THE TACTICAL STRATEGY

14 June 2007: DJIA 13,553

I 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. That’s not the sort of trade that would get Stanley too excited, however much bro he made out of it. So I’ve had to go elsewhere for the Bear stock. Fortunately, we have a relationship with Lehman (retarded, but my options were limited), so I’ve opened some lines with them. They didn’t even see the irony of it all – perhaps they’ll get it when I start shorting them.

Actually, the Bear numbers weren’t 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 wouldn’t 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 haven’t yet come to a decision about opening in London. It looked essential, but now I’m not so sure. There’s so much money to be made here and, despite the fact that it’s Boston, things could be worse – I could be based in Chicago. Ideally we’d be in New York, where my family is, but that brings its own complications. Living with your family – wife, kids and all that stuff – isn’t all it’s cracked up to be, especially when you’ve got used to a bachelor existence. Boston suits me fine.

That doesn’t mean we shouldn’t be alert to opportunities in the UK. I like the look of Royal Bank of Scotland (I don’t 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 doesn’t ring any alarm bells anywhere. Granted, we’re doing well from all the volatility, but something tells me that we should be more worried about all this stuff. We’re not too far away from a 14,000 Dow and that is pretty scary. That’s why we keep on getting these little corrections – looks like some guys just can’t sustain their belief and take their profits before it all comes tumbling down. But it’s 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. We’re all making money, aren’t 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 Charlize’s number, I’d call her right away. Instead, I think I shall pay for a few hours of the delightful Delta Redd’s company, on personal account. If I ask Stanley to pay, he’ll insist on coming too, which is not my idea of fun.