Friday, Mar 06, 2009
News for the great unwashed
The Sun: Bank slashes rate...and flashes cash
HISTORY will be made next Wednesday as the Bank of England starts to magic up cash.
For three months, almost £1billion a day will be pumped into the economy.
This is unprecedented in the UK. It has not been seen anywhere in the West since the Great Depression of the early 1930s. The worry is whether it works.
The banks that got us into this mess must get us out by passing on the “new” money.
It is the Bank of England’s last card. Cross your fingers and hope.
Posted by little professor @ 08:16 AM (1514 views) Add Comment
35 Comments
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1. crunchy said...
The only way I see this working is for wages and business turnover to double over the next 2/3 years.
I can't see that happening.
WILL NOT WORK.
2. paul said...
3. jackas said...
Alaistar Darling:
"There is not enough money in the system"
Not enough money for what? There must be another side, I guess he's talking about things that money can buy, right? So "assets" then. So he effectively said:
"There are too many assets in the system relative to the amount of money"
Or, maybe it's not the number of assets, maybe it's the price of them?. So maybe he said...
"Assets are priced too high".
Right, that makes sense. That's what we've been saying for years. So why don't you let the prices fall? Wouldn't that be easier? No?
Scumbag.
4. timmy t said...
Jackas for Chancellor... Jackas for Chancellor...
5. techieman said...
Look you silly bloggers ... dont you know we all have a devine right to a perpetual boom?
6. str 2007 said...
Morning techieman
So how has the last week panned out for you then ?
Are you expecting a bit more bumping along the bottom or are you still anticipating a take off before the BIG fall ?
7. mrmickey said...
If money is a representation of wealth printing more of it will just take what wealth is left in the economy and move it somewhere else, to believe this will ultimately somehow create more wealth is very strange.
8. growler said...
STR: I think some corporate margins will be lined with the QE but people, whilst tempted, will not "go spend". Two ways QE can go: If printing money (for that is what QE is) works, then we have 10 years of what happened in Japan. This will itself seriously depress property values. If QE fails, we will have a bigger crash and then huge interest rates (10%+) - which will emasculate property prices as people suckered into low interest mortgages suffer massive increases. I can see it actually work, but the outcome will be Japanese "lost decade" and no prospect of a return to a property boom for good. Expect a Germany-style property value curve as banks' fingers will be so burned, they will never loan negligently again (and get away with it).
9. 51ck-6-51x said...
jackas - nice comment.
10. 51ck-6-51x said...
However I'd also add that I'd go for an L-shaped Japan economy over a depression any century!
11. str 2007 said...
Growler
I'm not sure how the amounts being 'printed' (I think 2 x 75 billion) has actually been calculated.
As far as I can tell the banks will simply hoard this money to re-capitalize themselves.
I personally maintain that the government needed to do something that would cause direct spending quite quickly.
My personal example of this was generating £30k/1/4 acre building plots in every town and village across the country for owner occupiers. This would have the effect of those owner occupiers immediately commissioning a house to be built, which would itself on average pump £200k into the local economy. The money leant against the project would be relatively safe due to the low cost of the land.
Nimbies etc would have to quickly come up with agreement to where new houses would be built etc. But that I think would go some way to easing pressures.
I imagine you could well be right with regards to a lost decade. Not sure about the sky high interest rates, I personally think the system has got to a point where by it would become more broken by high interest rates than low. (Unless of course they got everyone onto a 5% fixed 'til end of mortgage deal to take houses out of the interest rate equation - then they might be able to use them as a tool again.
12. techieman said...
STR2007 - well yes low was around 3500 (so far) and yes there was some upside (to be honest wasnt expecting more downside to retest the low 3500s but i suppose that just goes to show how weak the market is.. [Im assuming you read my remarks of monday .. i think!]. As for now im really not committed either way. I sort of expect a move up (as downside targets have been reached) but i am not confident that the move back up this week meant that the retracement and pullback over the past few days is just part of a bigger retracement before a new swing low in this cycle or we have had the full retracement.
Either way the next swing low will be one which i think might hold for a while. Wether we have had or are near the short term bottom could be blown out of the water a bit by the unemployment numbers this afternoon.
As for my position i am still short with about 400 points of intrinsic value, but its really a small position (about 5%) ... "just in case". I expect to give some of that back and have as far as im concerned made the money from this move.
A move back up to around 3850 - 3950 isnt unexpected IF this low holds. Sorry if thats a bit rambling and/or on the fence.
13. mark wadsworth said...
I like the way that people direct questions at Techieman and he answers them.
