Yay... Gimme some o' THAT bailout!!!

As reported all over the place, including the FT, the Obama administration is avoiding the word "Bad Bank" and going for "Aggregator Bank" in a public-private partnership. Implying that the risks and rewards will be shared equitably between private investors and the US taxpayer, unlike a bad bank scheme (what we in Asia used to call an AMC, or Asset Management Company in the good old bad old days) in which the taxpayer bears all the cost (bad bank => bad scheme!)

"The exact details of how the private-public partnership will work are not known. One option discussed by policymakers is for the authorities to co-invest alongside private investors in a “bad bank” or “aggregator bank” that would purchase the toxic assets." (FT)

Head fake.

What it is starting to look like is a scheme whereby the US taxpayer limits the downside to the private investor (hedge funds and the like) while handing them all the upside, should there be any. An (almost) free option - especially if the hedge funds get cheap govt financing to buy that stuff in the first place!

If it was possible to properly price the toxic assets with upside potential across a basket of the assets, the hedge funds would already be buying them off the banks... and it would just leave an even bigger (if not terminal) hole in bank balance sheets as the assets would be marked to the sale price (rather than to model or market.)

"Many (probably most, possibly all but a handful) high-profile, large border-crossing universal banks in the north Atlantic region are dead banks walking - zombie banks kept from formal insolvency only through past, present and anticipated future injections of public money. They have indeterminate but possibly large remaining stocks of toxic - hard or impossible to value - assets on their balance sheets which they cannot or will not come clean on." (Willem Buiter in the FT)

It certainly IS necessary to take the toxic crap off the books of banks to help them to start providing credit again. We in Asia know this - because that's what had to happen before our banks got recapitalized in the '90s. (Yes, that's the right order of things - keep up!) But, in my view, that does not entail a bailout of the existing equity holders of those banks, and certainly does not require (OK, almost) free options to be handed out to hedge funds (especially those borrowing at government rates and/or on a non-recourse basis to do so.)


----------

Here's more on the potential lunacy of marking to market... from Willem Buiter of the FT, again. (Though look at it from the effect on the balance sheet: as the liabilities get written down, the bite on the other side is out of the equity base, which makes sense... but it does also make it sound awfully odd on the P&L.)

.
::

So how's the Asian ADR portfolio doing?

Not so good - not losing any money at all, but not making much either. Better than a slap in the face.

Long positions on Marketocracy:

CEO

CHL

CMED

FMCN

FXI

JASO

KTC

LDK

LFC

MR

NPD

PWRD

SCR

SHG

SNP

SOHU

SPIL

TCL

VISN

WX

Short positions on Marketocracy:

CEA

CHA

EDU

IIT

KB

NTES

PTR

SHI

SKM

SNDA

STP

TSL

TSM

YZC

Remember, these are portfolios that are supposed to be viewed combined as a $2m base Long-Short fund. On that basis, mildly up should be compared with Asia ex-Japan at down some 7% or so YTD. Would rather be up more than "mildly" but, it's better than...

::

Short Squeeze? Long Squeeze?

So on Friday we had the Asian markets inexplicably firm, right from the start, despite soggy US overnights. Then that night, really really sh1tty job loss data and company announcements in the US (and multi Euro-rate-cuts, which left Europe unexcited,) was greeted with joy and a size rally (characteristically obnoxious Wall Street behaviour.)

Monday we went charging up in the morning in Asia on long onlies shoving cash at us, not on the weekend's Obama New New Deal infrastructure and jobs proposals, as it was largely ignored at the time, but on the start of China's 3 day We'll-Do-Whatever-It-Takes-Because-We've-Already-Seen-The-Export-Data Conference (the "central economic work conference")... and then we got a turbo boost from not-new-news that Chinese domestic investors will one day, some day, be able to invest in Hong Kong. And then there was the olf chestnut: "It Was Bargain Hunting" (ie "wedonno.") No real evidence of size short covering actually seen by brokers, but many reports (much later in the day) that it must all have been from short covering.

Only after the US powered ahead on Monday that evening, did those shrewd commentators decide that Asia's upswing had all actually been for the Obama New New Deal...

Then a couple more days of bad bad corporate news and slashed guidance in Asia and the US, horrible macro data from China and elsewhere... and continuing strength in the markets, including negative 3 month Treasury yields (briefly)... and here we are, with Long Onlies continuing to drive the bus, and much talk of sector (though not country, yet) rotation.

