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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (10071)	3/13/2004 12:00:13 AM
From: TobagoJack	Read Replies (4) \| Respond to of 110194

The short and sweet version, in summary, we are fcuked :0) Message 19880990 <<(a) I sold my hovel and am renting a shack (b) The market will always fcuk the most number of people (c) I got into the non-USD trade (60% of portfolio) when Warren Buffett said "go"; Warren was ignore by most until December, when everyone and their dog was talking about how the USD will keep crashing; so I covered my non-USD trade in January (d) The market fcuked the shorts last year, then stuffed the bond holders, and now the market will stiff the junk holders, and screw the USD shorts, and then the market will again fcuk the USD holders (e) Everyone says this year will be OK for stocks because it's an election year; I say bullsheet, the market will fcuk the longs, because if everyone knows 2005 might be dicey, why would they wait for November 2004 to sell (f) What will trigger the killing? I don't know, maybe the onset of realization that inflation is for real (g) The folks who believe oil will head for 20 will get fcuked too (h) I just know there is something out there we do not know, and it will fcuk us (i) J6P needs 200 grand pre-tax just to live like a human being, and he will get fcuked, and he won't have a house to eat any more>> Chugs, Jay

To: ild who wrote (10071)	3/13/2004 6:42:28 PM
From: ild	Read Replies (2) \| Respond to of 110194

Debt Wish Steve Persky gives the long and the short of it for his Dalton Global Opportunity fund ... Q: What surprised you about last year? What do you see this year? A: How quickly revulsion turned to affection. The market moved from record-wide credit spreads to a love affair with junk and high-yield debt. The lower the credit quality and the weaker the company, the better you did in the equity and debt markets. In December '02, the mindset was very, very defensive. A year later, IPOs are back in vogue, spreads have narrowed -- it's a very rapid, drastic change in sentiment. The other surprising thing about '03 is that almost nothing went down. The only category of hedge funds that lost money were short-sellers. The stock market had one of its broadest moves in history. The only bond that made money on the short side was Levi Strauss. I don't think we are going to get two years of that. My mindset is very cautious. You have a much higher percentage of bonds trading above par now. The equity markets are much more aggressively priced. The volatility index is way down. Interest rates have been very tame. If you had told me a year ago that the dollar would go down 25% to 30%, that you would have falling unemployment claims and rising gross domestic product, and then asked where fed funds and the five-year note would be, I'd have thought, much higher than they are today. Despite a huge U.S. current-account deficit, the dollar is falling apart, central banks in Japan and China are buying Treasuries as fast as they can and that's keeping interest rates down. Q: What will reverse it? A: Well, I don't know what the next disaster is, à la Parmalat or the next fraud. The big risk is a very sharp unwinding of the carry trade, à la '94 and '98. The Fed starts to tighten and all the institutions that are running long-duration, long-volatility positions and are funding short at 1% are going to scramble for the door. It could get very ugly. Basically, I'm bearish on interest rates. I think the Fed has got to move rates up. I am very concerned about duration. On our short book, there is much more duration risk than on our long book. online.wsj.com