Well, it's the "same old same old" this weekend I'm afraid - markets rising in the face of ongoing 'bad news' merely serving to reinforce my view that 'the news' is of little relevance to anyone who aspires to trade for a living. And also anent 'the news' - although this household most assuredly has zero interest in matters political, Williams is quite pleased to note Gordon's ultimate lack of bottle regarding the autumn election he was so shamelessly touting - simply because it would have been a bit of a shame if somebody else had kicked him out now. Then he could have blamed someone else when the wheels finally come off UK Plc, as they are so obviously about to do. That would have been just a tad unfair methinks - although of course he'll just blame poor Mr Darling in due course.

Anyway, there's really not a massive amount going on that might be classed as 'new' - usually when I have to take my eye off the ball for a couple of days, 'something' happens - but not this time! Northern Rock is still scratching around for a buyer (it ain't gonna happen guys - the vultures are hopping around the still breathing carcass but they'll get their chance to tear it apart soon enough. Gosh, that's a strong bit of imagery from such a mild fellow, eh?) But as I mentioned in an earlier WICS, there's nothing at all amusing about the situation. The company is now in hock to the tune of £11bn from the Bank of England because nobody else will roll over its debts - much less increase them, it earns around 6% on its mortgage book, and its borrowings cost 6.24%. "Go figure", to quote my Yank brother in law.

Moving along, it seems Barclays have done a pretty good deal vis a vis the ABN AMRO takeover - they have bottled out, just like Gordon. That will prove to have been a very sensible move (although in saying that, there are some pretty horrendous costs involved and trying to grab ABN in the first place was more than a tad imprudent.) Now RBS (Royal Bank of Scotland) have a clear run at ABN and THAT is going to prove exceptionally imprudent. Time will tell, but I'll be astonished if it turns out to be a happy marriage.

Next, HIPs have now taken the blame for the lack of sales of three bedroom houses after first becoming the fall guys for the slowing demand for four bedrooms. Ho Ho - not a word about the general pessimism that's beginning to permeate the world of property then. As the boss of HBOS suggested during the week, "Expect mortgage rates to rise, to reflect a fundamental shift in the lending markets..." It may well be that the UK base rate won't rise - indeed it may well fall as deflation begins to bite - but the point is that mortgage rates are a reflection of what the 'inter - bank' lending rate (LIBOR) happens to be - that's to say the return banks expect when lending to each other - and that will rise, not fall, as risk (or the perception thereof) rises.

Anyway, all of the above is as I suggested at the beginning of these ramblings - just the "same old" etc. And in the "same old way", markets are rising in the face of all that 'bad news' - why? Because they rise on OPTIMISM, just as they fall on PESSIMISM. It really is as simple as that - or as complex, if you want it to be! So why the current optimism then? That too is EASY! - Uncle Ben Bernanke (The US Fed chairman) will bail everybody out as usual when things go a bit pear - shaped. After all, he dropped half a percent off US base rates the other week when a few mortgage providers went bust, so he'll just keep doing the same as Ol' Greenspan the Savings Destroyer used to do, and inflate a few more bubbles via ludicrously low interest rates. Thus we'll all be saved, so we can just buy and buy, secure in that certain knowledge.......or not. This time of course it's not going to work because the consumer (who represents over 70% of the value of both the US and the UK economies) is faced with ever - increasing costs and very little in the way of pay rises - and crucially, is finding it harder and harder to borrow - and over the coming few months he or she (and a lot of people are involved here!) is going to have to remortgage when fixed rate deals end. THAT will be when the words of the HBOS spokesman really hit home - 'home' being the appropriate word. Word in the financial industry suggests that current fixed rate mortgagees will be paying between about 25% and 60% more after their fixed rate ends. Not funny.

Anyway, as has been occasionally mentioned in these jottings, when markets fall on increasing pessimism, WE need have no worries because as traders we'll be able to benefit - as discussed last weekend of course.

In fact, just to continue last weekend's wee mention of the differences between 'investing' and 'speculating', it might be worthwhile doing a little bit of arithmetic to improve our understanding of 'timescale' - you'll recall we spoke about 'investing' needing a longer timescale than does speculating. Let's say, for the sake of the example, that if you're going to invest in shares rather than simply keeping your cash in the bank (or under the bed?) you'll want a higher return than is available on deposit, to account for the increased risk involved in buying into companies' future profits via investing in some of their shares. Would a steady annualised 8% return be unreasonable to aim for? That's just a couple of percent more on average than you would have received from deposits over the past ten years, and I see nothing at all unreasonable about it as an expectation, given the extra risk involved. Hmm, let's do a wee sum. Let's consider an investment of £1000 in a FTSE100 'tracker' fund - such a popular vehicle with your 'financial adviser'. 8% annualised return over the last ten years would give you £2195, minus charges, to be fair. Let's 'round' that to about twice your original investment. Ten years ago almost to the day, the FTSE100 closed at 5305, so twice that is....hang on while I grease the old abacus again.....10610. So that's OK then. Oops, sorry - no it isn't - I see the FTSE closed on Friday at 6595.8. Work that out in terms of the annualised return - and don't forget to deduct the fund manager's charges either! Anyway, you get my drift - and before you email me - yes, I know there are investments that have done very well over the past ten years - of course there are. But you MUST consider the 'risk premium' before you measure anything. Sure, you could have chosen exactly the right penny shares or whatever and made ten times your original stake - but the whole ethos of 'investing' is for 'security over the long term' and the penny shares example is therefore totally irrelevant. The vast majority of those who think of themselves as 'investors' are fundamentally cautious folk - and nothing wrong with that - but to make a decent return over a shorter time frame, it's 'speculating' that best does the job. And my real point? My real point is "It might be a good idea to keep most of your cash well away from stock markets, to consider very, very carefully before investing in anything therein, but to speculate with a small proportion of your funds, whether for sheer enjoyment or to build up some kind of income, or both." And that of course is NOT 'financial advice' - just the way Williams looks at matters financial. YOU might well have an entirely different view of the whole thing.....in which case, why the heck are you reading this?

OK - let's round today's blethers off with a few charts - first of all the FTSE100 for the past ten years just to give you a graphic view of what I was banging on about above - and yes, IF you had 'invested' at 'the bottom' you 'would have' had a better return than from 7th October 1997 - but unfortunately my scary granny's crystal ball was lost somewhere during one of our house moves.....Then we'll look again at "today's" FTSE which 'ought' now to continue climbing a bit more. After that there's a chart of AMEC to let you see how earlier 'resistance' has now become 'support', and finally the chart of Minerva is a great example of 'rolling' ('dynamic') resistance off a DMA. All good stuff for the learning process!

That's the lot for now - I'll be unavoidably 'on the move' again during the week I'm afraid, but nothing can be done about that at the moment - so I won't be answering emails between Tuesday evening 9th October and Sunday morning the 14th. Please bear with me - the next two months are likely to be a bit awkward overall, but hopefully thereafter things will settle down again - I greatly appreciate your understanding.

All the best then, until next weekend.

Ian.

'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'