Meanwhile, all the short covering that was supposed to have been driving the markets (the rise in which was, by snide implication, of low quality), but had really been holding off, seems to be creeping its way back in, alongside some long side activity from the HFs...

• From a hot NY sales-trader last night: "75% of demand coming from HF's - 1/2 of which covering 1/2 adding to position in energy, financials - Seeing dedicated $ being put to work in tech, mats, energy"
  
• From a not-so-hot (looking) salesman in Taipei on Monday: "In terms of exposures, across all long/short funds, the net bias fell from 70 long at the start of the year to 17 end-November... Cash on the sidelines has grown. Light excess cash (5~10% excess cash) fell from 42% end-07 to 34% end-Nov; medium excess cash (10~20%) from 11% to 9% and heavy excess cash (over 20%) ROSE from 47% to 56%."
• From a Korea sales-trader this morning: " THIS IS A LONG SQUEEZE NOT A SHORT SQUEEZE - Foreigners have Net Bought $373mn in Dec MTD... YET Foreign % ownership of KOSPI current 29.12% still lower than Oct 30% lvl as buying cannot keep up with mkt cap rise."

All this alongside waning skepticism about a year end rally. ("But... but... this rally would just set the bar higher for next year... so, why, er, huh? And look how much they're UP from the October lows... it's crazy! I'm not playing - books are closed, bud! But... well, I give it one more day... one more day... Oh crap crap crap - I better cover this and buy some of that...")

I actually do give it another day (then I add to my shorts to trim back my net long position.)

.
::

Sell more to squeeze the shorts!!!

U.S. Exchanges Said to Seek Targeted Short Sales Ban

"Oct. 10 (Bloomberg) -- U.S. exchanges may seek to impose a temporary ban on short sales for individual stocks that plunge... Under the plan, a stock that ends trading with a loss of at least 20 percent would be protected from short sellers for the following three days, the people said..."

So... hmm... if I am shorting the hell out of a name, even if I only started when it was already down 8-10%, and it starts to get to maybe 15 or 16% down on the day, I would probably slow my short selling right down or even start to cover some or all of the position under this 20%/3day ruling - so yes, that might actually work. Yay! Then my bear-raiding buddies and I can whack it again the next day for another 15-16% and the following day for another 15-16%. Cool.

Oh, wait... But what if I want to squeeze the short sellers that have smacked down a stock I am holding in my portfolio by 15-16%... What would I do? Well, towards the close, I might go and sell the hell out of it to get it to breach the 20% fall for the day limit and then pile in long the next few days to force the shorts to cover under the 3 day ban.

It may not even be a name I already hold - I could short sell just enough to force it through the 20% mark and then cover quickly and pile in long as above.

Of course, I may actually fail to get it down more than 20%, since as a short squeezer trying to drive the stock up, I will be shorting hard into a lot of buying by bears covering their shorts that day so they can drive it down on following days (you following this?) So if I don't get it trading more than 20% down, I can still enjoy the ride, i.e. make money on my short the next day and decide what to do later.

Neat. We need a bit more volatility and uncertainty in this market to keep things interesting.

.
::

When I'm 64: The Pair Shaped Fund is... UP!

Well, 64 calendar days later, my Marketocracy directional Asian ADR pair portfolio is holding itself above water, but only just... up 0.2%, with the long fund down 12.3% and the short fund up 12.6%.

Over that period, The MSCI Far East Free index was down 32.4% and the S&P500 was off 29.8.. annualize those (compounded, roughly) we're looking at down some 80% for both of 'em.

Right now my beta adjusted net position is 3.1% short, with gross exposure of 44%. (Unadjusted that's -0.5% and 56%.) Yes, pretty low gross exposure, but I think managing exposure is, now more than most times, key.

Current live positions:

• Long SNDA, SOHU, PWRD / Short SNDA, NTES
• Long CHU/ Short CHL
• Long KTC / Short SKT, KEP, PKX
• Long SCR / Short CMED
• Long SNP, CEO / Short SHI
• Long UMC / Short TSM
• Long VISN / Short FMCN
• Long LPL / Short AUO
• Long JASO, YGE / Short LDK, STP
• Long INFY, WIT / Short SAY
• Long TLK / Short IIT
• Long LFC / Short HBC

(Some positions are on the way in, some on the way out.)

