Monday, June 30, 2008

The sky is falling...

...Well that was fun, was it not?

And yet, volatility remains at acceptable levels and the hysteria that punctuated last weeks swoon, replete with cries of doom for every significant financial institution in the United States, has subsided.

But the Recapitulator believes in accountability and was wrong about the 1310 level being the bulwark for steady movement forward. My yearly strategy is unchanged, this is not the time to switch strategies.

And so now it is time to revisit a great out of print book on horseracing (first recommended by a great investor and generous persona) that contains many, many nuggets of wisdom: "The Secrets of Professional Turf Betting".

Chapter 4 "Keep Out of Those Switches"

..."Racing is simple. Everything about the game is logical and common sense and elementary...but the game is decked out in an endless number of minor contradictions and open switches and deadfall traps, in order to lure the average player into doing everything wrong.

If the average player - the public play- kept out of all these switches and traps, the the powers-that-be would have to make the game far more complicated in order to insure the fact that the majority of players continue to lose and continue to furnish money to keep up the game"

And, so it goes with the markets.


...cannot come fast enough. What a Travesty. Mugabe, hero...I am at a loss for adjectives or superlatives that accurately contain how much this hurts Africa in the short term.

Robert Mugabe hailed a hero at African Union summitY
Sonia Verma in Sharm el-Sheikh, and Philippe Naughton
Robert Mugabe was hailed a "hero" by Africa's longest-serving head of
state as he joined his fellow leaders at an African Union summit.

The 84-year-old flew to the summit in the Egyptian resort of Sharm
el-Sheikh only hours after being sworn in for his sixth presidential
term following a one-candidate election run-off widely decried as at
best a sham, at worst a travesty of democracy.

He entered the conference hall accompanied by the leaders of Egypt,
Tanzania - the AU chairman - and Uganda, and his enemies' hopes that
he would be disowned by his peers were quickly dashed.

"He was elected, he took an oath, and he is here with us, so he is
President and we cannot ask him more," said Omar Bongo, President of
Gabon since 1967. "He conducted elections and I think he won.

Thursday, June 19, 2008

Now on to Jedda

What has historically happened in commodity markets when intraday volatility makes new highs for 7 consecutive days?

Of course, one must be careful with quantitative analysis as all oil traders are looking to the Jedda conference this Sunday for guidance as to the direction of oil.

This dovetails into an email response I just wrote to an investor (names removed as I am not going to provide investment advice per se on this blog):

Got out of *** and several other multi-line insurers. Whole world is bearish, I love it and sold lots and lots of puts (calendar spreads as well) for nice premium. Even sold *** as well. (*** does not "creep" up to explodes to those levels)

I have several positions that will profit from the Euro area being doomed. Sell PIGS, buy core country (Germany, France) debt spreads as well as my good old dollar/euro. Starting to build China doom scenario and Latin America problems (coinciding with commodity bust). Argentina already underway.

Long term, I am all about Africa - provided AFRICOM builds a base on the Sub Saharan west coast.

Exessively pessimistic valuations being priced into an environment with low rates, large cash positions (significantly overseas) in the S&P 500,, Jedda, Trichet denying reality and Europe still pretending they are OK. This is the time when flexibility, tolerance, and democracy eats the lunches of countries and political systems that lack these characteristics.

As usual, wall street analysts are wrong. RBC called for S&P 1000 a couple of days ago with the same conviction and analysis of that sock puppet ***** **********.

Sometimes, Investing and trading is more about emotion and temperment than analysis. Recall when the entire world was bullish back in the day...

Friday, June 13, 2008


The Recapitulator loves Africa. No other continent has so much potential (admittedly, this is from a low bar) for investment and growth. Of course, the tradiiton of violence continues, and until a real security option exists for investors, Africa will never see the devlopment it requires.

Of course, the Foreign Corrupt Trade Practices Act hinders United States investors in the region...our competitors from China and India have no similar legislation. This necessitates an U.S. African Command to protect U.S. interests in the area, and the sooner we have boots on the ground in Sub-Saharan Africa, the better.

Even adjacency to South Africa is no guarantee of stability. Can one imagine a Robert Mugabe as President of Mexico (or Canada) behaving like this??

By MacDonald Dzirutwe

HARARE, June 13 (Reuters) - Zimbabwe's President Robert Mugabe said on Friday liberation war veterans would take up arms if he loses a June 27 presidential run-off vote.

Mugabe told youth members of his ruling ZANU-PF party in Harare that the veterans had told him they would launch a new bush war if the election was won by opposition leader Morgan Tsvangirai, whom he accuses of being a puppet of the West.

"They said if this country goes back into white hands just because we have used a pen (to vote), 'we will return to the bush to fight,'" Mugabe said, in the latest ratcheting up of pressure to extend his 28-year-presidency.

Erin Go Bragh

/start bad pun

As I said, all eyes were on Ireland, and the Irish eyes are smiling...

/end bad pun

Difficult to assign weakness in the Euro/dollar specifically to Irelands's "NO" to the Lisbon treaty referendum, but it is all the same undeniable that the Euro area is likely doomed for the long run. Portugal, Spain, Italy, Greece have made that a certainty. Uniting a disparate group of historically unfriendly (or at the very least "competitive") nations in close proximity to one another in the era of financial weaponization and conflict will prove too much for a centralized group of elitists in Brussels.

European Realpolitik is still alive and kicking.

Tuesday, June 10, 2008

Regulatory vultures...

circling a very fattened prey...

CFTC Announces Interagency Task Force to Study Commodity Markets

Washington, DC – In light of the recent rise in crude oil and other commodity prices and the influx of new investors into commodity futures markets, the Commodity Futures Trading Commission (CFTC) is announcing the formation of an interagency task force to evaluate developments in commodity markets. The task force – which includes staff representatives from the CFTC, the Federal Reserve, the Department of the Treasury, the Securities and Exchange Commission, the Department of Energy, and the Department of Agriculture – will examine investor practices, fundamental supply and demand factors, and study the role of speculators and index traders in the commodity markets.

High commodity prices are posing a significant strain on U.S. households and the announced Interagency Task Force will aid public and regulatory understanding of the forces that are affecting the functioning of these markets. The Interagency Task Force will strive to complete its work as expeditiously as possible, and will make public the results.

With friends like these...

A neck-snapping last few days, to be sure. The Recapitulator received many calls and emails laced with variants of the "I told you so" argument with regards to the prospects of the U.S. economy, stocks, and the dollar.

Some comments were well-deserved in the midst of severe autocorrelation in oil increases (i.e., big up moves begat more big upwards moves in oil). And then there was last Friday for stocks.

I am no-where near surrender.

Autocorrelation amongst any asset class reaches a fevered pitch...then prices collapse. Oil is no different and the fundamental issues are, well...who knows? Weaponization of oil obvious, but Russia, the Saudis, and even Chavez are rattling their sabres less. The summit on 6/22 will surely have much jaw-wagging addressing this.

And of course, the dollar, which everyone disparages to no end, hits a 3-month high. Again, all eyes on Ireland.