"I started off with nothing an' I still got most of it left...." (Seasick Steve). A strange name for an ageing blues/rock person but a mighty appropriate song title to describe current market events? I had no plan to produce these ramblings this Sunday but given the week's events and all the nonsense on Friday, here are just a few wee observations to go along with this weekend's video clips - and hopefully to answer a few of the (many!) anxious emails I have received. It's sure that you have read/are reading more than enough "comment" from all the talking heads - so if you don't bother to read the remarks below, it will be totally understandable! As above, these are just going to be a few wee snippets and maybe a tad disjointed at that, due to my not having had time this weekend to put much together, as you know. Anyway, for what it's worth -

On 15th September (after having refused to rescue Lehman), the US Treasury Secretary said "You can rely on the soundness and resilience of the (US) financial system." Was it only the following day that AIG admitted it too had failed, and had to be 'rescued' by the Fed? Then as the week progressed, we saw the new "toxic waste deposit bank" being set up with US taxpayers' money - the current cost estimate is a mere $1trn or so. Paulson (Treasury Secretary) claimed that the cost would be far less to the taxpayer than not providing the dosh at the moment. Hmmm. Even $1trn is nowhere near enough to cover the costs. US taxpayers and their children's children will still be paying for that particular piece of government intervention. Savers can be expected to lose out, while the least deserving are cleaning up. There wouldn't be an election looming, would there? If anyone believes that "the authorities" actually know what they're doing, then they would believe just about anything at all. And make no mistake here - the debt has NOT "gone away". It's just that on both sides of the pond, much of the liability for it, has been passed on from the guilty to the innocent. YOU (if you're a taxpayer) might never have taken out any kind of dodgy loan, and YOU might be a prudent saver, yet YOU are now being stuck with the fallout from the greed and stupidity of others. As you will be aware, I have no time at all for any kind of politician of any particular hue, but if Brown and his lot don't get totally destroyed at the next election then I will truly lose any remaining faith I might still have in the sense of the British people.

Friday's ban on the short selling of some financial stocks (immediately copied of course by Wee Allie on the UK side of the pond) seems to have been remarkably well timed to coincide with a "triple witching" day (use Google for more if you have never heard of this) and it seems to have got an awful lot of big election campaign contributors (in the USA) very neatly off the hook......

"Short covering" - where you have to buy back borrowed shares to get out of a "sell" position - was what caused most of Friday's massive bounce. The rest of it was almost certainly caused by punters now believing that the SEF (in the search engine if you're new to the IW "take" on things) is invincible and immortal - and that bank stocks in particular, can now only rise in price for ever more. So the public is rushing in as always - one question from this cynical player: who is currently selling their bank stocks to Joe Punter then? (Without a seller, you can't have a buyer...) It wouldn't be big players who actually own these stocks would it? They wouldn't happily be selling at a far higher price than they would have otherwise obtained, would they? Are you seriously suggesting that all of a sudden, shaky businesses are now off the hook? Sure, for a while at least, the likes of RBS (Royal Bank of Scotland) shares can't be sold unless you own 'em first. Royal Ripoff Bank has lent out ALL your money - if you have deposits therein. In fact, it has lent out £161bn MORE than all your deposits added together. Does that make it a sound business? (I'm just using RBS as an example here - all banks meantime have a very dodgy capital base - are you going to tell me that Bradford & Bingley has been transformed on a twirl of the SEF's wand into a strong, well run company? If that's what banks are, why would they need to be bailed out? I'll mention the current blaming of short sellers somewhere below.

In the UK, the Broon person is taking the credit for having rescued the economy from City excesses, and for having brokered the Lloyds/HBOS deal - total nonsense of course. "I have always believed in the need for (financial) regulation" - a claim from that particular bender of the truth during the week. That'll be why he presided over ten years of unfettered borrowing excesses then - fostering a UK economy founded almost entirely on debt, and touching his forelock to anyone deemed to be worth a bob or two. And if anyone thinks Edinburgh will see more job losses than will Halifax anent this HBOS takeover, dream on. A by-election in Glenrothes, and both Broon and Allie with Scottish constituencies? Ho ho ho.

UK business leaders are yelling for an interest rate cut to "stave off recession." I'll bet Gloomy Gordon doesn't want a cut right now. He can blame Mervyn King's inaction for everything in due course, so "inaction" in that regard suits Broon just fine at present.

