Selling some Exxon Mobil, market cap just too high:

Currently trading ~$76.00, market cap about $443bn, this will not be sustainable over the long term. Any company that makes this much money will eventually have it competed away. Plus I think Oil has seen its best days, and a US slowdown should take the price lower from here.

 

Sold it in £5/tick, so a short of about £38,000 notional.

Housing collapse clearly unfolding, recession should follow

OK, so where are we.

First, my positions. GBP is f*cking killing me, I covered some 2 weeks ago, but combined that with selling a 1.8850 straddle...well, it promptly went up every day since I put it on. I feel that this trade is falling into the "markets can remain irrational longer than you can remain solvent" category. £1 buys you $2? Nuts. UK economy just happens to be 6 months to a year behind the US, this trade may need some more time. But as i said before, my flaw on this trade was not using a stop loss.

I remain short £6/tick of GBPUSD (that's £600 per big figure). I'm not covering now it's gone up 8 days on the trot, lets wait for a pullback and see what happens.

Talking of stop loss, I've put in an order a few pence below the market on my LloydsTSB position (current price a little under 550p), so if it doesn't bounce from here I'll be cut out for only a small loss. This one is annoying since I made a few grand within days of putting the trade on, but i believed a takeover was close so held on. The upside/downside in this stock is (UPSIDE) it prices in a takeover (or gets a bid), versus (DOWNSIDE) it's earnings fall due to its unsecured lending exposure to a slowing UK economy.

 

I feel comfortable with my other open positions...short S&P and DOW, mostly through options...short Washington Mutual, the US mortgage lender, what can go wrong during a housing crash? Short Bunds and Gilts, yes I still believe in the global reflation trade...central banks still need to take liquidity out of the system, through much higher interest rates. And long Pipex, the UK internet service, this penny stock should do fine whilst other small UK operators are getting bought out, if I got to make £10k on this one I'd probably take the money though and look for a lower re-entry. So targetting 14-15 pence (currently at 12p).

 

Now, what new trades are out there to put on? I have room to buy single name US stocks, due to my index short. Keeping an eye on previous ones I've traded like Motorola and Intel, so any extreme selling of either may give an opportunity for re-entry. Can't help thinking that trading US stocks through options to capture the downside on indices, whilst picking up single name stocks on days of extreme weakness, could be the best opportunity now. Oil...this ones tricky, I feel that it's either going WAY lower due to slowing global demand, or going WAY higher due to OPEC manipulation and a falling dollar. Will wait on this. Eurodollar futures....was an idiot, missed this one, should have bought, probably STILL supposed to buy Dec '07, but again, today is not the day for entry.

 

More another time, portfolio still well in the positive for the year, but would LOVE a 8-10% fall in stocks over the next couple of weeks!

Selling some Vodafone

Just sold equivalent of £13,600 of Vodafone, stock price currently 134p. (I sold the Mar '07 future at 136 in £100/penny).

 

I think that over th next year, the competition that Vodafone will be facing in the future will become more apparent, with ultimately free mobile telephony being available by routing calls over the internet.

 

And being a long-time Vodafone customer, I know how badly run a company this is! I like to think I am vaguely technology savvy, but getting email to work on your phone, or watching video clips, using the internet, and even understanding what 3G means is NOT explained or eploited by Vodafone at all! This company will be out-competed and out-priced by new and existing competitors eventually.

 

I plan to get the position to about 4 times this size, but lets use this as the initial entry point.

 

 

Market Cap:  £71bn

Dividend Yield: 2.87%

Next years EPS estimate:  11.6

Next years Net Debt: £19.2bn

Selling more Bunds

Selling another £10/tick of Bund futures at 118.00

 

That's the Dec '06 Bund future, with the yield on 10y Bonds ~ 3.75%

 

 

As I've said before, European economy steadily expanding, so a clear sign to be short bonds...and there is no reason for yields on 10y Bunds to be flat to 2yr Bunds virtually, there are plenty rate hikes still needed by the ECB. 4% first stop, and the £30/tick I now have own should make about £5,000. So easy it's boring!

Buying even MORE downside in stock indices!

Zero-cost option trade:

Sold Jan '07 12,000 DOW calls at 473 in £2/point.

 

Bought Jan '07 11,600 DOW puts at 35 in £27/point.

 

It's a matter of time before the 10% correction is due.

Can't resist a quick profit...sold Motorola after 3 days! And stopped out on Oil long:

Motorola stock up 6% from when I bought it 3 days ago...$22.65...so sold
out the £10/cent I had bought on Monday. £1,246 to the good guys! This
stock market is nuts!