(NB This is NOT the performance and portfolio of my day job fund, which is primarily invested in the live markets in Asia.)

::

Pot calling kettle Mack

Prominent North Carolinian John J Mack of Morgan Stanley was out there last week saying that "short sellers may be spreading false information and using abusive tactics to attack companies."

Pretty rich (which he is, of course) considering Morgan Stanley's pre-eminent position in global prime brokerage, basically the lifeblood of hedge funds.

==============

Meanwhile, short bans seem to have gone airborne, (maybe Dustin Hoffman can play Hank Paulson in the inevitable movie?) as Barry Ritholtz notes in his must-read The Big Picture.

My comments: So, short selling no longer allowed. No problem - if I'm short a position in one of the 799 (just hypothetically, of course), I just won't cover into this bear rally - I'll simply go long the same amount in the same name and then when I DO want to go short, I'll sell the long position in Morgan Stanley (oops) again. (And until the short bans kick in globally, I could box in trades long/short in markets while they're still allowed.)

======================

Update: From Roger Nusbaum, of Random Roger fame, responding on Barry's site,

"HT, you might want to double check that before you do it. Used to be that if someone was short v the box they need to borrow all over again in order to lift the long leg.

The idea being that short v the box is not short. To establish a new short you must borrow shares.

I may have it wrong but you should ask whoever you trade with."

GOOD POINT! And a good point that I should check with my PB... though I was thinking in terms of my shorts via swaps and longs via cash (in some markets in Asia) or possibly using different accounts - but yes - good advice: CHECK FIRST! Thank you, Roger!


::

"Back in the U.S... Back in the U.S..."

"... Back in the USSR!"

"We believe that free market capitalism is the best path to prosperity"

Hah!

============

Some comments on the New RTC and the SEC/FSA bans (?) on short selling from those smart folks on my blogroll at left:

• Paul Krugman: "Comrade Paulson seizes the economy’s commanding heights"
  
• Calculated Risk: "Details of how this will work aren't available yet. But one of the key problems - in addition to the risk to the taxpayer - is that this program will actually reduce regulatory capital as losses are realized. The opposite of the goal! "
  
• Long or Short Capital: "The obvious question is, who will bail out the Treasury?  The answer is paper."
  
• Macro Man: "Pretty soon, the authorities will simply delete the "sell" key off of all electronic and broker trading systems, and appropriate all red paper sell tickets that may have survived from the 1980's."
  
• self-evident: "Congress appears ready to move on a plan to buy bad mortgages.  There are no words for how hideous this idea is.  The wealthiest people in our society — the same ones who created this mess through their unyielding greed — are about to get bailed out to the tune of hundreds of billions of dollars. "
  
• Big Picture: "We Are A Nation of Morons, led by complete Idiots, making us complicit in our own self destruction."
  
• Aleph: "Eliminating shorting is stupid.  Enforcing getting a locate is smart" and "Anyone going to the new RTC should feel pain, and a lot of it.  It should be the last resort for companies that are failing.  It should not try to keep companies alive, but merely conserve the value of assets, and prevent contagion.  "
  
• Cassandra: "Tttttthhllllwwwwopp! (sound of cork popping)"
  
• Dealbreaker (1): "Welcome to Pakistan"
• Dealbreaker (2): "When the big bad short sellers came to blow your houses down today, you could've yelled through the window, "Huff and puff away, f**k sticks, unlike Lehman's house of straw, and Bear's trailer park of hemp, these bricks ain't comin' down." Instead, you caught the next train to Coxville to cry to your mama and clutch behind her legs while she wields a bat at the bullies."

=========

Finally, a jolly thought for the weekend, aidst the euphoria... is Nemo at self-evident right?  That MS is counterparty to $10.3tn (that's TRILLION) of derivative trades vs GS at just (!!!) $1.8tn?!  And then there're both BAC(+MER) and C at ~$40tn?  JPM at $90tn??!!!  (That's TRILLION.)  

Yes, nominal etc etc, but... $90 trillion???!!!!!

.

::

How big is TOO BIG (to fail)?

