Tyson Knows Best

Politics and slowly emerging from the dead

2010-03-18T10:13:00.002Z

I took a brief break from trading after my call on the beginning of the double dip proved to be wrong. That is not to say that I do not believe that the double dip will happen - I am still convinced that this will happen, especially in the UK. I refer readers to read my article in GX Magazine for more details.

I closed my short ESM0 positions at a decent profit of £570, but if I had closed at the bottom I could have realised £870. Luckily I employed a trailing stop. The reason I held the trade for so long following the bounce was that I had intended to keep the position open for the long run if the ‘W’ shape were to be fulfilled. This was not the case, and even though I could have made more money by closing the position when it was in profit, I stuck to my initial conviction. Put it this way, if I had closed near to the bottom, but the market fell even further confirming my initial view, I would be kicking myself even harder than I am now! But that’s the name of the game; you have to take risks to make the big bucks!

I have been watching news of the election in the UK unfold and the sentiment seems to be that we may be heading for a hung parliament (where no one party has an overall majority). This would be terrible news for the pound. I have taken a couple of short sterling trades based on technicals. I will post the graphs another time.

I am in favour of a change in government and that means that I am supporting the Tories, but that is mainly because they are the best of a bad bunch! The fact that they plan to tackle the UK's deficit as soon as possible is a positive step and I think that a continuation of the Labour government would be bad news for the British economy and our credit rating.

I have also taken a couple of short term short positions on the S&P (ESMO - June contract) and the FTSE (Z HO) again based of the technicals - you can see the graphs below.

The portfolio is perfoming steadily with a 20.8% return over the initial investment.

Update....

2010-02-25T16:05:00.000Z

It's been a couple of weeks since my update - mainly due to being uber busy at work! The market bounced following the recent drop following the break of the long term diagional support. This rally seems to be over now the recent support has broke. The graph below is showing a head and shoulders formation where the neckline has broke down. These are all bearish singnals. I cut my shorts at a pretty good time and I am going to look into load the book once more. I took another S&P Future short on the 16th Feb at 1,098. I could have picked a better entry if I waited a bit longer for the graph to touch the upper resistance once more.

Regardless, the 61.8% Fib level has not been sucessfully penetrated and the resistance at 1,114 looks strong. I see the 1,066 as the next support level, a break of which should see the price action return to the low at 1040.

Cutting shorts....

2010-02-11T16:40:00.000Z

Quick note - I have cut my single name shorts as I have lost some of my conviction on the downswing as we have failed to make new lows. I am still bearish, but thought it best to lower my risk and wait for a clearer picture to emerge.

Interestingly, it looks like I should have kept the the long BP trade off the support that I cut yesterday - another case where I cut to early. I should have had more conviction in the trade given the strong technicals.

An indication that rates may rise....

2010-02-10T15:41:00.000Z

Today, Ben Bernanke publically announced that the FED may raise the discount rate in the US "before long," but repeated the Federal Open Market Committee statement that low rates are warranted "for an extended period."

How ambiguous is that?! What ever the reason behind the announcement, the fact is that this is bad news for equities and furthermore adds more uncertainty to the current market climate. Higher rates are likely to encourage people to put money in savings which means less spending (lower consumption) and consequently, lower profits and less incentive to invest (why invest in risky stocks if you can get the same returns in a "safer" savings account). The S&P fell sharpy on the news.

This is good news for my net short portfolio. This morning the ESH0 (S&P March Future) rallied up to 1,072 on the back of news out of Germany and the EU suggesting that they would support a possible bail out. On the back of this, I added to my shorts at resistance, getting in at 1,070.5. This gave the portfolio heavy exposure to the downside (3 short S&P positions open), so I closed the short opened yesterday at a small 1pt profit on the diagonal support @ 1,065 (since been broken). I also took the opportunity to close the BP long position (short hedge) which is likely to be impacted by the possibility of falling oil prices should the fall in equities continue.

Sideways movement....but where next??

2010-02-09T13:36:00.000Z

At the end of last week, I mentioned that I would be looking to re-enter shorts at 1,066 on the March Future - I have taken this position today. However, the market looks to be trading sideways, without any significant indication that the trend will be continuing in any one direction.

In light of this, using the spreadsheet tool I have built, I was looking for a technically strong long position as a short term hedge. BP Plc (BP/ LN Equity) is sitting on a good diagonal support formed since March last year and have taken a small long position with a tight stop.

On the S&P500, the price action has been contained within a downwards channel (daily graph) with the next key support at 1,040 (cash index).

I have attached my latest graphs below with a brief comment on each - feel free to contact me with any questns or comments.

AAL LN - diagonal support broken on downside. Price contained in down channel. Shorts good unless diagonal support is broken on the upside and/or resistance of channel broken on upside.

BAC US - diagonal support broken on downside. Break out from converging triangle validates shorts. Looking for horizontal support to break for continuation on downward price action.

BP/ LN - big support holding thus far. Favour long positions as long as this is the case. Resistance (previous high) to be broken to further validate long positions.

DXY - down channel broken on up side. Trading within an upwards channel off low. Inversley correlated to the S&P.

S&P500 - 2hr graph (March future): noise at the previous low. Price action contained by downwards channel. Continuous lower lows achieved validating bearish view.

Daily cash index graph: diagonal support broken on down side and trading within a channel. Trading just above a key support zone.

PRU LN - diagonal support broken on downside. Shorts good unless diagonal support is broken on the upside and/or resistance of channel broken on upside. Next support zone joins recent low and a previous resistance.

End of another sucessful week...

2010-02-05T15:02:00.001Z

The markets continued to fall as I expected this week - unfortunately I was a bit conservative in closing my single name shorts early, especially Lloyds which could have banked me another 140 points!

Nevertheless, the portfolio is performing well with the current value over £12k.

I closed the most recent S&P short opened @ 1,097 when it looked like we hit a support @ 1,067. Again, this was premature as the S&P dismissed this technical level and powered through, reaching a low of 1,050.5. I still have my long term short from 1,127 open with the 'double dip' in mind hoping that the high may be in for the time being.

From a shorter term prospective, I am looking for a retrace back towards 1,066 to sell short once more.

Levels to watch:
Support: 1,059 and 1,050 (March Fut); 1,039 (cash index)
Resistance: 1,065 and 1,078 (March Fut)

On the cash index, the 1,070 level looks key to me - it has acted as both a support and resistance level in the past. A breach above this level will mean re-evaluating my bearish view.

The long dollar trade is looking better everyday as it continues to power through the diagonal resistance. From a fundamental and macro point of view the trade is looking like a good long term bet.

