Past edition of the "What Ian Can See" WICS trading information newsletter.
Ian's weekly look at the world economic situation and his world view. Members get access to the current edition, archives, chart analysis and one-to-one mentoring on your trading.
February 16th 2020
Hello again, after yet another week that seems to have been shortened by at least three days. Where does the time go, eh? Into some kind of black hole probably - the same one no doubt wherein our taxes end up.
What do you reckon about Boris' latest wheezes, upon which to spend said taxes, plus a whole lot more? I reckon when he was a wee boy his ambition was to become a civil engineer. He just can't help himself, can he? Now that he also has the keys to Number 11, there will be no stopping him! Historians will probably call the next few years the "Boris Brown Envelope Bonanza period".
£307m per mile for HS2? How in the world can a mile of track cost that much, tunnels notwithstanding? And as for his proposed Scotland-Ireland bridge.....Hahahahahaha. Boris Brunel, eh? Vanity projects all, and what will they do for the proverbial man in the street, in the greater scheme of things? It's pretty unlikely that Mr Johnson and his ilk care anything for the man in the street, and just think of all these non-executive directorships of construction companies, that will be on offer in due course to certain retired politicians, eh? Gangsters all.....
Anyway, what else has been going on, beyond the non appearance so far of a coronavirus panic? New all-time highs for the Dow and the S&P500, not to mention Germany's DAX! Is that unbelievable?
No, it can't be unbelievable, because it happened during the week, but it's certainly hard to believe given the underlying facts. The whole thing simply reinforces my firm view that all that drives market action, is herding behaviour. If the crowd reckons they should be buying, the markets rise, and vice versa. Markets are not rational, because crowds are not rational when they're all moving in the same direction. Trust me folks - it really is that simple! Once emotions turn negative, down will come valuations. It's just that after so many years of a firm belief that central banks will always ride to the rescue, it's taking a lot longer than common sense would suggest, for prices overall to start dropping. But they will drop, believe me, they will, and the end result will not be a pretty sight!
Given the foregoing, in some ways these factoids I present most weeks, are pretty meaningless when you think about it, because markets meantime are clearly ignoring them completely. Nevertheless, they're worth reporting in my view, because we'll all be able to tell people in due course, "I told you so!"
Onward then to some such factoids, and first there was the Torygraph report that "UK growth was stagnant in the last three months of 2019".
As mentioned in these ramblings a few times of late, Germany's economy in particular, is sliding deeper and deeper into recession. Now there's an announcement by Daimler that it's going to cut another 15000 jobs, according to Handelsblatt (a German business newspaper).
Given the parlous state worldwide of the motor industry and Germany's dependence thereon for an awful lot of jobs, a lot more redundancies will happen there as this year progresses methinks. That effect won't be confined to the Bundesrepublik either.
Meanwhile in Italy, their largest retail bank (Unicredit) is closing 450 branches and sacking 6000 staff. And so it goes on.....
Yet the irrationality continues!
What do you make of this, I wonder? Yank ten year bonds are currently yielding around 1.63% on the current purchase price. They are rated AAA by two of the three main rating agencies, and AA+ by the third one. Compare that to Greece, where all three agencies rate the sovereign debt at BB minus, or even lower. That's to say, junk. So what? So, you would expect that if USA bonds are yileding 1.63%, then Greek ones should be yielding 5% at the very least, if not even 10%. Is that not a reasonable assumption to make? I think so! And what, pray, are they actually yielding? Less than 1% is the answer! The madness of crowds....... If you haven't already read it, I recommend the book entitled "Extraordinary Delusions and the Madness of Crowds" written by Charles Mackay and published in 1841. In part it's tedious, but overall it's a real eye-opener to the stupidity of so many "investors". And as I suggested in these mutterings last weekend, nothing will change, because people don't change.
Still with Europe (but this applies to some other countries too) it's worth noting that Germany, France, The Netherlands, Denmark, and Spain still issue negative yielding bonds. Now give that some thought! If you buy into (say) the ten year German bund (bond) your current yield thereon is minus 0.379%. Thus if you hold it to maturity, you are guaranteed a loss on your investment! Guaranteed! So, what's the name of the game here then? "Pass the parcel"!
