Impressed By The Bear Market Rally

You have to be impressed by this bear market rally. It has now gone more than 10% from the bottom in a matter of days. Our expectation is that it will subside rapidly, sometime next week we expect a major pullback. We could be wrong, but we cannot see this lasting.
What saves us is being well diversified, and we can not stress this enough; to be well diversified in these markets. We are taking a hit on the short positions we have, but we are making gains in many of the smaller cash currency positions. Most importantly though is that the dear gold has risen form below 900 to around 925, this along with the equities bull market has lifted mining shares as well. Weird that gold should make good gains when the markets are rallying, makes you wonder if gold will pull back when the equities turn back again.

Either way we are not parting with our gold. This is the old fashion view, that will come back into vogue again. You count your assets and worth in gold. Your gold is your gold, end of story. Once having changed your mindset to gold as your base you think of every investment and speculation in terms of “is this thing worth me parting with XXX ounces of gold?”. Usually it is not, and thus you stay away from most investments and speculations – witch is just what you should do. To do nothing is for the most of the time the right thing to do, especially if you own gold. Should more people start thinking like this, as we think they will, the velocity of money will go dramatically down (just look at ourselves, not making moves). The central banks will answer this by printing more money, to keep inflation going at 2-2.5% or thereabout. More money means more demand for gold, seeing gold soaring even more. Self reinforcing. This could get quite interesting.

All in all we did not expect this strong a bull move and we are down from it. However we now are adding gold on dips and looking for right moments to add some short positions on the broader markets and specific stocks.

Today we are even going out on a limb with a specific put recommendation.
Swedish Swedbank is heavily exposed to Eastern Europe and the Baltic states. In reality they have already lost all their equity and are under water. Stock has risen from SEK 17.80 a week ago to SEK 26.50 today, that is a 49% gain on the surge in confidence, all false. The trouble Swedbank is in will soon resurface, soon enough to short it on a short term contract.
You can today get the put option to sell Swedbank on April 17. 2009 for SEK 22 for SEK 1.70. We like that short. This is almost 5 weeks from now. The worry and angst will return way before that.
So I go out and recommend this specific put contract, time will tell. The trick will be to buy it on a boom day like today, and sell it the day the angst returns, probably already by next week, almost certainly way before April 17. Put it out and sell it at SEK 2.55 with a 50% gain. Note that this is not investing, but speculation with the potential for 100% loss. If you are inexperienced you should not allocate more than 1% to this kind of speculation.

This is it:

http://www.nasdaqomxnordic.com/optionsandfutures/microsite?Instrument=SSE120

SWEDA9P22 2009-04-17 1.40 1.85 3,630.00 100.00 22.00

We ordered some material from the U.K. last week, it is a 4 kg shipment. They choose to send if their “transportation agency”. It went by road through Europe, terrible, just terrible, the whole experience just terrible. I am on my 5th email and 10th phone call about this now, terrible. We have ordered so many times from the US lately we have forgotten how bottom of the barrel bad European infrastructure still is. The parcel is now with Norwegian Tollpost Globe who have failed at delivering it for 3 days in a row. If you need something reliable I strongly suggest ordering from the USA with delivery by one of the major carriers. Stay away from Tollpost Globe.

Today is Friday, some new bank failures will be announced in the US, perhaps that will break the rally.

Stick with your gold, put your faith in that.

UPDATE:
See the excellent comments to this thread in the forum:
Comments in the forum please on the thread with the same title.

Hans Lysglimt
Oslo, Norway. March 13. 2009

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