"How high's the water Mama? - It's three foot high an' risin'..."......The words of the late John Cash come to mind when reflecting on the ongoing plight of the Hard Rock Mortgage company - "How high's the debt level Adam? - It's £16bn an' risin'..." Doesn't scan as well as John's effort, does it? Ex Chairman Ridley has gone, but how can it be that those really responsible for the fiasco will still be at their desks on Monday? Ridley after all was like the vast majority of "non - executive" chairpeople - ie he had not a clue about 'his' company's business model. I loved the response to the Select Committee questioning: "But nobody could possibly have foreseen the credit crunch....." Hmm, I wonder how the good analysts at Baillie Gifford et al might respond to that particular terminological inexactitude? Several analysts were suggesting at least three years ago that the Rock's concept of banking wasn't exactly rock solid - not to mention the fact that just about anybody with half a brain could work out that to lend up to six times income and 125% of valuation, could end in tears at some stage - a warning perhaps to potential investors back then, that they should have looked very closely at just how Northern Rock actually went about raising the necessary cash to lend in so profligate a manner. Oh well - maybe the shares will still be worth something once the vultures have had their day. It certainly bears out yet again the Williams contention that if you can't (or won't) conduct serious fundamental research, then 'investing' (as opposed to 'trading') can be very damaging to your bank balance.

Moving along to another wreck that is just in the process of happening (If you have ever been involved in a car crash you'll understand what I mean by saying "slow motion - but totally inevitable") - a consortium of US banks has just agreed to set up a "crisis fund" to cope with the sub - prime mortgage fallout. According to reports, this will "remove the threat from mortgage meltdown". Williams is amazingly speechless for once.....but only for a moment or two while he removes the expletives from the first draft of these ramblings on the grounds that you good people are probably not as foul mouthed as my family claims me to be when I get riled - as if! ....Hmm, let's examine the above "remove threat" claim. First, the alleged fund amounts to the huge sum of $80bn. What percentage is that of the even huger amount owed by all the Hirams and Myrtles from Podunk Arkansas etc? (No disrespect to Podunk of course, nor indeed to anyone called Hiram or Myrtle). The point is of course that $80bn is nothing but a gesture - but what really matters is that these banks KNOW that this mess is only just beginning, and that they really have no idea at all how to handle its fallout. Why do I say that? Because I've looked at how this $80bn is to be funded, and how it is to be secured. Basically, it is to be funded by short term borrowing from within the very same institutions who are providing it, and secured against mortgage debt........and yes, if you're saying "But....but surely that is like the famous bird that flew round in ever decreasing circles till eventually vanishing up a part of its own anatomy?" then you have got the picture, clear as a bell. It's not a laughing matter of course, but I'm afraid Williams is still chuckling merrily. Nonetheless (due to different legal criteria in the USA) depositors in many US banks might care to give serious thought as to the safety of their cash - and that is NOT amusing at all.

Next, a wee bit of "psychology", hopefully to assist some of you new guys and gals - to whom I wish a a very big "welcome!" Anyone daft enough to stick with these ramblings has to be one of my favourite people, that's for sure. First I'll reproduce an email from someone who came on board over two years ago, then fell by the wayside as it were - it's interesting that he contacted me again the way he did - and doubtless he'll be in touch again a bit more often, because that tends to be the way it goes, in my experience.

To: Ian Williams

Sent: Thursday, October 18, 2007 10:56 AM

Subject: Hi from P......

"Ian,
You may remember me. I attended one of your workshops. You might wonder why I didn't communicate for over a year and why am doing now. The answer, as you will very easily guess, is that after some initial setbacks I decided that TTEW did not work for me, so my search for the Holy Grail continued.
I won't go into all the details of what I did in the last year or so, it's the usual story. But I learned a lot about myself. I realised that I have an impatient mind and I have never really fully appreciated the true nature of trading (that there is no certainty and no guarantee).
Does this mean I am over it? Far from it. It all depends on how my trades are doing. I have no doubt that the moment I have a losing run all the old doubts will start raising their heads.
So, in short, I don't know the solution to this, other than to keep practising and doing my best not to jump from one system to the next every 6 months. May be I'll get this one day, may be I won't.
Just wanted to say hi, really.
P......."