Some patsy, at some point, will be left holding the toxic thing when the music finally stops. Nothing could be more certain. And another point to ponder here - the latest Bloomberg figures suggest that negative yielding debt worldwide at the moment, totals around $11trn. Can you get your head around that? I certainly can't!
Across the Pond, Bank of America figures are suggesting that share buyback programmes are already 27% ahead of last year's total. Hmm - and of course that's part of the reason for the elevated levels of the major indices at present.
Out in the world of the proverbial man in the street however, things ain't quite so rosy.
Elsewhere in the world, it seems to me that we can expect another Argentinian sovereign debt default at any moment........
OK - enough of economics!
Onward to silly/weird/vaguely depressing bits and pieces, and first there was Mr Musk's announcement two weeks ago that Tesla "doesn't need any more investment. We're cash flow positive". So what happened the other day then? A $2bn rights issue announcement. Ho ho ho.
Then there was Bloomberg's piece entitled "China sacrifices a province to save the world from coronavirus". Hmm. Maybe that should have read "to try to save its imploding economy"?
Next, that fancy new bridge near Edinburgh was touted as "will never need to close due to high winds". Shame they hadn't thought of ice forming on its suspension cables.... The Forth Road Bridge, or the Farce Road Bridge? Actually, it's a thing of some beauty especially when it's lit up after dark, so I'm just being a wee bit over-critical perhaps.
Then I noted that John Lewis' profits slide has obviously been halted by the new head honcho. She certainly seems to know her stuff, and the whole thing is going to be saved by the introduction of a new range of goods. Cosmetics for men. Gosh - I can hardly wait to go there and get a decent choice of blusher shades at long last!
Next was a Graunad piece about the mental health of young people being adversely affected by "climate anxiety". Yes indeed - Greta has a lot to answer for.
And how about this EU proposal to slap a 25% tax on red meat, in order to save the planet? Let's hope Boris doesn't pick up on that notion!
Still on the climate theme, how about that Dutch (naturally!) government engineer who is proposing to enclose the entire North Sea with dams across the English Channel and between North Scotland and Norway? The idea is to stop sea levels rising. Hmm, if that did go ahead, the North Sea would lose its salt content in due course and its ecosystem would be in a right old mess. Perhaps better just to relocate low lying stuff on higher ground? I certainly hope Boris hasn't read the dams suggestion - it would be right up his street, or more accurately, across his stretches of water...... More construction! Goody goody!
Then (more "climate"!) there's a ski resort in the Pyrenees that is meantime bereft of white stuff. Seemingly it's experiencing "the warmest winter since 1900" and of course is blaming climate change. Natch. Now forgive me if I'm being a wee bit simplistic here, but the "1900" bit surely means it was warmer back then than it has been since then? So where does that leave the climate change logic?
OK - that's more than enough wittering on for one weekend. Before the charts section, I would just like to leave you with some more links upon which I won't comment. Just for your interest...
Onward then to some charts as usual, and first there's a look at Kier, which has been in the doldrums (a sideways channel) for some considerable time. It fell inexorably from about £5.50 this time last year, and two years or so before that it spent some time around £14. It seems to me it's now going to head back upwards and a break above 160 would tend to confirm that idea. (Not necessarily as high as £14 though!) Next, there's a clear countertrend channel on the Barclays chart, complete with a probe and a retrace. Then there's an update of the Playtech chart for you. I last looked at it on January 26th when it was still in a sideways channel. Since then it has broken lower before retracing and falling away again, to a little support.
Finally, I have redrawn the rising wedge "look" on the DJIA picture, because there are now enough "hits" on these lines to make that a viable idea. A (possibly!) final new high could represent a throwover thereof, and if that were to happen, a break below 28500 would tend to confirm it. We shall see!
OK folks - that's all for this weekend. With Mme W off on a short visit to family, I'm home alone.
Thank goodness I have the help of a famous Irish chef...... You may have heard of him - he's called Mike O'Wave......
On that note then, unless I starve in the meantime I'll be with you again next weekend.
All the best
The rest of this post, which is the charts and analysis, is available to TEW course members only. Members receive the latest post, the archives, plus the manuals, video updates and one-to-one mentoring from Ian Williams via email.
'IMPORTANT NOTICE: This information is for EDUCATIONAL PURPOSES ONLY. It represents only MY understanding of what is happening in the market for any particular share, stock, commodity or index. In NO circumstances should it 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'.
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