Seeking Absolute Returns

MODEL PORTFOLIO SEEKING ABSOLUTE RETURNS

Sound Advice 2nd April 2009

The EquityBell Securities leveraged model portfolio was started on 27th January 2009 as a paper trade with an

initial value of £100,000.

The portfolio currently has an NAV of £96,948 -3.05% in 66 days*

Leverage 1.68 times

Only our most robust investment ideas will be placed into the portfolio explaining the

rationale, entry price with comments on reasons for holding and explanation of the exit

and price and net profit and loss.

Open trades Date Asset size FX price value margin Price

now value £ P/L

26/1/2009 MRW shares

Long 9,700 CFD’s

GBP 258.00 25,026 7,500 267.75 25,972

946

26/1/2009 SBRY shares

Short 8,075 CFD’s

GBP 309.75 -25,012

7,500 320.76 -25,901 -888

27/3/2009 USD / NOK

Short $50,000

USD 6.9094 -50,000 2,000

6.5529

50,431

293

27/3/2009 US Dollar Index June 09 Futures

Short 1 contract

USD 84.85 84,850 2,230 84.98 84,980 -88

2/04/2009 Gold as a FX

Short 50 ounces

US$ 916.25 45,812 1,832 901.7 -45,085 494

Starting Value £100,000

Portfolio NAV £96,948

Loss £3,052 -3.05%

Loss taken £3,795

Current Positions

FX

Short USD vs long NOK

Short US Dollar Index

Future

Commodities

Short 50 ozs Gold

Fixed Income

none

Equities

Food Retail Spread

Long Morrison CFD 258p

Short Sainsbury CFD

309.75p

EquityBell Securities was set up in October 2008 by a collective of seasoned market professionals to provide outstanding investment advice to clients running non-discretionary portfolios through direct market access

brokers and wealth managers. The credo is absolute returns by giving sound advice in asset classes that are individually appropriate to the risk appetite and base currency of each particular client.

THIS IS A MARKETING COMMUNICATION Intended for information only and should not be construed as an invitation or offer to buy or sell any investment vehicle or

instrument. This note has not been prepared in accordance with legal requirements designed to promote the independence of investment research; and is not subject to any prohibition on dealing ahead of the dissemination of this

marketing note. EquityBell Securities will provide extra detail on data or graphs used in this note upon requested.



Closed trades Date Asset size FX price £ value margin Exit

date Exit price

£ P/L taken

26/1/2009 EURJPY FX

Short EUR 100k

118.606 92,988 2,800 02/02/2009

113.35

4,155

26/1/2009 Carrefour shares

Long €50k CFD’s

EUR 26.495 50,341 7,000 04/03/2009

24.97 -2,580

26/1/2009 LVMH shares

Short €50k CFD’s

EUR 43.42 -50,367

7,000 04/03/2009

45.25

-1,890

26/1/2009 June Gilt Future

Short 1 GBP 118.71 118,710 3000 05/03/2009

122.00 -3,290

26/2/2009 10/3/2009

Gold Long 100 ozs

USD 913.5 91,350 1300 16/03/2009

926 921

25/2/2009 EURUSD FX

Short EUR 100k

1.2786 88,152 1,763 18/03/2009

1.3080 -2,113

18/3/2009 UST 1o yr June future

Long 1 contract

US$ / GBP

121.50 121,500 2,700 20/03/2009

124.875 2,318

26/1/2009 MRW shares

Long 9,700 CFD’s

GBP 258.00 50,052 7,500 20/03/2009

240

-1746

26/1/2009 SBRY shares

Short 8,075 CFD’s

GBP 309.75 -50,024

7,500 20/03/2009

307 222

24/3/2009 Gold Long 50 ozs

USD 922 46,100 1,844

01/04/2009

928.0

208

*These are gross figures that do not include commissions and funding charges on some products FX

We have previously covered how the US and UK are printing money within quantitative easing which should depreciate the US$ and Sterling. At the G20 meeting in London, both China and Russia are calling for a new reserve currency. They both appear keen on expanding on an internationally recognised basket of currencies created by the IMF in 1969 called the Special Drawing Rights (SDR). SDR comprises the US$, Yen, Euro and Sterling and is only used for international accounting like setting the maximum goods carried liability of airlines. The Chinese want to establish a new basket global reserve currency, managed by the IMF that can be used for trade, bonds and borrowing. This is because there is no other bond market of the same US$2 trillion size as the US market that can accommodate US$ sellers. In August 2005, China revealed the Renminbi currency (CNY) is fixed against a basket of world currencies that comprise the US$, the Euro, the Japanese ¥en, and the South Korean Won, with smaller weightings of UK Sterling, Thai Baht, Russian Ruble and the Canadian, Australian and Singaporean dollars. The weightings of the components within the basket are undisclosed, but analysis reveals the Japanese ¥en, Euro and Korean Won have a greater influence than the US$. What most commentators appear to have missed is that China’s currency is pegged to a basket that is remarkably similar to the SDR. The Financial Times reported today “China, which is pushing to end the dominance of the dollar as a worldwide reserve, has agreed a Rmb70bn ($10.24bn) currency swap with Argentina that will allow it to receive Renminbi instead of dollars for its exports to the Latin American country”. Harmony is the key objective G20 meeting in London as no one wishes to undermine the fragile confidence politicians are trying to foster with the US$821 billion of G20 stimulus which is 1.5% of 2009 GDP. While it will take many years to set up SDR as a liquid reserve currency alternative, rhetoric at the G20 may weaken the US$ in the near term.