"Too big to Fail"

"Too big to Fail"

"Too big to Fail"

We've been hearing a lot about this bank being too big to fail, or that bank (or GSE or commercial bank or investment bank or insurance company or hedge fund or money market fund or... central bank or... deposit insurance corporation or...) but what does that mean?  Yes yes yes, systemic risk etc, but Nemo over at newly-discovered (to me) self evident has done a bit (a lot) of work to find out at least what scale of bigness we're dealing with these days.  Read the posts here: Part 1, Part 2 & Part 3 but for example, here's what he (/she?) writes about Merrill, AIG and LTCM:

Merrill Lynch has $966 billion in assets and $931 billion in liabilities.  They are counterparty to $4.2 trillion in derivatives trades.   They get brownie points for including HTML anchors in their 10-Q.  (Do we still use the phrase “brownie points” after Katrina?)

AIG (10-Q) has $1.0 trillion in assets (10-Q page 1) and $972 billion in liabilities (page 2). They are counterparty to at least $447 billion in credit default swaps (page 87).  But that does not include the old-fashioned insurance operations, and who knows what else because I am tired of slogging through this stuff.  Executive summary: What would happen if an insurer with $1 trillion in assets were to fail?  I have no idea; and neither, I suspect, does anyone else.

In 1998, Long-Term Capital Management nearly collapsed.  They had $129 billion in assets and $124 billion in liabilities.  But the real problem was that they were counterparty to $1.25 trillion in derivatives trades.  Because their collapse might have created a chain-reaction throughout the financial system, then-President of the NY Fed William McDonough called together the heads of the major commercial banks and investment banks and politely asked them to cooperate.  The banks bailed out LTCM without any government backstop.  (Bear Stearns declined to participate in the bail-out, a fact never forgotten by its peers.)

Great stuff.  Scary reading.

(Just updated my blogrollthing at left)

=========

"You've Got The Fed" (from Versus Plus)

.

::

Pair shaped, Part II

OK, it's been 31 Calendar days since my first few trades on Marketocracy.  (See: "It's all going Pair shaped!")

A few winners, a few losers, and a few fat fingered trades using a new (to me) system, and the long fund plus short fund are, combined, down 0.3% (-0.2% excluding the order entry errors).  

The MSCI Far East index (ie Asia less Japan and India, no Aus) over the same period is off 12.3% and the S&P500 is off 4.2%.  

Annualised (not too accurately, as it works on calendar days) we're looking at -3.8% (-2.0% ex-cockups) vs Asia at -147% and the S&P at -50%.  Not too bad, though I'd prefer to be up.  Will be more interesting to see how it all does as markets swing up.

Current positions, some on the way in, some on the way out, all paired but with some net long & some net short trade positions...

LONG: SINA / SNDA / PWRD / CHU / KTC / SCR / SNP / UMC / VISN / LPL / SPIL

SHORT: SNDA / NTES / CHL / SKM / KEP / PKX / CMED /SHI / TSM / FMCN / AUO / ASX

.
Stumble It!
::

::

Dear investor...

A new classic post from the always readable Cassandra Does Tokyo much earlier today. First few lines below, please see the rest here.

Dear Investor,

This letter is to inform you that the wheels have come off of the proverbial wagon at ACME Systematic Leveraged Macro Momentum Fund LP, and that the same awesome thematic portfolio that made you feel (in the first half-year) as if you'd become very rich in comparison to those sucking wind on their leveraged MBS portfolios or Japanese Small-Cap Value Funds, has, quite literally, spontaneously combusted in our faces.

Our long-oil (PBR, SU, SWN), long coal (MEE, BTU), long fertilizer (POT, MOS), and long iron ore (CLF, RIO) positions have been crushed (no pun intended), and…

cont...

I especially like the reference to Taleb. Must all be somewhat close to the bone for some, to say the least.

(For more, check out the Hedge Fund Implode-o-meter.)

.
..
Stumble It!
::

It's all going Pair shaped!

So, reading a free copy of Forbes a couple of weeks ago, I came across an article on the "Oracle of Manitoba" himself, Randolph McDuff.

Who?

Exactly! He's "the best stock picker the world has never heard of"... with an eight year compound annual growth of 36%... vs 1.1% for the S&P500 (and 11% for Buffett's Berkshire.)

Sadly, it's all imaginary... but in a trackable form via Marketocracy, a pretty realistic online portfolio management site which I had never heard of, and subsequently looked up (and compared with similar offerings.)

