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O! Bama!

Bill Bonner — Wed, 21 Jan 2009 13:06:43 +0000

Today’s the day… the whole world turns its weary eyes to you. Never before have so many people counted so much on just one man.

“Obama’s moment arrives,” says the International Herald Tribune. “World needs Obama to succeed,” begins an editorial in the Financial Times. “The Hope of the World,” says one Paris-based magazine… with a photo of Barack and Michelle on the cover.

In the torrent of words and pictures are two thoughts: One, a sense of achievement and pride… in that Americans elected the son of an African as their top man. It is thought to mark a major step forward for the whole human race. We have risen above our prejudices… and our past. At least, that’s what they say. Two, there is an expectation… or perhaps only a wish… that this man can somehow keep the world economy from falling apart.

As to the first thought, we have no opinion. We were never able to get into the spirit of racism. In fact, we were suspicious of it. People don’t really care about race; it’s culture that matters. Culturally, Barack Obama is as white as snow. But who cares? Most of the white men elected to America’s highest office were either numbskulls, chiselers or frauds. There’s no reason to think a half-black man will be worse or better.

But as to the second thought, we have a number of opinions… most of which you have suffered already, dear reader.

Here at the Daily Reckoning, we wish Mr. Obama well. But it is not wishes that make people wealthy. It is work, saving, innovation, and luck. And it is not wishes that fix a post-bubble economy… it is a bust. Best to let it happen.

But we are alone in that opinion… as in so many others. Everyone wishes the errors of the bubble years would just go away… that the bust would disappear. Of course, it doesn’t work that way. Instead, the errors of the last boom/bubble period – known as the ‘Great Moderation’ – get passed to the Obama administration along with the keys to the washroom. And now, the whole world looks to the captain of the team… waiting instructions.

And here we turn to the rest of the news. Markets in the US were closed yesterday. But Britain had its worst day in years. And today, Asian markets are trading lower… because of the problems in the banking sector.

“Blue Monday,” the Daily Telegraph calls it. The Royal Bank of Scotland has just reported the biggest loss in British history – 28 billion pounds worth. Its share price lost 67% yesterday – also a record breaker.

The Brown government is on the case… like the Obama government on the other side of the Atlantic. Last week, the Bank of America got a $138 billion handout. And Merrill Lynch got guarantees covering $118 billion in dodgy assets. This week, what fixes will her majesty’s government come up with? What magic wand will the chancellor wave to make the bust go away?

We remind readers that the Brits were America’s closest sidekicks during the boom years. As American house prices soared… UK house prices soared even further. And as Americans went deep in debt, the Brits went even deeper. Those were the days when the Bubble Gang robbed the banks of capital – paying out huge fees and bonuses… rewards for making the worst deals and investments in the industry’s history.

RBS, for example, is in a jam because its managers went on an acquisition spree – including the biggest banking deal in UK history, the purchase of ABN Amro for 49 billion pounds. Each acquisition was like a conquest, celebrated with champagne and bonuses. But did RBS have 49 billion? Of course not. It borrowed the money; it was a leveraged deal. And naturally, now that the bubble years are over, it’s having a tough time paying the money back. Mistakes have to be corrected after all.

And so the Brown government has stepped in. From an initial bailout of Northern Rock, which put the government on the hook for 55 billion pounds in September ’07, the taxpayers’ potential liability has grown with each step of the banking crisis. In September 2008, it was Bradford and Bingley that needed a bailout. Then, the whole sector needed credit guarantees… and a special liquidity scheme was added in October… followed by further insurance and a “toxic asset” buy-up plan a few weeks ago. Now, the total at risk is nearly 1 trillion pounds… or nearly $50,000 per UK taxpayer.

Bloomberg reports: “The pound dropped to a record low versus the yen and the weakest level since 2002 against the dollar on concern the government will have to rescue more banks as the economy slips into its worst recession since World War II.”

Jim Rogers says: “The UK is finished”.

“I would urge you to sell any sterling you might have,” said Rogers. “It’s finished. I hate to say it, but I would not put any money in the U.K.”

The Commonwealth Bank of Australia said there was “a high risk of a cut to the country’s credit rating outlook”.

