Don’t fight the FED

Don’t fight the FED.
We have, with part of our portfolio in puts during this boom, and so far we are down on that.
However, we have recommended to keep most of your portfolio in cash – we still think that is sound.
There is going to be a fire sale, it has not yet begun. Stay in cash. This boom is a great opportunity to sell.
We have no confidence in the FED.
But they are able to pump in money – so what. Someone is going to pay, it will be our children.
Is that value creation? To rescue the Wall Street bankers at the cost of our children?

Shame on them.

Anyway.
Intrade betting for a US recession in 2008 shows it all:

http://www.intrade.com//?request_operation=main&request_type=action&checkHomePage=true#


The chance of a US recession in 2008 has fallen from 70% to 30% in less than a month.
All of a sudden the market is boasting with confidence.

We still believe there will be a major hit. We are in mostly cash and some February 2009 and 2010 put options.
We have missed out on the rally. Well, we don’t believe this is for real anyway.
We have taken a hit on the put options, but we still have 10 months to go (21 on some).
If these 10 months are all boom, we are all loss on them.
Time will tell.
We will be on watch for renewed panic, for whatever reason – and might unload some if it comes.

We are mostly happy with recommending selling gold for cash at its peak at USD 1030, it’s been down to 850.
A leveraged possition down in gold would have wiped out equity.
We still believe the commodities are in a bubble.
Wheat has turned, the others will before long.

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One Comment

  1. Patrick Hanevold
    Posted 8 May, 2008 at 4:21 pm | Permalink

    Id say: Dont fight social mood!

    As a firm believer that stocks and markets are forever and always priced insanely wrong, id say its not the FED thats responsible for the market not following sane and logical paths. (But mood does!)

    Instead of the economic statistics leading the market, the market (or more properly the aggregate social mood it measures) determines economic behavior that leads to the statistics.

    Im not much of a bookworm, but I know a good set of books on the subject called “SOCIONOMICS: The Science of History and Social Prediction”. It explores the idea, and makes a strong argument that socionomics describes social and economic behavior better then traditional economic theories.

    And I think we both know a gentleman that got quite wealthy with this insight, and hes latest moves certantly confirms these theories in millions per minute. Hes moves lately is even crazier then the exploitation of market mood in the dot com hysteria we where both part of. In itself a huge confirmation, and also what got me dedicated to market psychology.

    Patrick