Friday, 10 April 2009

Now that's unfair!

The market made a mockery of my forecast as the US starting foaming at the mouth and buying banks after Wells Fargo claimed they had made $several billion profit. Well, many of the banks have been having a ball-being recapitalized for free, and enjoying the fruits of government largesse as money is doled out hot off the printing press. (Wells Fargo may be one of the prudent banks that didn't give out ninja loans).
Doubtless there will be more rises to come, and few are now sticking their necks out proclaiming this rally to be a dead cat bounce.
So far the B of E has given away £26 billion, and more in hand, so markets can have a soft ride for a while yet.
I need to have some exposure for expiry week, and managed only to get 1/4 of my usual trade size taken as my price for a 4100 Apr call was 22, and the F flopped around the day's high for a while.
The world's economies are in danger of becoming so unbalanced as the only industry surviving is the credit industry, all around shops and factories are closing and there are a lot of angry people. The banks continue to behave badly.
It is extraordinary that as Nasim Taleb says we are rewarding the people who drove the school bus blindfold and then crashed it.
I had to revisit the long forgotten definition of the Sharpe ratio, which the banks evidently failed to comprehend as their risk was catastrophic and their rewards are actually negative. Sharpe also devised other metrics for assessing performance- all of which would seem to be looking rather sorry now. Taleb also railed against the idea of a Nobel prize for financial maths, and as seemingly everyone got it wrong in retrospect, that makes sense- though I am forever indebted to Myron Scholes and the late Fisher Black, without whom I'd be pricing options with an abacus.Or more likely phoning a friend.

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