ardano

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dear "alpha" why not call your big picture the macro view, or global view

The Only Chart True Investors Need to See

Here are a few other overlays...First. Consider that the 1871 through the early 1900 time frame could be linked to the passing of the global leadership torch from the UK to the US. History teaches us that the winners of wars write history and gain economically.

The next phase, through the 1929 crash to the New Deal is similarly politically oriented. We had a technology boom...the industrial boom. Creative destruction got us both the roaring 20's and the depression later. Boom and bust. It took the combination of the New Deal and winning WW 2, that again allowed the US to write history and establish bedrock capitalist roots throughout Europe and Asia. Again, the US was the key benefactor. Look at the growth curve from the end of WW2 through the 70's. You don't have to be a genius to understand the US led the world and our economy boomed.

What about more recent history? We finally won the cold war and unleashed another wave of capitalism. Remember the peace dividend? Then we had another revolution, the information technology revolution, that sparked another extraordinary economic boom. However, like the industrial revolution before it, creative destruction begat the dot.com bubble. The difference to me is rather than deal with the issues regarding the dot.com roaring 90's, we rolled the problem into the real estate bubble. What's changed to alter the view of the chart?

My fellow alpha readers are right to point to, energy, currency valuations, (a function of global markets for goods,) and maybe the other chart not viewed, political leadership.

The current housing/credit crisis will be more difficult to solve because the US will have difficulty generating the equity required to liquify both our banking/credit system AND consumer balance sheets.

If we get another big leg up from here it will be because politically we reach agreements with key global powers, think OPEC for energy and China for industrial production, and trade agreements. We have to win the wars we are currently waging and prevail at the bargaining table on multiple trade treaties. If not, we could endure years of below par growth.

Why Congress Blames Index Speculators

I have never understood the logic of any futures index or futures vehicle based on a long-only model. I have written on other posts regarding commodites and have referenced CTA's who have crafted index products that are both long and short. (I would be happy to provide specific examples, but do not want to run afoul of marketing rules for CTA's.) Of course, these indexers also have their own managed products. But how is this different from what Goldman does with a long only product? Or one hand clapping as I like to say.

Here's an example. I know of one index and fund that has identified the 22 most liquid futures contracts, with the exception of the SPX. Eleven commodities, six currencies and five bonds, no equities. Each of the 22 gets a constant 4.5%. Through a defined model once a month the manager makes a single long/short call. Therefore the portfolio is only traded 12 times a year; consider it re-balancing monthly. The fund could be 20 long and 2 short, or eleven long and eleven short, or any permutation based on methodology. An investor captures returns from long term trends, not trades. Is this not a more logical approach to capturing returns from futures markets?

Long only indexing is a problem under the observation rule. Observing an event alters the event. Long only commodities funds do impact futures markets. However they are not villans, just slow plodding investors likely to post gains then give them back.

As for Congress, they gave away control of financial markets with the creation of the SEC, a Commission born out of panic. Sound familiar? With the exception of a few Members and Senators, no one on the Hill has any interest in financial markets because the system runs through the SEC. And what a great job they've done!

Remarkably Congress knows more about commodities than it does securities. After all, every farmer knows how to compute ag futures. Dont kid yourself, plenty of these guys know exactly what's going on. Consider that corn is not grown in the Middle East, a point well made in this article. Where is the outrage over inflation caused by ethanol, and the subsidies locked into king corn? Did anyone on Alpa post an article on the Ag Department's inflation projections for next year? It was not a pretty picture. But don't worry, the federal system specifically de-links food and energy from its inflation calculation. And you guys think the feds don't know what they're doing...

These are indeed strange days.

Troubling Aspects to the GSE Bailout Bill

Once again, with feeling, FNM and FRE debt will be protected at all costs. Think about who holds that paper...Paulson and Bernanke seemed to have flipped a coin to see who is going to backstop the GSE's. Bernanke's a little busy right now propping up banks, brokers and other institutional investors. I think he said, "hey Hank, why don't you take this one." After all we're only talking $5Trillion. Due to longstanding accounting problems it was only dumb luck that Fannie and Freddie didn't have more bad paper on their books. They could not originate subprime, only acquire suspect paper through other procedures. Unfortunately, due to the implicit backing of the Treasury, soon to be explicit, Fannie and Freddie lack the cushion that is keeping other traditional banks barely solvent. However, if the backing of the Treasury has meaning, and I think it does, what's the difference? Oh that's right, there's the question about morals and banking. People will say all that money was paid out through Fannie and Freddie and now the taxpayers are caught holding the bag.

Trade of the day, buy Fannie and Freddie debt, not the equity, and short the long Treasury and US Dollar as more paper will have to be floated to make implicit explicit

Dollar Falls to Record Low Over Fannie and Freddie

To my fellow seekers.

Some of KL's observations are accurate and some data points valid. However, sometimes the logic that jumps from a series of observations to a trade/strategy is dubious. Current markets are perhaps the most challening ever. I have commented on articles talking about recent statements by Jamie Dimon where he says that the complexities of the markets are difficult for him to deal with. He's the head of JPM, and he's confused? I agree that posters need to be careful with their logic strings, but that as readers we should also be as postive as possible to advance accurate information as we seek alpha.