The US Treasury announced on 17th

March 2009 that US National Debt is $11 trillion, which is US$36,000 for every citizen or US$71,000 for every tax paying worker. It now requires US$6 of debt to produce US$1 of GDP and debt is growing and GDP is shrinking. The reserve currency status of the US$ is the main anchor of support. If an alternative to the US$ is being created like the SDR and countries are bypassing the US$ with their own swap agreements like China and Argentina, how long can faith be sustained in the Greenback. USDNOK Chart We have shorted the US$50,000 against buying the NOK at 6.6094 with a stop loss at 6.93 and a target around 5.92. June US Dollar Index Futures (DXM9) price chart We have also shorted 1 contract of the June 2009 US Dollar Index futures at 84.85 with a stop loss of 86.85 and a longer term target of 81.

Commodities Gold Chart

Gold is still seeing considerable scrap selling from Asian individuals (particularly China) as individuals need cash in the face of job losses and sharply contracting economies. Gold may also come under pressure from the G20 SDR creation rhetoric which is touted as a viable alternative to owning Gold. Yesterday we sold and took profit on the 50 ounces of Gold at US$928.0 which was previously bought at US$922. Today we have sold 50 ounces short @ US$916.50 looking for a much lower target (maybe US$835) sometime in the future.

Source: Saxo Bank

Source: Saxo Bank

Source: Saxo Bank



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10 146 275 406 540 667 798 931 1060 1192 1336 1465

NASDAQ Comp from Mar 2000 Dow Jones Ind from Sep 1929

Nikkei 225 from Dec 1989 S&P 500 from Oct 2007

S&P 500 - YOU ARE HEREThe primary trend is lower. However, markets

rarely go down in a straight line and we should

expect a short covering rally/consolidation soon.

Later we are likely to resume a grinding slide with

possible technical targets of 400 for the S&P 500 and

2,000 for the FTSE 100 on sharply lower earnings

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10 yr US Treasury Note yield currently very low @ 2.74%

Fixed Income Central Banks around the world are providing liquidity by bringing short term rates down close to zero. The US and UK quantitative easing programs are buying longer dated government bonds to provide liquidity further out on the yield curve. At some time this year, longer term interest rates (over 10 years) should start to rise. When 10 year US Treasury rates come down to 2.5% (from the current 2.74%), we will look to sell short the 10 year UST June future or buy the CFD of the UltraShort 20+ years US Treasury Bond ProShares ETF (code TBT), expecting rates to rise.

Equities

The S&P500 index has rallied 26% to 845 from the 6

th March low of 666.79 mainly on short covering.

Commentators are saying many investors want to buy on any pullback as they believe the economy will improve over the next couple of years and want to grab a bargain now. We are highly aware that the primary trend of equity markets is lower. The current fiscal stimulus packages are designed to halt deflation and inspire inflation as politicians and central bankers throw money at the economy until they perceive the “green shoots of recovery”. On the next page is a chart of equity index performance each day past the ultimate peak of the market during a financial crisis caused by overburdening debt. We can directly compare how Wall Street 1929, Japan 1989, NASDAQ 2000 and the S&P500 2007 pan out over the subsequent days as Governments struggle to reflate economies. This would indicate that we have not seen the worst yet and the current reflation rally may run out of steam soon. Sell in May and go away springs to mind As markets nearly always overshoot during times of turmoil, the current S&P 500 “counter trend” rally is likely to continue through the 930 resistance line to approach 1,000 during the spring, despite gloomy economics. Given that we consider this counter trend rally as a risky, short term momentum trade, the scale and duration of this rally is an unknown risk. We will look to establish a longer term short position in equity indices sometime in the next four weeks.

Data Source: Yahoo Finance

Data Source: Yahoo Finance



Food Retail Spread Morrison Supermarkets 267.75p on a 15.42 PE and a 2.28% div yield, 2009 est EPS 17.40p Sainsbury 320.75p on a 16.81 PE and a 4.00% div yield, 2009 est EPS 19.10p The spread between Morrisons and Sainsbury is 53p. We continue to hold the position.

Conclusion The current “perception of coming inflation” momentum (not value) rally in equities should continue to the end of

April and reach the resistance levels set in January (S&P 500 at 870 and then 930). After that we expect equity

indices to resume the primary downtrend through to October / November 2009. We like Gold for the longer term,

but remain short during the current selling pressure. We are looking for a retreat on the 10 year US Treasury

yield down to 2.5% for a reversal and longer term advance in rates. Longer term we look for quantitative easing

to weaken the US$.

EquityBell Securities Dowgate Hill House, 14-16 Dowgate Hill, London, EC4R 2SU Tel: +44 (0) 20 3189 2108 www.equitybell.com

Risk Warning Notice: Equity Bell Securities is a trading name of Equity Bell Limited (registered office: Talbot House, 8 – 9 Talbot Court, London EC3V 0BP. Registered in England and Wales No. 6725781) is an Appointed Representative of London Islamic Investment Bank Limited, which is authorized and regulated by the Financial Services Authority. Whilst every attempt is made to ensure the accuracy of the information provided, no responsibility can be accepted for any inaccuracy. The information provided cannot be relied upon as constituting a recommendation, nor construed as any offer to sell, or any solicitation of any offer to buy investments. No liability is accepted for any loss whether direct or indirect, incidental or consequential, arising out of any of the information being untrue and / or inaccurate, except caused by the wilful default or gross negligence of EquityBell Securities, its employees, or which arises under the Financial Services and Markets Act 2000.

Seeking Absolute Returns

Economy & Finance

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