BofA / Merrill Lynch is out with a note on interest rates. They see the Bank of Canada as the next central bank to move on interest rates.

– Bank of Canada’s Carney speech hinted that the central bank is considering a rate hike earlier than the prior forecasted mid-2010.

–There is a trade surplus expected for December and a 15 month high for January housing starts. Both of these data points support a forecast for the first Bank of Canada rate hike in June 2010.

Meanwhile, as the world turns, so does the Factory and it’s cast of characters. X is monitoring world events; The Consigliere continues to build his law firm specializing in the law of attraction; Pinky Megiston is beautiful; and Anything Anywhere! seeks more avenues through which he can add value.

Apart from all that, sovereign risk spreads are igniting. The dollar is catching a flight to safety bid and stocks are crushing lower–the S&P 500 is off about 2.5% as I write. Gold and silver have been pummeled most severely, off 4% and 5.5% respectively.

Sovereign risk spreads have risen dramatically this week, led by the European majors. Holders of sovereign debt—in particular Portugal, Italy, Ireland, Greece, and Spain—are running for cover. Not surprisingly, politicians will blame these events on speculators. However, a closer look at the money flows reveals true fear: real money is fleeing sovereign debt (selling government bonds) as opposed to speculators driving risk higher by buying credit default swaps (insurance). Nations with the largest deficits and the most in need of short term financing are being sold the hardest.

Dubai has continued to see risk premiums rise, as it scrambles unsuccessfully to sell off some of it’s holdings. Like a skydiver free-falling through the air, Dubai is reaching for it’s reserve chute. The velocity is building to the perilous downside. Hope is not a viable strategy here and now; but other than bluff, it may be all they have.

The crash of 2009 was not foiled—it was postponed.

We are sitting on the precipice of something special. An event where fortunes will be made and lost. Great art will be inspired, and an ageless tale will be re-told.

And the beat goes on.

Meanwhile, back at the headquarters of my for profit think tank, I read George’s book today, The Crash of 2008 and What It Means. If you are interested in his view of the inter-market relationships and forces that were in place during the banking collapse last year, I recommend it. He traded actively during 2008, and he lays out the thought process(es) behind his positioning. He is a decent critic of himself in that he admits to many mistakes. He ended 2008 “modestly higher”, which he considers an accomplishment in a “period of almost universal wealth destruction.”

He candidly admits to missing the largest part of the crash, “Although I am an experienced short seller, I got caught several times, and in the end I largely missed the biggest downdraft, which came in October and November.”

He also talks to being slow to recognize the trend reversal (strength) in the dollar, causing him to give back profits. “Eventually I understood that the strength of the dollar was due not to people choosing to hold dollars but to their inability to maintain or roll over their dollar obligations. In a very real sense, the strength of the dollar, like the fever associated with sickness, was a measure of the disruption of the financial system.”

While the collapse was decently predicted, the rush to the dollar caught most off guard. Most traders–even the ones that made a killing being short the mortgage and mortgage related markets–would agree: it was surprising that the risk aversion trade became buying the dollar–the currency at the center of the collapse.

Green Energy

As the housing bubble that led to the collapse of 2008 deflates, another is being built. The massive investment in cleaner, more efficient distribution of energy is the next great growth industry. I invest heavily in energy. It is, after all, the mother of all markets. I’ll end with my favorite line of the book:

“Nothing is quite as profitable as investing in an early-stage bubble.”

And the beat goes on.

In the future (past), society began to re-asses the utility of being online. The internet (as we know it) develops in a series of cycles. In time, we learn that during certain cycles, it becomes more valuable to utilize the internet to hide oneself as opposed to promote oneself (inversion).
-Mister Volatility

After a conference call with my assistant, Tonya, I am still uncertain if I own any preferred shares of Twitter. Trading public markets is like venture capital with one caveat—timeframe. Venture investors trade over periods of years. Mister Volatility (that’s me) invests in ventures himself and has, from time to time, lent money to VC firms to participate in their arbitrage. Private equity is a longer timeframe trade. In public market trading there is sufficient liquidity on smaller timeframes (scales), down to the millisecond. These micro scales present results to the exponential–so I must build models to trade them. The liquidity cycle of Venture Capital is much longer. Given the variance in timeframes my investment focus is dual: Private equity on in the longer frame and public (liquid) markets on the shorter.

I do not own any direct shares of Twitter—but it is possible that I own some through a fund. The reason Tonya doesn’t know is because she doesn’t know everything about me. If there is one imperative I can impart about assistants, even the great ones, it is this: keep some secrets.

Anyway, what I am saying is that I want to buy shares of Twitter, even if I already own some. If I already have some, I’d like more. I understand there are shares for sale at Sharepost.com, and I instructed Tonya to take care of it. Unfortunately, she said the website will not accept my registration because The Tinker Factory does not release it’s physical addresses, and an address is required. Therefore, if anyone is interested in selling me shares, please come by the office sooner rather than later. I am an internet analyst after all, and my analysis reveals that the market cap of Twitter will surpass that of Google. In fact, it will be the second largest company in the world (as measured by market cap). We will talk about the first largest company in the world later, but I’ll give you a hint: think automated distribution and green energy. (But don’t limit yourself to the typical definition of clean and efficient power. Might not “green energy” refer to banking–some money is green and banking is about moving money, which requires energy!)

Perhaps someone will be in touch soon to sell me some shares. No matter, I am going to build some companies over the next couple of weeks that I’ll sell to Twitter for stock as opposed to cash.

And the beat goes on.