Well, here we are at the last WICS of 2008 - and who would have thought that so many of my Really Scary Granny's predictions would have become reality during these last - somewhat astonishing - ten or so months? Certainly those of you masochists who have suffered these ramblings since they began way back in the mists of time (well, 2004 actually) will be aware that the RSG predictions took rather a long time to pan out - but nobody can deny that they certainly HAVE finally jumped up and smacked a few people in the face!

Anyway, there's no plan to "do a retrospective" here, you'll be relieved to learn. A far more important question is "What might happen next?" and that can be answered in one word: "deflationary depression".....oops, that's more than one word - sorry about that.

"Depression" is just a term to describe a very deep and long lasting "recession" - the kind that few people still living, have experienced as an adult - and it would be reasonable enough to suggest that this time round, in Western - style economies at least, few will suffer the hunger and true homelessness experienced by millions during the last Great Depression. But shrinking economies and the attendant joblessness are already a done deal - and things will become far worse before the bottom is reached. How much money has the USA alone, made available this year so far in "bailouts"? (Several $trillion is the approximate answer). What has the economy been doing as a result? (Still tanking is the precise answer). How many interest rate cuts have there been worldwide? Have these made the least bit of difference? Are banks happily lending again at the Broon one's ludicrous "2007 levels"? Will politicians ever get real? No answers are required to any of the above! Politicians are the most brilliant people on the planet (yes - even more so than bankers!) at grabbing your money - and by far the most incompetent at spending it wisely. (I'm pretty sure somebody famous once said that, or something similar - so my apologies for the unattributed plagiarism if that's the case.) The Broon one apparently is toying with the idea of a "giveaway" similar to the recent George W one - where taxpayers got a refund in the hope they might go out and spend it on "stuff" to keep the whole sorry mess rolling for a wee while longer. Broon's plan (seemingly) is not to give you cash, but to supply you with "redeemable vouchers" so that you HAVE to use the dosh to acquire "stuff" rather than pay down some of your debt....aaghh. That is just so unbelievably stupid that there's a danger it will indeed happen. Did I mention recently, something about "cutting open another artery to see if that slows the bleeding from the first one?" Give a politician a chance to pretend he understands Keynesian "economics" and say goodbye to your children's future prosperity. (Try the search engine with "dreadful man Keynes" for more, if you can be bothered -and "children paying" might also be worth a look.) Anyway, that wee bit of tonight's rant covers the "coming depression" bit - what about the "deflationary" part? There have been lots of emails (at least two) suggesting that IW has lost the plot here, because the Fed and Broon are both suggesting they plan to run the printing presses at full speed and flood the world with dosh - hence fuelling inflation. The flaw therein however is a simple one - yet massively significant. People no longer want to borrow. Mass psychology has altered hugely these past few months. Previously it was a case of "having to have", no matter what the cost. The new Porsche Cayenne (type that into the search engine for some REALLY "Really Scary Granny" observations!) was just added to the remortgage along with the wife's Z4 (how sexist is this guy? - not in front of Mme W nor the weans he's not!) People used their houses/credit cards like a money pool they could dip into whenever they wanted. Now however, even if they still have the facility to do that, they simply won't. They might certainly buy the odd treat, but it won't be a new car to p*** off the neighbours - it's more likely just to be a CD of something they know the Joneses detest......Certainly I can recall when cash was extremely tight and a wee bit of "feeling down" was the Williams mood, a new (and of course unaffordable) LP (HOW old am I?) would be purchased whatever, just to lighten things up for a while - and that kind of buying will certainly still be on the go. Will it be enough to cure the world depression however? Nae chance. So in that sense, printing money will make no odds until the mood changes again in a few years' time.

The other aspect of "printing money" that Bernanke and Broon (I know it's not Wee Allie's way of thinking - he is actually quite sensible for a politician, albeit without moral fibre, the same as all the rest of that breed) are currently banging on about is "quantitative easing" - that's a fancy way of dressing up "running the printing presses so fast they seize up" but it applies specifically to the buying back of government debt. The idea is that in order to pay for all these idiotic bailouts - and for those still to come - governments have to borrow money. Gosh - really? In order to borrow, they issue "gilts" (Treasury Bonds in the USA) and try to sell these to whichever patsy is willing to buy them. In fact, the patsy gets an IOU from the government - a "guarantee" that in (say) 30 years' time, the T Bond in question will pay out 100%. Generally speaking, that's a pretty safe bet when issued by a government like that of the UK, USA etc etc, so the interest rate paid thereon tends to be pretty low compared to gilts issued by the likes of Argentina. However, in these current circumsatnces, lenders to the government (ie the buyers of gilts/T Bonds etc) are looking for a higher return than "normal" because they are well aware the government is borrowing far too heavily and might struggle to repay the capital. But the government doesn't want to pay too much interest because that would just add even more to its debt burden (ie YOUR burden). So Ben and Broon etc have come up with this great wheeze - print more money and then use it to buy back lots of gilts, thus keeping their perceived value high and interest rates low.....go figure, in my Yank brother in law's words. My own word for it all would be "Duh".....Try the search engine with "before vanishing up its own" to get the general idea. No matter how much "extra" cash is printed, it won't fuel inflation because it will all go towards propping up Treasury stock - but interest rates thereon will still rise, according to my RSG's crystal ball. Eventually, once the "feel good" factor returns (as it will do, thankfully!) the printing presses might then create rampant inflation because that's the usual way governments avoid their obligations to borrowers - but it won't be for a few years yet, of that we can be pretty sure. "Stuff" is going to get cheaper and bargains will be had - but not quite yet!

OK - lecture over, and on to some of the silly stuff (although there is another wee "lecture" somewhere below, seeing it's the Bah Humbug season....) - and first, the Broon one seemingly has gone on record that he has "saved the world". Words from IW are unnecessary.