Not sure if I will be the Oracle of Anywhere, but I am toying with running a long and a short fund (Marketocracy doesn't -yet?- allow combined long-short funds for some reason) based on fundamental pairs in Asian (non-Japan) ADRs on a medium term horizon. Based on what actually trades in reasonable volume, that's a universe of about 70 counters, of which less than a fifth have a market cap of under a billion bucks.

(IF I can work out how it all works - a bit of a struggle with the short book orders last week!)

Pairs I am working on at the moment for a portfolio startup position - ie likely to be adjusted faster than my planned steady state 3-9 month holding period going forward:

• +SINA -SNDA,NTES
• +VISN/-AMCN (careful --- corporate action)
• +CEA/-ZNH (careful --- corporate action)
  
• +CHU/ -CN
• +KTC/ -SKM,KEP

Thinking is to be broadly market neutral on a beta adjusted basis (+/- 15%, occasionally wider), but with scope to take directional bets on the pair net positions themselves.

No trades on yet (see above), but will keep you all... posted.
.
..
Stumble It!
::

Getting high on the Short Base

1) "I'M RUNNING OUT OF ALL OUR INVENTORY"- HEARD OUT OF (prime broker) LEND DEPT.

2) CONSENSUS (clients) - RALLY WILL NOT LAST, JUST ANOTHER DEAD CAT BOUNCE, IGNORE BULLS

3) See: (this-market-has)
.
..
...

CNBC, once again, ahead of the game

==>
=====>
=========>

(On CNBC.com this morning.)

===============

Or maybe those eagle-eyed editors at CNBC just saw the notes Goldman wrote yesterday on Citi and GM?

Playing with your Food plays

Credit "don't call me CSFB" Suisse is out with a glossy mega tome, the like (and weight) of which we rarely see these days, on the theme of food and rural income in Asia. (Never mind about the trees.)

The central thesis is that Asia's need for food self-sufficiency will rival the Western world's need for energy, with demand growing at a faster clip than supply... with inventories in Asia now already at a 30 year low, this problem will take years to fix. Total acreage supply in Asia is growing at only 0.3% per annum since 1990 - the only way Asia can meet its growing demand is through yield enhancement.

In the meantime (during the meanwhilst), rural incomes will likely grow at a rate so far only seen in urban centres. That's 1.7bn people connected to agriculture in Asia, and rising farm investment and rural income is likely very different to how most investment portfolios are focused. Most of the research I see these days focuses on urban wealth creation (BMW-aspiring yuppies and supermarket/ department store shoppers.)

The CS STOCK PICKS with which I currently agree
(one or more of which may be current portfolio positions, either long or short):

- CHINA: China Mobile, Chaoda Modern Agriculture, China Agri-Industries
- INDONESIA: United Tractors, Bisi, Indofood,
- KOREA: CJ Cheiljedang, Namhae Chemical
- MALAYSIA: KL Kepong
- SINGAPORE: Noble, Olam, Indofood Agri,
- TAIWAN: Taiwan Fertilizers, Sesoda
- THAILAND: Big C Supercenter, Thai Union Frozen

(And for those of you who squint at big reports, here are the slides.)

Less popular than Bush after 100 days - Myung-bak "W" Lee

From a great salestrader at CLSA in Seoul this morning:

Today marks the 100th day since president MB Lee was inaugurated. He holds the unfortunate claim to fame as the most unpopular president in history with an approval rating of only 19.7%.

Obviously at risk are MB LEE's hard nosed stance against unions (AUTOMAKERS meeting labour unions soon), along with the start of the Grand Canal project (CONSTRUCTION names may come under pressure). BANK privatization may also be at risk, especially after the financial labour yday said they would strike beginning June 11 to protest the govt's fund-raising plan.

We'll see more protests today, with over 100,000 people expected to gather in Seoul to demonstrate against US beef imports. Expect another day of mayhem downtown - but hopefully more peaceful than what was seen over the weekend:

Neither Dave Thomas nor Clara Peller were seen there:

(Not too surprisingly, if you think about it.)

================

From the Economist: KAL's take on Bush... and Brown... and Sarkozy...

================

On the other hand, I am working on the idea that perhaps MB Lee will look to juice up his non-existent popularity by some wild fiscal spending and boost domestic feel-good (and consumption) that way... and perhaps end up further weakenening the Won, to the benefit of some tech exporters?? Just a thought.

Back!

Took a bit of a break (from blogging) in May, but eventually, the DTs took over and I couldn't accurately key in my copious algos on FIX.