So my question is, what about the fact that the FTSE has done the world's greatest double-top, from 1980 to 1999 up 250%, then halved by 2003, then doubled again by 2007, then halved again as at today's date (to below where it was 11 years ago)?
14. denzil said...
QE certainly takes us into the next phase. The next phase will be nationalisation of those banks that are heavily indebted to the taxpayer.
Nationalisation would not be my choice BTW.
15. techieman said...
MW - first yes i answer em but i might answer em wrong. Im getting ready to take a bath at some stage.... so im hoping that when (not if) that happens i wont be fully loaded.
Second - where is the question? It reads like a statement [so does that so why have i put a question mark after it?]? As you probably know my time horizon is relatively short term (but not mega short term). Do i know where the market has been and the support resistance levels on the weekly / monthly charts? Answer not as well as i should!
Staying safe or playing Dfence is the most imprtant thing i think.
16. growler said...
@str.
Interesting idea with the plots, but the weight of nimby pressure and incompetence of government means it will not be a runner. We've empty houses and flats at the moment. I also think this policy is not "wide" enough to be seen to help all people. Some people will not have enough money (or interest) to be homeowners - hence easy pickings for anti-ownership/right-to-let lobbies.
I can see QE failing in the public eye - although I believe it will work and prevent a total crash but "no recovery" will be seen as failure.
As a cynic, I can see vouchers issued to people as a "necessary measure" sometime 3 months before GB stands to be reelected. These vouchers will be for people to go buy something in a designated "key industry" - a bit like free Clubcard points from Gordo.
@ Mark. As a cynic, my view is that it takes a bit of time for the market to see through the hype, self-interest and inside/fraudulent trading. We all know now that CDOs, Madoff and others are worth nothing like what we thought. Tech dot.com was another illusion. There will be more in the future as the market "reinvents itself" to find new ways of moving around what they've always moved around: money.
17. techieman said...
By the way checked out the forum the other day (dont post there) and there is someone with a list of things some highlighted as have happended some not highlighted. Found that interesting - anybody know what im on about and what the source is?
18. mark wadsworth said...
Techie, thanks, I was talking about medium term, i.e. the next couple of years. If you only do day to day stuff, then fair enough.
19. techieman said...
MW - next couple of years? But thats after lunch isnt it?
My framework is this low then a move up to around 3900 ish then a move back down to new lows then a boom boom for a while (retracing quite a lot of this move as a bull trap) then some final capitulation to create substantially lower lows than here. I will "fill" that out a bit as we get there.
Of course anyway thats not worth much as it can all change but basically i dont think we have had the real capitulation yet. I wouldnt bet the house on it ;-).
20. str 2007 said...
MW
Sorry if you were feeling left out on that one. I direct the stock market questions at techieman because he does seem to have a good idea what may happen. It takes me a while to understand what he's saying sometimes with his trade talk but I'm getting the hang of it ish.
But mw you're welcome put your pennyworth in when I ask, I'm always interested in opinions.
Incidentally techieman, I happened upon a free seminar yesterday ( I know sprat to catch a mackeral) for knowledge to action ''Traders University''. Not a real University obviously. They concentrate on Spreads and have various systems they work to.
As I understand it they use ADVFN and Sharescope and in addition have their own piece of filtering software that sits underneath which basically runs the 350 looking for breakout opportunities.
Essentially they promote a 'system/methodology' of logically using the spread betting process to trade in a structured manner (taking the emotion out of it if you will) and keeping risk level calculated and to a minimum.
Obviously all this training is done for a fee. Just wondered if you'd heard of them or if indeed there were any other system/methods to put some structure to regular trading that you'd recommend ?
Growler
I agree the 'plot' thing is unlikely to happen, but it could be done quite quickly and punch large quantities of money directly into local economies all over the country.
Far better in my opinion to spend £300k on a house that has to be built than $400k on one that already stands as that simply transfers money and gives estate agents and solicitors a bit of money. Build a house and a whole raft of people have something to do from Local Planners, Architects, Ground Works, Brickies, Chippies, Electricians, Kitchen/Bathroom companies, Carpets etc etc.
At present I see a bunch of greedy bankers not believing their luck that they've milked the economy for what they have, completely got away with it and now the stupid government are pouring another £150 billion in their direction.
I suspect every banker is rubbing his hands and working out various schemes to make sure they pocket most of it.
21. growler said...
@20. "At present I see a bunch of greedy bankers not believing their luck that they've milked the economy for what they have, completely got away with it and now the stupid government are pouring another £150 billion in their direction."
