Amongst others the norwegian branch of the Icelandic bank Glitnir offers 6.5 pct nominal interest, and 7 pct nominal interest if willing to bind the capital untill 03.06.2009. This is money covered by the norwegian bank savings fund, so considered close to risk free up till the limit of rougly 400,000 USD per person per bank, that is, if spreading across two banks the limit is 800,000 et cetera. So considereing risk free rate at around 7 pct, and a risk premium of 8-10 percent, one has to expect at least 16-20 pct gains on alternative placements to want to enter.

If we look a bit at the development of the Oslo Stock Exchange (click image for larger size):

OSEBX.I closed at 435.73 today, after what can only be characterized as a couple of hopeless months, bringing us back to march 2007, if looking for another day with close at this level. As such this is well below the 200 day moving average of 461.71, but with a potential support level if trying to make a trend out of the turns in late january and early march of this year
The interesting thing is that norwegian companies still shows some promising earnings potential, so these levels, in theory, should offer some nice P/E ratios for people looking to invest. The obvious question is the investment horizon; One should not invest anything in equities if not willing to stay in the market for at least 5 years, and it is the volatility in the market that over time should pay off.

US shares closing higher with financial and healthcare stocks climbing the most should help tomorrow at least. Falling oil price taking away some pressure from the US market and worse than expected US pending home sales could not stop today’s recovery. SP500 closing the day 1.7 % higher. DJIA up 1.35% with Bank of America the best performing blue chip up 9.30%. Nasdaq100 up 2.40 %.

In the after-market Alcoa (AA) just posted better-than expected 2Q EPS of 66C vs analyst estimates at 65C and at the time of writing the futures are pushing upwards, which should at least make tomorrow an interesting day.

But now that summer is here I’ve managed to find some time for some fun, too. And this, obviously (for people that knows me it should be fairly obvious anyways), includes time spent working with computers and programming of such. The thing is, my server farm didn’t cut it anymore, as Gamma was pushing the limits of it capacity. Beta is old enough as it is and Alpha is all the way in Ålesund doing its job nicely so I try not to overwork it too much.

This prompted the addition of a new server in the server farm, but first, lets recap the existing farm:

Gamma
For those who don’t know already, Gamma is the primary server in my apartment in Oslo, it is Dell PowerEdge 1900 with a Xeon 5110 1.6GHz/4MB CPU and 2 GB of RAM consisting of 6x 750 GB drives in a RAID-5 setup contributing an efficient storage capacity of 3.4 TiB to the network (the rest of the overhead is ext3 overhead and system partitions).

Gamma serves DNS, as well as runs the SKS keyserver keys2.kfwebs.net as well as most other tasks on the LAN.

Beta
Beta is the oldest computer in the farm, aging back to 2001. It has a graphical setup and is used as workstation in Oslo. The CPUs are Dual PIII 1000 MHz and it has 1 GB of RAM and about 1 TiB of non-redundant storage. It is the router on the network and as such provides both a firewall, DHCP server and a squid transparent proxy.

Alpha
Alpha is the primary web and email server and is hosted on dedicated line in Ålesund. it runs the sks server keys.kfwebs.net as well as DNS. The server is a Dell PowerEdge SC1420 with a Intel® Xeon™ prosessor (3.00GHz, 2MB cache, 800MHz FSB) and 1GB DDR2 SDRAM (2×512MB 400MHz DIMMs). It has a 73GB SCSI Ultra320 (10000rpm) 1′’ 68 pin drive.

Delta
This brings us to Delta. Delta will be an addition to Beta and Gamma in Oslo and has a Intel Core 2 Quad Q9450 Yorkfield 2.66GHz LGA 775 95W Quad-Core Processor, 4 GB of RAM and 16 x 1TB drives in a RAID-6 setup with two redundant drives. This adds about 12.7 TiB of storage to the network (again looking away from system drives on the server itself)

To sum things up, running Monte Carlo simulations on this farm is rather quick.

to be updated…

Sentiment among German financial analysts and institutional investors unexpectedly brightened in March, but remained at historically low levels, a survey from the Center for European Economic Research, or ZEW, showed Tuesday.

The ZEW think tank’s economic expectations index rose to -32.0 points from -39.5 points in February, beating economists’ forecasts of a reading of -40.0 points. The indicator was well below its historical average of 30.3 points.

The outcome gave the euro a boost to trade at $1.5451 at 1020 GMT, compared with $1.5400 ahead of the data.

Source: Dow Jones Newswire

I’m only speculating on small varieties, with a bid/ask spread of 2PIPs relatively minor moves can give small profits, so I went in at spike at 1.5218 and out again some 10 pips lower with 8 pip profit.

All in all it is a nice and slow Tuesday with some Microeconometics lectures and some trading to make the the day slightly more interesting.

As too often, also in other aspects of my life, I fail the patience/risk-seeking to follow things through to get max profit though, and as such had some opportunity costs compared to if I just stuck in there a bit longer.

That said, the volatility and nervousness amongst traders makes it possible for the markets to go in unpredictable directions, and I figured closing out the position before having a mid-term exam and a dinner arranged by my bank afterwards probably was a good idea. The dinner by my bank is a concept called Bank & Bacalao. For those not familiar with Norwegian meals/dishes; Bacalao is made with the primary ingredient Clipfish (which again is made out of Cod (or as Puerto Rico and the Dominican Republic prefers, for price reasons, out of haddock ) ) , potatoes, tomatoes, paprika, soya oil, onions and spanish pepper or chilli. But I’m getting off track here..

EURUSD currently trades at 1.5186, which is still rather strong compared to USD (but it will, in time become even stronger) . We see USDNOK in 5.16/5.17, and if we don’t have USDNOK at 4-levels sometime in 2009 I’d be very surprised.

