Monthly Archives: October 2013

30th October 2013 — Banking BP

At the end of August my MIDAS system gave a very clear read on BP. It said to buy.

And so buy I did.

I managed to open at 441p and today sold out at 485p for a fantastic, leveraged, tax free profit!

I saw Zak’s video this morning suggesting there was more upside to come for BP, but in my position I was happy to bank the profit. From a MIDAS perspective, what’s just happened with BP is a fairly common occurrence; a beleaguered stock in a bull market pulls back to long term primary support and then spends a couple of months consolidating at that level. During this time management becomes increasingly exasperated with the stock’s performance (after all those bonuses aren’t given out for languishing share prices!) and surprises the market with a positive corporate action. Usually this comes in the form of a share buyback or, as in the case of BP, a surprise dividend.

 

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29th October 2013 — Fed monetary policy – building a modern Tower of Babel

The story of the Tower of Babel is one of the classic legends of humanity overreaching itself.

Recorded in the Book of Genesis, the Babel story tells of a time when all the people on Earth lived united and shared a common language. They gathered in modern day Baghdad (a.k.a. Babylon) to build a great city and tower to celebrate their superiority and advanced learning. God, however, took a different view of their achievements. He came down from the tower, scattered the people across the face of the earth and introduced different languages, to confound future attempts at such hubris. Some non-Biblical versions of this story have God destroying the Tower of Babel as a punishment.

Whether or not you believe the story of the Tower of Babel, ancient insight into the human condition recognised the dangers our species can pose to itself when it becomes too assured in its ability to control all that it is surrounded by.

Sadly this lesson appears lost on modern central planners.

 

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23rd October 2013 — The taper is off

I spent much of the last week toying with the idea that the taper might be back on at the end of this month. I was starting to build a plan to short the market, figuring I’d spotted something everyone else had missed.

Sadly this turned out to be nothing more than vanity!

After the “deal” that was reached last Wednesday to extend the debt ceiling (again!), I wondered if this might have removed the political uncertainty, which had such a bearing on September’s Bernanke Blink. Looks like I was wrong.

When trying to anticipate anything to do with the Fed over the last few years, the best thing to do has been to wait and see what Jon Hilsenrath has had to say. It is well known that the chief economics correspondent of the Wall Street Journal is Bernanke’s favoured mouthpiece in the free media.

 

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17th October 2013 — Debt ceiling extended, taper back on, short stocks?!

If it wasn’t for the last minute, nothing would ever get done in American politics. For the third time in a row, a compromise was reached, seeing the debt ceiling temporarily extended, the government reopen and the crisis averted.

In reality, absolutely nothing of any substance was achieved last night, other than a further delaying of the inevitable. America’s structural deficit remains unchecked and the shutdown of the last few weeks will prove to be utterly pointless, as federal workers will receive back pay. The Federal Government is now permitted to continue borrowing until February 7th next year.

This might sound like we have four months to wait until the next installment of this never ending drama, but there are some potentially significant repercussions of what has happened in the last few days, which could have altered the landscape dramatically.

 

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October 15th 2013 — Hedge your bets; 48 hours from an American default

If you are not watching this story, it’s time to switch on. The deficit ceiling debacle is back in full force. News crossed the wires, about an hour ago, that the Republican leaders in Congress have had to admit defeat in their efforts to provide an alternative plan to the bipartisan agreement, which is taking shape in the Senate.

We are now just over 48 hours from a US Default.

While the odds are still against this actually happening, they have nevertheless just shortened significantly.

The Democrats have a new found hardness about them and it looks like they are determined not to blink first in this latest fractious standoff.

 

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14th October 2013 — The will get rid of the debt ceiling (at some point)

Last week’s joyous market rally, in response to the Republican offer to extend the debt ceiling by six weeks, was absurd. Quite exactly why a marginal stay of execution was a reason to buy stocks is beyond me. American politicians have had over two years to reach a resolution, since the deficit ceiling became a full-blown crisis, so why should we have expected any magic after six more weeks?

But whatever the case, clearly this time was reason enough for stocks. On reflection, I suppose it’s quite simple really. When the market wants to go up, it goes up, defying logic and reason. Either you choose to go with it or you get out of the way. For what it’s worth, I’m electing to do the latter for the time being.

 

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12th October 2013 — The Baltic Dry Index screams buy miners

The Baltic Dry Index (BDI) couldn’t be sending any clearer message for resource investors at the moment. It is screaming, as loud as it can, to buy mining stocks!

For once I am not talking about precious metal miners, but rather the producers of raw materials, with real industrial and commercial applications.

 

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4th October 2013 — Eye on AIM

I am increasingly exasperated with London’s Alternative Investment Market. It’s broken. There are no two ways about it. AIM’s structural faults are so obvious that I cannot see how it will possibly last in the long run. I, for one, will perform a delighted little jig on its grave, when it eventually goes the way of the Dodo.

As a private speculator (there are no investors at this end of the market), day in day out, I see the same shoddy practices repeated over and over on AIM. Excessive compensation, terrible operational performance, obfuscating RNS announcements (even if “Nomad approved”, ha ha!) and absurd broker valuations are just some of the ills, which afflict this market.

 

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