"When the facts change, I change my opinion....." (Keynes).

You have heard that statement mentioned before in WICS of course - so with markets, especially in the USA, heading ever upwards, have 'the facts' indeed changed, and if so, has Williams (at last) changed his opinion?

Well, 'yes'.....and 'no'.

'Yes' - the 'facts' have changed across the pond, in one particular - and pretty major - respect, but 'No', Williams has NOT changed his opinion!

How arrogant, but let me elucidate before you judge too harshly.

The 'fact that has changed' in the USA, is that the stock market regulator - the SEC - has finally bowed to pressure and has agreed to reduce the margin requirement rules that have been in force since the Depression era - over 70 years in fact. (The 'pressure' to which I allude came allegedly from fund management companies, but being just a wee bit cynical, I rather suspect that politicians of the Republican persuasion might have had a touch to do with it too - with the housing market now heading for meltdown and mid term elections looming, the last thing they would be wishing to see is the visible start of the next Great Depression just at this specific moment.)

So what has been changed by the SEC, and how will this affect USA markets?

Well, for over 70 years, 'margin requirements' - the amount of equity required by a USA - based fund manager before being able to leverage a trade (plenty about this stuff in the manual by the way!) has been 50%. In other words, if Freddie Fundmanager wanted to buy or sell a million Microsoft shares, then he was obliged physically to own a minimum of half a million before he could conduct the transaction. The SEC's thinking of course was to control the degree of risk involved - as we know, the more the leverage, the greater the potential profit but equally, the greater the potential loss. Anyway, in their undoubted wisdom (Hah!) the SEC has agreed that margin requirements can be reduced to just 15%. And guess what? Yup - all these extremely young and inexperienced people who allegedly 'manage' the investment and retirement funds of the Moms and Pops of America are already revising upwards their Christmas bonuses as they pile into the markets on the back of borrowed money - indeed, many are borrowing both shares AND bankers' cash to ratchet up leverage to a dizzying height.

And the effect? You'll doubtless recall an earlier WICS remark that "Once everyone who can buy, has bought, prices can only begin to fall..." NOW of course, a whole lot more buying can be done, by the same people who have been piling in for ages - so it's hardly surprising that the indices are continuing to push on upwards.

Anyway, that's just a thumbnail sketch of what has changed. What has NOT changed, is my view of what the result is going to be - it's just that the collapse is now going to happen somewhat later than predicted, and from a greater height. I have not the slightest doubt that the Dow, the S&P, and the Nasdaq (being the three best known USA indices) will see something approaching 50% wiped off their eventual highs over the next few years. And given that both 'euphoria' and 'depression' are highly contagious, I expect European markets too, to continue their upward progress for a while longer before the overall mood changes once again.

Anyway, that's simply 'What Ian Can See' and as I also suggested in an earlier issue, I have a spare ski hat and a bottle of ketchup stashed away, just in case I'm wrong!

Moving along, it's pretty likely that the Dow will drop back next week and into November, perhaps to around 11700, and the S&P perhaps to 1360 - but if they do, I don't think it will suggest more than a 'profit taking' retrace and it's highly probable that at least the Dow will be sitting on all time highs by the year end. We'll see.

Headlines during the week: it appears Ryanair is the 'least popular airline in the world'. Bad timekeeping, surly staff...now I'm no fan of Ryanair - indeed I detest all air travel for its horrendous effects on the upper atmosphere - but fair's fair guys - if you pay £9 to fly from Aberdeen to Dublin and return, can't you put up with an hour's delay and no smile? It's a long time since I took a plane anywhere, but I don't ever recall British Airways staff having been all that welcoming - and I never paid as little as £99, never mind £9, for a flight!

'Drugs Firms Hit By Development Snags': Glaxo and AstraZeneca both seem to be having 'issues' at present - which is why I don't like trading pharma stocks - if you examine the charts you'll perhaps see that finding a decent SL (Stop Loss) can be pretty difficult, and there are just so many other 'easier' charts out there!

'Insolvent Britons Set to Rise By 400%' - I love headlines! I can just see all these bust Brits gently rising up on bubbles of debt, disappearing over a mountain somewhere among all the jet contrails.....but it's not that amusing really and it's going to cause an awful lot of heartache for a huge number of people.

It was interesting to receive an advert from one of you in Glasgow - thanks James - recruiting debt collectors for work throughout the UK. It seems it's a 'Rapidly expanding business' offering 'Great career opportunities' to 'Mature individuals with door to door experience'. Benefits include a 'Competitive salary and bonuses' but the part that made me smile was the bit about 'Free medical insurance'. Listen guys, if you're planning THAT kind of career move in the Glasgow area, make sure it's really, really good medical insurance!

And speaking of bubbles, I note that MPs' expenses too are somewhat inflated, at nearly £87m. It was amusing to note that commentators are seeking 'more transparency' but the parliamentary chappie responsible for overseeing the claims says "The system is based on trust" so that's OK then - 'trust' and 'politician' of course are synonymous.

Finally, before we move on to examine a chart or two, let me please reiterate that I write the above ramblings for YOU - 'by request' in fact. So if you don't enjoy them and if you want something different, tell me! I won't be offended - I'll only sulk for a day or two, I promise. It's just that some of you seem to have some difficulty in separating my WICS remarks from my comments on charts - PLEASE understand that when it comes to TRADING, the charts are what matter, and my opinions in WICS are only that - MY opinions. There have been loads of excellent 'buy' trades these past months, irrespective of what markets 'should' be doing - so trust the charts at all times. There will be plenty fantastic selling opportunities in due course, have no fear of that, and you'll see these 'brewing' on the charts as they begin to set themselves up for the inevitable drop.

Today's charts are intended to discuss the matter of 'courage' and the benefits of using DMA - based management for exiting winning trades - an aspect of trading that seemingly has proved a tad challenging to some of you recently, and I know a few of you are kicking yourselves for having dumped a winning trade 'too soon'. Don't be hard on yourself, because at least in the early stages of a trading career it can be immensely hard psychologically to appear to be handing back profits. But please make no mistake - in order to make consistent profits, you MUST 'hand back' some of your 'paper gains'. That's undoubtedly one of these 'Trading Secrets' that I mention in the manual - and it's so glaringly obvious that hardly anyone sees it!

We'll look at Admiral, Big Yellow, and J D Wetherspoon - all shares that many of you have traded - and well done indeed to those of you who are still 'in' your buy trades - but as mentioned above, don't beat yourself up if you dropped out a while ago because sticking with a winner is far, far harder psychologically then holding on to a loser - the exact opposite of course of the behaviour you need to cultivate!

Then we'll examine Informa, partly for the same reason as for the three companies above, and partly to highlight when it's a good idea NOT to stick with your chosen DMA to manage your exit strategy.

That's your lot for this weekend - I'll speak to you again in November - my, how the time flies when you're enjoying yourself! It will soon be time to migrate back to my winter quarters....

All the best for now,

Ian.

PS - What might happen if National Express can get above £10? And have a wee look if you have the time, at London Clubs International, St Ives, Murray Income Trust, and Aberdeen Asset Management......as well as your own 'watch list' of course!