.......and the last bear staggers wearily back into his cave, pulling the door tightly shut behind him. It's just too, too bright out there and with all these silly male bovines gambolling around in what he considers to be HIS meadows, it's all just too much to "bear"....Sorry - couldn't really resist that one!
Seriously though (moi - serious??) "bullishness" is most definitely at an extreme now - even more so than over the past three months or so - and you know what the IW view is of that! It was more than a little amusing to hear and see all the excitement that surrounded some of the big "profits announcements" that came during the week - J P Morgan's huge "plus" numbers kicked things off, closely followed by those from Goldman Sachs and Intel. All big players and all providing clear evidence that the bears are just plain wrong now.........or are they? Let me share a question from one of you and my response thereto to explain why IW is pretty unimpressed by these fancy numbers. (A message to "Mark", who asked the question - you'll see I have added a little here to my original reply.)

"Hi Ian,
Intel, JP Morgan and Goldman Sachs have just exceeded earnings expectations. I remember last quarter when this happened they went on to lead the rally a lot higher. How do you square these results with your declining market conditions comments over the last 9 months?
Thanks, Mark".

My reply was as follows:

"Mark - time will tell! When the real facts change, I'll change my view. But JPM & GS have "earned" profits - how? Because 1) they got massive taxpayer bailouts that were the only thing to have kept them afloat long enough to do so in the first place, and because 2) said profits have come from where? Providing credit cards? Nope - they lost a packet there. Mortgages? Nope - they have massive problems in that area. Lending to business? Nope - they did hardly any at all. Acting as underwriters for US govt debt increases, which they bought themselves anyway and then bunged straight back into Uncle Sam's 'quantitative easing' scam, so it's all just a smoke & mirrors circus? Yep. Go figure......... and re Intel, how did they improve their bottom line? By selling more chips? Nope. By increasing their prices? Nope. By sacking thousands of staff and becoming thinner overall? Yep. And re the 'leading the markets higher' thing, that's not how markets work anyway - it's 'participant beliefs' that move prices. The rest of the 'reasons' are only 'justifications' by the pundits, after the event."

Now don't get the wrong idea from my flippant tone - Mark has been a regular correspondent and he always asks extremely searching questions - rightly so of course. It's clear that he too is beginning to be swayed by all the current flimflam being encouraged by those who would encourage such things - and I'm not remotely blaming you for that, Mark! It's possible however that Mark may have also noted the fact (after he had emailed the above) that Bank of America failed to join the "false profits" (geddit? - profits/prophets - Oh, please yourselves then!) and announced losses of around $1bn. They made nothing from fiddling around with US government bond underwriting/sales/purchases etc. No, they lost a packet on credit card defaults - much more than they had expected. They have a mortgage loan book that is beyond redemption. In other words, they (and the others above too, by the way) LOST money when dealing in the "real economy". They have contributed NOTHING to any possible "real recovery" - quite the reverse in fact. And when you note that jobs are still being lost all over the place (and according to one survey the "true" unemployment level in the UK is nearer 3.4m than the published 1.6m, when everything is accounted for) the conditions for a real, sustained recovery are a very long way off.

Now don't get the wrong idea - markets COULD keep powering on up while people still believe they will do so. You know this has been said before, at least a million times in these ramblings - but here you go again - DO NOT CONFUSE TRADING WITH INVESTING! As a TRADER, you could well still make some pretty nifty profits on "buys", if you follow the charts and their technical signals (try WICS of September 20th this year for more about this.) That's what this stuff is all about, for goodness' sake! But as an INVESTOR, this might just be a bad time. Think about this for a moment - when is "almost everyone" bullish? When do people begin to believe they "must invest or miss out"? It wouldn't be AFTER a very strong bull phase, now would it? And in particular, it wouldn't be near the end of a very strong upwards push that happened after a major collapse? (Think 1929 and 1930.....but that can't possibly happen again, can it?) Looking at the other side of the picture, when does "nobody" even think of investing? THAT is when investing can make sense! (And as frequently mentioned in replies to emails, I own NO stocks, not anywhere. Nor have I done so for many years now. TRADING is my "thing" - BUT (apologies for the capitals but this is an important point to make in order hopefully to draw a line under this seemingly difficult concept) in due course, when share prices have reached a bottom and when good "defensive" stocks - like utilities for example, look like two things are on the cards, Ian Williams WILL be buying some as investments, in order to spread the portfolio a bit more widely and to contribute to the retirement income when the trading boots are finally hung on the study wall.......

Oops, sorry - you wanted to know "what two things".......first, prices low enough to make the dividend payments attractive enough, and second, the imminent onset of inflation becoming a very high probability scenario. Right now, "cash is king" (try that phrase in the search engine) but once inflation takes a hold in a few years' time, the value of cash will be destroyed as governments ensure the "value" of all their massive debt is simply diminished by the effects of said inflation. The share price of good quality stocks will rise along with inflation, as always – whereas cash in the bank will be trashed, again as always.

Anyway, onward! (And please, no emails asking what and when I might be buying. As an ongoing subscriber to these ramblings, you'll be kept au fait with things as and when, rest assured.)

Speaking of "retirement income" above, it was interesting to note that (according to a City whistleblower), "The hidden fees double the true costs of investing." Oh yes. Add a wee bit more to "double" and you'll get nearer the reality. Collective investments (like unit trusts, insurance bonds etc) are not inexpensive. "Up to 40% of private pension pots go in fees" according to the gentleman concerned. Absolutely - and not at all amusing either. And as regards "other" investments, the UK's biggest private "buy to let" landlords, who seemingly own 900 houses (!) have decided to sell up and retire. The "valuation" of the portfolio is around £250m and the asking price is a mere £180m.....good luck to them in their retirement, but a sale now - by a very astute couple indeed - into such a depressed market, certainly says something about the investment potential of property for the foreseeable future.........and according to "Insider Housing" magazine, the UK currently has around a million empty houses, including 3000 in Westminster alone. It's amazing that MPs are not queuing up to get mortgages on them.......Speaking of MPs, the tax authorities are investigating 27 of them for alleged "irregularities". Only 27??

Meanwhile, up on Tyneside, there was a real "shock - horror" headline: "Newcastle Brown Ale No More." Ah - sorry - they only meant "brewed", not "consumed". That's not so bad then. On that note, on to the charts and first today, a look at a company that might well sell you a pint of Brown Ale. Mitchells & Butlers has been forming some nice horizontal support - is it going to fall through that? Then we'll look at a possible stop loss for Prudential "buy" trades - again this one has been on the "watch list" for a fair while and the most recent valid "buy" has been performing extremely well indeed. (See video clip 2747 for more about this particular share.) Finally there's an update of the German DAX index from WICS of 4th October - it has pushed up a bit higher after forming some pretty nice support on its breakout from the earlier wedge.
OK - that's all for this weekend - some hard overnight frost means Mme W is getting a bit anxious about some of the outdoor plants so it's time to get the wheelbarrow out. Happy trading till next weekend!

Ian.

PS - thanks to "Chris" for the long email from his world tour. He and his good lady are still meantime in the USA and he suggests that although people there detest the government and realise that one day they are going to have to "pay up big time", the overall view is that they are cutting back a bit on expenditure, but that overall, things are not as bad as they are painted. That could be taken as "encouraging" anent the alleged "recovery" but it could also be taken as "denial".....time will tell!

'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'.