That’s bad news for the value of the pound. It has today fallen below $1.40. It’s slumping against the euro as well.

“One more bad piece of news – like this month’s jobless data, for example – should really help it on its way down,” says Theo Casey of The Fleet Street Letter. He has a way to play it:

“How you could make money as the pound is crushed…”

*** It was only a few months ago that Mr. Brown stood before Parliament and misspoke… “We have saved the world…” he began… before the MPs started laughing.

He meant to say that he had saved British banking with a 37 billion pound program. But even that turned out to be wishful thinking. Now, he’s back with another 350 billion pounds in rescue money. The earlier saving grace put 20 billion of the taxpayers’ money in RBS. That now looks like a poor investment; the bank is only worth 5 billion. But that doesn’t stop the politicians from putting bad money after good. Besides, they’ve got plenty of bad money… and are about to have a lot more.

Yes, dear reader… we have confidence in our central banks. And our confidence was raised even higher after reading this report in the Telegraph:

“Bank of England edges closer to ‘printing money’” says the headline.

The report continues:

“Under the scheme’s terms, the Bank will be able to buy assets including corporate bonds and commercial paper, a move which Mervyn King, the Bank’s Governor, called “an important additional tool to improve financing conditions in the economy.”

“The asset purchase facility does not in itself amount to quantitative easing or ‘printing money,’ because the scheme initially will be financed by Treasury Bills and does not involve an increase e in the money supply.”

And here’s the money paragraph…

“However, the Treasury has given the Bank’s Monetary Policy Committee the option to go down that road by extending the scheme at a later date and paying for assets with what amounts to newly created money…”

Now, all three of the Western world’s leading central banks – the Fed, the ECB and the BoA – are ready to print money. And the big question before us is how long will it take them to get the printing presses oiled and working properly?

Mr. Obama enjoys more “political capital” than any leader in history. The whole planet – and perhaps the whole galaxy – is rooting for him. What will he do with it?

As for his inaugural speech, Mr. Obama is expected to appeal to the public’s residual sense of heroic civic service.

“Ask not what the banks can do for you… ask what you can do for the banks,” he is likely to say… Just kidding, of course. That is what he is likely to do, but not say. Everyone believes the banks need more money. He is likely to give them more. How? Using the “quantitative easing” technique… otherwise known as printing up money. The banks, of course, will not lend… and people will not borrow. They’re not fools. So, then, the Obama administration will begin pumping harder…like they do in Zimbabwe.

*** Zimbabwe just released a new bill – the 100 trillion dollar note, said to be worth about 33 US dollars yesterday. Today, it is worth about $16. Tomorrow, it will be worth about $8. Within a week or two, it will be as worthless as all the other notes the Zimbabweans have printed.

Of course, we’re a long way from there. Many prices in the US and Britain are actually falling. The feds still don’t have the printing presses working properly. But they’ll get the hang of it; we’re sure of it.

A Zimbabwe-style inflation may seem unlikely. But is a US-style inflation, circa 1970s, unrealistic? That too, was caused by policy errors, says Robert J. Samuelson. The feds were so eager to promote full employment, he writes, they caused stagflation. Consumer prices were rising at a 13.5% rate by 1980. Unemployment reached as high as 11%.

Those rates weren’t the end of the world. But they were the end of an era. Stocks fell from a high in 1966 down to a low 14 years later. And bond yields went in the opposite direction. From the lows of the ‘50s and ‘60s… they were in the double digits by the early ‘80s. Then, of course, stocks and bonds bottomed… and a new boom began.

The average bear market in stocks takes about 15 years to reach. Looking at it from our usual happy, positive perspective, we put the beginning of the bear market in January 2000. Since then, stocks are down in real terms. If the bear market were to last 15 years, you could expect the bottom six years from now… at prices probably about half what they are today.

But never before have so many financial policymakers been so determined to prevent a correction. How? By causing inflation. Our guess is that they’ll get the hang of it long before the bear market has run its course.

“Inflation could return sooner than you think,” says MoneyWeek magazine. “Instead of deflation, by the end of this year we could have the beginnings of really rapid inflation,” said hedge fund manager Jim Mellon, “which could get out of control, particularly in America.”

