The Tactical Strategy
14 June 2007: DJIA 13,553I have begun shorting Bear. This is not as easy as it sounds. Bear is my prime broker. They should be lending me their stock so that I can then short it. Thats not the sort of trade that would get Stanley too excited, however much bro he made out of it. So Ive had to go elsewhere for the Bear stock. Fortunately, we have a relationship with Lehman (retarded, but my options were limited), so Ive opened some lines with them. They didnt even see the irony of it all perhaps theyll get it when I start shorting them.Actually, the Bear numbers werent so bad. Revenues down 10 per cent, but how reassuring to see that they can still rely on hedge funds to prop things up. Our friendly PB has managed to skin us for another 10 per cent, a highlight of the earnings statement. Funnily enough, Stanley did not call to discuss the numbers. I wouldnt have answered anyway. I was with the partners discussing tactics (there is no such thing as a strategy in these markets). They agree with my negative view on US financials, and my call that we could see a 15,000 Dow by year-end. I also want to load up on commodities. Oil, especially, is a one-way bet. The Chinese appear to be drinking the stuff.We havent yet come to a decision about opening in London. It looked essential, but now Im not so sure. Theres so much money to be made here and, despite the fact that its Boston, things could be worse I could be based in Chicago. Ideally wed be in New York, where my family is, but that brings its own complications. Living with your family wife, kids and all that stuff isnt all its cracked up to be, especially when youve got used to a bachelor existence. Boston suits me fine.That doesnt mean we shouldnt be alert to opportunities in the UK. I like the look of Royal Bank of Scotland (I dont know whether the Queen actually banks there, but it still has a certain cachet), especially after their recent trading update. They are wisely staying away from the sub-prime market. Prudent guys, those Scots. I may just take a small position.There are plenty of other things to worry about. The market is all over the place and nobody seems too concerned. A swing of 150 points in a day doesnt ring any alarm bells anywhere. Granted, were doing well from all the volatility, but something tells me that we should be more worried about all this stuff. Were not too far away from a 14,000 Dow and that is pretty scary. Thats why we keep on getting these little corrections looks like some guys just cant sustain their belief and take their profits before it all comes tumbling down. But its a one-way deal: we dropped 200 points last Thursday, made it all back and more by today. The 10-year Treasury yield is up to 5.25, but nobody cares. Were all making money, arent we?Enough market philosophy. Much more importantly, I had some good news on the personal front. I have a delivery date for the Aquarama. If I had Charlizes number, Id call her right away. Instead, I think I shall pay for a few hours of the delightful Delta Redds company, on personal account. If I ask Stanley to pay, hell insist on coming too, which is not my idea of fun.----The Podolsky DiariesA cautionary tale for our times: The fictional account of one hedge fund manager's decline and fall from grace - as recorded by his faithful amanuensis, Richard Greensted.
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