Now, if only I learned how to become more patient… but at least I have a dinner with 800 crazy bankers and clients to look forwards to.

• I’ve been too busy with everything else
• I really haven’t had that much on my mind that was worth writing about

But today I felt different, so here we go with my little rant, hopefully there will be some comments to it.

USD keeps depreciating against the Norwegian Krone (NOK). We have had a 2.26% depreciation the past two days and USDNOK is now trading at 5.1899. If we look at monthly data we see that NOK gradually has appreciated since 2002, when USDNOK was at levels above 9. It passed the 1992-high of 5.20 in august 2007 and is now trading around 5.19. This marks a 46% appreciation which, I believe, most will agree with is a massive movement.

I have no doubt that we will see USDNOK continuing to decline, and we’ll see the 4-number before or during 2009. I speculate that after this; presuming the US can get its act together, we’ll see normalization around 2013-2015 at a 6-7-range. But we’ll see if time proves me wrong or right on that one.

One thing is certain. with EURUSD at 1.5, with expectations to reach 2 by 2010-2011, USA loses international purchasing power. The upside obviously being gaining competitive strength again.

And being competitive internationally is something the US of A has neglected for quite some time. If we e.g. look at the the automaker industry and agriculture; the political reign has been dominated by protectionism and neglected modernization, supported by, to mention one factor, strong lobbying from worker’s unions.

If we look at the auto-industry, consider the gas-efficiency and some americans complaining about 2-3 USD / gallon gas prices. As a comparison, the after-tax-price on gasoline in Norway is about 13 NOK a liter, or 2.45 USD / liter, or about 9.26 USD / gallon. Then, if we look at the crude oil prices, which currently trades at or above 100 USD a barrel. Or, converted for american’s convenience (it is not like we can expect them to do arithmetic), 100 USD per 42 gallons of crude oil; 2.38 USD / gallon for the raw material.

I expect to see even higher oil prices in USD-terms over the next couple of years, as USD depreciates against the Euro. Taking into account an EURUSD of 2 (versus today’s 1.5) we have a 133 USD/bl oil price on just forex fluctuations. An oil price in the 150-200 USD range isn’t something I’d be surprised to see, and that would still be relatively stable in Euro-terms.

With an upcoming presidential elections we can only hope that Americans will take a stance for a sustainable long-term economy, rather than going for the easiest quick-fix and consequently the politician promising the most. Of course, such a hope is against my better judgement, but that is after all why it is called hope.

Until then; the BRIC countries (Brazil, Russia, India and China) are what can help the global economy by supplying increased consumption. If we look at today’s situation; where USA has a net negative savings rate (being indebted on average), China has a savings rate above 50%. Politicians are already trying to bring the savings rate down and support consumption rather than savings, in order to offset negative consumption growth from the US. And we are indeed seeing a slightly higher effort in savings, if only it had happened 15 years ago.

The thing is, taking profit can be rather important, looking at the USDJPY position I hold yesterday, if I had stayed in for as long as today I would’ve ended up loosing money, as USD appreciated quite a bit against JPY. At least I can use that as a slight comfort.

Well.. there are other chances. All in all I’m looking forwards to having some days off around christmas and finally get to read some non-school and non-work related information. There has been far too many news articles about work the past month (8,000-10,000 articles in total… gotta “love” it when Subprime troubles hits Norway) so will be nice to get the thoughts away for a while, although I don’t start my vacation untill the 22nd.

FED 1: The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 4-1/4 percent. Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending. Moreover, strains in financial markets have increased in recent weeks.
7:34 PM
FED 2: Today’s action, combined with the policy actions taken earlier, should help promote moderate growth over time. Readings on core inflation have improved modestly this year, but elevated energy and commodity prices, among other factors, may put upward pressure on inflation.
FED 3: In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully. Recent developments, including the deterioration in financial market conditions, have increased the uncertainty surrounding the outlook for economic growth and inflation.
7:35 PM
FED 4: The Committee will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth
FED 5: Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; William Poole; and Kevin M. Warsh. Voting against was Eric S. Rosengren, who preferred to lower the target for the federal funds rate by 50 basis points at this meeting.
7:36 PM
FED 6: In a related action, the Board of Governors unanimously approved a 25-basis-point decrease in the discount rate to 4-3/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, and St. Louis.

Now the sterling can hopefully do its job too, after the USD did.

I shorted EURUSD at 1.46065 and purchased it back at 1.46057 giving a mere 1 pip profit. Why? as we can see EUR had a ride with a couple highs testing resistance around 1.4614 so it was simply a relief to close the position at a small profit rather than loss.. but obviously, what I should’ve done was to stick through it and wait for the drop to 1.4584 which would’ve given a 22 PIP profit..

Well, we can’t win them all…at least the initial expected development was correct, now to work on timing..

Some rather heavy moves on EURNOK this morning, with EUR appreciating a full 939.7 pips, representing a 1.22% increase. To put it like this, going 100,000 EUR long at the 7.7279 level and selling again at the 7.82187 level would’ve resulted in a 100,000*0.0122 = 1220 EUR profit. Why did I ever go to school followed by work today, I should’ve been trading…

Well, a new week and new opportunities over the weekend. For now, have great time.

Pip generally refers to percentage in point, and is the lowest decimal/unit an exchange can take place at. This is typically 1/10.000 (fourth decimal point). e.g EURUSD is quoted using five decimals, but only four are significant.

A practical example: A pip spread of 2 between bid and ask for EURUSD, which happens to be the deal I have with my brokerage house, means that while purchasing/asking we quote a price of e.g. 1.46945, while at the same time the bid price is 1.46925. In this case, the 2 pips is the fee paid to the brokerage house for their services.

(30 pip spread between bid/ask price from broker)