small. Actually empty. :(

You have one that fits the ticket?

GM and spiked flat S&P day

What's with the US market today? Up over 1% out of the gates this morning, then steady as a rock.

This is the first time I've ever thought that the market is being "held" by ONE "investor".

But then I remembered something Don Miller had written in his blog: That markets tend to move overnight/european session, then volatility just disappears.

Yesterdays poll of where investors, well actually Marketwatch.com website visitors, think GM will close (I put in a emotional under 30$) had over 40% saying below 30$ and over 25% 30-35$. Now however it looks like over 35$ will be close. The percentages did change this morning to a more balanced view. But if your chips had been placed yesterday, 65-70% of people, myself included, would have been wrong.

Market Is Making Me "Schizo"

So investors are fighting to get into GM.

Why?

1. ...because the weak dollar is going to allow exports to be very competitive vs the cars manufactured by Japan, Europe? Or because the import of cars from Europe will drop?

2. ...because cars will be made in the US and shipped to Emerging Markets?

3. ...because cars like the Volt will get subsidized by the US Gov?

4. ...because the US population is going to grow and need more new cars?

5. ....because GM produces in several strongly growing emerging markets?

Or is GM valuation a bubble?

1. ... because loads of big european car manufacturers have plants in the US and competition will remain stiff no matter what the USD does?

2. ... the guys building TESLAs or future version of it will negatively impact sales of GM?

A. I have no idea about the valuation metrics of GM at the moment. I guess the question is, are people getting richer and do they need NEW cars? I can imagine a lot of people will switch to an electric or hybrid car when it has mass market appeal and is a lot cheaper!! I like driving 5-10 year old cars because insurance rates are low and depreciation isn't as steep as with newish cars.

B. To be honest I don't understand why there's always a silent period when information would be needed most when it comes to IPOs. Yesterday on Fox Business the guy from GM just made comments about new models they have. No hard facts about markets, competition - or anything of real value!

This poll on GM seems about right to me. They should have left range "cheap". But I guess the IB's doing the deal had to lick the US Govs shoes - lucky UBS that they're not left holding any paper ???

Atmosphere Is Being Charged - Thunderstorm Needed

Todays headline:

The real issue:

The US have taken another wrong turn with QE2 and are now headed the wrong way. They think everyone else is going the wrong way though. Delusional. :)

Anyway. The only thing that is going to get them to stop spending like complete jackasses is a nice brutal move on their treasuries.

As long as they can do what they're doing we'll see them continue. Investors round the world had better wake up to this colossal risk soon!

Ireland, Greece are in the headlines now. But they're NOTHING compared to the USA and UK.

The above is a fundamental view. As the USD is getting stronger one had better just ride it for the moment. M&A, IPOs are en vogue. Even though I think GM is going to be a terrible investment for those buying (even if they do have the VOLT?!), at least the US Gov can get out...

A few assumptions I currently am making

Assumption 1

Sometime in 2011 or early 2012 people are going to start wanting more interest on their US and UK investments. (Maybe similiar to what the greek, irish and portugese have seen in 2010)

Assumption 2

Price of treasuries and gilts will have to come down. (Knowing that the Fed will need to reign in liquidity at some point will become clear and will have everyone front running them. Just like they got front run into buying at astro levels with QE1 and QE2)

Assumption 3

Companies with

a. high levels of debt

b. exposure to drop in treasury prices

c. risky balance sheets

will do badly

Assumption 4

Companies with

a. lots of prime location land or office space

b. low debt level

c. solid balance sheets

will do well

Assumption 5

Inflation will go to high single digits in western economies.

How To Save The USA

My summary of Jeremy Granthams' point: The US needs to spend on infrastracture, not on own treasuries/bonds... and they should hire boatloads of builders, who'll all go and spend the cash on home improvement, restaurants, maybe also booze, hookers and other fun things like gambling. Worst thing is feeding banksters and hedgies. They seem to not spend enough. Surprising really.

His words:

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Fiscal Stimulus Appears To Be the Only Option

I’ve always been sympathetic to the general idea of crowding out: that government spending displaces an equal and offsetting amount of private spending. But it is an academic argument and, although it may have a grain or two of truth, it smells of the typical recent tendency in economics: to be heavy on assumptions and light on common sense and the real world.

