Well, last weekend's attempt at songwriting seems to have "struck a chord" with a few of you! The answer is "yes" to those who emailed asking if the wee ditty applied to them in particular.........but today's offering is also applicable to some of you:

"Ah got the PBA, over - analytical blues. Ma tradin' finger's frozen an' all Ah can find is an excuse...."

PBA of course is discussed in the manual, and there's a wee bit about it too in WICS of November 12th 2006 if you care to have a look back. It's always hard to strike the correct balance between over - enthusiasm and over - analysis in this game, but as with everything, practice tends to make, maybe not "perfect" - but certainly a "wee bit better." And of course if nothing much is going on but you have the mental strength not to simply jump into trades, then the best way to avoid the PBA syndrome is to switch off the computer and do something completely different. I'm told that some kind of sporting event is on the go in the Far East at the moment. Maybe you could watch some of that for a while? Trust me, the markets will still be here when you get back to the screen! And what is also "still here" is the ongoing drop into recession of all Western economies. Even the CBI has managed to dose itself with some reality and admit that things are pretty bad and that they are no longer "optimistic". Those of you who have been taking a regular dose of WICS for any length of time will know that IW is no fan of the terms "optimism" and "pessimism" when it comes to market analysis and comment. Both terms are emotive and just plain inappropriate. Organisations like the CBI, the CML et al would be better served by being "realistic". It is NOT "pessimistic" to be talking of recession and trying to work out the effects thereof. It is NOT "optimistic" to be in denial. And you may be 100% certain that by the time everyone is talking about the "upsurge in optimism" the bottom of the recession will be long past and the next growth phase will be well under way. It still amazes this grizzled ol' bear just how far behind the curve are so many allegedly professional market commentators and trade bodies.

I'm also always amazed/amused by just how brilliantly some of these people manage to state the glaringly obvious once the horse has galloped off into the sunset and the stable doors are being chained and padlocked. Sir Alan of Greenspan (type "Alan Greenspan" into the search engine for a whole swath of IW references to him) has proclaimed that "Banks are still at risk until house prices stabilise". Wow - really? That is just so perceptive. And the FSA in the UK is suggesting that "house repossessions should be undertaken only as a last resort" - another pearl of wisdom there.

Oh yes - changing the subject a wee bit, but still on the "stating the obvious" tack - last weekend I mentioned a degree of IW annoyance about certain aspects of advertising anent classic car sales. Several of you were kind enough to email in agreement - seems quite a few of you are petrolheads then! Anyway, one of you recently bought a vehicle - and seemingly you're delighted with it - from a guy who indeed states the obvious. His name is Bob and he sells classic cars that are not overly expensive. He calls his business "Bob's Affordable Classics". Now THAT's a company I could deal with!

Anyway, back to our muttons - and it wouldn't be unkind to suggest that the idea being floated (allegedly from Allie but I'm unconvinced) regarding UK stamp duty on house purchase - to "defer/suspend" it in order to "help" prospective buyers, is dead in the water. Did anyone actually think a) that it was a good idea in the first place, and b) that government money (ie YOUR money) would be available to fund the thing anyway?

Oh yes, and speaking of "your money" (if you happen to be a UK taxpayer) it's no surprise to have seen £3.4bn of the Northern Wreck debt exchanged - on your behalf - for shares therein. Gosh, they're going to be worth a whole lot to you in due course. That mess is turning into even more of a fiasco for sure. Northern Rubble's decent mortgages are all moving to other lenders - thus letting the Wreck pay back some of the debt to the Treasury - but the rest (and that's an awful lot!) will be left with the taxpayer. A bit of a scam eh?

And speaking of such - scams that is - methinks that the much publicised wrapping up of Wrapit (wedding gift supplier if you haven't heard about this) and the blaming of HSBC for its demise may well be hiding something a tad smelly. As you will be aware, IW has a certain phobia when it comes to banks, but in this case the old proboscis is twitching as regards "where did the money go?" We'll see.

Still on the subject of banks and their management, one of you kindly informed me during the week, that there's a scheme on the go to assist bank directors improve their public image. It involves dropping them into 300 feet of water, because deep down they're actually very nice people......Ah, the old jokes are the best!

Another scam (that has been on the go for a while of course) has again received some bad press - according to the Times, UK biometric passports seemingly can have their "unique" chip cloned in under an hour. £4bn and counting, for "enhanced security". Oh really? And the megabucks NHS superdupercomputer seems to have pretty much given up the ghost already - another huge surprise.

And yet another scam - a nice wee potential earner for HM Treasury - is the proposed retrospective car tax hike on so -called "gas guzzlers". No thought of course has been given to the fact that every NEW car built, will use up even more of the world's allegedly scarce resources, and that (well maintained) older vehicles won't do so - because they already exist. Any plan to "force" people to scrap a perfectly usable vehicle in favour of a new one just doesn't stack up. And don't try to tell me that the relative ongoing emission differentials will compensate, because they won't - not until everything is run on batteries........oops - but where does the electricity come from? Ask Arthur Scargill....time to move on methinks.