I am sure the bankers are (as I said in 8). The banking profession have well and truly made their bed and will have to sleep in it.
I see what you mean about building new to employ people in something constructive (forgive the pun). I still think we ought to meet up in B&Q HW and have a chat over our idea....
22. flashman said...
I am 99% certain that none of the Traders University systems work. If they had a system that works, they would keep it to themselves. Adding a few lots per day to their trades would make more profit that all the fees they charge. Also putting any system into the public domain is a virtual guarantee that it will stop working
Ask any system sales company to show you an audited set of trading accounts (several years worth, not just the 2 months that worked). Not one system sales company has ever acquiesced to this request.
23. techieman said...
STR2007 - i dont like breakout systems. I used to trade based on the movings averages, but the problem is when the trends arent trending (i.e. the markets arent moving). I wouldnt know of any company and i would treat them all with a very high degree of scepticism.
I dont know if you have heard of the turtles.[i have posted before] I will show you something which is a well known breakout system (and its marketed expensively) but here the rules are FREE. It really works but you can have massive drawdowns... read the manual and decide.
http://bigpicture.typepad.com/comments/files/turtlerules.pdf
24. str 2007 said...
Growler
No problem this weekend ok ? probably not Sat pm. send me an email str2007@o2.co.uk (that's o2 as in the phone not zero 2).
Looking forward to it.
25. techieman said...
Flash... have YOU heard of the Turtles ? Richard Dennis and Bill Eckhardt? Apparently they had a bet on wether traders were born or made. Hence the training programme and hence the film trading places.
26. str 2007 said...
Thanks for that flashman and techieman, if I'm honest I suspected as much. And agree that if it was that good why tell anyone. There's always a reason for that though ..... sales patter, don't you love it.
Most of what they were saying rang the right bells (it would). As I understood it their system would only bring up a few out of 350 that were 'ripe' for long or short position. A stop loss would also be in place to make sure not more than 1% of your trading account was at risk with any single punt.
I'll have a read techieman, many thanks.
27. flashman said...
techieman
Yes, the Turtles are still famous in the States. I think that Richard Dennis eventually lost a packet in the late 80's and was successfully sued by his customers. Is that right??? I had no idea that the idea for Trading Places came from the Turtles
I was living in the States during the dot com boom and the world and his dog were attending seminars and buying systems.
28. flashman said...
Str 2007
Many years ago I read a fantastic book called ‘reminiscences of a stock operator’. It was written in 1923, but it is as relevant today as it was then. It was a huge influence on me and gave me a genuine leg up. The sad thing about trading is that most people get bust out of the game just before they get good. Educating yourself before putting your hand in your pocket is a good idea. I would advise anyone to stay away from the seminars and systems. There are many good books that you can learn from without feeling a serpents tongue in your wallet.
29. 51ck-6-51x said...
flashman, oh yes, a great book - the tag line in my opinion is "Men who can both be right and sit tight are uncommon."
30. flashman said...
techieman:
Just scanned that Turtle’s Rules document. Some pretty sound stuff. I concur on the break out systems. If you are lucky enough to trade it in the right era you can make a packet but in the wrong era you hand it all back
31. str 2007 said...
That's intruiging flashman, what do you call the right era for the 'Turtles' ?
32. techieman said...
flash / 51CK - yep read that too a while back and the Charles mackay book (which is a bit more olde worldy). STR2007 - any era when the markets have decent trends and are not bumping along the bottom. The pdf deals with diversification, and other good stuff. The problem with a breakout system is if you statt after a big trend that you havent participated in. What will typically happen is you will get whipsawed and then give up just when the next trending breakout happens OR when the trend does occur and you are on-board you dont stay in as long as you should (so you can get your money back). A mechanical breakout system will work but the drawdown may mean that your emotions get shot (we are all human) and you cant take that vital next trade.
Remember even when you are right ... you are wrong!!
33. techieman said...
flash - re Richard Dennis i dont know - i know that some of the turtles made and lost fortunes. Curtis Strange made about $20m but then lost it all (although im not sure it was through trading - i think there are some interviews on youtube).
I would recommend reading the "market wizard" books - not that they are specifically helpfull, but they do give a flavour and some nice stories.
34. flashman said...
The turtles method is basically trend following. In the right market this can produce huge profits but when market conditions are not optimal, drawndowns are very deep. This is partly because most breakouts tend be false moves, resulting in a large number of losing trades. The originator of the Turtles method lost tens of millions in the late 80's
35. str 2007 said...
Thanks all
I've just ordered the 'Reminiscences of a Stock Operator' so look forward to that arriving.