The Good, The Bad, The Ugly

This is a test... This is only a test of the new "interact" message recording system.

Chowk FOMC (un)hedge Fund, shall post all of its transactions, in real-time when possible, otherwise end-of-day.

Viewers shall be able to follow the gradual decline in the Fund`s Net Asset Value and be amused by its approaching bankruptcy

When Net Asset Value reaches zero, the fund shall be ignominiously closed.

All transaction costs and commissions shall be charged as a flat 3% of equity per annum. This includes hypothetical management fees.


ASSET ALLOCATION

The capital allocation is to be spread over equities, bonds, currencies, commodities and derivative instruments. There will be no real estate, antique, precious stones, collectibles or art work in the portfolio.

Beginning allocation as of August 26, 2003 is:

50% ($ 5 M) in money market funds, 50% ($ 5 M) in 13 week T-Bills.

The stock market as well as the bond market are extremely dangerous places to invest in at the present. This will change some day and we must keep our powder dry for that day. In the mean time we have to preserve capital.

For opportunistic short-term trading risk capital is never to exceed 10% of total equity.

Relative performance against a benchmark is not how we measure results. Absolute returns and capital preservations are the critera.


OBJECTIVES

The stated objective of Chowk FOMC (un)hedge Fund is to lose money as creatively as possible. If the Fund survives a year of operations, or worse yet, if there are any accidental profits, the agony shall continue.


METHOD to this MADNESS

There is a certain method to this madness. We shall explain each move and, as much as possible, declare strategies and trading tactics well in advance of the actual transactions.

Every new position opened will be explained and an ``exit plan`` will be declared in advance. If any particular position goes sour, it shall be closed out at a loss in accordance with the exit plan.

If ever there is a profitable position, the exit plan will be modified accordingly and the position will be closed out in accordance with the revised exit plan.

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SR,
its still pretty ugly out there...

Ras

#18 by tahmed32 on June 13, 2003 10:13pm PT

and unlike japan the us economy is a net debtor economy whose (creditors, ie foregin investors) are increasingly looking to see if there can be other alternatives to US( in such decisons both ideological reasons as well as business reasons are coming to play, very dangerous situation.)
Like I say we are living in very intresting times. I have a feeling that in the coming decade or two some very radical changes may take place.

Very informative and useful article. I`ll probably read through it one more time more carefully, but generally I think you are right: investment in gold is good, in dollar bad and in stocks ugly. In addition to the good, the bad and the ugly, I think you need to add a fourth category: downright scary (since it could gobble up the good, the bad and the ugly).

To this category would go......real estate. Real estate is way overpriced by any reasonable standard nowadays. In the US the housing market seems teetering on the edge of a dip as stocks were after the dot-com bust a few years ago. Mortgage rates have no more room left to go down in the US (my friend refinanced his house at 3.5% a few days ago). Commercial real estate is worse, with acres of empty office space. Outside the US - in the UK, France, Germany - things are even worse.

So, why would the downright scary gobble up the good, the bad and the ugly? Remember Pear Harbor....oooops, I meant remember Japan. When the real estate bubble collapsed in Japan in the early 1990`s, it sucked the the rest of the economy in as well. If the same should happen in the US, it could well start a recession in this country. And if the US catches a cold this year, Europe will catch SARS. And if that happens, what will poor Pakistan do other than fall sick like you did. Except it wont be due to hedonism.

At least this what I think, but I would be interested in your views since you are obviously much more up to speed on these things than I am.

PS: What`s the deal with the royal ``We``?

Re : Article

Sohail,
Nice article, really enjoyed reading it. You predict that the US dollar and the stock market will continue to decline or at least be stagnant in the near future. What’s your take on the economies of the developing world say in Asia and Africa.

Regards,

Faruk.

Hi SR:

Hope you are recovering well. A good summation of your school of thought. Can`t find too much fault with it except my reservations about any hope for the gold standard. I`ve been somewhat busy off late. The market is a cruel mistress. Will interact more next week.

later
-sac

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well the line is dropped now lets wait for the fish to bite.

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ERROR CORRECTION--- PLEASE NOTE

The article mentions $300 Billion shortfall in S&P 500 pension funds projected for 2003.

This DOES NOT imply that $300 Billion will have to be paid up by the corporations in 2003.

The amount of projected payments at the end of 2002 was $29 Billion for the year 2003. Revised estimates for current year are $35 Billion. This is the amount of real money that the corporations will have to cough up to pay into their pension plans this year.

The $300 Billion number came from the total pension fund asset losses due to market decline from 2000 levels.

My regrets for this error.

The following article in FORTUNE magazine is a good overview of the pension problems of corporate America.

http://www.fortune.com/fortune/investing/articles/0,15114,395147,00.html

...SR

I can`t say i understand monetary policies. I am curious to know if the difference in the spending and saving habits of japanese versus americans is why the Fed is about to cut the lending rate further to ward off deflation. This just might work, no?

#6 by Tipu on June 12, 2003 9:28am PT

you have to increase the level of rethoric this isnot sufficient :)

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This seems to be a follow on your posts about the euro/dollar debate. Interesting observations and I can vouch for your observations on the Canadian dollar.

The American market is perception based and the international perception still holds value for it. Interesting twist the debate on the euro in the UK. My guess; the euro was rejected by the UK, because that would have pegged the Brent crude to euro and weakened the United States seeking lateral entry into the OPEC and would have given the EU too much influence. Adam Smith`s ``invisible hand`` in the form of the American pressure, might have forced Blair to convince Brown to ditch euro. This is a hypothesis...

Ciao

you did not introuduce a hindu / muslim pakistan/ India angle to this we can predict not many people posting on this

Re: SR

I hope that your health is improving and from the looks of this article, you seem to be in good shape! I will post a reply, after reading this article. SR sahib, I might have a few questions for you!

Ciao

I wonder how long it will take for at least some of the countrieis to either switch form the dollar based valuation of currencies to some other currencies or on a gold based (or in case of Malayisias gold coin based proposal) or a mixture of both. Maybe 1-2 decades? This creation of money (ie printing ) by fiat has lasted too long. with emerging economies slated to be big enough in the next 2 decades to take thier own course and not be dictated by US it will be intresting times.

US however as a industrial nation is pretty strong it may suffer some severe damage but will surely surive as a strong industry based economy for many more decades to come.

The Impact of demographics on fortunes of nations is very intresting to watch especially since very little is in hand of the countries themselves. with the occupation of American land by white settlers took one of the rapid demographic changes of history took place. Now the the advanteges seem to be slowly shifting to the east.

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