This concept is known, after the British nineteenth century economist, as Ricardian Equivalence, but to be fair to Ricardo, there were no government statistics then, so everything had to be theoretical. The same relatively small group of taxpayers also owned most of the bonds, so one can see how Ricardo might have gotten there. But today, the government’s hiring someone is absolutely not the same as a private company’s hiring exactly the same person, for if the person is not hired, the government bears all of the costs of unemployment and the corporation none. This cost is not merely welfare, food stamps, and the loss of taxes federally and locally. It also includes the long-term cost to society of the unemployed losing their skills and becoming less employable. For lower-paid workers, these total costs may equal, on rough estimate, one-third to one-half of the cost of hiring them. In this situation, there is no equivalence. A hired worker who would otherwise be unemployed is simply a better bargain for the government. A more capitalist alternative would be to offer some or all of the government’s savings as a subsidy to employers who hire lower-skilled workers. This has been tried and, at times of severe unemployment, seems to be effective.

The real problem starts when direct governmental spending cuts into the always limited pool of skilled workers, or it is attempted when the pool of unemployed workers is only marginally above normal and the private sector has begun to hire. That is “crowding out.” None of these conditions applies now. It is intuitively obvious, at least to me, that if fiscal spending were directed only: a) to lower-skilled workers, b) when there is clearly an abnormal level of unemployment, or c) when you hire them only to do jobs with a high return to society, that we will all come out ahead and there is no equivalence. Future debt commitments are paper; current useful jobs are real life. How can we possibly be better off when the unemployed who want to work are sitting idle and depressed, as their skills decay? Be serious! With a dreadfully deteriorated infrastructure and a desperate need for improvements in energy efficiency, there is certainly a great potential supply of high societal returns waiting to be had on one hand, and an army of non-frictional unemployed ready to get to work on the other."

GMO, Quarterly Letter – Night of the Living Fed – October 2010

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Irish sovereign bonds have reached new highs

The Irish are messing up the pre-X-mas rally in equity markets I anticipated!

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Irish sovereign bonds have reached new highs in the last days (7.9% for the 10yr bond). In our view, the high probability of default implied by the recent hike in spreads is more a reflection of very negative market sentiment and recent press releases than a result of changes in underlying macroeconomic and financial fundamentals. The increase in the spreads has followed a series of negative press reports on the potential losses of the banking system, including in the two largest banks. In addition, there is considerable uncertainty regarding the ability of the government to get Parliamentary support on December 7 2010 on the 2011-2014 fiscal adjustment programme, which aims at reducing the deficit to below 3% of GDP by 2014.

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source: Barclays Capital

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Unhappy market participants waiting for pullback

. . . “Money managers are unhappy because 70% of them are lagging the S&P 500 and see the end of another quarter approaching. Economists are unhappy because they do not know what to believe; this month’s forecast of a strong economy or last month’s forecast of a weak economy. Technicians are unhappy because the market refuses to correct, and gets more and more extended. Foreigners are unhappy because due to their underinvested status in the U.S., they have missed the biggest double play in decades. The public is unhappy because they just plain missed out on the party after being scared into cash after the crash. It almost seems ungrateful for so many to be unhappy about a market that has done so well . . . Unhappy people would prefer the market to correct to allow them to buy and feel happy, which is just the reason for a further rise. Frustrating the majority is the market’s primary goal.”

. . . Robert J. Farrell

Bob Farrell was Merrill Lynch’s esteemed strategist for decades. He penned the aforementioned comments in September of 1989 after the D-J Industrial Average (DJIA) had risen from that year’s January price of 2100 to its September high of 2791 without any meaningful correction. Accordingly, those investors waiting for a pullback to “buy” were frustrated. Similarly, present-day investors are pretty frustrated as the DJIA has leaped from its August “low” of ~9940 into last Friday’s high of 11451 without any significant correction. The recent “Buying Stampede” began on September 1st with a 255-point Dow Wow and has continued for the past 47 sessions without anything more than a one- to three-day pause/correction before resuming the onslaught.

^ The above is from a Investment Strategy comment out of Raymond James today...

Equities: If you're short or in cash - you're fucked!

That provocative statement sums up my opinion very neatly. Of the equities I watch and which are in the news in my local market, most have been beaten up going into results, only to then be bid up once the news hits. Also movements after positive earnings surprises tend to be stronger than I'd expect. I put this down to short covering. This market has got a lot of shorts and they're weak. They have fundamentals brutally against themselves: Liquidity for one. Then you have an IPO market and M&A starting to glow. Just check out the last 30 issues and check how many are up and by how much.

I think it's a great time to be long.

PS: The above is my position talking. Especially love financials as they've been lagging and are today moving big time!