How am I doing?

It is always good to take a look at the positions you were thinking about after the fact and see how they did. Let's see:

• A short in gold. Definitely not a good start, although I am sanguine about this one in the longer term. Gold at over $1000 does not make sense.
  
• Long the iTraxx and short the components stock. Too early to tell.
  
• Long yen, short dollar. With the dollar at a hundred yen, that is doing very nicely. I'd probably take it off here.
  
• A modest long MBIA and Ambac stock. This is basically a long irrationality position. It is underwater so far and needs a tight stop/loss: one issue will be whether the recently announced ratings reforms break their business model even further.
  
• Short Baltic Dry. That worked, and would have been taken off by now.
  
• Long a FTD basket on the subordinated prefs of national champion banks. Positive carry but looking sickly on a mark to market basis. Still a trade I believe in though.
  

Maybe I do have a future in global macro... from these shoots and so on.Incidentally, the FTD position is interesting given AIG's comments on fair value. According to the FT:

American International Group is urging regulators to change controversial accounting rules on asset valuations to stem the tide of writedowns that have wreaked havoc on Wall Street. [...]

Under AIG’s proposal, which has been presented to regulators and policymakers, companies and their auditors would estimate the maximum losses they were likely to incur over time and only recognise these in their profits.

All other unrealised losses would be recorded on the balance sheet but would not affect profits. In AIG’s case, this method would have reduced the impact of the $11bn writedown on fourth-quarter results to $900m.

Given AIG's losses, this is not just nonsense, it is self-serving nonsense. 'Let me make up the earnings I would like to have had' is not an accounting principle, it is a CFO's fevered fantasy.

The FT reports a more measured version of that sentiment:

“It might be hurting but fudging the accounting is not the answer,” said one Big Four partner. “Investors can make their own mind up as to whether the outlook will get better, but they can’t do that for a company without a clear, fairly valued starting point.”

“If management are going to use more of their own judgments in valuations, I’d think markets would be looking to build rather more risk premium into these companies,” said Ken Wild, global leader for international accounting standards at Deloitte.

And that is exactly the point. Investors, like Buffett, are mature enough to understand volatility in earnings if a good enough case is made for the position that is generating that volatility. But that case has to be made. It is not good enough for corporates to say 'trust me' and neglect to provide the users of financial statements with information on what the real earnings are. For the FTD basket the case is basically 'too big to fail'. I think that's a reasonable investment: you might well think it is nonsense. But the point is that if I was investing your money, then you would need to know what the market thinks of the position I put on, not just what I think of it.