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No6's Financial Markets Thread


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What has the Naked Trader, a.k.a. Robbie Burns been up to? He seems to merrily go on his way, making profits, enjoying the upside, but with an eye to what could happen. I like Robbie's honesty, he doesn't claim to be a great market technician or guru, just keeps it reasonably simple and picks more winners than losers.

 

===============

 

Markets

 

 

When markets are on an uptrend it's fascinating to see how they also lunge down from time to time to catch as many people out as possible. That's the way it is. A bit like poker - do you hold your hand or fold?

 

In the main my hand is still out there!

 

Anecdotal evidence can often be the best reason to carry on holding. Cab drivers tell me their business is back to where it was a couple of years ago.

 

Starbucks seems to be permanently full. Indeed yesterday I waited in a queue while someone spent £30 on coffee and those horrible addictive cold drinks that are full of crap and sugar. The restaurants are chokka and it's hard to get a table.

 

Of course it could be collective madness as we carry on living on debt and Quantitive Easing. I guess we'll find out in time but for now there is some confidence out there.

 

With the portfolio continuing to gain nicely I don't actually feel I need to "trade" much - with the money rolling in it's kind of if it ain't broke don't fix it for me. I'm fully invested in Isas and I never add any extra money in so to buy something now I need to sell something and there's not much I want to sell. I did manage to get a nice FTSE fiver long open at 5573 and another fiver at 5601 and have now raised the stop to 5650 so profits will get locked in if it dips from here. No science to it, just bought on the massive dip and scaled in. And got lucky.

 

http://www.nakedtrader.co.uk/index.htm

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Could be, but the market is entering its favorite time of the year, Santa rally. Showing some strength today which has surprised me.

 

SO what is a santa rally? Whilst winter months or more specific Nov-Jan may be statistically good, for me it is a period of a week or so prior to christmas, when even in a bear market, the feelgood factor overcomes longer term sentiment. Others may disagree.

 

Anyway remember reading some article a few years back about the positive returns to be had prior to the festive season, did my best to find said article but failed.

 

But came up with this from last year as some sort of explanation.

 

http://www.huffingtonpost.com/2009/12/21/s...e_n_399243.html

 

p.s Seen a few goodbye 11,000 dow calls of late, did they mean hello 11,100 + :lol:

 

 

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SO what is a santa rally? Whilst winter months or more specific Nov-Jan may be statistically good, for me it is a period of a week or so prior to christmas, when even in a bear market, the feelgood factor overcomes longer term sentiment. Others may disagree.

 

Anyway remember reading some article a few years back about the positive returns to be had prior to the festive season, did my best to find said article but failed.

 

But came up with this from last year as some sort of explanation.

 

http://www.huffingtonpost.com/2009/12/21/s...e_n_399243.html

 

p.s Seen a few goodbye 11,000 dow calls of late, did they mean hello 11,100 + :lol:

 

The santa rally is getting earlier and earlier, but not as early as the shops with their Christmas sales starting, well, about now.

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FTSE Gold and Silver miners seem to be ramping it up in recent weeks.

 

Hard to believe that you could have bought Fresnillo, a FTSE 100 company for less than a pound a couple of years or so ago. It shows you don't need to risk on juniors to make good returns on the gold bull run.

 

================

 

Mexico-based precious metals miner Fresnillo (FRES) revealed silver production reached a record level in the third quarter ended 30th September 2010, sending its shares up 40p to 1,281p. Silver production rose by 1.1% to 10.69 million ounces, while gold production was also on the up, with 91,822 ounces of the yellow stuff unearthed in the three months, a 44.4% increase on the corresponding period of last year. The company added that it was on track to achieve its production targets for 2010 of 340,000 ounces of attributable gold and 41.1 million ounces of silver.

 

Ahead of third quarter production results next week, Canaccord Genuity reiterated its "buy" rating for African Barrick Gold (ABG) with an increased target price of 840p, up from 720p. Although the challenges at Buzwagi are likely to have persisted into the third quarter, management has guided towards previously forecast production levels towards the end of the year. Thus, should results from Buzwagi begin to show progress, the broker believes the market will begin to review the group investment case at what is now a substantially higher spot gold price than at the time of the initial public offering in March 2010. The shares climbed 13.5p to 622.5p.

 

UK-Analyst.com: Wednesday 13th October 2010

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FTSE still seems to want to go up.

 

Mentioned African Barrick Gold above and this morning the price was down by about 10% at one stage. The news report below gives the reason and why sometimes with shares a bolt out of the blue can hit the price hard. Also, it perhaps shows the problems gold and silver miners may face in the future when it comes to security. Could also be a buying opportunity.

 

http://www.ft.com/cms/s/0/8b88c69a-d75e-11...html?ftcamp=rss

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Starbucks seems to be permanently full. Indeed yesterday I waited in a queue while someone spent £30 on coffee and those horrible addictive cold drinks that are full of crap and sugar. The restaurants are chokka and it's hard to get a table.

 

Of course it could be collective madness as we carry on living on debt and Quantitive Easing. I guess we'll find out in time but for now there is some confidence out there.

 

With the portfolio continuing to gain nicely I don't actually feel I need to "trade" much - with the money rolling in it's kind of if it ain't broke don't fix it for me. I'm fully invested in Isas and I never add any extra money in so to buy something now I need to sell something and there's not much I want to sell. I did manage to get a nice FTSE fiver long open at 5573 and another fiver at 5601 and have now raised the stop to 5650 so profits will get locked in if it dips from here. No science to it, just bought on the massive dip and scaled in. And got lucky.

You see risk hanging over the market, so wouldn't you only count yourself lucky when you sold at higher prices and booked the profits? Would you set yourself targets to sell?

