Archive for November, 2012

Roll on Eurogeddon!

Thu, 29th Nov 2012 Leave a comment

I had an interesting “subscribe before it’s too late” e-mail from MoneyWeek a few days ago (click here to read it). They argue that Britain is basically broke and inevitably doomed to return to the 1970’s, a la Greece, and I have considerable sympathy for their view. It’s not just Britain though; the entire Western world (with the honourable exception of Germany) has so much debt that it is effectively bankrupt and when the markets finally accept this, everyone will be in for major upheaval.

I suspect it will start with the Eurozone – no amount of austerity will enable those countries to balance their budgets and the European Central Bank will have to start printing money to fund their deficits. This will lead to high inflation which will spread to the rest of the Western world (yes, even the mighty U.S. of A.) as their budget deficits come under scrutiny. Inflation will lead to higher interest rates and that will make Western government debt unserviceable. In order to avoid hyperinflation of Zimbabwe proportions, governments will have no choice, but to accept defeat and default on their debt.

Categories: The Economy

No change there then!

Sun, 18th Nov 2012 Leave a comment

Chart of FTSE-100 at 16th November 2012

The FTSE has declined to support at 5600, falling significantly less that the Dow, and looks ready to bounce. Its fast stochastic is in single figures which is usually a good indicator that a bounce is imminent.

Across the pond, the US elections left things unchanged and the markets shifted focus to the “Fiscal Cliff” after a slight election day bounce, so it almost went to plan. The only aberration was that the bounce in the Dow didn’t reach the 50-day moving average (see below).

Chart of Dow Jones at 16th November 2012

The Dow has declined 1000 points in the last month or so, a fact which seems to have provoked surprisingly little comment. It has hit a major support level now though, at 12500, and its fast stochastic is also on the floor suggesting that a rebound is in order. It is difficult to see how big that might be, but I think getting back to the 13250 area is quite possible, particularly if the compromise noises coming from the Republicans amount to anything concrete. Tax rises have been a red line for them up to now, but, if they compromise on that, the fiscal cliff problem could dissipate quite quickly and we could see a substantial rebound.

Categories: Fiscal Cliff, Stock Market

On track so far …

Thu, 1st Nov 2012 Leave a comment

Chart of FTSE-100 at 31st October 2012The FTSE has gone mostly sideways as I suggested it might in my last post, but, to be honest, there is nothing really to suggest the next move to me.

Chart of Dow Jones at 31st October 2012Looking at the Dow, there has been more of a decline in the last couple of weeks and the flat bottom is suggesting a bounce back to the 50-day moving average (the green line). However, while my predictions of the FTSE have a reasonable success rate, my track record with the Dow is not very good, so I am not very confident. If it were to go to plan however, I would be looking  for a significant dip after that on both the Dow and the FTSE.

According to what I have been reading recently, the US markets have been worried about a Romney victory as he is much less keen on QE, as well as the prospects for inflation, so next week’s presidential election could be a significant event for the Dow.