You Are The Worst dot Com

As anticipated and forecasted, the BOE cut interest rates by 25bp to 5.25% and ECB left rates unchanged at 4%.

GBP:

At the moment, the Bank of England is more concerned that slowing growth will bring inflation below target and suggested that more rate cuts may loom on the horizon as long as economic data points to deteriorating conditions following the lead of the American counterparts. Similarly to the USD, the pound is heading towards a period of slowing growth and its time to short it.

EUR:
Even though interest rates remained unchanged, ECB President Jean-Claude Trichet appeared to soften his previous hawkish stance on rates, noting that risks to growth in the euro zone were on the rise. Analysts increasingly believe the ECB will have to cut rates later this year despite rising inflation. Trichet stressed multiple times that the risk to growth is to downside and uncertainty about market turmoil is usually high which triggered the massive sell-off of the EUR/USD. Look for a period of moderate rise in the EUR/USD but mainly trading within a narrow band pending further economic news but for the short-term, its good to go short as the momentum is favouring the down trend.

Trading:

• At the moment, there looks to be a relatively good amount of trading opportunities with the majority of the event driven news out of the way. At the moment, I am looking at a short on the EUR/JPY on the 1-hour downtrend and since its a Friday, 1-hr is perfect for an intraday trade with all the profit-taking that goes on during the mid-session of the NY open.

• Another trading setup is the EUR/GBP (my fav. pair) on the Daily charts forming a flag formation again and a break to the upside past the .7500 region would signal another buy opprtunity possibiy to at least the 0.7600 region.

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The Institute for Supply Management’s (ISM) non-manufacturing index, released Tuesday, plummeted to 41.9 from 54.4 in December as analysts fore casted a figure of 53. It was the steepest drop since the index was launched and the lowest reading since the aftermath of the Sept. 11, 2001, terrorist attack. A reading of less than 50 indicates a contraction of service activity, which accounts for about three quarters of the U.S. economy.  The sharp decline in the ISM index is significant because it suggests a recession could be worse than the relatively mild one experienced in 2001.  A remarkable 14 of 18 sectors ranging from insurers, restaurants, hospitals reported to the ISM stating activity shrank in January.

As a result, fed fund futures are pricing in a 74% chance of another 50bp cut next month.

…..

Not much going on again on the trading aspect and my previous sole lot on the EUR/GBP was exited early due to the rising strength in the GBP the last couple of days.  The exit point was @ 0.7460 which netted a profit +14 pips and the entire trade netted a total of +59 pips.

The opportunity to re-enter may very well occur very shortly however due to the event risks of interest rate statements from both parties; any entry should be delayed until Thursday.

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NEW YORK (Reuters) CNBC - Technology giant Microsoft Corp <MSFT.O> said on Friday that it had offered to acquire Internet media company Yahoo Inc <YHOO.O> for $44.6 billion in cash and stock.

Microsoft said it had offered to buy Yahoo for $31 per share, which it said represented a 62 percent premium above the company’s closing stock price on Nasdaq on Thursday.

“We have great respect for Yahoo, and together we can offer an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market,” Microsoft Chief Executive Steve Ballmer said in a statement.

Yahoo was not immediately available for comment.

Microsoft said it had identified four areas that would generate at least $1 billion in annual synergies for the combined entity.

Yahoo shares rose 56 percent to $29.95 in premarket trading on Friday following the announcement. U.S. stock index futures also jumped after the news was released.

……

It looks like Microsoft is really on a roll here ever since the buying a piece of the social networking giant, Facebook, as it looks to keep up with eventual I.T. successor Google. But where’s the synergy? Yahoo has had much more success on the web than Microsoft, and Google increasingly looks to challenge Microsoft with online office apps. There’s search, too: the two companies combined would command 27% of the search market against Google’s 65%. And of course there’s advertising, where Google is also dominant and Yahoo is building out Panama.

Former CEO, Bill Gates, was not available at the time for questioning thus we will leave you with a classic photo of a provocative Gates doing the dirty deed with teh release of Windows 1.0.

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With all the hype recently about Goldman Sachs being the only major investment bank to avoid being stung in last year’s subprime mortgage fiasco and the record profits it rung up last year, bonus time was expected to be a time of good cheer for Goldman employees.

But, according to The New York Post, some were not so happy with their year-end stocking stuffers. The paper, citing “whispers”, said that some cost center employees, the back office operations, IT employees and such, were getting stiffed.

The firm’s chief executive, Lloyd C. Blankfein, was rewarded with a record $67.9 million bonus, while its co-presidents, Gary Cohn and Jon Winkelried, each received bonuses of about $40.5 million, up 58 percent from last year. And the bank also set aside 20.2 billion to pay employee wages, benefits and bonuses this year, a 23 percent increase from last year.

But cost center workers expecting 75 percent of their salary as a bonus, got only 15 percent, the newspaper said.

Link

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Bad bets on the U.S. subprime mortgage market, as shown countless times in the past few months, can be deadly—or at least markedly unpleasant—for hedge funds. Good bets? They can be unspeakably lucrative.

Small Cap managers that are up 10% this year are considered to be doing well. If that does not impress you, this will:

And no one, it seems, bets as well as John Paulson and his Paulson & Co.: The $4.5 billion Paulson Credit Opportunities Fund, set up last year for the express purpose of betting against subprime, is reportedly up a remarkable gross return of 690% and a net return, after fees, of 551% for the first 10 months of the year, according to a source close to the firm. The firm’s Credit Opportunities II fund has made a gross return of 410% and a net 328%.

Paulson’s assets under management have mushroomed from $6 billion in January to nearly $28 billion, and the firm is close to cracking the top 10 in hedge fund land, at least in AUM. It is hard to see their performance being much better. I am assuming they are number one, a remarkable feat for such a large fund.

He’s so confident that it’s going to get worse, he’s raising a new $5 billion fund.

Lets get the numbers straight: The company is a 9 person hedge fund and at the 2% assets under administration and 20% of returns valuation (and that’s conservative for a very well regarded HF manager like Paulson) that’s $3.82 billion they’re taking home in compensation this year alone.

Another prime example of a big shot hedge fund manager making exuberant amounts of dough points to Steve Cohen at SAC Capital Partners whom has a policy to keep 50% of gains plus a 3 percent management fee. Then again, he’s generated an average annual return of 43.5% since 1992 - which is astounding. Cohen’s personal compensation levels have been off the proverbial hook for years now. So much so that it’s actually funny to read:

2006 - $1.2 billion
2006 - $1.0 billion
2005 - $450 million
2004 - $428 million
2003 - $350 million

So, How do you stack up with the best and brightest?

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