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fransgeraedts (99.70)

Banking in the sun; state of play 7



November 03, 2007 – Comments (0)

Things are going well for me in Capsland.


Only 298 people are doing better; my score went above 1000 for the first time; my rating reached 99 and i became the hottest player of the last 30 days!! (drumrolls)

Redthumbing the financials has been my main bet from the beginning. I believed (and still believe) that the repricing of credit risk that was triggered by the suprimecrisis is a fundamental shift, ending the era of cheap and easy credit. It will not only lead to direct losses in the billions but also to a structural shrinkage of revenue and profits for financial institutions.

Sidebets have been greenthumbing gold; redthumbing builders, mortgage-lenders and -insurers, home related retailers. All of these bets have done well too. My bets on health and against the chinabubble have brought only mixed results so far.

I still hold that this market could go two way's; a reluctant bear market where a slow drift upward is punctuated by days of massive losses; a manic blow out that would take the markets quickly much much higher. Decisive will be wether or not the US economy goes into a recession.

The strange action in the markets since the July highs could be interpreted as evidence of a struggle between those two perceptions. The investors who do not believe that a recession will happen use downdrafts as buying opportunities. They invest their money i what surely will be the leaders of a manic blow out: selected techs, BRIC shares, commodities, infrastructure. The investors that do believe a recession is probable sell the market near its highs and short the weak links: financials, housing, high P/E.

Both camps are buying gold!

For now i give the reluctant bear the edge.

Fool on,




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