Monthly Archives: April 2012

5th April 2012 – An interesting experience

It’s not like I already have far too much to do, but something happened this week which has incensed me.

I am a holder of Summit Corporation (SUMM).

Yesterday the company announced an awful placement. I need to be careful what I write here, as this is an extremely contentious issue.

Anyway the upshot of this is I have helped set up a discussion group for shareholders.

The website is www.troublesumm.co.uk (I came up with the name – Ahem!). I will write more about this after the event.

As a result I probably won’t have time to blog for a while. I also have secured some more writing work.

Busy, busy, busy

2nd April 2012 – Does the money on the sideline matter?

I first came across the amount of money parked in short-term deposits at central banks on Zerohedge. Just before Christmas their writers used this as evidence of a developing liquidity crisis. This was before the ECB’s LTRO measures and equity markets were struggling. The Zerohedge writers indicated this heralded an upcoming crash.

Part of the problem with Zerohedge’s articles is that they are heavily biased in favour of a crash.

I agree with a lot of what they write. Their analysis of the severe structural challenges we face is informative and insightful. At some point there will be a crash. Zerohedge will almost certainly warn us immediately before it happens, but this will only be after a long succession of false warnings.

Back in October/November I realised that the money on the sideline presented a huge opportunity for the market. Unlike in late 2008 and early 2009 this money actually existed. After Lehman failed, the financial system had nothing like the same level of liquidity to support it.

However Zerohedge has recently been arguing that this doesn’t matter. Their belief is that institutional investors are now fully invested, while retail investors have been heading for exit in droves.

I can’t argue with these statistics, but I don’t agree with the interpretation. Continue reading