Cut a little GM risk on S&P downgrade:

Sold £3/cent of GM Jun '06 stock at 21.85, leaving me long £7 a cent(so
about £15,000 exposure). Did this because of S&P downgrade to single-B
credit rating, need to read the report in full, but basically I scanned
it quickly and it concerns me if GM is losing access to its loan
facilities. Maybe this company can go bankrupt after all. If once I've
read it I still feel comfortable and I want to get long again, so be it,
I'll buy it back, I don't care if I miss a few percent.

Stock closed at 22.15 in the June contract, so you could say it was a
bad sale, but I'll wait and see. Interestingly, check out what FIAT
(FIAT IM on Bloomberg) equity looked like 2-3 years ago, when everyone
thought that company was going bust...stock is now double the level it
was at then. My money is (probably) on GM being the same by 2008...

On another note, I hope all you readers have been shorting the pound as
I've mentioned in umpteen posts...its now on the verge of collapse
following US rate rise taking US rates above the UK...we should see 1.55
in cable in short order.

So the FED keeps going. And a trade post from a couple days ago:

First off, just to say that I was thinking about the size of my
positions, and decided that given how strong my view is that Treasuries
are (massively) over-valued, I needed to have a bigger short on, so sold
another £10/cent of 10y Jun '06 Futures at 107.44, taking my size up to
£20/cent (which makes it about £150/basis point).

That was when 10yrs were around 4.71% I think, but now they have sold
off a decent amount today following consumer confidence in the US being
through the roof, and the FED hiking (plus German IFO also very high).
10y Treasuries last 4.79%. Haven't read the FED statement yet, but it
seems to me that despite rates now at 4.75%, the US economy is in
overdrive, with unemployment low (4.7%) and dropping further, and credit
conditions still exceptionally loose. Long rates are still low, as are
credit spreads, allowing both private equity and the consumer to borrow
to spend. This will not end until money becomes more expensive, so we
probably need another 100-200bps increase in long rates. Lets face it,
with the FED at 4.75% and looking like they are going to 5.00%, 10y
Treasuries would still not look terribly cheap even at 6.00%.

The bond market meltdown is coming, be prepared.

Closed out my Oil short for £250:

Just bought back my small short in Brent Crude May '06 @ $61.66, I had
been short £2/cent at $62.91.

Still think its more likely to go down than up, but we'll see how
trading it around goes. Anyway, I had shorted the UK Brent Crude
contract by mistake, had meant to sell US Light Crude since it seems to
be the global benchmark. Not sure if there is really a difference, if
anyone knows of a reason these shouldn't always trade close to each
other please leave a comment!

Main risk continues to be in GBP which is going down slowly but surely,
also my US equity positions are down a touch although GM is up a little.
And I am still short £10/cent of US 10y Treasury futures, I should
probably increase this as I think the FED will keep going, and even when
it does stop I suspect the curve steepens. Just seems that the whole
world has the view that the FED is wrong, is hiking too much too fast,
and will have to start cutting this year. Does no-one out there think
that the US is a very dynamic, flexible and powerful economy that can
take 5% rates in its stride and keep on growing?? Comments appreciated.

Year to Date P+L ~ £10,400

Current PROFIT this year is about ~£10,400 (I need to check the level
some of my trades rolled at, eg. if I had a March contract, my
spreadbetting company automatically rolled it into June contracts when
it expired).

Highlights are:

UP £3,400 on GBP versus USD in FX (outright and options)
UP £3,000 on BT stock
UP £1,700 from being short Treasuries (10y and 30y)
UP £1,000 on Cisco Systems stock
UP £800 on IAC Corp (Ask.com)
UP £500 on EUR vs GBP in FX (outright and options)
UP £450 on long GOLD
UP £375 on Dec '06 Short Sterling
UP £300 on shorting CRUDE OIL
UP £250 on Heinz
UP £200 on S&P call.

DOWN £800 on GM stock
DOWN £700 from shorting DAX outright
DOWN £300 on long DAX/Short FTSE & CAC relative value

I hope you readers are getting involved as well! Every trade, and every
time I've closed them, have been detailed at the time, you can read them
in earlier blogs, I always put the size and the level where I put trades
on. If you haven't joined me yet, my highest conviction trade is the
short GBP trade versus the USD. Don't miss it. See details in my earlier
notes.

Buying sugar:

I was reading an article on Bloomberg today about sugar, with the basic
summary being several fund managers (who i'm sure are already long)
talking about how it could quadruple and still look cheap.

Well, that was enough to do some further looking into sugar, since the
trading I am interested in is in identifying trading opportunities where
prices have CONSIDERABLE room to move. Thinking further about my current
views on the world, it seems to me we have a broad-based global economic
recovery, inflation creeping higher, money supply and liquidity
extremely high (although now slowly being removed through central bank
hikes) and a vast number of people being dragged out of poverty in
China/India through the forces of globalisation.

