"Shock - Horror! Chancellor Sleeps Through Own Budget Speech, Head Firmly in Sand!" A bit clunky as a headline perhaps, but not too far removed from the facts? Wee Allie has no ideas of his own of course - they all emanate from Big Gordy, but for entertainment value per Mr Wogan's assessment, the budget delivery surely would acquire "nul points"? (And to be fair, probably wee Allie DOES have his own ideas, but his opportunity to express them will be reserved for his shaving mirror). Anyway, the whole thing has been done to death already so there's no point in Williams adding to your misery - all I might suggest is that it merely served to confirm the "Frail Grasp on the Big Picture" (WICS of February 17th 08) that accurately describes the knowledge levels of finance ministers everywhere. I think our wisteria - a plant with a great grasp of our wall - probably has as good a grasp of economics as do these folk. Allie suggested that UK "growth" estimates were being trimmed by a whole quarter of a percent because that bad ol' Uncle Sam is in a mess - but Gordon's "Golden Rule" (type "golden rule" into the WICS search engine if you want to read more about it) would remain intact over the "economic cycle". Probably by now, only a couple of days later, he's in a cold sweat after the collapse of Bear Stearns has made it more than abundantly clear to anyone with half a brain, that the real problems are only just beginning. Ah, politicians - don't you just love 'em! And with the Treasury itself predicting a 20% drop in stamp duty revenues, you do have to wonder about the world Allie and co inhabit - not to mention the Financial Services Authority, which (anent Bear Stearns) is "Hopeful the malaise will not spread..."

The collapse of Carlyle (a hedge fund) and the halving in "value" of Blackstone's share price since launch (use the WICS search engine - you'll find a reference to Bear Stearns somewhere too if you look for "Blackstone") merely serve to reinforce the fact that there is far more trouble still to surface - trouble that the smart players have known about for ages of course - which is why Blackstone became a public company last year and the previous owners took most of their money out - at the expense of the "not so smart money" that bought in of course. Nothing really changes!

Anyway, a few wee explanations, to answer the (many) emails that have arrived these past few days - what precisely IS a "hedge fund", a "private equity group", and an "investment bank"? Good questions! The answer - "not what they were supposed to be"! (NB that the following "explanations" are gross oversimplifications and they're only to provide a bit of an overview.) A hedge fund was supposed to be a fund a bit like an investment trust, that took in cash from the public and from other collective investment entities (like a pension fund perhaps). Against the money it had collected, it could borrow a certain percentage from a bank, and then the idea was that it invested almost all that money in - say - a worldwide share portfolio. I said "almost all" - it was also meant to spend some of the cash buying a portfolio of options, or of CFDs (Contracts for Difference - ask your broker!) that took the OPPOSITE position to the main portfolio - ie if the shares FELL in value, the options/CFDs ROSE in value. That's known as "hedging your bets" - hence "Hedge" Fund. A safe (ish) way to invest then? Yes, absolutely. Until they all got very, very greedy and not only borrowed far more to buy shares than they ought to have done, but also totally "forgot" to spend any dosh buying the hedge positions. After all, shares can only rise in value, can't they? Why be stupid and waste money on these silly Put Options eh?

A "Private Equity Group" is a company that also collects loads of cash - this time mainly by borrowing vast sums from banks, which it then uses to buy up the shares of a publicly quoted company so that said company can be removed from the Stock Market. Then (usually) the purchased company gets just a tad "asset - stripped" before being saddled with massive debt (via the Private Equity Co's borrowing even more against the so -called remaining "assets" and paying out these borrowings in the form of huge fees to the PE company's owners). Then, in order to repay the debt that has accrued, the PE company offers the "revitalised" original company back to the public via a new Stock Market flotation. Joe Public buys the shares and the proceeds flow back to the original lender. Ho hum. If your eyes have glazed over by now, believe me, so have mine......gosh, is that the time already? - must have dozed off....But many of you wanted some kind of brief - ish "explanation" so don't blame me. Oh yes - "investment banks" - basically the crooks who lent the dosh to the above hedge funds & PE companies - and by dint of adding even more greed and stupidity to their sins, they sliced and diced toxic waste (yes, it's in the WICS search engine!) till the band played, and (like Bear Stearns) they themselves borrowed upon borrowing to leverage their performance and pay themselves huge bonuses. Seemingly they have about $31 borrowed for every $1 in actual assets - clever stuff while the music keeps playing and the toxic parcels keep getting moved on - but here we are with the stereo well and truly fried and nobody able to crank a gramophone handle any more. It's not at all funny of course because hundreds of thousands of innocent people are going to lose their jobs over the whole fiasco - and as mentioned above, the problems are only just beginning to surface. Yet "denial" is still the name of the game, and Joe Public is now participating in the latest craze - buying oil and gold. After all, they will be safe havens in troubled times - they can only keep going up in price with a recession brewing, can't they? Can't they?? Hmm.