And I put a stop in this morning on Crude, with the sharp fall today, I
was stopped out my £5/cent long at 58.15, so losing £495. I was never
overly keen on this one, and can easily imagine a substantial fall in
energy prices due to economic slowdown and loss of confidence of the
bulls in this market.

Actually I need to buy the downside:

OK, having just paid 1400 for SP500, I can't take it. I have to be short in size. I just bought January 1350 PUT for 7.89 points in £100 a point.

 

I can't believe how cheap options are. For 3.5% out of the money, I can buy a Put for about 1% of the notional value. Crazy stuff. Bring on the meltdown.

 

 

And Year to Date P+L is up £13,500 as of just now.

Cutting back some bad positions:

I must use a stop-loss, I must use a stop-loss, I must use a stop-loss, I must use a stop-loss, I must use a stop-loss, I must use a stop-loss, I must use a stop-loss............

 

 

Having been SMOKED on my US Equity Index shorts....I am cutting it back a little. Bought £50/point back of SP500 at1400, I was short £100/point all the way from 1241. Nightmare. Really believe in US slowdown, and lower equities, but feels like it will never come, and I can't take the pain any more. I am annoyed at myself for the poor discipline.

 

I am still short the DOW at 11,500 in £10/point from an options trade, have £50 left of SP500 short, and have a March 2007 PUT on SP500 at 1330 in £250/point. That'll do.

 

 

Also cut back some of my GBPUSD short, trading just under 1.8900 I bought back £5/tick. Now have £6/tick short left. Also sold a 1.8850 PUT and CALL to Nov 24, in £5/tick, sold the call for 90 cents and the put for 50 cents. So at worst I put the short back on at 1.8990, or get taken out of £5 of my remaining position at 1.8710. Ho-hum. Have waited to long for the GBP collapse, and again didn't use stop losses so gave away more P+L  than I needed to.

 

 

And finally, have put a stop on my Crude long, am long at ~ $59.20, currently at ~ 58.70, and I've put in my stop at 58.20. Have £5/cent on, I am not convinced by this trade, I think confidence has been lost from those in the long side of the energies market (Amaranth wipe-out helped that!), OPEC seem to have lost some control, and the oncoming slowdown I see will not help demand. So lets not lose too much on this one...

 

Buying ~£20,000 of Motorola...next year is their year:

Just bought £5/cent of Motorola stock, stock currently trading at $21.20.

 

Motorola, from what I've read (will try and dig out some links another time), are all over Wi-Max (yes my favourite technology which is going to change the world in the next couple of years!). Stock has taken a beating on recent earnings, but it seems the company is setting themselves up for the future in investing within the WiMax space. (As an aside, I think Intel will also be a HUGE beneficiary of selling WiMax chips, and Microsoft Vista for that matter....)

 

Get aboard, the stock has taken a fair drop recently and now looks like the right entry point.

Closing the BT long before results tomorrow:

Sold the balance of my British Telecom long. Stock has had a great run, up from ~220p when I first bought it, to 290p now. I had originally bought £200/penny (so £44,000 of stock), had sold £100/penny at ~270, and sold the balance today with the stock a little above 290p.

 

£14,153 in the bank. Sweeeeeeet.

 

Results out tomorrow, think its 9-month revenues, looks like they'll only be a little up on last year, so not sure the catalyst is there for a massive re-rating higher of the stock. Happy to take my money out for now.

 

 

US stocks....they kill me! Surely they gotta go down some time soon??? This credit bubble is becoming farcical.

Late post! Sold more Bund futures...yesterday:

Just to keep all positions posted...I sold another £10/tick of Dec Bund futures at 117.43 yesterday, increasing my short to £20/tick at about 117.75 average...shame really, its up 45 ticks today to 117.82 unfortunately!

 

Never mind, this one is all about the long-term. No way 10y Bunds can hold onto 3.75% with the ECB on a rate hiking cycle. It's going to be just like the Treasury market last year, where they NEVER priced enough into the curve...I remember (and posted at the time) Bill Gross talking earlier this year about how good value the Treasury market was, around the time the new 30y came at 4.50%, well that bond preceded to PUKE 11 points lower in short order (as I had predicted at the time)....now, Bill Gross is up about 2.40% Year-to-Date, he'd have been as well sitting in cash! And now he's telling us he sees 10y Bunds going to 3.60%. I mean really...base rates are at 3.25%....growth is in place....inflation risks are there...unemployment has only JUST started falling, it's only just under 10% in Germany, it can drop a LONG way from here...would rates at 3.50% cool the situation? 4.50%? 5.50%?? Maybe. Maybe not. But either way, I don't see the rate hike cycle stopping anywhere near current levels.

