The cosmic void

One of the best days for quite some time for Flash Rabbit's fund - pretty well everything that Flash expected came to pass, although he had to give it all his full attention to squeeze the maximum juice out.

He put a quick short on MBIA and added to his short on AMBAC mid-morning, thinking that the banks' loan mess was on the verge of unravelling, and sure enough, they tumbled - particularly MBIA which Flash Rabbit thinks is stuffed in the medium term. And if they are stuffed, then so are most of the banks. Well, that's what the market seemed to think today, anyway.

He added to his FTSE and Dow shorts - if only he was less nervy then he would be sitting on an enormous pile of cash by now. As it is he made a lot but would have made much more if he'd kept his nerve and not kept dropping in and out. Some very simple errors made about remembering to let profits run and not jumping in at the wrong price point, not doubling up and then panicking when the market seemed to turn...as it was, it was as close to a straight line down as one is ever likely to see. And beneath the 5620 mark on the FTSE lies a gaping void with no support in sight...perhaps that might focus some attention on desparately trying to heave the index up from the abyss on Monday. Oil may be the key, but regardless of what happens with oil, the macro picture is still bad, bad, bad. It's great that China and India have begun to bring their fuel prices in line but that will only create even more inflationary pressure - it might reduce demand for oil there but it will also create wage pressure and increased manufacturing costs. So it's all a devil's bargain. Oil is the inflationary poison and that's why Flash is interested in post-oil economies and the people who are thinking about them. If he had the capital to be invested in solar power, and most forms of renewables, he would. He did take out a quick long in Scottish and Southern Energy at the end of the day - might or might not work, especially if the market tumbles further with more grim data next week, but he's going to give it a go.,

Flash's short position in HBOS (along with half the rest of the trading community, probably) has been the story of the week - took profit on that but has left one bit of it still running, because Flash thinks that in spite of any short term rebound, HBOS is in bad trouble. Any bank that uses the word 'resilient' in a trading statement makes him think that it must be feeling pretty beleaguered.

Flash waited for the housebuilders to rise - utterly illogically in his view - as no-one much has any chance of buying a house at the moment - and then banged on a quick short on Persimmon - a fast £40 profit and he'll probably reinstate the short when the market settles (if that's the right word) at the start of next week. He's kept a short in place on Barratt too. The banks might write off some of Barratt's debt but that's because of saving their bacon, not Barratt's...so no particular expectation of any improvement there. And if (when?) interest rates rise, all hell will break loose in the housing market. It's bad enough already...the only kinds of housebuilders Flash Rabbit is interested in are low carbon, low energy, low impact, intelligent ones. And there don't seem to be any of them in the FTSE 350 that he can spot.

What Flash Rabbit is now thinking is - what's the next phase once the bank meltdown has happened, we have a sense of the longer term direction of oil (vertically up or moderately horizontal?), once the housing market has unravelled - and what's the next toxic shock? Massive devaluation of the pound and the euro? Currency chaos? Mass unemployment? He will be pondering that over his copy of the FT during the weekend and trying to spot the next theme.

So he ends the week in good shape with virtually all his positions (bar Euribor) showing a healthy profit. Nice one.

Next week Flash will talk about his longs and his shorts.