I also cut half of the gold position - I was very bullish gold coming into this year, however the sentiment I am getting from the market is that the rally may have been a mini bubble which is always liable to burst. Since I lost some of my conviction, I closed half at a small but significant loss, keeping open a small position while keeping a close eye on my stop at 1,024.

Have a good weekend all!

Range trading on the back of some bad news...

2010-02-04T15:26:00.000Z

The S&P rallied in the early part of this week, mainly on the back of good GDP news at the end of last week. However, a mixed bag of news surrounding jobless claims in the US, concern governments will struggle to fund their budget deficits in Europe, strikes in Greece promted by spending cuts and the BoE deciding against further quantitive easing has caused the market to drop sharply today.

Worth noting that both the BoE and the ECB have held rates at 0.5% and 1.0% respectively.

The BoE decision in relation to QE looks to be driven by inflationary concerns. This may put upwards pressure on interest rates. However, the ECB and the FED have signalled the intention of keeping rates at their current levels for an extended period. In the UK growth was lower than expected at 0.1% which is leading many analysts to expect that rates will remain low to avoid falling back into recession.

All good news for my portfolio which is net short. I had cut my S&P short on Monday @ 1080 following the rally. I since opened another short close to the top of the range @ 1097 which is looking healthy. I am sitting on the BAC, AAL and PRU positions. The Dollar trade is also looking good especially on the back of the jobless claims news out of the US. All in all, I am still bearish.

Good GDP news out of the US

2010-01-29T15:02:00.000Z

GDP data out of the US today was better than expected with QoQ annualised return hitting 5.7%. Personal consumption was also slightly better than expected. The S&P reacted as would be expected, ralling from today's low of 1,070 (March Fut) back up to 1,090. I took the opportunity to close out the rest if the Lloyds position (+253 points) and the Exxon short (+101 points) and also added to my short S&P position at 1,088.

I am still bearish - the index is making lower lows while failing to breach the upper level of the range.
Key levels to keep an eye on (March Fut):
- Resistance: 1,090 ; 1,103 - a break above 1,103 would lead to re-evaluating shorts
- Support: 1,080 ; 1,071 (today's low) ; 1,066

Profit taking...

2010-01-28T15:48:00.000Z

The S&P pretty much did exactly what I was expecting today - we saw a retrace back up to the resistance at 1,103 on the March Future (1,107 on the cash index) and a subsequent fall. I used the retrace to add to my short S&P position. I am expecting it to return to the recent lows around 1080 (March fut). The employment news out of the US today was not great which adds to my bearish bias. US GDP data is out tomorrow and some big firms are scheduled to release results over the next week (including Microsoft and Amazon) which should give an indication to the price action we can expect in the short term.

I also took closed the IBM trade at a nice profit (+152 points) and closed half of the Lloyds position (+265 points) to lock in some realised profit.

A little note on the S&P...

2010-01-27T17:24:00.001Z

Just had a close look at the S&P cash index - following what I was saying below about the fact that it may be trading in a range, today's double bounce off the support @ 1,085 may be a sigificant signal to suggest that we may see a retrace of the fall back up to the 1,100 level. Something that is worth keeping an eye on.

Downside favoured...add to shorts!

2010-01-27T16:13:00.001Z

Quick update - the S&P has continued to fall on the uncertaintly surrounding banking reform. The index has fallen 4.69% since breaking it's diagonal support.

This obviously has implications on single names. I have used a tool I have built to identify stock where they may be the technicals to take advantage of the drop. My tool threw out Anglo American, Prudential, Exxon Mobil and IBM as good technical shorts should the fall continue. This is in addition to the Lloyds and Bank of America shorts I added previously. It makes sense that financial and oil related stocks are the first to be hit.

Short term it looks like the S&P is trading in a range between 1,100 and 1,081 (March 2010 future). For this reason, I cut half my short S&P. I also lost conviction on the Ford position and closed it at a small loss. I will look to a break above 1,100 reassess my shorts. In the meantime, I will be looking for a break of 1,081 to add to my shorts while keeping a close eye on the the single name charts for support areas to close my positions.

I have changed the structure of the portfolio table to make it easier to follow. I have added a hypothetical account balance of £10,000 and you can track the performance by looking at the current value of the portfolio on the top left of the caption. It is also easier to assess the margin requirements of putting on similar positions with most online brokers.

S&P broke down - start of a new bear?

2010-01-25T15:55:00.000Z

Following Mr.Obama's comments on banking reform on Thursday, the S&P conculsively broke it's long term support on the downside. This prompted me to stop and reverse my long S&P position. As you can see below, the size of my short is double that of the long position I had previously - this is because my conviction for trading the break of the support was very strong.

The apparent reversal in the market also caused some of my longs to get stopped out - namely Cameco Corp and the Powershares Water Fund. From this I decided to reduce the risk of the portfolio and close the EM ETF and the iShares Energy Fund. The reason is that the portfolio feels overweighted on the long side considering this may be the start of a wave down.

I have opened short positions in Lloyds, Bank of America and Ford to hopefully capture some of the move down. You can see the details below - I will follow up with graphs in due course.

S&P level tested and held....so far!

2010-01-18T16:44:00.002Z

The diagonal support on the S&P (March 2010 future) looks to have held for the time being - although it is Martin Luther King day in the US and the equity markets aren't open (futures are trading). I am expecting a continuation of the bounce tomorrow with mining leading the way - which should be some much needed good news for Cameco.

American banks will be in the headlines this week, with earnings reports from Citigroup (Tues), Bank of America, Morgan Stanley, Wells Fargo (Wed), Goldman Sachs, American Express and ICICI (Thurs). General Electric are reporting on Friday and IBM's results on Tuesday should give an indication about US business spending. Trading updates from the US airlines Continental and Southwest will come in on Thursday.

S&P Update - Back on support and looking weak

2010-01-15T18:19:00.000Z

Quick note - the S&P is right on it's support, despite the good financial results out today. We may see a continuation of the correction at the beginning of next week. Keep a close eye on the cash breaking 1,130 and the March Future breaking 1,127 - if it does I will look at stopping and reversing the long position and also re-evaluate the Emerging Markets ETF and the iShares S&P GBL Nuclear Energy positions.

Have a good weekend all!

Cameco Corp looking weak

2010-01-15T15:14:00.002Z

Cameco Corp is dropping towards it's stop at 30 - I have decided to move my stop 29, just below the medium term support. The reason for this is because I view the position as a long term trade. What I don't want to happen is to get stopped out when the long term support is broken then seeing the medium term support hold and the price bounces back up past the long term support.

