It was a pleasure to spend time with Peter Boockvar, David Rosenberg and Richard Bonugli as we prepared a Thanksgiving feast for the global macro world. We cover many relevant areas and provide measured analysis of important financial concerns. Pour your favorite libation and take a listen as you sift through the cornucopia of ideas and develop possible profitable trades.
This not a series tout but rather a roadmap to where the global financial system is headed and some of the potholes its facing. We at Notes From Underground were early in warning of the coming volatility. On September 17 we a post suggesting possible investments for what was appearing on the horizon. My favorite was VIRTUFINANCIAL(VIRT) as a firm that does well when investors suffer pain.
Yet it’s interesting that GOLDMAN has performed so poorly when it is a company built to profit when markets are in chaos. The basis of Goldman is to be the largest hedge while it gets to examine the flows of its clients. Challenge the premise all you want but you better have more than mere opinions to support your views. CME and ICE have performed fabulously because turmoil increases volume, which leads to revenue based on tolls paid to exit and enter the markets. Is the turmoil over? Hardly. But I would not advise investing in these companies as the smart money was there at the beginning of the volatility.
The recent story of the blow-up in natural gas provided a classic example of market complacency leading to ridiculous strategies. This situation was reminiscent of Amaranth from this perspective: The natural gas equities were falling in price while the NG commodity was rallying ferociously, revealing a troubling disconnect. Optionsellers.com is certainly not the only firm selling naked options as a sure way to enhance returns. As I can recall, Bill Gross once bragged about his model of selling out of the money options in an effort to enhance investor returns.
As Dennis Gartman is prone to say, there is never just one cockroach. The last few days of trading has revealed a breakdown in the role of haven strategies where investors run to safety in GOLD, sovereign bonds and, of course, the YEN and Swiss franc. The haven dynamic was called RoRo: risk on, risk off. This model has definitely broken down and we will be monitoring to see where the money flows will be headed. Have a drink and enjoy the PODCAST.