TGIF

It's rock-and-roll in the market - intraday moves of 4-5% being the norm, yesterday was the biggest party for risk-on for a long time, but end of the day we remain inside the weekly range, but lots of people including yours sincerely has gotten burned from trying to fade both up-and downside.

A quick look at our benchmark models inidicates that the main theme remains Doon-and-Gloom with a performance of +609 bps post yesterday, while our risk on model called benchmark for same period is down 234 bps.

Meanwhile despite last nights massive upmove the Beta-model remains solidly net short (1x capital) - performance so far -318 bps.

Note: The beta-model is a slow moving model used to capture the main trends - not specific recommendations.

Oterwise I spend most of yesterday discussing with several people the 'timing' of the real crisis. The main arguments among the smart people is that it's too early to call for the crisis yet, there could be anything from six month to two years before it materialise for real...

I'm more sceptic, as you surely know, my main issue and positioning right now remains anti-EU for the following reasons:

Globalisation has two major bottlenecks which stops the natural proces

Germany going it alone on capital restrictions upsets a system where the whole premise if free floating capital.

Now German investors needs to go abroad to manage risk - and everything being equal the investment flow into Germany should be less, as this type of socialistic remedies decreases the transperency of investing and increases both the legal- and transaction price.

The globalisation now have two main bottlenecks:

A. China - who by fixing their exchange rate(from strengthning) maintains current account surplus despite the normal process being the opposite for young growing nation and..

B. Germany, the biggest GDP factor in Europe by far(and the riches) - but partly closing the freemarkets the current account surplus of Germany will become less exportable, plus there could be political ramification towards Germany(I note several MSM is taking "the piss" on the Germans) and I see this as a sign of anti-German sentiment(which I certainly do not share) - this is from FT Alphaville this morning: Full FT Alphaville link (click for version)

'We expect one of Deutschland’s debt defence brigade to start issuing a statement any second now . . .

DO NOT DIZPUTE ZE ZAFETY OF ZE BOBL SHOULD YOU CHOOSE TO ZELL ZE BOBL BAD ZINGS WILL HAPPEN TO YOU SCHWEINHUND'

Europe game-theory:

De-facto we have seen a gigantic step towards EU becoming true economic zone with coordinated fiscal policies - this is good for the long-term viability of the EU, but it ignores the inevitable political aspect which is several nations will not move and ratify this (Denmark, Ireland, Holland for sure)... so we have wedge where on one side the policy makers are taking steps way beyond the spirit and legal text of Masstrict (which is good economically) - and a political process which stipulates that giving up any sovereign power is matter for the domestic electorates - in other words: For now the politicians can excuse themselves as "saving the EU", but long-term they need to go to their electorates and get the approval to move Europe closer to true Union.

There is NO WAY this will happen! The distrust in Europe is bigger than ever before, but it's long tidious process and we need to see who wins out.

The odds clearly is for this to take longer, for this to become yet another bubble, before we will have to the adjustment we should have faced in 2008/2009 - transfer of debt to one balance sheet to another still does not help anyone, but the perception remains that the world is saved.
 
STRATEGY

Remain extremely defensive. The "models" still confidently short the markets, and end of month manipulation should be used to sell the remaining balance of stocks on your books.

Nice week-end