Also, see the latest performance of my portfolio below. The average was as high as 4.5% during this week, but today's drop in the equity markets has wiped off some of those gains. The retail and jobless claims data out of the US was pretty bad. The S&P is back testing it's long term support - again I am expecting the level to hold. However the end to this week and the beginning of next should give a clearer indication to the short term direction of the market. Keep an open mind!!

S&P Support Holds - portfolio update

2010-01-14T12:28:00.001Z

The S&P bounced off it's support in style yesterday which is good news for all the bulls out there. From a technical perspective, this weeks candle formation is all important - at the moment it is showing a 'doji' which conveys a sense of indecision between buyers and sellers. It could be that the the buying pressure is starting to weaken. Obviously, we have to wait until the candle is fully formed to infer anything, but it is worth noting that the candle may signal the start of a reversal.

The latest performance of my portfolio is below - I have included hypothetical 'bets' for those looking at the leveraged spreadbetting option. As you can see, using leverage significantly increases the percentage returns as determined by the margin required to put the positions on.

Note - the £100/pt shown for equities is the same as £1/pt where the tick size is x100 (as offered by most spread betting brokers). For example, Shaw Group trading @ 3240 (32.40 x 100), long £1/pt.

S&P - Big break??

2010-01-13T15:32:00.001Z

For those who are interested, the S&P is hovering around it's long term diagonal support on the weekly and daily chart (formed since the March 2009 low). A break of this line may be a key signal so I am keeping a very close eye. As you can see, I am currently long the S&P in my virtual portfolio. Tomorrow's retail sales data and inflation data on Thursday could be key. See below for graphs...

A New Beginning....

2010-01-13T11:35:00.012Z

As you may have noticed, it's coming up to a year since I last updated my blog! March 2009 was a very busy time for me career wise, so I ended up sacrificing my blogging duties so I could have a life. Now thing's have calmed down a bit and I have had some good news!

I am going to be writing monthly articles for GX Magazine on my views on the economy and investment ideas. The articles are going to be supplemented by entries on my blog - readers can follow my latest thoughts, check my graphs and follow the performance of my virtual portfolio.

My first article is appearing in February's edition so I cannot go into too much information on here before it is published.

I thought I'd share my virtual portfolio in the meantime - I have selected the following positions based on my views on how I believe the economy is going to perform in the year ahead and beyond. Short(ish) term I am bullish the equity markets (US and emerging markets), medium to long term I am bullish the nuclear sector and gold. I have also gone for a defensive play with a water fund. Should my views change, I will update on here. You can see the performance below - I will be monitoring the positions daily and once the article is published, I will upload the charts. Click on the below table to open in a new window.

The opening prices are from the 4th January when I started writing the article. They are securities that I have been watching for months and ones I believe are worth looking at for good growth potential.
The average performance can be used as an indicator for the performance of a portfolio made up of an equally value weighted portfolio of the securities on the table.

Please feel free to contact me if you have any questions or comments!

Is cutting interest rates a good idea?

2009-02-05T13:38:00.007Z

It has been a hell of a long time since my last post! I have been off enjoying myself in Vegas before the Xmas break and Mauritius post New Year. The economic, financial and political world gone through a great deal since my last post - the inauguration of Obama in the US, more government bailout's on the cards, terrible unemployment (Q4 2008 1.92m, highest level since 1997) and GDP (Q4 2008 -1.5%, official recession confirmed by 2 consecutive quarters of negative growth) figures confirming the recession is with us, the Israel-Gaza conflict, just to name a few.

The latest piece of news announced today is that the BoE base rate has been cut by 50bps to a record low of 1% - the 5th interest rate cut since October. The aim is obvious - to attempt to stimulate lending and to boost the shrinking economy. Good news for industrialists, retailers, builders and estate agents. However, as I have written about previously, I completely disagree with the notion that we should try to borrow our way out of trouble, hence I think the rate cut is yet another wild decision by the powers that be.

Firstly, it is terrible news for savers and creates moral hazard. Those who were prudent enough to save when things were booming no longer have the same incentive especially when they see bail outs for the careless being handed out left, right and centre. It is as if they want people to get themselves into more debt that they can't pay off rather than save which is what caused this crash in the first place! What the BoE seem not to understand is that by paying lower rates there is less of a chance that people will keep their cash in the bank or building society. The result, fewer funds become available for borrowers and the effect of the interest rate cut is nullified.

Secondly, the damage to sterling could be horrendous. Lower rates means lower returns for foreign investors in sterling denominated products. That gives them less of an incentive to hold sterling, lowering it's value. The more the pound devalues, the more reluctant external holders are to own it. The implications are that in order to service the massive national debt which is estimated to be well over £1 trillion within 5 years, the government will have to issue hundred of billions of pounds worth of gilts. And if external investors do not want to invest in sterling assets, who will buy the gilts?! Unless the government offer higher rates to entice investors - so by cutting the base rate, the long term rate of interest that we'll have to shell out is forced up.

A look back at recent history points to the Japanese interest rate cut to nearly zero in 1995. All that succeeded in doing was shattering confidence so badly that the economy suffered the so-called “lost decade” of collapsing property and share prices. In fact, the Nikkei 225 index is now no higher than it was fully 26 years ago. The bottom line? Lowering interest rates from 5.5% made sense. Cutting them now is a big mistake. Unfortunately, the Bank of England has struggled to work that out.

A Christmas gift from Madoff and the FED

2008-12-17T11:14:00.006Z

It's been a while since my last entry, and in our current climate, two weeks seems like an eternity! We've had the botched attempt by the US government to secure their auto industry, the fall of Woolworths and Entertainment UK, the release of more terrible economic data - especially unemployment - exemplified by the announcement of massive redundancies and spending cuts at Rio Tinto. We have seen the German chancellor feud with Gordon Brown over their different approaches to the financial crisis - the Germans do not believe more debt is the answer and are refusing to burden future generations with high taxes (endure the pain now so that things will be better in the future - very prudent thinking). And let's not forget the pound hitting new lows against the Euro following fresh concerns over the health of the British economy and hints by the BoE that interest rates will be cut again soon.

This week has seen one of the largest ever financial fraud cases come to light. Bernard Madoff, the former chairman of the Nasdaq stock exchange and hedge fund big man (!), was arrested after running the world's largest yet least intricate pyramid scheme ever. Those who are not familiar with the world of funds may be interested to hear how simple it was too do. Obviously being a person with a credible record, he convinced people to invest in his fund with promises of high returns. When it came to the end of the year, he claimed that he successfully made said returns which convinced existing investors to keep their money in the funds and attracted new investment. The new investment money was used to pay the existing investor's returns. All was fine until the credit crunch hit and investors wanted their money back. Incredibly, it is not until such circumstances arose and his own admission of guilt, that he has been caught.

