Trading the Easy Way - CFD trading, spread betting and spread trades training

Here's my discourse from September last year, followed by a recent chart:

Well, it's very rarely that Williams doesn't know where to start these weekend ramblings, but today it's more a matter of selecting what I can leave out, rather than what I want to discuss! Anyway, I'll do my best to compress the 'information overload' that meantime seems to permeate markets, but nonetheless I'll try to give you a bit of a flavour of how things look from here.....

To begin - looking at the "Big Picture" - in the "biggest picture of all" we have Bernanke (the latest US Federal Reserve governor) living up to expectations after his comments when he was appointed, that if need be he would "drop dollar bills from a helicopter" to "save" the American economy from recession - and his knee jerk half percent rate cut the other day is clear evidence that he meant what he said. "So what?" I hear you ask - so ongoing savings destruction for the more prudent Yanks (not that there are many, evidently), so ongoing destruction of the dollar, so ongoing inflation of bubbles as speculators get the idea the Fed will always bail them out (Type 'Greenspan Put' into the WICS search engine if you're new to all my ranting - and a big "welcome" to you if you are indeed a new subscriber!)...and so on. Will inflating the dollar supply and cutting interest rates work? Not a chance! The Fed has never, ever, reduced rates in advance of markets falling - it has always done so AFTER they start to drop. The Fed FOLLOWS economic events, it never leads them. Sure, at the moment the stock markets are once again euphoric even if the once mighty dollar is dropping like a stone - but the current rise is not going to last. Peter Schiff of Euro Pacific Capital put it very well the other day when he said "This (the Fed rate cut) is not going to stop a recession - it might slow down the process for a few months but it's just going to make it worse." How true. Whenever governments intervene, things just get even messier when eventually economic forces win the day - and they always do win. The problem is that free market forces are being distorted by government interference, and given the example of Japan (deflation, falling incomes, property collapse etc etc after the effective nationalisation of their banking system and interest rates below 1% for years) you would think your so - called "leaders" might learn from history - was it one of the Roosevelts who said that "The only thing we learn from history, is that nobody learns from history"? I can't recall, but it's absolutely true of course.

Bernanke's problem (and for sure, HIS problem is going affect the economy of the entire planet) is that he's an academic (nothing wrong with that in itself of course) - but he's a "one trick pony" academic. What do I mean by that? Just that he obtained his qualifications on the back of a thesis written over thirty years ago, and that he has produced nothing new since. Not only that, but his thesis was written around the idea that the 1929 stock market crash would not have occurred if the Fed had stepped in before the crash and reduced interest rates "as required". Now, as I suggested above, the Fed has NEVER reduced rates in anticipation of market action, so his thesis is a "would have/could have/should have" piece of theoretical junk that was totally and completely demolished by the fact of Japan's massive deflation of the past 15 years or so. Don't lose sight of the fact that despite Japanese interest rates dropping to ZERO (yes, zilch!) for a long time, the Nikkei 225 Index which previously (in a massive property - related bubble) had reached around 40000, was sitting at just above 7600 in April 2003 and today is still trading at only 16400 or so - it has an awful lot of ground to make up before it's back to where it was 15 or so years ago! No, once people begin to feel bad enough about 'money' and once they find they can't just borrow any more against falling house prices, they'll inevitably reduce their spending and since both Britain and the USA depend massively on "consumption" rather than "production" for economic activity, recession is not only imminent, it's totally inevitable now. Interest rates could drop now to Japanese levels and it will still happen. Do I have a solution? Of course I do! Let it happen - it really is that simple. Trying to manipulate markets certainly delays the inevitable but only ever makes the outcome worse. Euphoria and the bubbles thereby created are part of the human condition and corrections are a perfectly normal part of economic activity. Some will lose their shirts, sure, but might it not be the case that they caused that themselves? To me, what is REALLY unfair is the way savers always get penalised via inflationary pressures and falling interest rates. Speculators (myself included of course) deserve no sympathy when things go wrong, much less government protection - but savers surely are the innocent victims of collapsing bubbles? Ah well, it was ever thus.