Moving on then, and Freddie Mac/Fannie Mae in the USA have indeed lost the predicted huge amounts - and there's a whole lot more losin' to be goin' on there, of that we may be certain. It seems that Freddie's "risk officer" - now redundant of course - warned the chief exec back in 2004 that the company's loan profile was "too risky" - naturally he was ignored. In the UK, the latest Halifax house price survey makes sorry reading for estate agents and those with huge mortgages. Lots of yelling for "sharply reduced interest rates" of course - with no thought given at all to the fact that Japan tried that a while ago, as mentioned before somewhere in these ramblings. Anyway, if you think about it, what's so bad about falling house prices? (Unless of course you were silly enough to have taken on far more than you could afford.) Obviously, the lower the price the better for a first time buyer, but that effect works all the way up the chain if you think about it. Say you have a house that might fetch £300000 today, and you have seen a £500000 property that really takes your fancy. It hardly takes a brain to work out that you'll need to find £200000 plus fees to "trade up". Suppose next year your house has dropped 50% in value and you can only get £150000 for it. If the other property has also dropped 50%, how much do you need to shell out now for the deal? Will property prices fall another 50%? Time will tell............one of you "in the know" was telling me that some people are currently paying their mortgages with their credit cards......

Next, I referred last weekend to the fact that BT's pension fund was once again in the red, and figures during the week suggest that the combined FTSE100 company schemes are now around £41bn on the wrong side of zilch, having been "plus £12bn" at the same time last year. Not good.

Anyway, on to an email from one of you that I thought might be worth sharing - but before that, a headline or two that caught the Williams eye. First, there was the TV chef who suggested using Henbane (a toxic weed) in salads. It seems he meant Fat Hen, which is a non toxic weed, the seeds of which feed many a bird in the winter months. I suppose the names of the two plants share a few letters but clearly Mr W-T is no son of the soil. Then there was the news that IKEA is now selling "cheap" mobile phones. Shame you have to assemble them yourself....and finally there was the utterly pathetic statistic that according to an ICM poll, 49% of UK parents ban their children from climbing trees. That is just SO pitiful it requires no further comment. Oh yes - just before the email mentioned above - to answer a question during the week (I won't bother with the relevant charts) - if the marriage proposal from Mr Xstrata is accepted by Ms Lonmin, then the answer is "yes.".........oops, sorry - I meant "yes, it will end badly - think Taylor Wimpey."

Here's the email then, and my reply thereto:

Hi Ian,
A couple of questions about choosing which trades to take in terms of stoploss liability - does the cost of the trade influence your decision about which trade to take? Is there a rough minmum/maximum below or above which you wouldn't take the trade?

My reply:

Yes - a very good point in fact. Let's say there are two similar looking charts but one shows a potential trade with a stop loss 100 points from entry, while the other shows a potential 50 point SL. Say your bank is £2000, so that your 4% risk capital is £80, as per the manual. That would imply a trade at under £1 a point in the first case, but £1.60 in the second case. Maybe less than £1 is below your spread bet co. limit anyway so that one is out the window - so by default you choose the second one. Then you might see yet another 'potential' to compare with your £1.60 one, that might allow you to trade @ £2 a point. It's part of the process of eliminating potential trades from the watch list in fact. The other thing of course is that a trade below a certain price per point needs to move a lot further into 'points profit' than does a higher priced one - £2 a point can make you £100 a lot quicker than can £1 a point as you'll obviously appreciate. On the other side of the coin, a SL that (according to the chart) could justifiably be only 5 points from entry, would cause me to 'back off' and allow maybe 15 points instead - because 5 points is just too near. (I'm thinking of shares above maybe 100p when I say that - a share at 50p might well be a 'buy' @ 51 with a SL @ 49.......unlikely however.) It's impossible however to say at what level you might choose not to take a trade on the above criteria. I know some TTEW subscribers don't bother below £5 a point, while others are perfectly happy at £1 or less - and I also know one or two fellow traders whose minimum is £100 and if a trade doesn't fit with that, they stand aside.

Second question -

I can see that if the DMA's are a long away from the current price, the stoploss could cost a lot - is there a point at which it just becomes uneconomical to trade it regardless of the size of your bank?

My reply:

A maximum stopout should cost the SAME irrespective of the number of points involved - your maximum risk is/should be 4% of your bank.

Anyway, I hope that might help clarify things for a few of the more recent subscribers to these ramblings.

Moving on to today's charts, as promised in the video updates we'll look at a couple of indices, but before that we'll consider why it might be unwise to look at opening any kind of trade on the chart of Taylor Nelson Sofres. Then we'll see an "all time high" after a resistance break on the Cobham chart - giving the lie to the notion that there are no potential 'buy' trades to be had. Then we'll look at the counter - trend rally in the FTSE100 before finishing off by noting that there's a bit of a triangle in the Spanish IBEX index - just to let you see something from outside the USA and the UK for a change!

That's all for this weekend then, so happy trading (or doing nowt of course!) till 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'.