I assign the blame on two parties. First, and most importantly, the regulators (in this case the SEC) failed to spot the massive irregularities between the returns Madoff claimed to have made and the manner in which they are made. There is a common misconception that hedge funds are unregulated. In the UK they are constrained by MiFID - all trades have to be reported to the FSA and independent administrators have to be hired for valuation and audit purposes. By the sounds of it, US hedge funds are not constrained by the same rules - which begs the question, what is the point in having a regulator in place if it is not there to catch such irregularities? The situation is made worse by the suggestion that the SEC had been warned about the possibility of fraud in 1999. Rather than obtain a subpoena to obtain information themselves, the SEC relied upon data voluntarily provided by the firm. Literally, one independent audit would have uncovered the scheme. Many people, funds and companies have lost a great deal of money through this guy simply because it looks like his firm were treated with somewhat preferential treatment by the SEC.

The other portion of blame goes to the investors themselves. During the good times, investors simply could not say no to the offering of 10% interest a year. They failed to ask the necessary questions and evidence. All they did was follow in the footsteps of other investors and relied upon the integrity of a former big chief on Wall Street. And these investors aren't the "get rich quick" type - they are major corporations - including HSBC ($1bn), RBS ($601m), Santander ($23m) , BNP Paribas ($460m) and Natixis ($605m) - funds, individual investors and even charities. When you put it in perspective, both individuals and firms gave this guy hundreds of millions of dollars to invest simply because other people had done - what the BBC have coined "Irrational Euphoria." I bet they aren't feeling so euphoric now!

In a world where hedge funds are quickly disappearing the collapse of Madoff is likely to to accelerate the contraction of the industry - in that it may persuade many investors to demand their money back from even high quality funds and funds of funds. As a result, I would like to personally thank the SEC and Madoff for providing me with even less job security that I had before.

The other piece of major news on the radar is the rate cut by the FED to a range between zero and 0.25% (from a high of 5.25% in Sept 2007) to try to stimulate the economy. Great news for people with debt, although as an attempt to revive the credit markets it will fall short. More bad news for people with savings. It also brings the risk of deflation to the surface once again - people put off spending money now (a further hit to consumer spending) due to the belief that prices are going to fall in the future. The implications of this move are massive for the US as they now have no monetary tools left at their disposal apart from changing the money supply which is a dangerous game. By printing off and pumping more cash into the system they risk further devaluing the dollar. It will be interesting to see the road they take now. I suspect a glut of chat from the Obama camp about increasing public spending and more public initiatives.

There are also implications for the UK. The BoE released the minutes of their last meeting where they cut the base rate to 2% - the board discussed the option of reducing rates further which sent the pound tumbling against the euro and the dollar. We should expect the BoE to act like the proverbial sheep and follow in the FED's footsteps and lower rates in the near future. I would go so far as to suggest that we will soon be enduring a 0% base rate. Not because it's the best thing to do for our economy or the pound, but because our own economists like to follow those in the US but a little bit later. A case of lets see what happens to them before we do it ourselves.

The problem for the UK is that if we lose the tool of monetary control of interest rates and with the possibility of deflation looming over our heads, letting Gordon Brown and his sidekick Alastair Darling play games with the money supply could lead to a run on the pound and further economic strain. Let me remind you that these two genius's think that getting into more debt is the answer to getting out of this recession - nice one guys!

Bring on the Euro!

2008-12-02T10:52:00.015Z

Back in the day before it's inception in January 2002, I remember saying that I was against Britain joining the Eurozone. Back then a mixture of youthful inexperience and British pride made that decision for me. Looking back in light of the knowledge I have acquired since, I still agree with the decision made back then. Sterling was a pillar of strength for the country and essential to maintain the strength of the FS industry in the City. Also, the nature of the housing market in the UK meant that more people are exposed to variable rate debt which could have been susceptible to unfavourable interest rate changes by the ECB. Since 2002, the government, media and the public have employed traditional hostility towards adopting the common currency.

As Paul Taylor in the Telegraph put it, "For most of the past decade, as the flexible, finance-driven British economy was roaring ahead of its sluggish Continental cousins, the economic and political case for joining the single European currency was hard to make."

The picture changed on Monday when the president of the EU commission, Jose Manuel Barroso, said Britain is "closer than ever before" to joining the euro. There is obviously an element of political spin from Mr.Barroso - the UK, being the fifth largest economy in the world, would be a boost to the standing of the EU. However, he has spotted an opportunity to take advantage of a drop in confidence in the country due to the financial crisis which may make even the staunchest cynic of the euro reconsider the option.

We are entering an era where he pressures on the pound are mounting. Next year, total government borrowing will be a whopping 8% of GDP and total government debt by 2014 will reach 57.4% of GDP. The housing market is collapsing and the pound has fallen 21% against a basket of currencies in 15 months. It is very likely that the Bank of England will drop interest rates to unprecedented new lows and they are likely to stay low for the foreseeable future. The result - downwards pressure on the pound, higher import costs, higher prices, lower consumer spending, higher unemployment...hardly what we need right now(see my last blog entry).

The mantra expelled by the commission is that "the euro protects." In my opinion, that is exactly what this country needs right now - protection from an over exuberant government, more interested in scoring political points than the future welfare of the public. The government would be obliged to follow the rules set out by the ECB for sound financial and economic prudence. In fact, if the UK were a member of the euro, the commission would already have initiated an "excessive deficit procedure," demanding that the UK gets its borrowing under control. In effect, it gives the government some accountability to a higher body.

Some would argue that this is a disadvantage since the government would not be able to employ monetary tools to safeguard the UK's economy. Interest rate decisions made by the ECB would be made for the benefit of the eurozone as a whole and may not be to the benefit of the UK's economy, for example if a majority of the eurozone is in a recession and the UK is not. Essentially, the UK would be at the mercy of the euros performance in those countries within the zone. A bad thing when the UK's economy was healthy, but remember that forecasts are that the UK will be hardest hit economy during the global recession. Through joining the euro, we may be able to seek strength from the more prosperous European countries (I am mainly thinking of Germany here).

There are also benefits for business and employment. A single and transparent currency will tempt more UK businesses to compete in mainland Europe and, visa versa, will encourage European businesses to venture into the UK - both boosting job creation. A prosperous combined Europe could think of challenging the USA in new and existing markets. A weak pound means higher prices for imports, a stable euro will encourage imports.

The idea of joining the euro will be seen by most people as an extreme one. The government have responded to Mr.Barroso's comments by reaffirming their position against it. And I am not stupid enough to believe that public opinion will change enough overnight to force the government into reassessing their position. However, I do think that the impending problems facing our economy and currency should force at least a rethink in near future. The government at least have a duty to explore whether the pound is a sustainable currency. Unfortunately, in reality the situation is going to have to become much worse before we see anything significant happening.