This increase in inflation, demand, and the sheer number of people with
increased spending power, it seems logical to think commodities can go
higher still. Also, it seems the world is becoming obsessed with
alternative energy sources, one of which is producing ethanol from
sugar, so decreasing supply into its regular markets.

Looking back at past "price shocks" in sugar in the 1970's, the spikes
are exponential in nature, and if we had an equivalent price move today
it would more than quadruple the price, and that is just to get it to
the same NOMINAL price as in 1970's, not even adjusting for inflation! I
will be returning to exponential price moves in future blogs, as I think
this could be a fundamental thing in the markets, as it is in nature.

I bought £10 per cent of New York raw sugar expiring July '06 at $16.43.

Adding to a winning trade...buying more IAC Corp:

Added to my InterActiveCorp position, bought £10 of Sep '06 future at
$32.05 in £10/cent. See previous note on why Ask.com (IAC own the
website, amongst other things) is such a buy, amongst them the fact that
IAC is worth ~$10bn whilst Google alone is worth over $100bn.

Ask.com launched their rebranded website search engine recently, it
looks great, better than Google, and I saw an ad on TV last night for it
which got me thinking again. I want to make sure I am long enough stock,
as this thing will look cheap WHEN its DOUBLE the price!

2 new trades to chuck in the book:

Sold May '06 Brent Crude @ $62.91 in £2/cent. Already $1.20 in my face!!
There seems to be too much talk from OPEC about not reducing supply,
whilst demand (or at least demand GROWTH) seems to be slowing (China has
already stated this). High supply & lower demand = LOWER PRICES! Figured
it was worth a small trade, I wanted to be involved in Oil.

And also I added to my Cisco Systems long equity position, as it has
been going well but I only had about £10,000 of exposure...I bought Sep
'06 @ 21.96 in £5/cent, thus doubling my position (the other £5 I had
bought at 20.60).

Working on my spreadsheet to simplify my P+L tracking...will keep you
posted.

Quick update - EURGBP Put rolled off, and have an eye on Gold and Short Sterling...

The 68.20 Put I sold the other week rolled off nicely, I think the spot
was up around 68.80 at the time of expiry on Friday, and has now gone
higher than that...probably should have bought EURGBP outright, as I'd
said I would, but the amount of strength £ was displaying had surprised
me, plus I am still short versus the $. And still think that is the best
trade in the book, now we need the market to start talking of UK rate
cuts again. EURGBP put pocketed £105.

Aside from that, Gold has moved a decent amount lower, and I'll step in
and buy it when I feel the sell-off is done...would like to scale into a
big long. And am considering some Dec '06 Short Sterling, market is down
around 95.25 (I had bought some a few weeks ago around 95.35 and sold
out of it at 95.52 I think it was)...there will be some correlation
between this and the short GBP trade, so wan't to be wary of getting too
big in the same trade in different ways...but anyway, just to keep you
aware, am thinking of buying, as I still view the UK economy as under
threat from Labour government policies, and taxes/power prices all going
up.

Closed out my 30y Treasury futures short:

Just bought back my Jun '06 US Treasury futures short at 111.07 in the £5 a point I had it on in.

Whilst I still want to be net short US rates, I was happy to take some profit out of the trade (I think profit taking is one of my weaknesses...), I still have the 10y short on, and I only noticed today that the Cheapest-to-deliver bonds into the contract are 15y bonds. I thought I'd been expressing a view on 30yrs! So time to flatten it and re-evaluate.

Rumours of BT LBO...So bought more stock:

Stories in the press today about a private equity bid for BT, stock only up about 4% though. Whilst I am sceptical on this happening, it is just the catalyst the stock needs, so I've just added to my position by buying another £100 a point of Jun '06 BT at 221p.

This is an awesome trade, you have to be involved!

P+L Update:

Year to Date I am up £4,728. Despite being a long way from £1 million
(not half!!) I am still happy with all my risk positions. And in FX, it
is only a matter of time before GBP collapses!

1 new trade, 2 closed trade...Equity index relative value, and closed Gold:

First trade, a short one...the £25 a point of Gold Jun '06 I'd bought at
557.75 just a few days ago, I've closed out by selling at 576.25...still
fundamentally like Gold, but lets pocket the £462.50 and see if we can
range trade it.

Secondly, following a big equity sell-off following the ECB rate hike
today (and subsequent hawkish comments from Trichet, the ECB governer),
I managed to get on the long DAX/short FTSE/short CAC trade...as I
mentioned before I think, I really believe Germany is entering a period
of growth and reform, whilst France sticks to protectionism and high
unemployment, and the UK increases taxes and red tape which will slow
the economy down.

I bought Jun '06 DAX at 5820 in £10 a point, sold Jun '06 FTSE at 5813
in £5 a point, and sold Mar '06 (they didn't have Jun '06) CAC @ 5006.5
in £5 a point. This will be a medium-term trade, unless I get greedy on
a quick move in my favour, and I am confident in it working.