 

They are all morons, just trade with a view you are keeping stuff for 6 months, and most sensible trades will work out (although my DOW and S&P shorts are really hurting...REALLY hurting...!)

Actually since I'm talking about it...just bought some Oil:

Just paid 59.14 for £5/cent of Dec '06 Crude Oil. If it moves up, I'll increase the position and put a stop-loss around the breakeven level.

Blog "kinda-correction"...still fully in the CABLE short!

When I thought I was buying back £5 of cable (GBP/USD FX) the other day, with spot around 1.9080, the trade didn't actually go through, as something messed up with my connection...and since today's US payrolls number, it has dropped back to ~1.9000...better lucky than smart!

 

Am going to keep on the full position (am short £11/tick, so £1,100 per big figure, eg 1.90 to 1.89). US numbers today were very interesting, with previous months payrolls revised up again by ~100k per month for the last two months, and the unemployment rate down to a VERY LOW 4.4%. I don't think the FED will be happy with that number, and some poor inflation data over the next couple of months could result in the curve pricing in rate hikes again.

 

So, with no CUT on the near-term horizon for the FED (and yes Roubini, I've read your stuff, and kinda buy into it, but we look safe untill the next bout of weak growth data), I can see the DOLLAR holding up well, so we'll keep on the short in Cable. I feel this also supports the shorts in Gilts and Bunds, as it seems that the global rise in interest-rates has more to play out.

 

As for equities, and earnings.....well I'll keep the S&P and DOW short, and opportunistically add single-name long positions when I see any opportunities. Although the trade I'm closest to pulling the trigger on is shorting Dell.

 

More on equities another time.

 

Oh and I'm thinking that its about time for Oil to have the next leg up again.

 

Current Year-to-Date P+L is £19,900. I could do with Pipex having another penny leg up, Lloyds TSB getting a takeover bid, the market realising that Washington Mutual is gonna get CRUSHED in this house price collapse, and need to add to my short position in Gilts and Bunds to about £50/tick short in each (so about £400/basis point each) and wait for the 25-35 near-term re-pricing in bonds which is on the horizon.

Very quick update! Covering cable, selling Bunds and Gilts:

Ok, couldn't take the pain any more, so bought back GBP/USD in £5/tick with spot around 1.9080...leaves me short £6/tick. $ seems to be breaking down, and lower rates look inevitable, AS DO HIGHER RATES IN GBP (and EURO, for that matter). The rate differential was the whole rationale for me having the trade on, so if that is going to be disappearing in the coming months, it makes me nervous on the short, even if I don't think you should get 2 bucks to the pound (shopping in the US is insanely cheap as it is for us Brits).

 

And also selling Bunds and Gilts here...yields are BONKERS, even Trichet (head of ECB) came out today and said "10y Bund yields are extraordinarily low"...YIKES! If he thinks that, then I am going along with him...although I wanted to be short anyway (I won't mention how bad a trade it would have been for you if you'd shorted US Equities in 1996 when Alan G warned of "irrational exuberance").

 

10y Bunds are around 3.73%, that's with base rates at 3.25% and CLEARLY going up to 3.50% next month, and a further series of rate hikes lined up for next year. The market needs to wake up. I sold £10/tick of the Bund future just above 118.00, so that's about £75 per basis point. And I will be increasing this, I want to make £10,000 if it moves from here to ~4%, so need about £250 ber bp.

 

And I sold Gilt futures also today, 109.78 on the future, 10y yields are a smidge over 4.50% today. Again, £10/tick. Base rates are at 4.75%, they are going to 5.00% next week, the housing boom in the UK is in FULL-FORCE (any Americans reading this, you wanna take a close look at UK prices and how they have moved over the last few years to see that it is way more irrational than even your own housing bubble) and needs SERIOUS slowing down. Rates need to get up to 6.50% I think. Gilts are in trouble, yes they may have support from the Government enforced theft from pension funds (through forcing them to match liabilities with assets, ie. buy Gilts even if prices are crazy, see 50y Gilts at 3.75%!!!!!!!!!!!!!). This should easily see a short-term move to 4.80%, where they were recently, and again I'll be taking the position up in size, maybe 2 to 3 times the size.

 

 

Sell bonds now while you still can (even the US is over-valued, although at least they'll benefit from the oncoming rate cuts).