FTSE....

The FTSE has been swinging in roundabouts since my last post on the 21st Nov. Some of the big levels I mentioned before have come into play (support @ 3700, 3830, 3945 and 4075).

Last week the FTSE bounced back above 4200 following news of the Citi bailout and fiscal stimulus plans in Europe with the EU Commission set to formally unveil a plan aimed at stimulating the economy, amongst other news. Some commentators have gone so far as to say that the deleveraging process which has largely contributed to the fall in the FTSE is coming to an end which may stimulate the markets. Again, in the short term, this is nothing but a temporary bull in an otherwise bear market, confirmed when the markets opened on Monday.

This week has seen the FTSE fall below 4000 again due to further recessionary concerns and the release of some terrible economic figures. Since then the FTSE has fluctuated violently in a tunnel between 3950 and 4170. Short term support @ 4035 and resistance @ 4165.

There are no outstandingly obvious entry points at the moment - in a week that one of Britain's oldest retailers Woolworths faced administration, the FTSE rallied. It seems that market sentiment is not reacting rationally which makes it so hard to read. I think the FTSE will end the year below 4000 - 4165 provides an entry point.

Britain's going down the toilet...

2008-11-26T13:02:00.009Z

I have given myself a couple of days to fully digest the contents of Alistair Darling's Pre-Budget Report released on Monday. At the time, watching his speech sitting at my desk at work, I really couldn't believe what was coming out of the Chancellor of the Exchequer's mouth! But I thought, no, give him the benefit of the doubt, wait to see what commentators have to say and see how the markets react before passing judgement.

Well the FTSE had it's best ever day ending up nearly 10%. Unfortunately this was not in reaction to Darling's speech. Rather it coincided with the announcement of the Citigroup bailout in the States which gave confidence back to the markets. For the markets to appreciate and price in the information will probably take until the results of the proposals start to show effect.

So, having had time to read up and mull it over, my conclusion is that Darling's actions could well end up in the bankruptcy of the UK. Might sound a bit extreme, so let me explain.

First, let me summarise the main points. Borrowing is going to increase to record levels, £78bn this year and £188bn next year (8% of GDP). It is expected that borrowing will fall from 2010 so that by 2016 Britain would only be borrowing to invest. VAT is to be cut by 2.5% from December 1st for 13 months. Government spending plans for 2010/11 are to be brought forward in an attempt to create jobs. There will be a new 45% income tax bracket for those who earn above £150k a year from April 2011. Also from 2011, National Insurance contributions are to be increased by 0.5% for everyone earning above £20k a year. In business, small firms are to get a temporary increase in threshold for empty property relief. Also struggling businesses will be able to spread their VAT, corporation tax and NI contribution payments over a longer period. Rise in corporation tax for small firms from 21p to 22p - planned for April 2009 - will be deferred. There is a lot more related to housing, employment, travel and the environment.

The outstanding proposal is obviously the increase in national debt between now and 2015. As I have mentioned in previous entries, such an increase in debt will be a burden on future generations - higher taxes in the future. Add this to the income tax proposals and we are seeing a huge shift in policy for "New Labour" which specifically contradicts Tony Blair's pledge at the beginning of his Premiership that Labour would not be a high tax party.

Aside from the politics, the implications could be horrific. The major assumption made by Darling in his proposals was that by the end of 2009 the UK would be entering into a recovery. This could well be the case. Looking back through history, negative growth has lasted for about 5 consecutive quarters (we have had one quarter so far) - but have we ever had a global slowdown as big as this one? This recession had been built on more credit than any other period and was preceded by the longest period of economic prosperity.

It is also being assumed that the proposals will actually work as they intended. I hate to break it to Mr.Darling but they almost certainly will not! The cut in VAT - irrelevant. Essential goods, such as food, do not have VAT added anyway so day-to-day spending is not affected. For other purchases, I fail to see how a fall of 2.5% will encourage an individual to spend money they wouldn't otherwise have spent. If a TV costs £117.50 today and £115 tomorrow and you were thinking "My existing TV could last me another year so I won't bother," would that £2.50 saving change your mind? M&S recently had a 20% one off sale which had consumers squeezing through their doors. Many other retailers have vouchers all over the net offering similar discounts. My point is 2.5% is nothing - consumer spending will not increase enough to help to stimulate growth. So immediately, the end of 2009 looks optimistic.

So let's say things take longer to get better. Consumer spending remains low, unemployment continues to increase and growth is stagnant. The only option for the government is to cut taxes and increase government spending once more to try to stimulate the economy. But this will need more funding - which means borrowing more money. The government will raise money - increase their debt - by selling bonds in the debt markets. The government will be responsible for paying coupons on these bonds - like interest payments on a loan - to who ever holds them. If the governments income from taxes is less than the coupon payments on all the bonds it has issued so they default we get a situation where the country could face bankruptcy.

This is real possibility - tax revenues are likely to fall significantly. Already the slump in the City has knocked £40bn off annual tax revenues. In addition to the loss in revenue supplied by VAT, businesses have been given longer to repay taxes, lower employment and lower city bonuses means less income tax, fewer houses getting sold means less stamp duty revenue - and all of these examples have further implications downstream. Hence, the government have planned to raise taxes in the future to ensure they can afford to repay the debt. But if people are in no better of a position than they are now, increasing taxes will cause havoc.

The crux of my argument is that in this current unique situation we have been met by a solution which is exactly the same as when we were enjoying a boom but on a much larger scale - more borrowing, more public spending, and more taxes. Without any real debt reduction plan in place if a recovery by the end of 2009 is not apparent, there will be extreme downward pressures on the pound and a rise in the cost of borrowing for the government.

I have recently read a forecast that suggested that the UK's global political influence is diminishing. Sterling is weakening and the country has a massive current account deficit. GDP is massively reliant upon the ailing FS industry. The well off who contribute vital tax revenue and who are largely responsible for job creation are leaving because of the prospect of higher taxes.

The question is - do you really want to be in the UK in a few years time?

Once in a century event and a quick note on the FTSE

2008-11-21T15:22:00.005Z

This week has seen a once in a century event occur - but it seems to have slipped under the media's radar. On Wednesday the dividend yield on the S&P 500 closed above the 10-year US Treasuries for the first time since 1958 - that is dividend yields from holding equity have surpassed yields from holding bonds. It is only the second time that the two have crossed in 109 years that data has been available.

This signifies two things - firstly that the crisis we are living through is a once in a century crisis. This cannot be understated, the global slowdown is going to continue to be one of the most difficult periods in modern economic history.

