Tuesday, March 24, 2009

Stagflationtastic!

U.K. Inflation Rate Unexpectedly Rose in February

“It’s a big surprise,” said Stewart Robertson, an economist at Aviva Investors in London. Um, is it?!?

Posted by tyrellcorporation @ 11:04 AM (2925 views)
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48 thoughts on “Stagflationtastic!

  • My services are available to the highest bidder.

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  • Even the mighty Vince Cable is starting to stop making sense.

    “In this deflationary environment, interest rates are as low as they can go to combat the threat, yet people are still getting squeezed on savings because prices are rising”

    Eh?

    Come on Vince you can do better than that.

    THERE IS NO DEFLATION.

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  • deflation in mortgage costs, inflation in everything else.

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  • With all this talk of inflation why has the price of gold droped so much today, I would have thought it would do the opposite.

    Could this be a good time to buy gold?

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  • Bloomberg: U.K. Inflation Rate Unexpectedly Rose in February… lol The wrong kind of inflation stopped deflation in it’s tracks.

    What’s new? Unexpectedly…lol Still waiting for a cheap new car!

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  • Crunchy

    Apparently second hand prices rose last month. I can only assume it’s the flood of people finishing 3 year leases deciding to either purchase the car at the end instead of re-newing (sensible option if they’ve looked after it). Or bailing out altogether and buying a cheaper 2nd hand car.

    After their initial fall last year, even 4×4’s seem to have stopped falling so much (casual observation on Auto Trader).

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  • I do not know if it is because I am getting older or what but quite frankly, any figures eg inflation, unemployment, migrants etc etc coming out of this government is adjusted to control the pupular opinions and help contractual obligations of the governemntal bodies rather than representing facts. As we all know depending on where you shop the prices can be quite different and so the inflation. Inflation figures are pulled out of the hat to help government causes with BBC the advertiser!

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  • 6. str 2007 Thanks for that.

    Rip off Britain! I will be an OAP before getting a discount on this bloody island! Deflation my ar8e.

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  • wdbeast

    Not sure what’s going on with Gold today, it’s certainly looking cheap in sterling terms compared to a few weeks ago. But I’m not really clear what’s caused the big fall this week.

    I can’t be sure if it’s now going back up or if there are more falls to come.

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  • str 2007 – isn’t the fall in gold due to the drop in fear caused by the Fed’s announcement of more money for old rope? (i.e. gold is a crisis hedge not an inflation hedge, and the implied crisis probability has fallen due to the announcement, therefore so has the gold price.)

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  • Euro/Chf short for a few days might do the trick! lol

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  • 51ck

    Cheers for that. Based on the fact that if the crisis worsens they’ll just print more money (I assume they will anyway) do you see Gold falling quite a bit more then ?

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  • mountain goat says:

    CPI is saying that the fall in sterling is working its way through to the high street. In a years time we will notice the effect of growing money supply as well.


    source

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  • str 2007 – I think it is so manipulated that one needs to be right in the middle of it to have a clue what it will do apart from making predictions of sudden moves due to upcoming economic announcements (the only times I’ve been involved in that market is when I believe a consensus is wrong on something like a FED target rate decision, and then only for a matter of minutes). However I would expect the price to go down in the short term, yes – but I imagine it will be up at $1k/oz again before too long.

    Do note, that if the market thinks too much money is being / has been printed then gold goes up, because too much inflation leads to a crisis (I think this is where the misconception of gold being a hedge against inflation comes from).

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  • mountain goat –
    yes, if there are not enough defaults, debt repayments and asset devaluations to counter the effect of the newly created money that manages to reach M1 (right?)

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  • (^^ actually I should just say “money that is in the liquid circuit” rather than using a monetary label)

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  • mountain goat says:

    Str 2007 – USD fell after QE announcement so maybe gold catching up.

    I was watching some videos interviews earlier today about gold, how the traditional relationship with dollar has broken down in the past 6 months i.e. gold and USD moving together. My conclusions are that there is buying by large investors, hedge funds, pension funds etc as protection against QE solutions to debt problems. However, the short term prices are still driven by traders losing money with their minute by minute buying and selling. I think gold is still worth buying at $910, silver at $12.50. Although USD to GBP is volatile, GBP to gold is more stable because gold and dollar moving together.

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  • 51ck

    Thanks for the insight.

