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Hello again - not much visible 'change' this past week - just more of the "same old same old", as the US housing market slips slowly and somewhat less than gracefully beneath the waves, and the UK government finally acknowledges the likely cost of the Olympics may be just a tad higher than the amount originally spun to the public - and 'private equity' deals/proposed deals keep hitting the headlines, just as predicted. I haven't needed much of my scary Granny's second sight these past few months, that's for sure - even the most myopic can surely read the writing on the wall by now! Quite a few minor US banks have now gone bust courtesy of mortgage - related difficulties, and more than one big bank will go down the pan before the year is out, of that I'm certain - but maybe an infusion of 'private equity' will save it. Hah. I see Blackstone (huge private equity firm - it owns Madame Tussauds and Centre Parcs, and a whole lot more besides) is planning a Stock Market flotation to enable the gullible and the greedy to make its current owners very rich indeed - did I mention dummies last weekend? It looks like the next private equity targets will be Alliance Boots and Cadbury's, and more will follow during this final feeding frenzy - 'final' because when the crash comes, private equity deals will be as out of favour as package holidays to Baghdad, until the next turn of the wheel brings them back again to prominence - it was ever thus. The game is called 'pass the parcel' when children play it, and it's cleverly done - buy up a few companies using massive debt to do so, package the whole thing to look like the fat cats are making megabucks from the deal (they are not making anything at that stage - but nor are they servicing the debt because their bankers - who are totally complicit - are giving them a 'repayment holiday' for a year or so - plenty time to arrange the flotation. Then the 'spin' is that YOU too can make big profits, just like the fat cats, because you will be able to buy some of the shares when the whole sorry mess becomes listed on a Stock Market. Needless to say, the punters queue up and at least a zillion dollars is raised. The debt gets partially repaid, the balance is transferred to the newly listed company, the fat cats retire to their lair and spend several months counting the profits they made from the sale of their original holdings - and they are no longer liable for any of the remaining debt because it's the new company's shareholders who pick up that particular tab.....why didn't I think of trying that myself years ago? By now I could have bought my own ski resort, and a helicopter to reach it...and banned all snowboarders from approaching within 20 miles.) Moving along, one of you (thanks Sue) was asking about finding 'sell' trades at the moment, and suggesting it was quite hard to do so because all too often, a price would drop below support, or out of a triangle, or start to change trend, or whatever - all per TTEW style trading - but then bounce back up again after having filled an order that ends up being stopped out for a loss. That's an excellent question but quite a hard one to answer, in the sense that for me it's easy enough because I've 'seen it all before' but if you're relatively new to the game a series of 'perfect trades' that end up as losers, can be pretty demoralising - indeed they can result in your losing faith in your methodology. What to do about it? I'm afraid the only logical answer is that if it's a 'perfect trade' then you have to let it get on with things and accept that a losing run is inevitable at some stage. As I hinted above, that's not much of an answer, and very easy for ME to say because this methodology has become second nature to me and I trust it without reservation. The only thing to do if you feel uncomfortable (whatever methodology you might want to trust) is to take the 'trading break' I mentioned last weekend, and when you return, trade 'light' for a while as you rebuild confidence. There's little more annoying (to myself too!) than a run of 'perfect' losers, but as mentioned above, they go with the territory I'm afraid. Speaking of the 'crash' that's now inevitable, it's been hard for me to concentrate these past few days, partly because we have some visitors from the Republic of Ireland with us at the moment and a very jolly time is being had, and partly because it has been difficult to stop laughing at the fact that Alan Greenspan (retired Federal Reserve Chairman and star opportunist of both last century and this one) has now decided he's a bear. "Turncoat" isn't in it as a description. "Destroyer of the savings of an entire generation" is closer, but still no cigar. Anyway, onward to another email and my reply - these seem to be popular with you but if you get fed up with them, for goodness' sake let me know! (my replies are in bold type below in the body of my correspondent's email and then there's a more detailed response below that, and thanks to 'John' for the questions.)
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