Secondly, it shows that the expected return on equity is now higher than bonds. There has been a shift to entice investors to put their money into equity. The optimists amongst us could be tempted into thinking that this may signify that equities are cheap. I, on the other hand, believe that there is still room for the markets to fall and we are still yet to see the bottom of the market.

FTSE....

A terrible week for the FTSE as it fell below the 4000 mark again.

As I expected, the FTSE approached, but did not quite hit, the 4075 mark again following my post on Wednesday - it hit 4062.5. This was a good shorting opportunity, although it would have fallen outside of the ± 10 pts margin I give myself.

From there it has fallen approx. 300 pts with huge swings. The 3945 level proved to be a support late on Wednesday and, following the penetration, resistance on Thursday with it bouncing off on the 1hr graph in the morning. This shows another shorting opportunity with a target of 3830, which it hit late yesterday evening before falling further.

Big drop in Inflation - good or bad news?!

2008-11-19T15:36:00.011Z

Every couple of days it seems there is an economic release which triggers a change of sentiment. As a consequence of the drop in the base rate and a fall in commodity prices, inflation has fallen from 5.2% in September to 4.5% in October - the biggest drop in 16 yrs! Despite the drop, the rate is still well above the BoE's 2% target.

So is this good or bad news?

A few months ago, inflation was the main concern for the Monetary Policy Committee (MPC). Inflation was above the 2% target and the pressure was on the MPC to curb the rise in prices. The problem was that the economic outlook was also bleak so there were two separate forces pulling the committee. Preceding the minutes of the MPC's interest rate decision meeting published today, Tim Besley (a member of the committee) cited that "the outlook for inflation had changed dramatically between August and the rate cut in early November. "

The rate cut was a tool to encourage consumer spending and to lower the cost of borrowing. The effect of this (if it works) is inflation. But the problem is that people are not spending money - despite the rate cut people would rather save because there is no short term confidence. Add that to falling commodity prices and we have a new buzz word - deflation.

Deflation in the short term is a not necessarily a bad thing - prices fall which encourages people to spend. The knock on effect into the medium term however, is dangerous. In prolonged periods of deflation, consumers hold off buying goods, reckoning they will be cheaper later. This can lead to further falls in demand and output. As firms sell less, they respond by cutting jobs or cutting wages. Overall, consumers then have less money to spend - and demand falls yet again. And the spiral continues....

What this means is that we can expect further cuts from the BoE in the next few months as they try to avoid deflationary pressures. Good news for borrowers, terrible news for savers.

The key point I would like to note is how the BoE's sentiment has changed so quickly. One second inflation is the worry, they react (quite late I must add...a criticism which has been frequently aimed towards the MPC) and now deflation is the worry. It strikes me that the mandate which gives the BoE monetary control over inflation is nothing but a political tool.

Controlling inflation through interest rates is virtually impossible in the UK because we are so reliant on imports. The UK runs on a current account deficit - we import more than we export - and the cost of imports is determined by the cost of inputs (raw materials, labour etc) in the exporting country and the relative strength of the importing currency. The pound is weakening so the cost of importing has gone up so we should be seeing inflation. However, the the cost of raw materials is decreasing, which suggests deflation. So the overall effect is determined by these offsetting factors.

We are seeing falling inflation due to the culmination of decreased consumer spending caused by the bleak economic outlook which suggests that the fall in the price of raw materials is greater than the pound has devalued (arguable point). What I predict will happen is that we will see the fall in inflation overshoot into deflation for one simple reason - the MPC are reactionary. They act to and not in anticipation of the future economic climate. Some may even argue that their goal of controlling inflation is redundant since there are so many externalities involved that their weapon of choice namely interest rates, is not influential enough to make a difference.

I can see the reasoning behind both schools of thought. My opinion is that, regardless of which one you agree with, expecting the MPC to control inflation is an absolute joke!

FTSE......

And another great call if I do say so myself!

FTSE hit 4075 mark early on Tuesday morning before retracing back to 4200 mark. Was trading in that channel for a while until falling heavily today. As I write this, it has fallen below the 4075 mark with next support at 3945. I expect a retrace back to 4075 where another shorting opportunity may arise.

What do we have to look forward to....unemployment!

2008-11-17T10:32:00.013Z

This morning the CBI have today announced that the recession in the UK will be tougher and last longer than expected with the economy set to contract 1.7% in 2009 and unemployment to hit 9% in 2010 (3m people out of work).

Add that to the news last week that BT are cutting 10,000 jobs, RBS 3,000, Virgin Media 2,200 Yell 1,300, JCB 400, Friends Provident 280, Leyland 250. And expect the list to continue growing as firms look to scale back operations and cost cut - according to the Press Association, Next are planning to cut jobs next year. Figures released last Wednesday showed unemployment to be at an 11 year high of 1.82m in the 3 months to September as firms cut jobs to cope with the economic slowdown.

The good thing is that in the medium to long term the recession should (in theory) push firms to become more efficient which should result in lower prices.

However, that obviously is not the immediate concern. Job security is essential for confidence in everything from politics to the markets. If people feel their jobs are unsafe, they save money for a 'rainy day' - less consumer spending, negative impact on GDP, further recessionary pressure...more job cuts! Again, more evidence to suggest that we are still far away from the worst this era has to offer.

The Financial Service industry, which was the single largest contributor to the period of sustained growth in the lead up to the 'credit crunch' (and cynical people may argue they were also the cause - but not me!), has also been hit hard. This trend is set to continue says Mark Kleinman in the Telegraph:

"In recent weeks, investment banks including Citigroup, Goldman Sachs and the former ABN Amro operations owned by Royal Bank of Scotland have embarked on new waves of redundancies, at the likely cost of thousands of City posts. Both Citigroup and Goldman are letting about 10pc of their workforces go, a proportion which, if applied to JP Morgan, would result in more than 3,000 jobs being slashed around the world. "

This is major blow for the City and the British economy. Despite being criticised by many commentators for causing the crunch through excessive risk taking and accepting ludicrously high bonuses (and pretty much any other buzz phrase that I am sure most of them don't fully understand) it is ironic that developments and enterprise in the FS industry which led the London becoming the financial capital of the world also led to economic prosperity, near to full employment and a generally higher standard of living. Without it, the City is dead and the British economy would be soon to follow.

During the much documented, and historically significant, G20 summit, the 20 biggest economies in the world agreed a plan to stimulate economic growth with interest rate cuts and government spending. They also insisted that Financial Institutions (banks, insurers, hedge funds, private equity) should hold more capital which will means less business and lower profits. As Robert Preston puts it:

"The City of London will shrink. And what was for many years the engine of the British economy, generating a third of economic growth and a significant proportion of tax revenues, will be running at 30mph, not 90mph. There is a cost to making the world a safer place. And much of the bill is being picked up by the UK."

