Thursday, 12 April 2012

Not cooking with gas? .... No worries mate!

Its hard to say any portfolio position is a more crowded trade than long Apple shares or US Government bonds. One that my ex-partner and I ran into more often than not in the last 18 months was and still is natural gas. It's a funny thing in hedge fund world, if you spend two days on the road in London or New York you'll know after the first 3 hours what the "money' play is. In my case it was natural gas. I won't mention names but for months now certain HF's have used long natural gas as their best money making, sure-fire, can't miss, lock it up special. So it was with a sigh I noted the natural gas price fell through its iron clad, it won't ever go there floor of 2 bucks per mbtu. I don't know what turns this around. The glut won't clear up quickly and the oft mention take up through the power grid remains mathematically challenged.


A couple of other finance things I'm watching:

1. Dodgy Spanish Banks: Banesto was the first Spanish bank to report for the period. Everyone should read these results, because it shows you what the EU template is going to be.

a) Make a profit. Produce it any way you can, just so long as the numbers add up
b) Magically get you tier 1 capital above the current limits
c) Make truly extraordinary gains, so extraordinary in fact that by the end of the reporting season everyone will have done the same thing making them just truly ordinary
d) Balance everything out with some provisions that will be big, but not big enough to cause real panic about the true quality of some of the collateral you've been passing off to the ECB

Would Miguel Induran, aka "Big Mig" want to ride his Pinarello today if Banesto was his sponsor?
2. Dodgy crude oil brokers .... aka beware of Iranians: I mention this for a couple of reasons. I noticed the FT was highlighting the discount that Iran was offering on its crude. I'm currently advising some people on the sale of a certain supply of petroleum products, but as soon as I took it to market I was swamped by Iranian's undercutting my price. It's a truly ugly business and if you're like me you run a mile from the first sign of a contact representing anyone speaking farsi - you just don't want to be seen as facilitating these people. The other thing is the 90 day credit terms they're offering .... you just can't compete using standard letters of credit on product from legitimate suppliers. The small trader is getting wiped out.

3. Not so dodgy Aussie jobs numbers: My brothers continue along their merry way. Aussie jobs dated outperformed expectations of 6,000 new positions by creating 44,000 positions for the period. Think about it .... This is a huge number and I'm prepared to swallow some paper losses for the moment until the Chinese reality starts to bite. There's an expectation that the RBA Reserve will cut its cash rate 25 basis points to 4.00% on May 1 . . . but how can they? Stay tuned.

Speaking of no worries, my back problem has almost gone. Unfortunately the rain is here again so it was off for a gentle session at the gym. While there I listened to the usual ESPN sports talk and one of my favorite cycling themed podcasts "The Bike Show". The Bike Show is a bit furry and green for most fire eating masters of the universe and it deals a lot with local issues in London. Having said that so long as you know that Blackfriars bridge is in London and that cyclists get hurt or killed there a lot you'll be able to get to the good stuff such as this weeks run down of the big one day races. I highly recommend it.

1 comment:

  1. Can you explain the thinking behind: "the oft mention take up through the power grid remains mathematically challenged..." for a nat gas novice. BTW, great blog!