Time for a Recap

What an interesting day the last day of November 2011 turned out to be. I congratulate Central Banks on their timing. Not only did it have the surprise element but it also helped year end trading books of banks with a 4% rise in equities. I hope every investor out there had the appropriate risk management discipline to survive such intraday volatility. So lets assess where we are the day after. Is there still a problem Europe? Unfortunately yes even after todays relatively successful French and Spanish auctions. While maybe European banks situation is slightly better with more relative cheap central bank funding available there is a whole plethora of problems facing the banking industry and Europe. The European debt problem remains. Yesterday action did nothing to resolve this except insure the security of a functioning global banking system. Countries around the world still face large debts to repay with falling revenues. Europe has not resolved their unity issues. As I have repeated many times they need fiscal and political harmonization through treaty changes. The grapevine says the draft treaty changes being considered does not have complete backing from all countries. Giving sovereign rights to a central European institution is a tough decision and not one to be rushed. Both US and China are being effected by the European problem. But lets not get too downbeat, there are many great investment opportunities. Liked I mentioned in my previous blog a long commodity short European problem is an interesting trade and one that has already paid dividends in the last few days. If interested I suggest you look at a Euro vs Australian dollar chart. In fact I think they some interesting plays in commodities. If you combine fundamentals with a technical reading of the markets I would suggest look at some long commodity plays. With commodities supply and demand metrics are key, combined with the analysis of the positions of both investors and the industry players. Also equity market provides some interesting investment opportunity.  I have identified some interesting companies that will benefit from an increase in infrastructure investment. Corporate credit should not be overlooked. Strong fundamental analysis of future expected cash flows in a recession environment can provide some great lending opportunities. This a market where hard work pays off. But whatever you decide to invest in discipline in risk management is key. They are many opportunities but there is also a high probability of surprises as well. The key to making money is discipline. It is what separates a great investor who has the potential to benefit from all market environments from a just a lucky investor. This is the key question that many participants in the hedge fund industry should ask, especially hedge fund of funds. I wonder if they have analyzed this about their hedge fund investments, and what category the likes of John Paulson or  Greg Coffey fit into?