Harry Hindsight

So Far So Good

I sat in the stand on the thirteenth tee for one and a half hours waiting for a glimpse of the awesome talent that is Tiger Woods and what does he do? Duff his tee shot out to the right. Four shots later, with me nowhere near he holes his second. As I often say timing is everything!

Golf is not a good spectator sport however it is isn't a bad social event. The Bollinger tent was doing roaring business with scouse footballers in one corner, a plethora of former rugby players in another and a load of fat rosy cheeked bankers in the middle, nervously checking their Blackberries as the equity markets slid.

They will probably be comforted by today's rise the FTSE though I would suggest that this is rally will last about  as  long  as Sergio Garcia's at the top of the leader-board on the last day of a major!

News from the California real estate association that the property market can no longer be described as a soft landing will not help things nor will the further capitulation of the semi-conductor market. We do however need to see a break back below 1235/1240 before we can put up our own Bollinger tent. Behind this there are a wave of stop losses from 1205 to 1195 and more below 1160 so if we see further losses this can quickly accelerate into a rout. Here's hoping!

So Bernanke basically says that interest rates might have to go on hold soon because the economy could turn into a pile of poop and equities soar. Irrational maybe but quite understandable. The world and his Handbrake were sitting short and many with stop losses around the 1245 level in the S&P. As I wrote last time the theme of this market for a while has been taking out the stops. There are just too many people chasing the same positions at the same levels. It is worth noting that the SOXX remains below the key 425 level and below this level at tomorrows close says to me the down-trend is still in place.

Accordingly I have altered my style and I will now start to dip my toe in the water with some equity shorts, NOT in full size yet.I am selling some SPX as I write, who says men can't multi-task,at 1259 in the cash, with a stop loss above 1282. I will increase to full size on a break of 1240.

Currencies are tricky. I keep wanting to sell Stg/Yen and it keeps going up and with expensive running costs it's tricky. In fact all the currencies are tricky, so let's stick to selling equities for the moment; that and the golf which I am now off to for the weekend with mini Harry and the Handbrake.

Have a nice weekend all

Harry

Sell Shares Wear Diamonds?

I have now just about recovered from my visit yesterday to Lords. Good company, good cricket and copious amounts of champagne can be a scary combination but I just about managed to scrape through and I even got off at the right station on the way back to Hindsight Castle. With Test Match Special in the background let’s see if we can make any sense of these markets and see where we can make some money.

The recent turmoil in the Middle East, or should I say the latest episode, has sent oil and Gold higher and equities lower. Though most people seem to be focusing on events in the Lebanon I am personally more concerned about the potential for troubles to escalate in India and Pakistan following the bombings in Mumbai. It seems an open secret that Bin Laden is in Pakistan and that Musharraf has not been as tough on the Islamic militants and their training camps as he promised to be. With Pakistan trying to suggest that the bombings could be related to the failure to resolve the problems in Kashmir there is a good chance of a further deterioration of relations between these two nuclear nations, one of whom is being relied on, along with China, keeping the world economy afloat.

Added to these global macro problems we have rising interest rates across the world on top of massive global consumer, corporate and government debt. The Bank of England have warned that a sudden jump in interest rates caused by rising oil prices could cause a 2% fall in economic output and wipe-out banks profits. Considering the weighting that banks enjoy in the FTSE and the S&P500 the potential for a large equity slump exists. If this happened there would obviously be an impact on the housing market as suddenly many people would realise that’s it’s not them but rather the banks that owned their property.

So how do we make money?

Sell shares and wear diamonds seems a pretty good call to me. The semi-conductors are down over 25% from their highs of the year whilst the S&P is less than 10% lower. A close below 1235 on the week opens up 1160, a break of which would see 1060 come into play. The SOXX looks like it will close the week below $425 trend line support, which opens up further falls.

In the FX markets participants continue to get whipped around in fairly range bound markets. It is worth noting that during the summer holiday period we often see counter trend rallies so I would be wary of playing the dollar on the short side, preferring to wait till September before looking for a continuation of the dollar fall; if that is indeed your way. I will look to play some cross trades and am looking for opportunities to sell sterling against the crosses, possibly against the euro, the Swedish Krona and also the yen but in these tricky markets the timing is more important than ever. The FX markets are particularly tricky due to the amount of speculative money trying to chase the market, many of which use similar entry criteria. Accordingly we keep seeing false breaks as market makers manipulate stop loss orders and we have to change to allow for this.

For example we have some good support in Eur/Stg between 0.6860 and 70 and though I am going to buy some euros at current levels I will not do my full amount, using any sharp stop loss related fall through 0.6850 as an opportunity to buy some more, rather than having my stop loss there.

Anyway I am going to watch some cricket and contemplate the irony of the Natwest three sitting in a high security prison whilst the government squirms over the investigation of cash for peerages.

Have a nice weekend all

Harry

“Use our worldwide banking experience to receive secure and rapid support when travelling abroad.” Natwest Travel Services

Obviously the three Natwest bankers being extradited to the US have used their in-house travel department as on Thursday they are to be whisked off to sunny Houston where they will face charges over an alleged fraud. The lucky chaps will be escorted on the flight by US gun toting marshals, no doubt to protect them from some crazed passenger who might spoon them to death with a plastic utensil. They will then be fast tracked through immigration and given some new clothes as a welcome present. Personally orange boiler suits have never been my thing but I am sure that they are all the rage at The Houston Federal Detention Centre, their home for the next two years.

If John Prescott can get a Wild West outfit for helping US billionaire Philip Anschutz get a casino licence what do you reckon Tony Blair will get for signing away all our rights to the US. He does of course have the congressional gold medal to pick up that he was awarded for being a “staunch and steadfast ally” and for his “outstanding and enduring contributions to maintaining the security of all freedom-loving nations.”

What “security” in which “freedom loving nations” might this be?

Iraq?  Methinks they are having just about as much freedom as they can handle and it is about as secure as a brown paper envelope in the San Siro, so it can’t be them.

The U.K.?  Our citizens can be extradited to the US for trial without any evidence being presented against them and the UK has no reciprocal rights over US citizens. In good old blighty a banker gets 10 years for making false loans whilst a paedophile who kidnaps and sexually assaults a three year old gets six.

So it looks like it has to be America then. No wonder the P.M. is too embarrassed to pick up the award, some three years later. It must even stick in his smug craw that every time he utters the words “special relationship” he gets bitch-slapped by Bubba Bush.

Wouldn’t it be nice to have a prime Minister who worked for us and wasn’t on a bit of work experience from the US before riding back there into the sunset for the $100k a pop lecture circuit. Sadly though when he does go it looks like we will get Gordon the Grinch. The man who took a nice wealthy girl called Prudence and turned her into a drug addled slapper intent on melting daddy’s platinum credit card. What a choice. Being the 51st state or an impoverished province of Scotland. This is not a time to give up alcohol!

Harry what about the financial markets? I hear you ask. Well as I heard on the radio today from that lovely chap Darren Winters: “ Let me tell you why now is one of the best times to invest in the stock market.” Yes I’ve been away for two years and it looks like some people are still talking b******s.