Is Sterling A Petro-Currency?

... or are we just a country dominated by a commodities-heavy stock market?  
Or something.  Insert your theory here:

Where are thou Santa Rally?

Stock markets are funny things, they give the right record of the state of the economy until they don't.

They rise and fall on specific company issues, but somehow reflect the whole market.

They are run by machines, but driven by human emotions and greed.

They are rigours beasts but follow obscure folk law rules like 'sell in May and don't come back to St Ledger's day' - which actually work most of the time.

And then you have the 'Santa Rally' nearly every year without fail the stock markets rise into the New Year, and then nearly every year they give up all the  gains in the first two weeks of January.

This year though the Santa rally is yet to kick in, even if it does the year will be a losing year on the FTSE - dragged down by its high resource sector composition.

A losing year on the stock market when the economy is in reasonably fine fettle is quite a rare trick, not something seen since 2001/2 when the tech bubble burst; perhaps the resources sector bubble is the same type of effect on the market overall which means a slow re-build from here as happened in 2003-2007?
 

What does Gold at $1000 say?

Gold has had a very interesting week. It has mooched around $950 for the past 6 months, missing the commodity rally, but then not being hurt by the equity rally either.

Then suddenly this week it has gone on a tear and is now approaching the psychologically important $1000 an ounce mark.

Gold normally trades in a relationship with the US dollar; strong dollar weak gold and vice versa. This relationship seems to have broken down this week. Why?

There are many theories about paper gold, china and central bank buying. Almost none of them assume a greater demand for gold in the market for practical use.

Are hedge funds and such like preparing of a market adjustment? If so Gold and cash would be the sensible places to put money whilst shorting the equity markets.

Alternatively, Gold is being set-up for a fall and is itself about to be corrected. With the world coming out of recession, this safe haven should be less attractive.

It is hard to know, but an interesting development. What are your hunches?

Any more legs to this market rally?

The FTSE ended up down today after a month of spectacular gains, it had the odd bad day last week too. The US markets were the same, as bank concerns reared up again. Some of the UK bank stocks have shot to the stars the past two weeks. How long can this last?

There are very few fundamentals to support the rally. In fact, there are only two:

1) People are bored with depressing news and market falls, they want rallies and optimism; it is spring after all. Sentiment counts for a lot, even in the face of overwhelming evidence.

2) Quantitative Easing, yup, printing money is so radical and its effects so unknown that it is messing with the markets. QE seeks to produce inflation, and with inflation coming, rational actors will want to own assets. Hence shares rising...perhaps?

On the easier side, Gold is falling quite rapidly now, back down to $872 (I sold at this level a few weeks ago, thinking it too toppy!). So at least with Gold back in some sort of normal range, it will be possible to switch out of stocks when the next bear hits.

I have a hunch this is going to be a lot sooner than we would all like it to be. The chart is a great prediction from Market Oracle lastyear.

Will the latest US bank bail out product succeed?

Another Monday, another US bank bail out plan. By my count this is version 2.1. So far the product has failed to meet customer expectations and there have been few buyers.

However, with the CEO Bush and CFO Paulson replaced by Obama and Geitner respectively, expectations have been set much higher for the product; in spite of this the initial release of a few weeks ago was met with lacklustre enthusiasm. There has been much investment in time and R&D since V1.0 launch in September of last year, but now with funds running low, a market breakthrough is essential.

As an initial barometer the share prices of US zombie banks like Citigroup and Bank of America have soared on the news. Clearly shareholders of banks think that this is the real deal. in the UK, the asset plan announcement had varying effects on LLoyds and RBS share prices - with both still languishing at relative lows for the year. So this is a good sign for financial community users.

Other initial indicators are that the US Dollar has fallen, this seems to be on expectations that US Government debt is going to soar and be much harder to bring under control. This suggests to me that the new product will not be that appealing to customers in the tax paying sector of the market. Suggestions abound that Congress will not have to approve the plan, suggesting some underhand play here by the Executives responsible.

Also I note that the product contains some code which may yet prove it to yet another bug-ridden release. The product relies on private investors putting equity into banks bad loans. City sources suggest that some have been sounded out and so there will be at least a little appetite, but with no mechanism for pricing bad loans yet discovered, this new code is liable to prove inadequate at the first real hurdle. No doubt a patch will be rushed out to 'fix' this in the near future.

I look forward to bank bailout product v2.3 which will be along shortly.....

Bear Market Rally Over?

Unemployment woes seem to have stopped the shares rally dead today. Sticking by my predictions for the week from Sunday (well, some of them are wrong already). Looking forward to Friday to see what the world looks like with its new socialist sheen.

A long way down from here, methinks...#

UPDATE: FTSE heading for 7% down today - total gain since 'bail out' = 1.1%. Close to call to have above the level of last Friday's crash by the time we reach this coming Friday...

LSE fails on day of joy

The London Stock Exchange, fresh from a year of ups and downs, has really managed to blow both its feet off with a shotgun today. Just as the market is reacting to the news from the US, its systems fail under the volumes. Even now, 7 hours after the failure, there is only auction trading and no completions.

The recent new entrant competitors such as turquoise and Chi-X are bouncing around at this gift from heaven. The events overall are not really going to help LSE maintain market share in trading.

However, a key point must be a focus on technology. The LSE has taken a very public route of using Microsoft as its key technology supplier; the same company that is known for its good products that have a problem with scalability and reliability. Nearly all Investment houses use Oracle as their base software provider for reliable, scalable solutions and IBM features highly too.

In IT as in the rest of life, stereotypes exist for a reason; they are based on fact.

A good day thanks to China Goldmines

Many people still find the stock markets a fearful thing and choose not to invest. Property seems like a much simpler bet and people can see what they are getting for their money.

The difference with property though is that you need a big sum to invest to make some money. Sometimes in the stock market there are easier ways to make money on a small scale and in a short period.

I was up early this morning and whilst reading the Telegraph, came across this story. China Goldmines had announced an amazing find of new gold, five times more than expected.

Thus is seemed very obvious what would happened when the markets opened. So I went to a broker similar to this one, opened and online account in 10 mins and put forward some cash (...from my overdraft facility, in case you think Mrs. Slicker would leave me with any pennies between paydays).

This took no time at all, the market were already open and the stocks had shot from 120p to 140p. I bought at that price and after hitting 172p, they closed at 167.5p today. This left me with a paper profit of 37.5p per share in a single day. Assuming I had in the region of 700 shares, this left me with a profit on paper of £213.50, less the costs of setting up the account, buying the shares and the cost of the overdraft (about £45). The overdraft is not payable until the month end so if I sell the shares tomorrow, the total costs will be about £32 ( a 21% profit overall).

So £180 for doing very little indeed, certainly no real knowledge of the market, just reading the business pages and reacting to it.

Now perhaps some of you will understand why I am so keen to look through all the business pages at the weekends....

PS All blue skies have clouds that intervene eventually, I came home to find Mrs Slicker in possession of several bags of 'strictly necessary shopping purchases' - no doubt with a cost of considerably in excess of £180.