Moving on to some of the other stuff spotted during the week - the Bovis chief exec certainly knows what's going on: "The current housing market is weak...." I wonder how much he gets paid to know that? Needless to say, he wants a "Decisive interest rate cut". When "Ah were a lad", the maternal reply to my demands was "I want, never gets. I would like, might...." The thing is, there HAS been a recent rate cut. What good did it do? Did mortgage costs drop? Did it save the world? And look across the pond - rate cut upon rate cut, doing as much good as they did in Japan a few years ago. The real problem - as banged on about frequently by Williams of course - is NOT interest rates, nor is it liquidity. (The amount of money available to lend/borrow in an economy.) It's SOLVENCY - or the huge lack thereof. "Solvency" in effect, is the "ability to repay a loan". If you have obtained a huge mortgage while having nae job, nae income, nae assets (a NINJA loan - guess what - it's in the WICS search engine...) then you are insolvent. You can't repay what you borrowed - simple as that. And THAT is what is currently trashing the USA economy - and is going to do exactly the same to the UK pretty soon. If you were in the moneylending business, would YOU lend to someone whom you know to be insolvent? It's that "rediscovered prudence" that is causing credit availablity to disappear for all but the most solvent of prospective borrowers - and even then, 100% loans are meantime off the menu. And spare me the bleeding hearts (like the Financial Ombudsman) who are suggesting that it's all the fault of the lenders and nothing to do with the outright lies told by overborrowers.....sure - greed on the part of lenders has been monumental - but if YOU acquired a mortgage on the back of a somewhat exaggerated earnings declaration while knowing in your heart that you were vastly overborrowed, why the heck should more sensible people be expected to bail you out via some kind of "THEY must do something to help, blah blah" kind of taxpayer - funded thing? It's just plain nonsense.

OK - rant over - on to a headline or two, and it seems the UK's energy minister supports "Clean Coal" for a new power station. Now wouldn't "clean" and "coal" be another good example of oxymoron? In these days of global warming, isn't a coal - fired power station just a tad retro? Coal has to be the filthiest emitter of pollution on the entire planet, unless you count Billy Connolly and Jim Davidson. And I absolutely loved the reaction from the "Green" spokeslady: "This is not politics - this is a game of smoke and mirrors...." Dunno about the "mirrors" bit, mind.

Over in the land of the no longer free, it seems 237000 houses are up for grabs, having been repossessed in January. (That's just the JANUARY figures!) Auction houses are doing pretty well - but methinks those jumping in to buy are a tad premature. There was a report during the week about a Californian couple's "euphoria" at having "snapped up" a place valued last year at $500000, for "only" $375000. Seemingly all it needs is "some decoration, a couple of new windows, the garden sorted out, and the pool emptied of rubbish." An American house and that's ALL it needs? Wowee. Wish I had known about it.

I see Ethiopia's government has just discovered that some of the gold in its vaults is fake - steel painted yellow - maybe THAT's what Gordon sold a few years ago for $275 an ounce? And here was I thinking he had acted stupidly....

Some areas of the UK economy are booming though - airport fees, credit card fraud, jobs as playground facilitators....

Michael Jackson has successfully remortgaged Neverland - that will be Neverneverland then.

Yahoo is moving its European HQ out of the UK - it's following Lewis Hamilton to Switzerland, and for exactly the same reasons - I loved the F1 driver's remarks last year when he said it was all about "privacy" - nothing at all to do with the small matter of tax of course.

And finally, the "Champagne" region of France is to be expanded as regards vineyards permitted to use the term on their labels. Forty more villages will qualify, to keep up with demand from all these bankers and hedge fund managers..........Hmm, the last expansion was in 1927. What was it that happened in 1929 again? But this time, the timing is even more impeccable!

Oh yes - before I forget - March contracts expire shortly so don't forget (if you're in a March - based trade) that if you want to keep it open you'll need to instruct your provider regarding "rollovers" into either June or September as may take your fancy. And as per an email from "Chris" - an excellent point - you may need to adjust your new stop loss too, because if the June or September quote is markedly different from the current price, you could find yourself "accidentally" stopped out of the new contract. That of course doesn't apply if you're able to use "cash" based stop losses rather than "quote" based ones. Please don't ask me about the nitty gritty - that is for YOU to deal with, via your spread bet company.

Oops - nearly forgot something else! The passwords will shortly be changing, so if you have received an email about that, please be aware that this might be your "last but one" WICS. If you have NOT had an email then fear not - when YOUR sub is about to expire you'll be notified in plenty time. And if you have completed the relevant standing order to continue to suffer these ramblings, then you are definitely both deranged and one of my favourite people - you'll receive the new access details in plenty time, never fear. (It may well be that over this week my replies to your emails will be somewhat delayed - all being well a new hard drive will be installed on Tuesday without this one refusing to reboot first of all - but if it does give up the ghost during the operation then there will be a few "swearie word days" during the rest of the week. Oh well, snow and extreme cold are forecast so it's as good a time as any to sort it out.)

Moving on to today's charts, first we'll examine that of Next Plc (mentioned in WICS of February 17th) - two thereof in fact - one looking at "the past" and one bang up to date. Why? Because of the old chestnut about support and resistance, basically. Then we'll have a look at Ricardo Plc (WICS, 10th June 2007) where resistance has been developing recently. Finally there's an update on Weir Group, last featured in these pages on 10th February this year - the channel probe, retrace, and move back up is developing quite nicely.

And that's the lot for this weekend - who knows what further financial shenanigans are going to surface as the week progresses? Whatever, have a great week and I'll speak to you again next Sunday.

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'.