The Future of Radio Is Online

interesting, but perhaps not definitive...The real answer is that radio will morph into something not yet understood, probably a balance of all systems, traditional, satellite and internet.

Local franchises in traditional radio do have value. Satellite and internet radio also have their drawbacks. Here's one, fidelity. Both sound thin. We live in a world of high def, yet when it comes to radio, we're going in the other direction. I don't get it. Ipods have less fidelity and dynamic range than a good traditional fm signal. Pop in a cd, (remember those,) and fidelity jumps. Cars come equiped with sophisticated amplification systems and dozens of speakers putting out sound that you can get of AM radio.

There are times when a radio listener must have local traditional radio. Other times that same listener will gravitate to a national feed. Circumstances will dictate that choice and given the technical upgrades of autos, consumers will be able to listen to all of them.

Sovereign Wealth Funds - Energy Futures Speculators?

As Masters said at this hearing...and I saw the whole hearing...commodities/... are NOT capital markets. Therefore, the large commercial interests, global interests in this case, always exert undue influence on trading and therefore price. Beyond that the hearing itself dealt with institutional speculators, but not what those of us who read alpha would consider speculators. Any institution, (pension fund, etc.) who uses the Goldman Sachs Commodity Index, for exposure to commodities does the entire system a dis-service. I say this because the Goldman Sachs Commodity Index, (GSCI,) is a LONG ONLY index. This makes no sense in commodities. Being "long" the CSCI is the ultimate in dumb money, since the GSCI does not expose an institution to the short side of a transaction. Many management options "replicate" the GSCI and charge a management fee to track it.

IF pension funds/institutional investors had to speculate the way alpha readers speculate, there would be no problem. I say this because the allocation would itself be hedged and the bias towards high price would be limited due to risk calculations.

The best way to deal with the manipulation debate is to force ALL investors to assume the same risk...long and short...then devise strategies to limit the inherent risk. The very same institutional investors, defined as index fund speculators, would then use their capital to provide liquidity on both sides of the market.

The commodities markets do not suffer from too much speculation. Instead they suffer from too much speculation on one side of the trade. Make the speculators play long and short and the problem goes away.

Why is it that Masters, Soros, and all the other so-called experts never mentioned this concept.

I call on alpha readers to tell me if I'm right.

best to all during these difficult times,

rr

Private Equity Should Take Yahoo Private With a $35B Offer

fascinating...and in theory interesting. However, as a practical matter, can a deal PE be done? I'd like to pose the question to alpha readers...

4 Sectors to 'Buy in May'

With respect to macro views detailed here, they remind me of rebounds off lows. The Dollar? Certainly due for a rebound. However, impossible to predict its future, (no pun,) as political control of the White House and Treasury will alter dollar policy. As for financials. They remain a stock pickers domain. Long and short positions in financials may well be one of the key trades for this year...and many alpha seekers will win and lose on this trade. I see narrow focused themes and violent swings throughout the year. In a macro sense the Fed is too optimistic about a rebound. Europe and Asia will also slow. Why do stocks get a bid? Commodities will continue to be hot as the leverage and liquidity will draw attention and assets. However, maybe nat gas will replace crude as the contract of choice...remember amaranth...

High Steel Prices: A Preview of Peak Oil

dear phillips49...great post. what is so unfortunate that as boone pickens, of all people, says is that leadership on the energy issue has been lacking all those years. We're in Iraq because of oil. Who are we really kidding? Could we have tolerated yet another huge reserve of oil to fall into unfriendly hands? We will cut deals with the Saudi's and Russia to insure the flow of crude and natural gas. And, only because we are forced, will we change our ways domestically. However, we will find a way to get beyond this. In spite of how bad things look now, this country, this system, is the only economy and society who can take another energy shock and finally make the necessary changes. However, demand destruction in this case will not be easy.

An Optimised Portfolio Using Only ETFs (IVV, IJH, IWM, EFA, EEM, SHY, IEF, TLT, RWR, IDU, IXC, IGE)

The original concept used to advance the theory of this piece is important. What has changed since its original publication is that new EFT's have been created to both fill the gaps and negatively correlate with the basic allocation model. Therefore, investment professionals can now add carefully add alpha and further test the mpt theory.

It's Ugly Out There. What's Washington Waiting For?

to all my fellow alpha readers...we're all reading tea leaves right now. That's the point. If "we" knew anything, it would then be discounted and we would all be talking "bottoms." The problem is you can't discount what you don't know. Part of what is not known is data driven. Therefore, we collectively hang on every key data point, (economic numbers, earnings, etc.) However, we are left to wonder what's going on behind closed doors in Washington, New York, London, Brussels, Japan, China, OPEC and other global trading partners. I agree with the Wachovia view, calling for a Growthsession...below trend growth that feels like a nasty recession. Regardless of whether we get the traditional recession, this will be plenty bad. In addition, if any other structured product dominos fall, we've got the potential for a really nasty financial market event. We'll be wishing for a recession if credit default swaps give way. I personally believe this is why the US Fed is waiting. They're not sure the worst is out there, so to speak, yet.

best to all my fellow alphas.

rr