Tuesday 23 June 2009

Is the FTSE going to tank now?

Friday and Monday have seen over 4% wiped off the value of the FTSE 100. That is a nice reminder of how things were back in Sept-October last year.

With this fall, there is much commentary in the finanical press about the end of the bear market rally and the next big dip.

What I think is less noticed is that the FTSE100 is still 8% down year to date, and that is after a year where it fell 30%. This is not exactly a great time for investors. If the FTSE falls now it is likely to be by a few more percent, not decimation.

As much as the comment now is that the rally is overdone, it is possible that the opposite is true too.

Having said that, I am preparing stop losses and positions generally for a renewed collapse in September/October of this year. We will need to see sustained improvements in many of the economic figures being published to say that we really have hit a bottom. Counter to this though, I expect inflation to kick-in next year and in an inflationary environment the stock market will be your friend


Old BE said...

"This is not exactly a great time for investors."

Do you mean short-term speculators? Real investors love falling prices, because it means they can get more for their money. Does the FTSE somehow "deserve" to rise year-on-year while the economy collapses under the weight of socialist mismanagement?

CityUnslicker said...

BE - two years falling prices is not good for investors, especially if you were about to retire or are paying into a pension fund which will have been money down the drain.

I don't think the FTSe deserves to rise, it needs to reflect the market. To reflect the mismanagement of the economy what level do you think the FTSE should move to - it had a high of 6600 pre Northern Wreck.


Mick said...

Hate to be pedantic, but I really dislike seeing decimate used in that context.

To me it will always mean a reduction of one tenth.

Old BE said...

If you are about to retire then your pension should not still be in volatile investments! I thought the idea was to slowly cash out?

No idea what the "ideal" level would be. It rather depends on the performance of the individual companies, does it not?

I think there has been far too much complacency by shareholders, to the point where they expect bad boards to get paid zillions for trashing the company.

idle said...

In a perfect technical pattern FTSE would have tested and failed to break 4639, being the twin highs of 4 Nov and 6 Jan, but 4512 seems close enough given the great volatility of last winter.

No reason why we should not test the March low between now and October.

CityUnslicker said...

Mick - be pendantic, that was exactly how I meant it!

CityUnslicker said...

Idle - quite possible that we do, but the charts don't always get it right, if they did we could all get rich very easily indeed.

Anonymous said...

Early last week, Bernanke withdrew liquidity of a few dozen $billions and caused thursdays market down(T+2).

On thursday last week he pulled another few dozen billions, which reflected yesterday/today, (T+2)

Slosh report in US.

Sunday, world bank downed 2009 contraction, from 1.7% to 2.9%, but still said recovery starting in 09.

Bernankes actions strengthened the $, and reduced 10year bond yields in preparation for this weeks issue of hundreds of $billions of debt, some to fund obama lunacy.

Now, $ index is back down under 80, and all debt is not yet subscribed.
Will Bernanke have to tank the market to strengthen the $ to get the debt away?

The stupid basta*ds are between a rock and a hard place, paying homage to the oligarchs.

The world bank statement seems highly propitious in its timing, so do bernankes withdrawals of liquidity, both causing a retreat from risk and a temporary strength in the $. The whole reminds me of last september when he caused the market waterfall by pulling liquidity too rapidly. Maybe he's learning.

The market is a discounting mechanism over the longer term. A certain element of the rebound has been in anticipation of coming inflation caused by global printing presses.
In the case of the $ and the £, it also is anticipating a severe currency devaluation, hence the rise in oil and commodities, the sectors that suffered the most in the last few days, as the $ staged a technical battle at the 80 index level.

Footsy and 250, all UK indices, could well go to unheard of heights, albeit in a worthless currency. Companies trading in international markets, in local currencies will do better.
In Germany in the 1920s, stocks were a good hedge.

Do we visit the IMF in Sept/Oct in a repeat of the previous fuckwit labour gov't?

Elby the Beserk said...

Slightly off topic, hope you don't mind!

Bill to imprison MPs who lie

Anonymous said...

"That is a nice reminder of how things were back in Sept-October last year."

What yo usay seems to imply that there is a seasonal trend at work. In which case the govt may care to even out this seasonal trend thereby provng that, in effect, there is no "real" decline in the FTSE figures but just another variation around a norm. Ipso facto - economnic growth is back, we are on the road to recovery and out glorious leader has indeed saved the world.

Gordon Brown is a ****** genius after all ....

CityUnslicker said...

anon @ 8.09pm

That is some very perceptive thinking there. Thanks for the comment.

I totally agree about the manipulation around the $ and £ re government funding.

It is why I am not currently in gold, as it is a victim of the manipulation.

Mohit Jain said...

Short terms players who want to make a quick buck often on the wrong side of the trade.

People shun the market when things are bad and that is sometimes the time to invest.

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