Short sellers - speculators like IW for example - and you too perhaps - are 100% to blame for everything of course. If nasty people like us were not permitted to exist, then the banks would not be struggling. Hmm, so it's nothing at all to do with their having handed out a zillion dodgy loans then? (type "NINJA" into the WICS search engine and follow the trail back from there.) Now we hear Bradford & Bingley admitting that there seem to be some "fraudulent" loans on their books, that they'll need to write off. Yes indeed. They really checked the credentials of borrowers when they were chucking money at anyone who requested it, didn't they? Make no mistake here - short sellers are NOT even REMOTELY guilty of anything. (I'm not talking here about crooks who spread inaccurate rumours, in the hope of driving a share price down - I'm talking about normal trading practices of course. And trust me when I say that truly strong companies can see off the short sellers any time they want, without recourse to begging for government intervention.) Short sellers can only make money by recognising companies that are in trouble and which are still denying that fact, and then taking appropriate action. The banks' business practices have been reprehensible for years, and short sellers are very much part of an "unofficial policing system" that sniffs out the dodgy far far more efficiently (and far more quickly) than the FSA and similar "authorities" ever can. Short sellers don't lock the stable door after the horse has bolted - they spot that the horse is restive long before it vanishes into the wilderness! It was the bears who identified the Enron fraud long before the regulators in the States could even spell its name. Just look at the charts of most of the banks over the past 18 months or so. Northern Rock's troubles (just to take one example out of many) were known to speculators long before Wee Allie "acted". Lansdowne Partners (a hedge fund) had a short position open on it for over two years before the Wreck's problems became public knowledge. How can you lend 125% of "valuation" AND six times "earnings" to someone - with minimal credit checks to boot - and still have a good quality business model? Do me a favour! And if you think the banks are now out of trouble, again, do me a favour! Fraudulent loans are now being estimated at around £30m in the UK. That figure will prove to be somewhat of an underestimate methinks.

Basically, it's "business as usual" folks, once the euphoria has yet again evaporated! Sure, we can't "short" some of the financials for now - but as I suggested above, look at the charts! The "sells" in that sector were pretty much over anyway by the time the FSA acted - late as ever! I wonder if they'll ban the BUYING of stocks in due course? What a bunch. (Don't worry - the "buys" will be safe enough.... and there will be plenty coming along soon - but not in the banks for a while yet.) Anyway, if anyone tries to suggest that the blame rests at the door of the speculators, let them be 100% certain they are wrong. "Don't shoot the messenger" would be the message - but most of the media of course pander to the masses, and it's just too easy to point the finger at the wrong people. The true source of the current meltdown is simple to see - it was the building of the credit bubble. And those responsible are central banks (ie governments) for having allowed the buildup of crazy amounts of far too cheap credit, and the financial types for finding ever more complex ways of pretending debt was a good thing, knowing that regulators had not a clue what was going on - and were being stymied anyway by their government masters. Gordon Brown presided over the most baseless UK "boom" in history and it's hard to imagine he is so thick he actually didn't know what he was doing.....hmm, there again.....So please be very, very sure that selling stuff you don't yet own, in order hopefully to buy it back cheaper, is morally not a jot different to BUYING something you don't yet own, in the hope of selling it on at a higher price. In the "real world", if you see a three piece suite being offered "really cheap" in a liquidation sale - or indeed a foreclosed house at what you think is a really low price, do you feel bad about the person who is losing his or her job/home/whatever while you arrange to buy it? Would you feel bad if you sell a foreclosed apartment in three years' time for double what you paid today for it? Would you feel sad for the person who lost his or her home and credit rating? Forget all the wrongheaded "psychology" that the world would stuff down your throat. Without trading in BOTH directions, markets would fail to function properly - not that they DO function "properly" due to government interference of course! Anyway, if YOU feel more comfortable when you "buy" than when you "sell", a wee bit of patience will soon enough give you all the opportunities you want - just don't start looking down your nose at short sellers or you'll get nae mentoring help from IW!

Anyway, finally - another thing from the British government on September 16th - "House prices are showing a slight recovery..." What substance are these people smoking?

On that note, have an enjoyable week reading all the press if you can be remotely bothered, and I'll see you again next weekend. Charts today are in the video clips only.

All the best.

Ian.

PS - if you were stopped out of a Hochschild Mining "sell" the other day on the massive "up" spike, please immediately speak to your broker/spread bet provider. It was a glitch in the system and trades have been reinstated where appropriate - but you may need to ask to have it done if it hasn't yet been corrected on your account. As pointed out in the manual, brokers and spread bet companies are NOT trying to "do" you - mistakes happen. Conspiracy theorists take note!

'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'.