Last week Germany officially plunged into a technical recession following worse than expected economic activity and, as Ralph Atkings at the FT put it, "intensifying fears about the depth and duration of continental Europe's downturn." A technical recession is defined as 2 consecutive quarters of negative growth (GDP is the measure of growth). This was followed by similar announcements by the Euro Zone, Italy and today the world's second biggest economy, Japan, added to the woes. Growth in Japan has been hit by the global economic slowdown which has curbed demand for Japanese exports. The US is expected to follow suit in January.

The key question is - how long will it last? Following the dotcom bubble, the US went through 2 quarters of negative growth followed by a rapid recovery. The recession that began in 1980 lasted 5 quarters as did the one in 1990. The National Institute of Economic and Social Research expects four quarters of negative growth and then stagnant economic output for some time after that.

Hugh Pym, the BBC Economics Editor notes:

"Those two recent recessions saw big declines in manufacturing output which led to factory closures and sharp rises in unemployment among manual workers. But manufacturing now accounts for a much smaller share of GDP. What no-one knows is how an economy with a much bigger share taken by financial services will react in a downturn."

My guess would be 'not well.'

My solution - and this good - there isn't one! As any economic academic will tell you, we are following the classic business cycle model. Following every boom there is a bust. And this is no different. Government intervention through monetary and fiscal policy and initiatives to stimulate spending and employment, can help find the bottom sooner but there is no simple fix to the problem. We have to ride an endure the recession storm for at least the foreseeable future.

FTSE.....

The FTSE continued to react of the support and resistance points which I noted on my blog on the 7th November towards the end of the week.

There was an opportunity to go long @ 4075 following the double bounce off it on Thursday (against the trend, very risky).

This could then have been closed and reversed @ 4440 late Thursday evening into a short position. The short could have been doubled up @ 4335 and again @ 4200 late Friday/today. Look to close @ 4075 early this week.

New points of note:

Support – 3830
Resistance – 3945 (previous resistance could provide support)

Tax Cuts and Falling House Prices - really bad news?

2008-11-12T09:48:00.016Z

Gordon Brown and his rivals have come out this week with tax cut proposals ahead of the pre-budget report which is expected next week. One thing they all agree on, consistent with the announcement of such cuts in the US and Germany, are that tax cuts are a useful tool during an economic crisis to increase consumer spending. The theory is simple, people pay less tax, they have more disposable income so they spend more (interest rates are low so incentive is to spend rather than save). Sounds like good news right?

The problem arises when the question is asked "how will the tax cuts be funded?"

The government is currently 43% of the UK's GDP or approx £640bn. A lot of this debt was accrued during the economic expansion and was used to fund public ventures (health care, education, etc). One obvious issue is that by lowering taxes now the government are prolonging the time it will take to pay it back - hence future generations will be burdened by our debt for which they will see little benefit (lower taxes now mean higher taxes in the future).

This is not my main concern. And this is ties in closely to falling in house prices. A cut in taxes could lead to a deterioration in the standard of living. All forms of public services run the risk of suffering cutbacks, the NHS, emergency services, public transport, schools, just to name a few. In my opinion, the public sector is full of unnecessary bureaucratic paper pushers burdened by inefficient management who have no incentive to streamline practices like competitive private firms (my economist side rears it's head!). And I doubt tax cuts will make the system efficient, but could rather reduce further the (somewhat questionable) levels of service. As a nation, we enjoy a high standard of living supported by our public services despite the issues I have highlighted above, if all of a sudden we were to find things not up to the standard we have grown to expect, I think many people would be angry.

In this weeks Money Week magazine, in a discussion about the outlook post the Troubled Asset Relief Program (TARP) in the US, have noted:

"According to John Hardy at Saxo Bank, the “best case” outlook from here is that the housing market bottoms out in 2009 as Tarp limits further price falls to around 10%. Foreclosures fall sharply as mortgages are rewritten, allowing most people to stay in their homes, and by the end of 2010 much of the unsold housing stock is absorbed. The more likely “middle case” would be that house prices fall a further 20%, while a sharp recession forces unemployment above 8% by 2010, and consumption contracts faster than ever before. Glimmers of a recovery might appear by 2011. But in the worst-case scenario, America lurches into depression, with GDP collapsing at its fastest rate since the 1930s. This lasts well into 2010, with unemployment nearing 10% and ‘underemployment’ approaching 25%. The housing slump grinds on into 2011, with some suburbs turning into looted “squatters’ towns”. Public unrest and criminality become endemic."

It may seem a little extreme, but the last scenario is a definite possibility. One only needs to look through history to see the social issues that have accompanied economic instability. Add this to the insistence of Mr.Darling that government economic policy should be implemented in accordance with Keynesian economic theory and we have a potential disaster! The theory that governments should save public money when times are good and spend on public ventures when times are bad is itself a good one. When the economy is growing, cut public spending and jobs so that when things get bad and private employment levels fall (as we are seeing now - unemployment is at an 11 year high) the government spends more money on public ventures (building schools, hospitals etc) which itself creates public jobs. Sounds good...apart from the fact that during the 'good times' the government increased public spending (government debt increased) and public employment is over-inflated. Why is it that Darling cannot see such an obvious fundamental flaw to his proposal??!

Going back to house prices - as a first time buyer looking to get on the property ladder, falling house prices is great news. The fact that the bubble did not burst sooner is testament to how sub prime debt was packaged in such a complicated manner by so called financial geniuses. According to the HBOS UK House Price Index prices have fallen back to what they were in mid-2005. I'd be looking for prices to fall to levels at the end of 2003 which is a further 18% drop before we even consider to be looking at the bottom of the market.

FTSE....

I hope people took some notice to my FTSE chat on Friday...if anyone was tracking the markets you would have seen the support and resistance points I mentioned come to fruition this week. The announcement of China's $586bn stimulus package on Monday gave the markets confidence, but that feel good factor soon wore off.

As you can see the FTSE touched the 4545 level which as a major resistance shows a sell signal. Further shorting opportunities at the 4440 and 4335 can also be seen as it hovers around those levels (add to the existing short position). In total from the top to the current level, one could have bagged 310pts. At £2 a pt and increasing the stake at each level one could have made £1550 (not considering he cost of the spread)!

Who said trading was difficult?!!

UPDATE - by the time I finished writing this the FTSE hit 4200 which is a recognised support. Closing here would have caught 345 pts.

A bold move by the BoE

2008-11-07T09:41:00.015Z

End of my first week writing this blog and what a week it has been. We've seen Lewis Hamilton become the youngest ever F1 Champion, Barack Obama become the first black president of the United States and the BoE unexpectedly slashed interest rates by 150bps - the biggest cut since 1981! The ECB also cut rates by 50bps.

