Hello again, after another interesting week in the world of finance. As expected - and as predicted some time ago in these jottings - the toxic waste fallout continues. (for some history, type toxic waste into the WICS search engine) Citigroup and Merrill Lynch between them have managed to admit to another $30bn or so of losses and writedowns. It's great the way the bad news is being leaked out so slowly - you have to admire their total lack of interest in anyone known as a "client". Anyway, will that be the end of these losses? The bankers would love you to believe that - but Williams would suggest that there is an awful lot more still to surface. They (investment bankers) are currently sitting on street corners in Dubai, Qatar, Singapore etc with their violin cases open and a big sign saying "angry shareholders and maybe the Feds to appease - please give generously" as they beg for money from so - called Sovereign Funds. Don't expect them to play a tune in return - even though they're pretty good on the fiddle. Maybe these sovereign funds (ie government - owned investment vehicles) that belong to the Gulf States would be better off spending their oil money on desalination plants and the like? Certainly their chances of decent long term returns from investing in the likes of Citigroup would not be that great methinks.

The other big story that hasn't quite broken yet is that of the troubles being faced by "Bond Insurers". A "bond" in this sense is a debt owed by some institution - usually a big corporation, or a local government somewhere - eg the State of Florida - or indeed even a national government. The debt is owed to those who lend money to said institution - a good example in the UK is "gilts" - UK government Treasury Stock that anyone can buy - and when you do, you're in effect lending your dosh to the government. Anyway, the point is that all such debt is insured against potential default. Some of it would be pretty safe - such as gilts for example, despite the Williams view of government financial ineptitude. However, other bonds might carry a greater risk of default and thus cost more to insure - perhaps for example Ford Motor Company bonds. Finally, lots of bonds were issued against mortgage debt, and that's where the (as yet below the radar) problem begins. The insurance companies that provide the cover referred to above, have had to start paying up for the toxic waste - related defaults, and the massive sums involved have begun to affect THEIR credit rating. Talk about a house of cards! When the insurer's credit rating is downgraded (eg that of Ambac in the USA the other day), then ALL the bonds it insures, are ALSO downgraded! (obvious when you think about it because if any bond defaults AND the insurer can't pay up, well, you get the idea.) Thus a whole load of "AAA" rated (the best) bonds are at risk of being downgraded - and if that happens, a whole load of major pension funds and other bodies will be in breach of their rules if they keep anything less than AAA in their portfolios. Thus they will be forced to sell anything that falls below AAA. What would a forced sale do to values? House of cards? More like an entire city block of cards!

Talking of city blocks, you'll probably have read by now of the property funds that are refusing to permit withdrawals by investors - Scottish Equitable being the latest, after Friends Provident did the same a few weeks ago. I think maybe I've mentioned "illiquid" investments in the past anent property funds. They usually keep about 10 - 15% of the money in cash in order to fund withdrawals, but of course the rest is tied up in commercial property. If too many folk want their dosh back in a hurry, then the 10 - 15% of free cash is very quickly depleted - it seems Scottish Equitable is now down to about 1%! Next they'll have to sell a building or three to increase liquidity - and that can't be done by tomorrow morning unless at a fire sale price. But even if they hold out for a "fair" price now, in due course they WILL have to sell properties for a lot less than they paid. Not good news for their investors I'm afraid.

Next, Gordon the multitasker (obviously still chancellor whatever Mr Eyebrows might believe) has been going great guns. He has seemingly secured the future of UK Plc after his visit to China - "Tens of thoosands of new jobs and massive new investment" will be arriving in the UK soon thanks to his schmoozing with his new buddies. In the words of Mark Lamarr ("Never mind the Buzzcocks" for those of you who - forgivably - might not understand the reference): "Gordon - dream on".

Meanwhile of course the esteemed PM/Chancellor has seemingly been "taking personal control" of negotiations regarding the prospective 'rescue' of the Northern Wreck. Certainly Sir Branson was one of those accompanying him on the China junket - and the same man is allegedly "confident" that his bid for the wreckage will succeed. Hmmm - although at the same time, Sir B. did suggest he would "battle till the eleventh hour to raise the necessary finance" - hardly affirmation of his other comments. Anyway, we'll see - but if the thing becomes Northern Virgin or Rockin' Virgin at a tiny price, then yours truly will be drawing his own conclusions, and betting on Baron Branson of Tyneside's posterior warming a House of Lords seat in due course. Cynical? Did someone call me cynical? Perish the thought! Oh, while I remember - believe this if you like, but I have it on good authority that the Wreck is STILL offering loans of 125% of valuation. Even Williams finds that hard to comment upon!

