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Archive for May, 2009

Crash imminent?

May 9th, 2009

So, is everyone on board the bear market rally soon? That’s when it turns. I’ve been believing the same for a month, so it’s perhaps not news anymore. I was hesitant to ride the rally at first but I couldn’t resist it. Now I think it’s time to put real tight stop losses on thou. I’ve taken long positions in gold and silver the last weeks and shortening the USD and EUR this week (against the SEK) as precautions, but still the equity rally is so tempting.

I’ve found a few people who agree with me about the likelihood of a turnaround, but of course only price pays in the end…

http://seekingalpha.com/article/136495-12-notes-on-the-current-market-situation

http://seekingalpha.com/article/134482-why-this-rally-is-unsustainable

http://bnwnewswire.com/editorial-Imminent-Market-Meltdown-Spells-Misery-for-Most.html

http://seekingalpha.com/article/135284-market-direction-top-strategists-weigh-in

So the coming week(s) I think we will have a really touch and go situation with lots of people thinking exactly like myself and putting tight stop loss orders in place. The whole situation could escalate quickly on some bad news (of any kind).

“we believe that banks that are too big to fail are too big to exist”

May 8th, 2009

This is a very good sum-up of the current crisis in american banks. Since they won’t allow them to fall (BoA and Citi in particular I think) these banks have to be forced to split into smaller units. “The Big 6″ perhaps should become “the Not so big 18″.

Link: http://seekingalpha.com/article/136196-stress-tests-and-the-nationalization-we-got

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Funny products from creative banks

May 7th, 2009

The Swedish bank Handelsbanken (SHB) recently announced a new product connected to the Chinese and Russian markets with a fixed 28% ROI (minus fees) if both the markets show positive returns after one year (as little as 0.1%). If this criteria is not meet the coupon goes on another year and so on up to 5 years. Every year gives a 28% return (IE 56% after two years, 84% after three up to 140% after 5 years). If not both markets are positive (at least one is negative) after the fifth year but none has fallen more than 40% the coupon defaults and pays 100% back. If at least one of the markets are down by 40% the coupon pays 100 - the worst markets return, IE if the Russian market falls 45% you get 55% back.

The most likely outcome is that both markets are positive after the first year (64% when backtracked march 1998 - march 2008) and the second likeliest outcome is that both are positive after two years (23% when backtracked). These two scenarios then make up 87% of the backtracked outcomes returning a very healthy 22,9 - 23,8% (including fees). In the backtracked period 2% of the tested months gave a negative return after five years, and I think that is very unlikely in today’s market also.

I think this is a excellent ‘alternative’ product as part (perhaps 5%) of a well balanced portfolio since it very likely locks in a profit of over 20% over a 1-5 year period. The last day to sign up is 17th of May 2009 and the Coupon will also be traded on the OMX Exchange from 28th of May 2009. The courtage when bought from SHB is 2% so perhaps it can be beneficiary to buy coupons on the secondary market (where you will be charged your normal courtage).

I will sign 200 coupons myself.

Link: http://hcm.handelsbanken.se/struktureradeprodukter/Warranter-och-certifikat/Erbjudanden/Kupongcertifikat-/