“It could be a year… maybe 24 months,” said an old friend yesterday. Terry Easton, who put the key question to Ben Bernanke last week, thinks Obama will follow Roosevelt’s program.

“Secretly, bankers are already being advised about how to handle a bank holiday,” says Terry. “There will be limits on how much money you can take out of a bank. And probably limits on what you can do with it.”

There will probably be controls on trading gold… that was one of Roosevelt’s plan too. And probably a national health care program. And who knows what else.

And until they get the inflation pumps working again, look for falling prices on stocks, houses… and just about everything else. Unemployment will rise higher than almost anyone expects. The Chinese economy could implode. Fortunes will change hands… with just about everyone ending up a net loser. Businesses will go bust. Malls will be closed. Banks will be nationalized (even more than they are already).

*** It’s eve of the Feast of St. Agnes tonight… looking for a husband? This is your big chance…

St. Agnes that’s to lovers kind Come ease the trouble of my mind…

- Keats

Source: O! Bama!

Bradford and Bingley’s White Swan Event

Theo Casey — Mon, 02 Jun 2008 20:23:19 +0000

When is a Black Swan not a Black Swan? When the “perfect storm of highly improbable events” happens all the time.

Nicholas Nassim Taleb coined the term Black Swan to explain how massive unforeseen events have the greatest impact on markets. But only the most naïve and optimistic of investors was not expecting further fallout from the abominable banking sector.

Bradford & Bingley (B&B), like Northern Rock, RBS, Alliance & Leicester, Barclays and HBOS before it, is in the spotlight and in a lot of trouble.

The company has launched a £258m rights issue at an offer price of 55p a share. They are set to issue a profit warning. Steven Crawshaw has stepped down as CEO. And they have agreed to sell 23% of their shares to Texas Pacific Group (TPG) Capital, a US private equity firm for £179 million.

This “perfect storm” hit the firm so hard that the FSA were forced to come in and suspend trading in the shares.

The downturn in the buy-to-let housing market means the UK’s eighth largest bank, from £3 billion in 2006, now is worth a mere £404m — less than Dignity funeral care. Which is shocking, viewed in isolation.

But, I’m pretty blasé about all of these rights issues and share plunges. Anything happening in the banking sector is a write-off (pun intended). Regular readers know that I’ve no interest in bottom-fishing for ‘bargain’ banks.

Despite my antipathy, I have been constantly advised to pile into banking shares. In the past 3 months I’ve been told:

To buy Barclays at 510p; the shares are now 363p;
To buy RBS at 330p; now 222p;
And to buy HBOS at 497p; now 368p.

All three tips were made, among other things, on the basis of big dividend yields, which seem to cover a multitude of sins.

Except they don’t. All three tips have incurred a greater capital loss than their total annual dividend payout would compensate for. And, none of these three firms is paying a dividend in cash. They’re paying them in shares instead.

This only serves to hurt the per share profitability, which lowers the already low share price… not what the dividend hunters signed up for.

The world’s worst stock tipper

I will no doubt receive another tip for Bradford & Bingley. Why do the tippers persevere with banks?

Because the culprit ultimately responsible for all of these tips is still at large, pushing bank stocks like never before.

Let me now reveal to you who that culprit is. This is today’s the print-out from my Bloomberg terminal, objectively ranking stocks by their value credentials:

Bradford & Bingley, Score: 99:89
Alliance & Leicester, Score: 83.96
HBOS, Score: 80:86
Barclays, Score: 78.68
RBS, Score: 76.42

Blame the machines.

Across the entire UK stock market, banks are the five best value investments around today. And it’s not just Bloomberg… running any value ‘stock screen’ from Reuters, to Digital Look, to Zacks, to ADVFN produces the same result. This is what every investor and fund manager has been seeing on their screens since late-October.

In objective terms, these are the shares to buy. But anyone who’s been following this advice over the last 12 months has lost, and lost big.

There are two ways to look at investments, bottom-up and top-down.

Bottom-up investing uses stock-screens — systems that zero-in on company fundamentals. Think of it as tunnel-vision investing. In a bull-run, it is a great way to buy stocks. I used to build stock screens for a critically-acclaimed investment service, so I can personally testify to how effective they can be.

