Jan 29, 2008

Durable goods order much better than expected, which could have FED thinking 25 vs 50bps. The FED must deliver to market expectations and provide as much insurance as possible. The risk of this strategy is higher inflation - perhaps thinking long on TIPS. Since late October 2007, the Fed has dropped its Fed Funds target by 125bps and there is still a negative 131bps spread between Fed Funds and the 2-Year T-Note. On the potential steep rise in net int margin bank stocks have rallied. The spreads are huge.

S&P 500 showing about 2.3% short, largest short exposure since 2002.

Hedge funds are on track for their worst month since the Russian default of 1998, with the average fund losing more than 3% so far this month, as per the daily HFRX Global index compiled by Hedge Fund Research.

Simple facts related to higher cost - China and India are consuming less than two barrels of oil per person per year while we consume 26 barrels, Western Europe consumers 13 to 15 barrels, Japan, Korea the same amount. Think about industrialization on billion consumer economies.