Moving along, it's highly amusing to observe the "blame game" as applied to the Northern Rock fiasco. This weekend, "short sellers" are getting it in the neck - people like us, who 'sell' shares we don't actually own, in order to 'buy them back' at a lower price. We are the ones to blame, and 'they' should stop us forthwith. It's just plain wrong that 'they' still allow it. Hmmm, but there's nothing wrong then with all these big institutional shareholders like Baillie Gifford and Deutsche Bank selling the Northern Rock shares they owned - and taking a huge loss in the process - when finally they woke up to the nasty smell? Of course there's nothing wrong with selling out! The 'shorts' only arose because the astute could see the big boys dumping shares and knew that was the beginning of the end.... Had it not been for short sellers spotting the monumental crookedness of Enron, that sorry mess would have dragged on an awful lot longer than it did, and would certainly have cost a whole lot of people a lot more than it did. As mentioned above, let the markets get on with it guys - the less interference, the better they tend to work...... (But as also mentioned above, the protection and encouragement of savers is something that is much needed, to my way of thinking. I know Gordon has somewhat mangled the meaning of the word 'prudence' but for all that, financial prudence is still a pretty good idea. I don't think though that compelling the UK taxpayer to bail out the irresponsible is a hugely good idea - and that is what has now happened of course, like it or not...) Nobody at the moment seems to consider that the blame for the NR mess perhaps ought to be popped through the letterbox of their head honcho, Mr Applegarth - he of the suddenly extremely low profile? And maybe he should be permitted to share said blame with the Financial Services Authority, who yet again are carefully pushing shut the door of an empty stable? Ho hum - some things just never change - although it seems the FSA plans a "crackdown on loan sharks" - hey guys, loan sharks will soon be the only people willing to lend anyone any money.

Next, I note that it's business as usual for BAE then, with Gordon continuing Tony's line and refusing to acknowledge that something a bit stinky is hiding there, in full view....

And the UK is going to get a lot bigger when it annexes several thousand square miles under the Antarctic Ocean - I know Gordon is keen to see three million new houses built on flood plains but I'm not too sure about this latest wheeze. Swimming is good exercise right enough but it's cold down there....

Finally, I note that Mitchells and Butlers (pub & restaurant operators) are looking into a £200m black hole - the likely cost to their balance sheet after their failed attempt at a highly leveraged property deal. Stick to pulling pints, guys. They say it will all be OK, but they would say that, wouldn't they?

Oh yes - nothing to do with markets of course but I had to mention it because it's so indicative of how low 'modern' society has sunk - some survey or other has established that the principal (UK) indicator that a child lives in poverty is his or her lack of a mobile phone. That is just plain sad, quite frankly - pathetic in fact.

Anyway, on that note, onward to a few charts, and first this weekend we'll see if the honeymoon in the USA is over for Taylor Wimpey, then we'll look at a wee break of horizontal support on the Euromoney chart, followed by an examination of the significance of "700" (horizontal support) for Capita, before winding things up with a look at nice wee triangle breakout on the chart of Phoenix IT.

And that's your lot for this weekend - indeed it's your lot for good if your subscription has ended, because passwords are being changed some time on September 30th. (If your free of charge twelve issues' worth of WICS is coming to an end - although I make sure everyone receives quite a few more than twelve - then to continue to listen to my ramblings - assuming you're daft enough to want to do so - there's a standing order form available at www.trading-the-easy-way.com/stoform.htm The commitment is one month at a time and YOU are in charge - you can cancel any time you want if you get fed up!

Trading the Easy Way

'IMPORTANT NOTICE: These WICS charts are for EDUCATIONAL PURPOSES ONLY. They represent only MY understanding of what is happening in the market for any particular share, stock, commodity or index. In NO circumstances should they be construed as recommendations to trade. If I choose to trade what I see, that is MY decision. YOU must, in turn, come to YOUR OWN conclusions about what action, if any, YOU might choose to take'.

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