My reply was:

From: Ian Williams

Sent: Thursday, October 18, 2007 12:25 PM

Subject: Re: Hi from P......

"P...... - great to hear from you again! EVERYONE does as you're doing, so don't feel 'different' - just realise that there IS a Holy Grail of trading.........and remember my Dad's words from the manual - "The eyes of a fool....etc" You are NOT a fool of course - my father was just making a very important point re the Holy Grail's location. Anyway, feel free to speak to me as you might wish.

Ian."

I guess the real point to make regarding P's email above is that there are masses and masses of "systems" out there, that suppliers want to sell you, myself included. Do they all work? Nope. Do some of them work? Of course! What not to do? Buy 'em all in the hope that ONE, somewhere, does exactly what it says on the tin. I recall saying something one time that went like this - "Do Your Own Research". Learning to trade isn't actually that hard - after all, I managed! What IS hard however, is maintaining self belief in the face of losing trades - and nothing is easier than blaming someone other than yourself when things go wrong. What if NOBODY is to blame, not even you? Market action will inevitably take you out of trades and lose you money. That is part of the deal and you simply HAVE to accept it as fact. And when that happens, the market wasn't 'wrong' - it just 'was' and that's all there is to say about it. I know this can be very hard for beginners - and for the more experienced too - because as a society, we simply HAVE to attribute blame. What if there IS no blame? We still seek a scapegoat - sure, if you hit the wrong key and buy when you meant to sell, you can say you acted like a twit but if you have never done that, then you have never traded! And if you chased a trade/jumped in/followed a hot tip, then yes, you'll have yourself to blame when you lose - but again, that's all part of the overall learning experience and we all go through it, I promise! Find a methodology that suits YOU - something you feel comfortable with, whether via myself or another, and then learn to trust YOURSELF within that methodology. Ignore 'money' - easy to say, hard to achieve! But try, please, to ignore the financial implications, win or lose. Think of a falling leaf (appropriate imagery for the season, eh? Who said Williams has no soul?) - this is NOT 'Kung Fu Grasshopper' stuff by the way - not really my forte - but for all that, this image isn't the worst I have ever come up with. What I mean is, watch a leaf falling, and ask yourself "When it lands, will it be facing dark side up or light side up?" (And if both sides are the same, find a different species of tree to stand under!) Then ask yourself "Who cares which way it lands? Will the outcome have any effect on my wellbeing?" (If you reply "I care...." then you need more help than I can provide!) Then take that same indifferent attitude with you into the trading arena, and apply it to your trading. "Do I care if this ordered trade is ever opened?" "Do I care if this open trade wins or loses?" When you REALLY don't care, you have arrived, I suggest. And surprisingly or not, that's when you start consistently to make much more than you lose............give it some serious thought! (But be very aware that I DO NOT mean that you should be CARELESS - that is NOT the same thing. You need to take great care within your methodology, to analyse and decide on what you want to order.)

Anyway, moving along to a chart or two, first we'll see that Halfords (last featured in these ramblings on 30th September) has broken the probe we spoke about then. Then (since we spoke about 'dynamic resistance' last weekend) we'll examine the opposite - dynamic support - on the chart of SAB Miller. Finally we'll see what the FTSE100 did after last weekend's comments thereon.

That's all for this weekend then - oh, before I go - just a word re 'hot tips' as mentioned above and in last weekend's offering - obviously it's up to you whether or not you listen to tipsters, but if you're inclined to do so, then it's only fair to say that you'll almost certainly never actually learn to trade for a living. That's worth some serious thought - and it's the only kind of 'tip' you'll get from me! The other point worth noting is that just as with the Press and the telly, where all that ever seems to be covered is bad news, so the Internet, in the form of trading - related bulletin boards, forums, message boards etc - whatever you want to call such rubbish - is stacked full of personal agendas masquerading as 'informed opinion' - mostly put forward by the totally unsuccessful. All I can say is "Beware!" And yes, WICS is full of personal opinion too - but at least it's not trying to hide the fact - and at least you get replies to your emails! (If you don't, then please look at the link in last weekend's offering and consider opening a gmail account if you suffer from undelivered mail.) Oh yes - and Friday was the twentieth anniversary of the October 87 crash - note how markets - particularly the Yank markets - responded! Did I ever mention the herd mentality?

Anyway, on that note, happy trading till next weekend.

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'