    I guess I saw Gold as more of a hedge against devaluation of currency as opposed to inflation. Devaluation of a currency leading to inflation. Same theme but different time frame.

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  • mountain goat says:

    51ck-6-51x – yes defaults on debt will hit banks. Bailouts puts the money straight back in their coffers. Sooner or later it will end up in peoples pockets but there will be a lag.

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  • last_days_of_disco says:

    Some things are going to get more expensive, other things are clearly getting cheaper. Deflation is the cause of this. Its got to do with he denial element. Deflation tends to result in sudden collapses. Those can cause other things to rise. We are definitely in a deflationary environment. Everyone has less money. That means money becomes more valuable. Money in circulation is what matters. Money being used and spent by people. If its not being used it might as well not exist.

    The problem is the government over reacting and producing loads to much. If that sparks a panic and people start off loading their currency, you are into hyper inflation. So even though the money supply seems to be rising, its the money in circulation that matters. Its very confusing because each industry will have different problems as a result and might hence go in opposite directions in terms of expenses and hence what they charge the public.

    And yeah, food is getting more expensive. The thing everyone needs because no one is buying other things for which there is a massive over supply. So those things are becoming increasingly worthless. How many cars does one need?

    This is going to rattle on and on and on. I think the Americans have shown how long it can go on for.

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  • mountain goat says:

    Sorry I am talking rubbish “Although USD to GBP is volatile, GBP to gold is more stable because gold and dollar moving together.”

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  • MG
    Thanks for that. It’s the GBP/Gold ratio I’m interested in as it’s my Sterling I’m attempting to preserve.

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  • General Congreve says:

    @8 str2007

    Gold has fallen because of mis-placed positive market sentiment to Geitner’s announcement on his toxic asset plan on Monday. His plan just revealed to the world that the US has more accounting trickery in the pipeline to make it’s bad bank assets look less bad. No surprises there. Your typical 10-year old would ask questions as to how this could work, because something would tell them it doesn’t add up, because it doesn’t, it’s creative accounting of the stinking BS kind.

    There is quite a lot of speculative investment money out there, bouncing around, and that followed the mis-placed positive sentiment to the stock markets – DOW up 6.84% yesterday. Much of this speculative money came from speculators/investors selling gold to chase the stock markets up, so gold ended up down across all currencies and continues to slide today.

    Hold your nerve, if you are in gold, as I am. Now is the time to add to your position if anything. Buy on the dips, add a little at a time to smooth our price fluctuations and don’t be put off by short-term price fluctuations – fortune favours the brave.

    The very dire global economic fundamentals are not changing anytime soon, we’re eyes deep in the mire for many years to come now. The path of least resistance out of this mess chosen by our democratically elected leaders is definitely one of price inflation, as today’s news proves.

    Crank up the printing press, devalue the currency and inflate national debt away to the benefit of the country and inflate personal debt away to the benefit of 90% of heavily indebted VOTERS (and thereby penalise the prudent minority as they watch the value of their savings and pensions evaporate in a cloud of freshly printed pounds). Obviously the economy will be trashed and we’ll get stagflation, but we’re already trashed anyway thanks to Crash Gordon’s economic incompetence. So the quicker we inflate the debt away, the quicker we can start rebuilding the economy. Of course, inflation will be the biggest vote winner for the powers that be, as it will squash burgeoning personal debt for the masses, so that’s where we’re headed, full steam ahead!!!

    So, if you have savings to safeguard, buy physical gold (and or silver), it’s a one way bet as far as I can see. With effective 0% interest rates on cash accounts, savers have already lost money this year thanks to the deflation reported here, oh sorry, I meant inflation didn’t I 😉 It’s only set to get much worse.

    Gold has been the de facto currency for over 5000 years when fiat currency has become debased, and fiat has never been debased to the tune of the catasprohic trillions that we are witnessing now. Gold can only be debased itself as quickly as it can be mined (2% per year max) so it is a safe, solid, dependable and tradable store of value. Unlike BoE/Fed/ECB monetary policy.

    When we really start to get stuck into inflation there will be a rush to gold (and silver) by the majority, this means gold will not only be a safehaven for protecting your wealth against the ravages of inflation, but that increasing demand will sent the price upwards strongly, making it a tidy investment vehicle too. People say there is a rush now, not true IMHO. How many people have you heard talking about it in the pub or at work, not many I bet. 60% of people are in shares some way or other, only 2% in gold. There is no bubble yet. When the proles start talking about it and start piling in and governments around the world have a solution to the crisis, that’s when to sell, not before.