Top-down investing is quite different. This method is far more big picture. The first question is not ‘What company should I look at?’ It’s ‘What assets should I look at?’

Top-down investors are not only looking at numbers, but at sentiment and market opportunities outside of a machine’s scope.

While neither method is perfect, in a market downturn it is essential to think big.

Bottom-up investing can lag reality — in the 2000 bear market, stock screeners were picking out the companies that had fallen hard and were more value trap than value opportunity. The same thing is happening here. A system is not a substitute for common sense.

If the market falls by 20%, you have to sit up, take notice and, depending on the portfolio, take action.

The fallout was an opportunity to re-evaluate and find safe-havens for your money. Those who did this have profited in the last six months. Those who had well diversified portfolios in a variety of sectors have probably broken even.

Those who held the ‘good value’ banks, house-builders and retail stocks must now take drastic action to pull things back.

Theo Casey

Source: Bradford And Bingley’s White Swan Event

Old Europe, New Growth

Rob Mackrill — Thu, 15 May 2008 19:13:49 +0000

A spritely performance from “Old Europe” – France and Germany – helped Eurozone growth exceed expectations in the first quarter.

Down in Putney, along the bank of the Thames, there’s an oldish Jag parked on a side street with a personalised number plate. Given the one time reliability reputation of Jags, it was perhaps chosen with some justification.

It reads: PE51MST.

The word fits the view prevailing on the UK economic outlook – whether you’re a central bankers, a politician or most likely amongst the majority economists call ‘consumers’. Bad news is chasing us down the street…

The Bank of England says it could be recession down the road. Inflation is going up for some time to come – north of 3%, unemployment is starting to edge up too, credit is harder to come by and costs more – in spite of the best efforts of the Bank of England, house prices are going down and house building has slumped, commercial property prices have too – by 16% since last summer says the Bank of England. Our leading banks have lost billions – Barclays announces another £1bn write down this morning – and once proudly touted government golden rules on borrowing become instead lead weights around Gordon Brown’s increasingly vulnerable neck.

Okay so we’ve had our fill of the bad news. Is there anything we can be OPT1M1ST about? Well, looking at the stock market Mr Market’s mood appears to be cautiously more positive. The FTSE 100 hit a low for the year to date on March 17 closing a little over 5,400. It’s up 15% since at a little over 6,200. MoneyWeek is bullish on Japan and the Nikkei is showing signs of recovery. It hit a four month high close today.

UK stock market sentiment as measured by Sharescope has risen since its March low though remains marginally bearish. As we’ve said, stock markets are the great expectation machines and always straining their eyes on the horizon to see what’s coming…then discounting it before it arrives.

The worst of the credit crisis is over they say but as we can see from Barclays latest £1bn write down and collapsing bank shares, it is by no means over. The FTSE 100 is marginally higher today yet RBS, a constituent of it, has slumped 14%. The bank has given up half its market value over the past year, a grim stat that causes some degree of personal financial pain to your editor. Given the bank is reported to be sounding out shareholders about the level of support for top management; it has hardly a vote of confidence.

Commodities have edged down from their highs perhaps only temporarily but no boom lasts forever. Central bankers will hope this one ends sooner rather than later and the market price mechanism will assert itself once again as the universal regulator of demand. Oil is a little down from its high at $124 and food prices are showing signs of stabilising reports the FT.

As for the Eurozone, “old Europe” – France and Germany – is leading the charge. European growth in the first quarter came in at 0.7% against consensus of 0.5% and that in spite of the drag of sluggish Med economies such as Spain and Italy.

Growth has hit its fastest pace in 12 years in Germany and surprised on the upside in France. Eurozone rates remain at 4% as inflation has bubbled up to a 3.6% high in March, easing to 3.3% in April. If he can keep that virtuous cycle going in the face of ‘cost shocks from abroad’ the European Central Bank’s Jean-Claude Trichet will be in clover.

*** News from the frontline on the ongoing creative destruction of traditional print media… Johnston Press plc, a regional newspaper publishing business with a heavy debt load, is raising £200m plus in emergency funds as ad revenue wilts under the pressure of the internet.