Next, the Halifax and Nationwide have decided not to make any predictions about 2009 house prices. Their excuse is that markets are "too volatile". Hmm, I thought "volatile" meant "up and down like a yoyo" but surely it must simply mean "down"....you learn something new every day in this game. (By the way - why is it that "every day" is now being written everywhere as "everyday", which means something different? Not that IW is at all pedantic you understand.)

Moving on, we see that BNFL has made huge losses, not to mention had a few radioactive leaks, and some directors have quite rightly been kicked out - with an average "goodbye cheque" of £1m. Listen, give me half of that and I'll happily make a mess of your company for you.

Leeds University has banned the sale of bottled water. How utterly pathetic. And speaking of pathetic - how about French supermarkets no longer letting you choose your own eggs? The disease police rule OK! What nonsense. It seems there is a bug you can catch from handling eggs, so only gloved hands are allowed. Loose eggs are sold at the cheese counter. Gloved hands select them and put them in the carton. The same gloved hands then pick up and cut the cheese you have selected.....oh dear. Omelettes will obviously be the next thing to be banned.

It appears there has been a "huge overspend" on the maintenance of royal residences. One simply cannot tolerate a draught, can one?

Jaguar is seeking a Mandelson bailout - will they get it? Only if Mr Tata owns a very large yacht....... And still with cars (if you can call a Jaguar a car of course) it seems GM is going to auction a few of its classic cars to raise a bob or two. "Bust" is the word, guys - and frankly, not before time. Dinosaurs go extinct eventually. And the first new car for a while from Lotus goes on show in Park Lane this week - bad timing or what? £50k for Lots Of Trouble, Usually Serious - who on earth is going to be dumb enough to buy one?

And Nasa is obviously a bit strapped - selling off a couple of space shuttles - but only to US citizens for some reason. That's Sir Branson's nose out of joint then...

And finally (before the other wee lecture referred to above) some Glasgow correspondence course provider is offering an "ethical hacking" course..... But they're being very responsible - they claim that "applicants will be very strictly vetted." That will presumably mean "we have vetted your credit rating and since you can pay the £1800 fee, here you go...." Training courses will be all the rage - Broon claims he's going to retrain everybody - "Real help now and real hope for the future". That's why there's loadsa bailout money but the DWP budget has been cut by £2bn....oh well, there will certainly be loft insulation instructor jobs, as well as loft insulation instructor inspector jobs, and loft insu........oh, you get the idea!

Anyway, re the "wee lecture" bit - in WICS of November 16th, mention was made that "only exports add value". One of you (Thanks David!) added his tuppence - worth and I'm reproducing it below, along with my response

Dear Ian,
I've just been catching up on recent WICSs, including the one for 16 November. In it you say "ONLY exports enrich an economy".
While there is a certain seductive appeal about this idea (and while I'm far from defending Mr Brown and his acolytes) I wonder if it's entirely true.
If you applied it to the world as a whole, it would mean that the world's economy would only be enriched by exporting to, say, Mars. But the world as a whole is surely much richer than it was in, say, 1500 or 1800 (and exports to Mars haven't figured largely in the news). If this hasn't come about through swapping, it must have come about because things have been created, or dug out of the earth (so value has been created and the world's total wealth has increased).
So, taking your chickens-for-wheels example: - while swapping a chicken for a wheel within a village doesn't enrich it, the creation of a wheel and a chicken must do. As does the extraction of metals and other minerals, the creation of works of art, the growing of crops, etc etc.
If that's right, the effect of Brown's money-sloshing depends on what it's sloshed into. If it goes simply into making us swap things, then (as you say) there'll be no net benefit. But if it goes into the creation of new value, then surely it would be useful. Of course, it's difficult to do this now that we have scarcely any manufacturing industry left (but perhaps now would be the ideal time to revive it).

Does this make sense?
Regards,
David

My reply was:

David - yes, that makes perfect sense - but only to a degree. Of necessity, WICS oversimplifies to avoid more longwindedness than usual (as I usually point out in fact).
If Obama spends taxpayers' cash on new schools/better teachers for example, in the long run that should help improve the USA's economy by providing better opportunities in many senses. But ultimately if such opportunities don't "add value" via the export of goods/service FROM the USA, then NO real value will accrue. Try Google re "Bastiat Broken Window" for some philosophy about this stuff.
Ian.

If you use Google re "Bastiat" as above, you'll get a bit more - David in fact came back to me suggesting that the window breaker was a vandal and added nothing to the economy for that reason, but that "adding value" was different. As with the Obama example above, that's true - if for example the Germans wake up to the fact that their motorways are so dreadful they need to be more or less totally rebuilt and if they create employment to do so, in due course their economy will benefit overall from improved transport links and the cost savings that arise from that. But if they just build "bridges to nowhere" as they have tended to do in the East of the country, they will see no real benefit. The Americans in particular will suffer from that kind of thing because of their "pork barrel" approach to appeasing/buying off powerful lobby groups. It was ever thus!

Anyway, on to a chart or two (thank goodness! - I hear you mutter) and first there's AMEC and potentially conflicting signals - thanks to "Jeremy" for having asked the question. Then there's something similar (ie "conflicting signal") on Go - Ahead Group before finally we take another wee look at the ongoing triangle in the RTSI.

And that's that for 2008. The next issue of these ramblings will be on 11th January -there will be video updates however, both on Christmas Eve and on 7th January. I'll be available over the festive season as regards answering your emails - but between 25th December and 6th January I'll be online only for an hour or so daily so if it's not urgent, please don't contact me then. And on that note, may you have a very happy festive season - and may we all enjoy a prosperous and peaceful 2009.

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'.