    I know what I’m backing to the tune of 45% of my savings (plus 5% silver), what about you? Gordon or Gold?

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  • last_days_of_disco said, “Money in circulation is what matters. Money being used and spent by people. If its not being used it might as well not exist.” –
    Good explanation. I remember being told by a member here that I should attend one of her (or his) economics lectures when I suggested that the creation of money does not necessarily lead to inflation.

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  • I’ve sold my gold and now shorting it. I’ve been following the price closely for a month or so and it seems to be determinedly downward , even the news that treasuries and bonds are being bought only caused a temporary spike that didn’t hold – bear in mind too the $ has been weakening over the past few days.

    Maybe a seasonal correction maybe people liquidating to get into stocks but not looking good at present.

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  • greytornado says:

    wdbeast wonders if it’s a good time to buy some gold and why the price has dropped…………….Well the US news has cheered up the stock market for a day or two. What happens in a week though, is not likely to alter the long term outlook; which many believe to be serious inflation. In fact they can’t print all this money without inflation happening. It is after all, a basic cause of inflation. Personally, I believe this particular moment is a very good time to buy some more gold.

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  • bellwether

    Me too, but not shorting. I take it that’s with your Barclays Spread Account ?

    Working out ok ?

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  • mountain goat says:

    I enjoy watching short term movements and trying to understand them but I am with Flashman on the point that 99% of people lose money trading in and out short term. My view is that for the next 6 months 20% fluctuations around $950 are likely, so I am buying gold below $910 and not selling unless there is a blowoff above $2000. Actually I am buying silver not gold, but entry points coincide with gold prices I mentioned. In the mean time happy that some of my savings are not linked to GBP.

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  • dohousescrashinthewoods says:

    “happy that some of my savings are not linked to GBP.”

    – as in Gordon Brown’s Policies? 😉

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  • Many thanks for advice

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  • dohousescrashinthewoods says:

    Interesting scanning down to earlier posts that focus on deflation, then this one comes smacking into their presumptions – not only did RPI not turn negative, but CPI (“queen Pollyanna”) is on the rise.

    Looks like inflation, not deflation to me.

    I read a while back that, with no currency on the gold standard, governments would rather print money like it’s going out of fashion than allow deflation, so deflation is used as a justification for generating inflation. The accompanying thought is that if GB can no longer hope to pay his debts, he will opt to devalue the currency in order to wriggle out of it.

    Looking at how the Sterling price of gold is falling for the moment, I’m considering selling up for a while and coming in again before inflation really snaps.

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  • STR you asked me on a good day because I’ve been shorting the Euro from 0.945 and its worked a treat. Also been making on gold as above.

    Apart from that been making a lot of mostly costly mistakes and buring through a fortune trading too much. It seems I don’t tend to learn until I make the same mistake umpteem times. Only recently put on stop losses largely at Flashmans insistence and also because I was paryly in dollars when the US said it was buying treasuries the other days.

    I have always wanted to try and find sure things and then hold them for a few days but this is far more difficult than it sounds.

    How about yourself?

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  • MG I think you are right, even if you are more right than wrong you have trading costs and spreads to overcome. It is a very difficult way to make money and as the accounts tend to run a tally there is no hiding from mistakes

    That said say however it is a challenge and you learn a lot about yourself in the process

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  • Bellwether

    Well you’ve made more progress than me on the basis that you’ve got a live account up and running.

    I think I know quite alot more than I did before Christmas. At least wih regard to the direction and how I want to start trading.

    I’m actually in the process of moving house at the moment, so will be at it alot more seriously in about a months time hopefully.

    So really I’m still doing some reading and deciding how I’m going to be doing regular trading.

    As much as anything at this stage I feel I need a structured (unemotional) way to how I trade and a practice that makes me sit down for say 2 hours a day and set up my trades having decided prior to trading a strategy for each trade (ie amount to risk, this will be 1% of account which will set my stop loss and then a predetermined exit point).

    This I hope will give me an organised structure for actually trading on a regular basis.

    If I can make any progress with this then yes it would be nice to have a little punt on the side at my ‘gut’ feeling trades or those based on an article saying for example that Pork will be up in the Summer due to expensive grain prices last year etc..