Moving along, it seems a Professor at New York University has suggested that US investment banks are NOT in fact making losses at the moment. No - they are simply making negative profits. Duh. And still in the US of A, it's clear that markets were as unimpressed with George Bush as is everyone else in the thinking universe when they tanked after his announcement that there's going to be a "fiscal package" - ie tax rebate - of $147bn. Seemingly that will stave off recession and also "create 500000 new jobs" according to the cloud cuckoo. Listen George - NOTHING will stave off a US recession, for the very simple reason that it has already arrived. And if you examine the case of Japan, you might care to note that fiscal stimulus, plus interest rates that were reduced to ZERO - and are still only half of one percent - did nothing to avert an 18 year recession that is still ongoing. Very likely there will be US interest rate reductions - in fact it's more or less certain - but all they'll do is further trash the dollar and the savings of working folk - they won't save the US economy. The same might well apply in Britain.

Back in the UK, it's not only Grumpy Gordon who can't count (see last weekend) - a spokesperson for the trade union Unison has suggested (anent pay demands) that "No-one could argue that an increase of 50p per hour fuels inflation"...a keen grasp of basic economics there then. Madam - ANY increase in ANYTHING "fuels inflation" unless there is a corresponding reduction somewhere else - and right now, THAT seems on the unlikely side, given the way prices are rising.

Finally, before I head off for that darkened room again, it's interesting to note that the Scottish Police pension fund is allegedly £50m in the red - there's a crime to investigate, guys! A better use of your time perhaps, than persecuting innocent motorists - though probably you'll just put up a whole load more cameras to make up the shortfall. What do you say to a Glasgow traffic cop? - "Please stop hitting me, officer." (Only kidding - honest!) Anyway, ask me nicely and I'll tell you where to look for the missing dosh....it will be helping to pay for a few inches of the new bridge....unless of course it's in an offshore fund somewhere.

OK - that's all for this weekend then (and all for good in fact, if your sub has expired, because passwords will change on Wednesday 23rd) so let's look at a chart or two. First there's one of New Star Asset Management - or 'mismanagement' perhaps - then some nice horizontal support to look at on the Mapeley chart, followed by potential 'triangle' strength for Autonomy. Finally there are a couple of charts of the S&P500, where there's a trendline break and support to consider.

There will be no WICS next weekend by the way - the next one will be on February 3rd, due to family commitments - so best wishes and happy trading until then. (I will be around for mentoring purposes however - but replies might take longer than usual, so thanks in advance for your understanding and patience.) And if you have decided to 'fly solo' and not resubscribe to these mutterings, I quite understand and of course I wish you well in all your trading - indeed I wish you well whatever your plans may be!

Ian.

If you look at the horizontal 'support' I have highlighted here, you'll see there was a perfectly valid sell trade last autumn - either on the break of the top line or to be a bit more cautious, on the break of 300. Then another opportunity came along at 200, and all of this action happened well in advance of last week's "bad news" with the company's massive (toxic waste - caused) losses. The message? Trust the charts! So often, we get prior notice, as it were, of impending events - and this is a great example of that. Where next for this once rising star? Hard to say for now - some "bottom fishers" may well think it's "cheap" and drive the price back up a bit, but it's more likely a black hole is beckoning. We'll see.

Here's another example of horizontal support - it was broken last year on £35 and now we're at "only" £12! What might happen now if it can't hold its current (strong) support on £12? if you refer to the recent chart of Capital & Regional you might see that despite people jumping in at various stages and pushing the price up because they believed it was "too cheap"/"great value", enough other people just wanted out and the price slowly leaked away to the downside. I'm not saying that is going to continue to happen here - but support is support - and £12 is a long way from zero!

I looked at this one on behalf of one of you, at the point where the channel had formed and the upside probe had occurred. After that of course you'll see that the probe was retraced when the price fell back into the channel - then up it went and gave my correspondent an entry wher marked. It has since hit £10 and not unexpectedly fallen back off such a 'round number'. Now I hope you can see the 'triangle' that has formed - all good stuff for your learning process! To learn more about both channels and triangles, please type these words into the WICS search engine (singular and plural) and see what you come up with. If you're a newcomer to this stuff, please don't get bogged down in it - together, we'll get there! Just drop me an email if you're confused and I'll do my best to assist. Meanwhile, try entering a DMA or two here, to see how it all looks.

Here we can see how (at long last!) the trendline was probed to the downside. Afterwards there was a retrace that stalled more or less exactly on the extended trendline, as so often can happen. (You'll need to shorten the timescale above in order to see that - to save you the bother, it's on the chart below) Since then it has fallen away and has broken its horizontal support. Where next? Probabilities suggest a bounce back up that will hit resistance on that prior support, followed by a drop towards the next area of support that looks to be just above 1200. As always, for more on such things, use the search engine and type 'trendline' or 'trend line' - without the inverted commas and using the plural too.

Here is more detail from the previous chart. We'll see how it pans out!

'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'.