Speaking of which, in one of the quieter periods last month, one of my better HK salestraders sent me this mildly amusing piece (which, he assures me, wasn't cribbed off somebody else):

We all know that no one is perfect, but if you were to have an ideal perfect Sales Trader. What would he be like?

• Guess to begin with he would look like Brad Pitt/Tony Leung if you're a female client. Or Jessica Alba/Miss HK if you're a male client.
• He/she would entertain you at the hottest spot in town. On top of beating vwap all the time, he/she would buy at day low and sell at day high for you.
• Always call you within 3 seconds after they have received your order in fix and always ask you the right questions like "how do you want to work that?" "Is there more behind?" He would give you all the winning stock ideas which are +50% in 2 days.
• And he would give you his views/ideas about how to work your orders and always be RIGHT!
• He would make you look like god's gift to trading in front of your PMs and CIO...

Well, wake up there is no such person!!! So now come trade with the imperfect Sales Trader extrordinaire which tries hard to keep you amused and always tried his best for you but admits it when he calls the mkts wrong and screws up (rarely).....Some clients call me poonson/viewson. God of trading and god of views in Chinese...Too kind...I'm not worthy

SALES TRADERS LINES

1. At the bid side, you will have to share. But if you pay the offer, they are all yours!!
2. The balance is 1,422,092 . That is it . That cleans them out!! (while in fact the seller has got 28mil shares behind)
3. "Thought we crossed the stk??" "Oh, that's the other seller not you."
4. I have some awesome news. You got them all!! They tried for an extra cent, but I told them to jam it.
5. He can't get hold of the P.M. I will let you know as soon as they do.
6. No mate, that is all agency.
7. You should buy them when you can, not when you have to!!
8. We were ahead of VWAP all day. But lost to vwap by 150bps becoz of volume skew/spike towards the close at the high levels
9. Client is asleep, we can do whatever we want with it...
10. No, that is an Option trade
11. No, that is a Derivative transaction
12. No, that is the straight through processing
13. No, that is DMA
14. It is an offshore seller and he is about to go bed. I would take that stock, mate.
15. It is a funding thing. The buyer can't do the other side . He is do something else is Asia
16. No, they are volume resticted. I will let you know when they can do a few more

-------------------------

His follow up, the next day, focused more on the comparison with algo trading

Talked about the perfect Sales Trader ydy and got very good feedback so decided to talk a bit more tdy. The rise of technology to our business has enabled us to do our jobs a lot better. I still remember the good ole days of waiting 5 minutes for the dealers to calculate a breakdown coz everything was manual and they had to mark each single print in their books. With the emergence of DMA and Algos, some people (including myself) worry that it would be the end of careers for Sales Traders. Not really, as technology improves it only means our roles will be different and evolved into something more sophisticated.

I see Sales Traders role to become even more critical going forward to drive and monetized the revenue on the sales side as we're at the forefront of the commission process as buy side traders gets a lot more discretion. We win the flow and trade the orders.

There are still a lot of things that the algos can't do. So NO is the answer and algos will never be able to replace Sales Traders (but they might be able to replace some sales side dealers.) You all know what algos can do; they can basically trade and time slice orders and get you roughly vwap, they can short sell aggressively, they can be 1/3 of mkt volume (or any % of mkt vol you like) and strictly adhered to that. They can also bid 25 names for 20k shares and go nuts and lift thinly traded stock up 15% when they feel they missed volume. WELL, lets now see what algos CAN'T DO...

• Algos can't source and provide you with big liquidity in stocks or get you that block which is 20 days of trading volume.
• Algos can't give you trading ideas.
• Algos can't broke that important research report that is relevant to you.
• Algos can't take views or call the mkts (might be a gd thing actually)
• Algos can't wine & dine you, and take you out for a drink at your favourite bar and drink till 4am in the morning with you. (might also be a gd thing..)
• Algos can't "generate" orders thru idea generation and relationship/trust, they can only "receive" orders.
• Algos won't listen to your frustration or get yelled at if and when you think we have screwed up. Enuf of that...think u get the idea....

Now all that was definitely worth an agency trade or two!

----------------------------

PS: "Algos" = algorithmic trading, through a computer at the broker's end using various strategies and at very low commission rates, and not seen by sellside traders
"DMA" = Direct Market Access, also via a program at the broker's end, but just banged into the market live and at even lower commission rates.
Neither much loved by the sellside (salestraders in particular) for obvious reasons.