    The thing I like about it is that for small traders at least sharing information only helps one another, as opposed to running your own business when playing cards close to your chest is essential.

    I suspect I will invest in a course and method at least to get me started, if nothing else it will actually get me started with my first incentive being to regain my start up costs.

    I sense left to my own devises entirely I’ll stumble around in the dark and loose as much as a course would have cost me in the first place (not that a course guarantees any success you understand).

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  • str 2007: I think I may have shortchanged you yesterday with my “juicy” comment. Truth is, I was a bit hesitant to explain my methods because they don’t sound too scientific. I also think I may have given the impression that I disagree with techies methods. I think that my trading style and techie’s have more in common than it might prima facie appear. For example, I’m pretty sure our ideas on money management are similar. But even the fundamental/technical difference does not truly exist. Techie uses indicators and tools but in a way so do I, because it is easily possible to use yourself as a technical indicator. The trick is to absorb as much information as possible and then try to temporarily forget it all. For some reason the information gets processed better if you ignore it. Then try staring at your screens while cutting out all thoughts about anything else but the squiggly lines. When you are almost in a trance like state, you will occasionally be able to predict forward directions. It only happens a few times a week… but it is enough. Unfortunately not everyone can remove themselves from all outside thoughts because they keep thinking about the lawn or what they just read. I think this method is what has kept me in the game for so long. Again, sorry if it’s a bit disappointing.

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  • Flashman

    No not short changed any info is helpful.

    I’ll enjoy the ‘trance like state’ I think I’ll be good at that !

    Not sure the missus will believe I’m working but hey.

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  • Just out for beer now but will peep back in later.

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  • Gold will drop in the short term due to the massive stimulus packages that have been announced over the past 2/3 weeks; however, once it becomes clear these packages can’t work, the stock markets will continue to fall, and then Gold will start to rise again.
    For the time being, the Fed & BOE are still intent on chasing their losses, but a time will soon come when they will have to stop.

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  • 33. flashman You have just reminded me of a good book by Mark Douglas “Trading in the Zone”

    Str 2007 I think it’s great that you are starting to trade soon. I think you will do well in time. You have mentioned the word work a couple of times lately.

    It may be different for you but that was my first trading mistake. Getting up in the morning to work! I would go to the computer and see crap trades that really were not low riskers just because I was conditioned to time slot working. I don’t think it works that way and sometimes I do nothing for days untill I see a high prob set ups and if you have the balls to stay with them in higher time frames it can beat hours of loses and revenge trading. lol. Revenge trading? That’s another story. You are right about risking 1% of your account, but starting out some may say half of that.

    Good luck with the “move”. Something tells me this year is going to be a sharp learning curve for you, plus you will learn more about yourself than you could imagine.

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  • crunchy

    Didn’t even have you down as a trader, (I apologies for any typos BTW but am now back from the pub).

    Perhaps you’d be good enough to elaborate a little on some of your jargon. High prob set ups ( high probability ) (higher time frames) I think I get those 2.
    Revenge trading – go on you can tell me/us that story.
    Glad I sussed out the 1% thing, I fear 1/2 of that might get me locked out too easily. (we need to make progress afterall).

    Every year is a sharp learning curve for me (not by design).

    I guess if you’re experienced at exactly what to look for you can get away with ‘picking winners’. I was trying to work on the basis I’d pick more loosers than winners and wanted walk away with a profit in those circumstances.

    How many hours do you put into finding those winners before you place a trade ?

    My mind was working along the lines of having, if you like a daily method for earning the bread and butter that just works. And adding the cream from the bits I pick up ‘because’ I’m trading and have my head in it, so to speak.

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  • STR High prob set ups ( high probability ) (higher time frames) Yes always trade off the higher time frames for trend then pending on your personality and account size find that same direction on a lower time frame. Let’s say you look at the daily then you may want to wait till the 4 hourly trends in the same direction. I always look to get in at the start never the middle or last stretch. thats what takes time. Thats the set up. Novice traders will trade off lower time frames unaware of this and always wonder why they are trading in the wrong direction. Thats why there loses are great they are waiting for the trend to change. That can take weeks.