“Traditionally,” reports the Independent “three-quarters of its revenue comes from ad sales.” Those sales have been falling relentlessly. Last year classified ads fell over 3%, car ads more than 8% and larger display ads 4%. Ad revenue fell another 4% in January and February this year. We’ve said it before, we’ll say it again. Sooner or later someone is going to start closing newspapers.

Regards,

Rob Mackrill
The Daily Reckoning

Source: Old Europe, New Growth

Neglected British Excellence

Tom Bulford — Fri, 18 Apr 2008 19:54:58 +0000

City short-termism continuously ignores high quality businesses until a predator bids for them.

Back from holiday I trawl through ten days of company announcements, to find that one of my supposedly long-term relationships may soon become no more than a quick affair. Raymarine, a company that I had tucked away in my ISA has announced ‘a preliminary approach which may lead to an offer.’ The share price has duly jumped and while this, like a swig from a whiskey bottle, gives me a quick thrill I am not so sure that it is good for my long-term financial health.

Good investments are hard to find. My hunting ground, the UK stock market, does not offer an unlimited supply of world-beating companies. So when I find one that is growing its profits, paying rising dividends, making astute acquisitions while all the time focusing on an area of undoubted long term growth I am in no hurry to give it up.

If a bid does come, then I can only hope that I get a proper price for my shares, and that this is not an attempt by the management to take the company private on the cheap – for which, by the way, I could hardly blame them.

This is a view shared by Adam Steiner, of SVG Investment Managers, which has a 0.39% stake in the company. In his opinion ‘Raymarine is a highly coveted asset in a long-term growth market and should appeal to private equity and trade buyers alike, of which there are several potential ‘fits’ in the market place….we would be surprised if shareholders would accept an offer below the price at which the company was trading a year ago’ – which was 450p.

We shall see. But what really echoes is the term ‘a highly coveted asset.’ Raymarine sells all manner of necessary equipment and instruments for the boating crowd. Now my boating experience is limited to one brief and unhappy sail around Poole harbor during which I somehow managed to lose my spectacles overboard and then spent the afternoon regurgitating the greasy mackerel that had been served up for lunch. But I don’t mind looking at boats from the safety of dry land, and whenever I get within sight of the sea I notice marinas absolutely stuffed full of them, all clearly owned by people with money to spare. So I reckon that Raymarine, which sells radar systems, chartplotters, fishfinders and other such gadgets should be on to a good thing.

And yet the shares trade on no more than ten times this year’s earnings. So if this is the ‘highly coveted asset’ that I think it is, or at least should be, this is certainly not reflected in today’s share price. Despite the fact that luxury yachts are not typically owned by those facing foreclosure on their mortgages, Raymarine seems to be suffering from a generalized fear about the spending power of the US consumer and also from the desire of panicky City fund managers to convert any holdings in small companies into cash at the first opportunity.

This is not an isolated incident. Another esteemed UK manufacturing company Enodis has accepted an offer from the Manitowoc Company of Wisconsin at 260p per share – an 80% premium to the price prevailing in the stock market. Engineer FKI is facing a bid from Melrose. Titan Europe, which makes huge wheels for tractors and earthmovers, has received a bid from US parent company Titan International. Oil services company Expro International is facing competing take-over bids and looks likely to follow two other small manufacturers in this sector Sondex and MTL Instruments, both of which have been bought by larger rivals from the USA.

Without exception these bids have been at substantial premiums to the value placed upon these companies by the London stock market. It is clear that City investors, obsessed as they are by short-term performance and unable to look beyond the next earnings report, simply do not understand the value of these companies.

It never fails to amaze me that a company can be scorned by City fund managers for year after year – and then suddenly a take-over bid comes along and no price is too high. It amazes me, but it does not upset me too much because it is precisely this brainless short-termism that gives you and I the chance to buy great companies at great prices. So where should be looking, now?

Contrary to the popular view that UK manufacturing industry is dead and buried there are several manufacturing companies based in this country that have fine records, excellent prospects and a global reputation for excellence. It is true that some of the manufacturing itself might now be done overseas, but the intellectual rights and the ownership reside in this country.

Off the top of my head I would place Domino Printing, Renishaw, Cobham, Vitec, Spirax-Sarco and Hamworthy in this category, and I am sure there are several more. Any of these could fall into the hands of a larger overseas bidder at some time. So buy quality – and you might get a nice surprise!