The reasoning behind the rate cut is simple - to stimulate lending and revive the credit markets. Bad news for savers but good news for mortgage holders...well not quite. If you have a tracker mortgage (which tracks the BoE base rate) then happy days. Otherwise, it is still not known whether the cut will be passed on by the banks...I know a couple of banks have said they will be passing on discounts on their variable rate deals but others have withdrawn some products altogether (an interesting stat I read recently - the number of mortgage products available in the market has fallen from 15,000 a year ago to just 5,000 now - a fact that will not be helped by the concentration of the retail banking market which will lead to less competition and higher prices). The UK Council of Mortgage Lenders has said that its members would not automatically pass a base rate reduction on to customers in the form of cheaper loans.

They blamed this on a “dislocation” between the base rate and the higher interbank borrowing rates. LIBOR, which is more relevant to banks when pricing credit, is still high despite falling below 6% this week. This means that banks are finding it harder and expensive to borrow money which impacts the consumer. Easily available credit is what caused this crisis in the first place. The banks are now risk averse - they are not willing to lend as readily - and if they do they want to levy a risk premium. So don't expect things to change dramatically anytime soon.

Was the decision a good one - well only time will tell. The markets were expecting a 50bps cut so the initial shock was a good one. I can think of a few reasons for the size of the cut; (i) to keep up with the US and Japan whose rates are extremely low; (ii) to force the banks to pass on at least some of the cut onto customers; and (iii) because they realised the sheer severity of the recession that is ahead of us and a realisation hit that they should have acted earlier (see Robert Preston's blog on the BBC website).

Other bits worthy of a mention - M&S reported 34% fall in profits; BA have reported a 91.6% fall in half year profits ; BT issued a profit warning which sent its shares below the 1984 floatation price; a Goldman Sachs fund posted $990m loss after 10 months trading; the IMF have predicted the British economy will shrink by 1.3% in 2009 and will be the worst performing of the developed economies; house prices down 2.2% in October according to the Halifax, brings total drop to 13.7% for the year.

And the FTSE....

Last week was the most successful week in the history of the FTSE100 Index. The FTSE enjoyed a consecutive 6 day winning streak which was probably a combination of excitement around the US presidential election (the markets rallied due to the belief that an Obama victory would lead to the quick implementation of policies and initiatives aimed at fixing the US economy) and in anticipation of rate cuts by the BoE and ECB. That finished on Wednesday when disappointing results from ArcelorMittal and Carlsberg A/S overshadowed the presidential election victory for Obama (the so called 'Obama bounce' never materialised). Add to this the terrible UK factory production and services figures which cemented the opinion that the country is heading for a recession. Yesterday property developers led the decline following news about a further fall in house prices.

This tells me that the current rally in the FTSE is no more than a temporary bull in a bear market. The trend is still down - a grim economic outlook for both the US and Europe will be the main factor driving the trend. Expect the markets to continue to be volatile.

Points worth noting (those in bold are major):

Support – 4200 ; 4165 ; 4335 ; 4830 (previous support may become resistance)
Resistance – 4440; 4545 ; 5065

Congratulations Mr.Obama - but it's only the beginning!

2008-11-05T11:16:00.008Z

I was planning to comment on all the week's news on Friday...however, the impact of this morning's events on moulding the social and political history of the world means that I can't wait (special thanks to my workmate for emphasising this to me!!).

Today will go down in history alongside the abolition of slavery and Martin Luther King's "I have a dream..." speech. A day when a black man has become the most powerful politician in the world...I bet many people didn't think that we'd see the day in our lifetime.

The BBC's Justin Webb has summed the situation up well:

"The American people have made two fundamental statements about themselves: that they are profoundly unhappy with the status quo, and that they are slamming the door on the country's racial past. "

I have to admit that I was concerned that the US electorate would not be able to see past Obama's skin colour, but I have to hold my hands up and give credit where credit is due...so, well done America!

Apart from the obvious implications in the history of racial integration, let us remember that Obama won the election on merit. Throughout the campaign he has shown that he is a natural leader, intelligent and full of integrity (a distinct contrast to his predecessor!).

I'm looking forward to a fresh approach from the US towards the global economic crisis (although, let's not be fooled into thinking that Obama's election win will do anything to stem the impending global recession!) and foreign policy (coming up with an exit strategy in Iraq, confronting the Iranian nuclear ambition...). I think we should now see a speed up in the implementation of economic measures to boost the US economy.

(For a good summary of Obama's Economic Pledges follow link to Robert Preston's blog on the BBC website)

Winning the election is just the beginning, now comes the hard part (well as of the 20th Jan when he will be sworn into office). Expectations are high, throughout his campaign he has emphasised the need for change and I am look forward to seeing the direction his changes take us.

What a week to start a blog!

2008-11-03T14:09:00.009Z

This is the first of what I hope to be many entries on my weekly blog...and what a week to start!

It all starts with the US Presidential elections which kick off tomorrow. It goes without saying that I am backing Obama to be first past the post...although I am weary of the deep seated discrimination of many of the US electorate. I doubt, despite the indications of all the polls, that the election has already been won. The problem with McCain is that he is too old (just think that if he were elected the US could be one heart attack away from Sarah Palin as president!) and his economic policies are no different to that of Bush's. The US economy needs new ideas and the country itself needs a new front which will accepted into the international political sphere. Obama is that front.

The BoE and ECB are expected to cut interest rates (again) on Thursday following dire economic news in recent data releases. The FTSE100 already seems to be buoyed by the expected cut...which many analysts are expecting to be 50bps.
As the FT have put it, "British and EU monetary policymakers are facing mounting pressure to slash interest rates to historic lows...amid a clamour for rate cuts unprecedented in their brief histories."

Of course the actions of the BoE, ECB, FED and other central banks around the world are a reaction to the Global Credit Crisis. I have had first hand experience of working in the industry during this difficult period which has moulded my opinions which I will document when writing my blog. In short, I believe the government actions so far have generally been poor or without foresight (for example, the US bailout plan - why try to push it through so quickly when the consequences for it failing to go through congress would be, and were, dire?! Add to that the ban on short selling, the nationalisation of Northern Rock, the "rent now, buy later" first time buyers plan aimed at reviving the housing market, the following of a Keynesian Economics policy- sure we can spend our way out of a recession...and the list goes on!), and that things are going to get worse before they get better!

Just a word on Lewis Hamilton - he's the man of the moment! 23 years old and on top of the world!! A legend in the making!

I will be posting my first full entry on Friday and every Friday from then onwards.