    Revenge trading. you know! When most traders start out and they take a few hits they sometimes will double up on magin 5/10% to recoup on a loss. Don’t even think about it. If things dont go your way and they will not from time to time it is better to switch off and go fishing. Never trade when angry the market will beat you up. I have the scars. lol
    I know techie and flash are good traders with great advice but your goal will be to filter that info and find a system that suits you. Thats the key. I may chip in from time to time with another spin if that’s ok by you.

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  • STR you say that your looking for a mechanical system to get you started I would suggest you check out the MAC/D indicator with standard settings. It is a lagging indicator but if you are a little creative with time frames you can work around that. It will only take a day to find out about how it works- Positive and negative divergents, neutralisation, the moving averages trigger line and water line. Its all free on the net. Happy hunting with whatever you decide to use.

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  • Crunchy

    Thanks for that advise and yes any future advise is more than welcome.

    From your MAC/D lead I’ve found a whole series of lessons on U-tube from informedtrader.com. 77 3-4 minute lessons which are very useful and interesting.

    These will hopefully make higher/lower timeframe comments clearer to me.

    Many Thanks

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  • Str. What I refer to above (trading from higher time frames down to lower) is know as top down trading. It works well in Forex because it can trend well at times. Personally when I refer to using different time frames which should all include independent macd’s I am looking for are extreme (if possible) oversold or overbought oppertunities.

    Let’s say a currency pair is overbought on your daily and the macd inicator will show this, I try and get an entry before I get a signal. Due to the lag of the indicator sometimes if you wait for the crossover signal to enter and again to exit you can miss a chunk of the move.

    So if I see the first signs of a major change in direction on the daily I will go down to the hourly for an earlier signal and have a try on a macd crossover signal there which in turn will effect the 4hourly and thus the daily. Sometimes the signal/”price action” will be false and bounce off again. If that happens I stop out and wait for another signal/entry point. To exit the complete trade is the reverse. One can trade off the hourly, 4hour or daily with this mechanical system. If I am trading off the daily and in a good trade all I need to do each morning is move my stop up. or use a trailing stop. I don’t have the temprement to day trade TO INTENSE FOR ME! However it may suit you.

    Hope this give you an intro to this method if you try it. You will develop the finer points as you trade, you will learn via mistakes and refine.

    A system that suits you is more important than a system within itself, IMHO

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  • Thanks for all the info Crunchy. I’ll bookmark this thread for reference.

    Agreed that the day trading may get a bit intense.

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  • General Congreve

    Sorry, somehow missed your post yesterday, very informative. Thank you.

    BTW if you register with HPC you can get a password and your posts go on immediately.

    Apologies incase you have done the above and I just missed your reply to me.

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  • 45. str 2007

    Just up checking on weeks accounts, yes sad but old habbits die hard.
    Since you are bookmarking this, thought I would drop you a link to a trader called Vince Stanzione.

    http://www.fsponline-recommends.co.uk/page.aspx?u=ftm&tc=MFTMK301&PromotionID=2147066010&u=354374&g=0&o=56911&l=166004&

    He says he is a millionaire and also claims fantastic, and I mean fantastic returns with a very simple system. Check him out with due caution.
    If you are serious about “profitable” trading I think you do need a great system, because without one due to little experience I feel the learning curve can be long, hard and expensive, so it makes sense. An investment on a solid course to get you started is money well spent not lost.

    That will be 10% of the battle won the remaining will be emotional. If you hate losing money and you truely are trading for profit and no other reason ( there are lots of them) you should with time get that under control.
    Tip- A system is only as good as the trader. Give two different people the exact same system and you will get two different results.
    That’s due to that 90%…… EMOTIONS.

    A mechanical system needs a mechanical trader. “We are making money mechanically and we are taking it from emotion wrecks.”
    (PERIOD)

    Save your emotions for the wife and family, that’s where it belongs. 95% of traders fail because they don’t have a rock solid strict trading plan and they don’t have rock solid emotional control. As a result they lose faith in a system and keep changing it, not them. D’oh.

    Hope this is of help…… I wish someone had said this to me when I started out! lol. Only funny when I look back. D’oh.

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  • Crunchy

    Thanks for that, good meeting place this.

    The layout of the promotion is the sort of thing I typically wouldn’t read, but as you mentioned it I read the whole thing and also watched a couple of the clips.

    I’m in the process of moving house over the next 2 weeks, so when I’ve got that out of the way I’ll get into this in more detail.

    Looks pretty interesting from what I read tonight. I certainly like the idea of simple systems.

    Many Thanks

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