Regards,

Tom Bulford
For The Daily Reckoning

Editor’s note: This is an extract from Tom’s free e-letter The Penny Sleuth. Tom is also editor of Red Hot Penny Shares and The Bulford Files. Previously he worked as a fund manager in London and Hong Kong for more than 20 years.

Going Cheap – UK Manufacturing Industry

Tom Bulford — Thu, 17 Apr 2008 17:02:55 +0000

Great businesses at bargain prices…Especially in manufacturing…Take a look at this quality going cheap…Back from holiday I trawl through ten days of company announcements, to find that one of my supposedly long-term relationships may soon become no more than a quick affair. Raymarine, a company that I had tucked away in my ISA has announced ‘a preliminary approach which may lead to an offer.’ The share price has duly jumped and while this, like a swig from a whiskey bottle, gives me a quick thrill I am not so sure that it is good for my long-term financial health.

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The situation is not uncommonThis is not an isolated incident. Another esteemed UK manufacturing company Enodis has accepted an offer from the Manitowoc Company of Wisconsin at 260p per share – an 80% premium to the price prevailing in the stock market. Engineer FKI is facing a bid from Melrose. Titan Europe, which makes huge wheels for tractors and earthmovers, has received a bid from US parent company Titan International. Oil services company Expro International is facing competing take-over bids and looks likely to follow two other small manufacturers in this sector Sondex and MTL Instruments, both of which have been bought by larger rivals from the USA. Without exception these bids have been at substantial premiums to the value placed upon these companies by the London stock market. It is clear that City investors, obsessed as they are by short-term performance and unable to look beyond the next earnings report, simply do not understand the value of these companies.

Until next time,

Tom Bulford
for The Penny Sleuth

PS: I write a newsletter each month called Red Hot Penny Shares which delivers exciting small company share tips to a loyal set of subscribers. My latest Red Hot company has a ‘Torpedo Technology’ that could unlock an energy supply bigger than Saudi Arabia’s! To discover more click here.

PPS: I also research for an exclusive group of serious investors through my alert service The Bulford Files. Concentrating on ‘Hidden Value’ companies my current share tip is a company with hugely undervalued land assets! To learn how to get involved click here.

This Week’s Market Mover?

Frank Hemsley — Wed, 09 Apr 2008 20:03:22 +0000

Will there be a cut at all? Looks like a half-point is out. Gold continues to confuse – here’s how you can buy it cheaply ahead of the next leg higher. Will margin calls lead the property market lower?

One of the potential market movers this week – for both
the UK stock market and the forex markets – is the Bank
of England rate decision tomorrow.

My learned colleague, Ben Traynor, picked up on this in
today’s Fleet Street Daily e-letter…

—————————
Will there be a cut at all?
—————————

“The doves are out in force. The Bank of England’s
Monetary Policy Committee (MPC) meets tomorrow, and an
interest rate cut is most definitely on the agenda.

“Pretty much everyone, from homeowners to the
Confederation of British Industry (CBI) wants rates to
come down… the market has priced in a quarter-point
cut… and what’s this? Gordon Brown – the same Gordon
Brown who, as chancellor, granted the Bank operational
independence in 1997 – is also sticking his beak in.

“If you look at this situation, because we’ve got low
inflation we can cut interest rates,” the prime
minister said.

“Hang on, Gordon. Isn’t the MPC is supposed to set
rates independent of political considerations? Naughty,
naughty Mr Brown…

“In fact, there’s some speculation that Brown’s
comments may have angered the MPC hawks, who’ll now
argue more fervently to keep rates on hold. I’ve said
before I’ve got this hunch the MPC might take the
chance to wrong foot the market and boost its
credibility. Now that Brown’s lumbered into the debate,
might that now prove too tempting a proposition?”

Ben follows the UK economy closely for his readers and
tries to piece together events as they unfold,
examining how they affect the big picture… and what
it all means for investors.