"I see you shiver with antici...pation"

So come up to the lab... And see what´s on the slab...

... In this month's thoroughly unscientific and statistically unsound...

Hedgething Instant Sellside Survey (HISS)

"Quick poll - do you expect the market to be UP in May... OR DOWN?"... asked to a variety of country specialists and pan-regional salestraders (mostly.) They could choose to answer with reference to any or all markets. So far, with 21 responses in...

UP = 10
N/C= 1
DN = 10

Pretty balanced, in aggregate, but HK and TW are 100% bulls, Korea is almost entirely bearish and pan-regional guys are just slightly -'ve. Two folks from Citi mentioned "Sell in May and go away."

For what it's worth, I'm getting slightly more bearish for May too.


------------------------
(Last month the expectation for April was 16:3:9 UP/nc/DN... WELL DONE sellside!)

That great sucking sound...

Remember that great sucking sound heard across Asia over the last few years? Of manufacturing jobs flying into China from Asia, and indeed the rest of the world? Well, Dong Tao of Credit Suisse in a short note this morning (will expand on it more later, I expect) is calling "The beginning of the end of an era – troubled export sector" - his key points are that the new labour law will further hurt competitiveness, adding to the existing pressures on exporters such as surging wage costs, currency appreciation, high material/energy prices, and reduced tax rebates. The hit is more likely to be felt in the Pearl River Delta (~ around HK) than in the Yangtze River Delta (~ around Shanghai,) and among Japanese and Korean companies with manufacturing there than by H-shares. Conclusion?

"The rising wage rates and improved labour right is bad for capitalists and export sector, but positive to workers and domestic consumption. We see the economy leaning towards domestic sector over the next decade, perhaps with slightly slower growth but better quality of growth."

So, find China domestic consumption plays for your long term long positions... A bit obvious, actually!

(... but I may try and come up with a short list of possible plays in the coming days/weeks.)




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I think I've sorted how to include links from CS. Here's Dong's April 2nd note on inflationary risks in China - particularly worrying rise input costs, and clearly colouring his view on export competitiveness, above.

Rice shortages, riots and starvation: Not funny

Call me old fashioned, but I don't find food shortages, riots and starvation as amusing as TheStreet.com appears to.






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THIS on the other hand is a very worthwhile diversion from highly whippy markets in this part of the world!

All this via the mysterious Prince of Wall Street, Paul Kedrosky's Infectious Greed and some dude called Nick.

Brokers vs DeMark... PowerTech (6239 TT)

The Battleground:
Powertech Technology Inc. of Taiwan (which tests, packages, and assembles integrated circuits... including memory products, and provides various kinds of IC package services, according to Bloomberg... Basically a DRAM play.)

IN the RED corner, we have Tom DeMark's TD Sequential (daily) as interpreted by a rank beginner (me.) We've had two Perfected Sell Set-Up 9's (green bar counts) the last of which more or less coincided with the conclusion of a Sell Countdown 13 (red bar counts) and now here we are, closing today at NT$120.5, down 0.4% (with borrow available at 4%):

"A TD Sequential (TM) Sell '13' Countdown was recorded 8 bars back, on 04/11/2008 and is still active... Typically after a TD Sequential (TM) Sell '13' Countdown, the market will respond within 12 price bars."

AND in the BLUE corner... representing 15 brokers with buy recommendations (vs 1 hold and zero sells) we have CLSA (known as Credit Lyonnais once upon a time,) with a buy call issued on April 10th when trading at NT$114.5 with a LT target of NT$136... so far up by 5%... pretty good in under 2 weeks...

... but will it rise a further 13% to the CLSA target or drop 13-25% to hit the DeMark NT$90-105-ish range first?!

Dhruv Vohra says: "Powertech’s strong client relationships and the limited increase of the industry’s memory IC packaging and testing capacity suggests that Powertech will continue outperforming the Dram makers. We have raised our earnings estimates by 8% to factor in the better 1H08 revenue and profit margins. If average selling price pressures ease, there is the potential for even more upside..."

Admittedly, CLSA's is a 12 month call (I think) and the TD indicator suggests possible weakness over the next ~4 days (!) so both could easily be right... but that's a minor matter!

(Drum roll, please.)

Let's get ready to rumble!

(Apologies to and help sought from those who know better!)