Each working day he writes a round-up of the big events
that are moving the financial world – to keep his
readers one step ahead of the crowd. If you have a
second, sign up to Ben’s free Fleet Street Daily email:

http://signup.fspinvest.co.uk/LF/fsd.html?newsourcecode2=XFSDD304

————————————-

Looks like a half-point cut is out…
————————————-

Ben’s right about most people calling for a quarter-
point cut. In fact, 81% of economists surveyed by
Bloomberg have predicted a 25 basis point cut in UK
base rates when the Bank of England announces its
decision on Thursday at noon.

And whilst there may have been an outside chance of a
50-point cut – given the volume of bad news coming out
about the UK economy and the latest housing market data
– this morning’s better than expected UK manufacturing
output data should put paid to such drastic measures.
Personally, I doubt it’s strong enough to keep the Bank
from a quarter-point, though.

And with the European Central Bank likely to keep their
rates on hold, once the UK rate cut is announced, we
could see further pressure on the pound which is
hitting all-time lows against the euro on the back of
all that bad news for house prices and the IMF’s latest
UK growth forecasts.

And if we get anything totally unexpected tomorrow,
then watch for the market moves.

————————-
Gold continues to confuse
————————-

Meanwhile, gold’s not done with sending confusing
messages to traders. Anyone who’s been making lots of
money spread betting the shiny yellow stuff all the way
up from $600 or so must be hating all this indecision.
Gold is no longer a one-way ticket…

I’m still in the bullish camp – even if $1,000 seems a
long way off again. We all know just how quickly gold
can move, once the conditions are right. There could be
some more profit taking still to come… but gold will
likely be higher than it is now in six months time.
It’s just a case of waiting for that next leg higher.

Adrian Ash from BullionVault follow’s gold’s moves
daily. If you’re keen on knowing what makes gold move,
he’s a good guy to know about – here are his
observations today:

“Spot gold prices slid into the London opening on
Wednesday, reaching a four-session low of $903.60 per
ounce before bouncing 1.4% to recover the day’s losses
on news that US gasoline prices have reached a new
record high for consumers.

“The average price of regular unleaded has now risen to
$3.343 per gallon according to the AAA survey, almost
20% higher from this time last year.

“International commodity prices meantime reversed an
earlier 0.5% fall, while the US Dollar fell on the
currency markets and Wall Street stocks opened lower
from Tuesday’s close.

“The subprime crisis presents a strong case for gold,”
said Philip Klapwijk, head of the GFMS consultancy, at
the launch of the group’s Gold Survey 2008 today
in London.

“Pointing to growing risk aversion amongst investors,
negative real rates of interest on the US Dollar, and
sharply falling earnings from S&P equities, Klapwijk
also noted a hitherto overlooked threat – a “sharp
deterioration” in the United States’ fiscal position as
a result of “the Federal Reserve’s largesse” in bailing
out Wall Street banks.

“We’ve been told by pension and other institutional
investors that they’ve been looking at gold for a long
time,” Klapwijk said.

“Now they’ve taken a position – or they’re just about
to – they say they won’t be distracted by short-term
moves in the price.”

Check out BullionVault if you’re thinking of taking a
position in gold – the dealing is very cheap and the
service totally unique. Check them out here:

http://www.bullionvault.com/Gold_Made_Simple_Safe.do#profitwatch

Please Note! Profit Watch will earn a small referrer’s
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service – giving you direct access to live gold market
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————————————————-
Will margin calls lead the property market lower?
————————————————-

The key to the property market – and whether this
latest headline-grabbing 2.5% fall statistic has more
serious implications – looks to be buy-to-let
investors, specifically the ones who stumbled into it
late, when the party was in full swing. I’m talking
about all those people who got sucked in over the past
two or three years by the “Become an armchair property
millionaire!” newspaper ads for property seminars
promising spectacular gains.

A rush to the exits by these “greater fools” as they
start receiving margin calls from their buy-to-let
mortgage lenders and we’ll start seeing a new surge of
supply in the market and lower or at least
stagnating prices.

Wow! Look at the oil price! $111 a barrel – more on
this and how to play it as we work it out…

That’s all for today.

Until Friday…

Best regards,

Frank Hemsley
Profit Watch

P.S. Don’t forget the deadline for Time Trader. You’ve
just a few hours left if you want to join the next
trade. Click here for details:

http://click.fspeletters.com/t/15742/1632470/156437/0/