 

But you also seem content to sit on your positions and "let the money roll in".

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You see risk hanging over the market, so wouldn't you only count yourself lucky when you sold at higher prices and booked the profits? Would you set yourself targets to sell?

 

But you also seem content to sit on your positions and "let the money roll in".

Me? The quote there was from Robbie Burns, also known as the Naked Trader, perhaps it wasn't clear, the link goes to his website? NT sets targets in his trading, but yes he does seem to be happy to let the money roll in when the market is going up. He doesn't seem to have the fear or bearish mentality that some have and he largely ignores doom and gloom scenarios and just gets on with doing what he does best. Not everyone has the temperament to do what he does, but he has been very successful and much of what he does is based on a keep it simple approach.

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One for those that think it is the calm before the storm.

 

==============================

 

Does this report show what's really happening to UK plc? Let's hope not...

 

UK plc looks as if it's grinding to a halt according to the latest figures released by insolvency advisor Begbies Traynor (LSE: BEG).

 

Of course, to paraphrase Mandy Rice Davies' famous quote, "well they would say that wouldn't they?". As insolvency advisors, it's good for business. And as an interesting aside, Begbie's shares were rocketing in the first half of 2008 when the rest of the finance world was falling off a cliff.

 

Nevertheless, there are some frightening data in there. Apparently, over 50,000 companies in the UK will be hit hard by cuts to public spending due to be announced next week.

 

Talk to most small consumer-facing businesses and the people directly involved and concerned with the bottom line will tell you the same in my recent experience. This is anecdotal stuff, but Begbies Traynor's report is at least based on real information -- however loaded it may be.

Companies in distress

 

The insolvency specialist reckons 123,361 UK companies are experiencing significant or critical distress. Quite what "significant" distress is isn't clear. It could cover a multitude of relatively mild sins, and small businesses aren't exactly the last to cry "wolf!" when feeling the pinch.

 

More telling, though, is the fact that companies with critical problems owe more than £57.5bn to creditors, suppliers and service providers according to Begbies.

 

http://www.fool.co.uk/news/investing/2010/...fwflwlnk0000001

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Me? The quote there was from Robbie Burns, also known as the Naked Trader, perhaps it wasn't clear, the link goes to his website? NT sets targets in his trading, but yes he does seem to be happy to let the money roll in when the market is going up. He doesn't seem to have the fear or bearish mentality that some have and he largely ignores doom and gloom scenarios and just gets on with doing what he does best. Not everyone has the temperament to do what he does, but he has been very successful and much of what he does is based on a keep it simple approach.

Oh right... yeah was a bit confused about who was saying what. Still, it struck me as a bit of a contradiction that he suspected the economy was due a downturn while being fully invested and letting his positions run. But then he also sets targets...? Now I'm confused. :lol:

 

Of course it could be collective madness as we carry on living on debt and Quantitive Easing. I guess we'll find out in time but for now there is some confidence out there.

 

Maybe I'm reading this comment wrong...... or the "for now" is a comfortably extended period of time, :lol:

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Oh right... yeah was a bit confused about who was saying what. Still, it struck me as a bit of a contradiction that he suspected the economy was due a downturn while being fully invested and letting his positions run. But then he also sets targets...? Now I'm confused. :lol:

 

 

 

Maybe I'm reading this comment wrong...... or the "for now" is a comfortably extended period of time, :lol:

 

You would have to read his book or follow his website to fully understand where he is coming from. He sets stops and targets as that is what traders tend to do, but if he has bought into something that is going up he often re-sets the stops and targets to take into account the uptrend, or down if he is short. Seems to make sense to me. One of the reasons why he is fully invested is because much of his trading is done via ISA's, which are available to UK investors as tax efficient financial instruments, in that you pay no tax on any profits. When it comes to share ISA's the only real choice is long investments, i.e. buying shares or ETF's.

 

Here's a comment he made a while back on his website re economics. I'm not sure that he does expect a downturn, by and large he doesn't mention economics very much, yet he makes a mint trading.

 

"I've been dallying with the idea of accepting the London School of Economics' invitation for me to speak to them.

 

I hardly ever accept speaking engagements. I've turned them all down - Investor Show? No, ta. Worldwide Traderinvestorflogthemyourbookoranythingelseyouwannaflogthem? No, ta. Go on you know you want to! No I don't really.

 

I don't have shiny powerpoint presentations with lovely looking slides. And I don't say what the organisers think they want the audience to hear.

 

And for me they're full of men in tatty old pinstripes trying to sell something to slightly weary but maybe this time it'll work investors. So I don't.

 

If you remember the LSE reckoned I could give an interesting talk on economics. I wrote and said I don't know the first thing about economics. In fact knowing about economics is bad news if you want to trade.

 

Good poker players are far more likely to make good traders than clever economist or accountants....

 

They don't realise trading is like a card game, it's you against others. Economics doesn't come into it. I've met economist and accountants simply too terrified to make a trade. Too worried about acid test ratios!"

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If you remember the LSE reckoned I could give an interesting talk on economics. I wrote and said I don't know the first thing about economics. In fact knowing about economics is bad news if you want to trade.

 

Good poker players are far more likely to make good traders than clever economist or accountants....

 

They don't realise trading is like a card game, it's you against others. Economics doesn't come into it. I've met economist and accountants simply too terrified to make a trade. Too worried about acid test ratios!"

Interesting comment... and now I fear I'm going to derail this thread from trading to economics. :lol:

 

I kind of see what he means about trading being a distinct discipline from economics but I wonder if the two can be completely separated.

 

I mean, the trader wants to make a profit right? The trader is then forced to ask how he can make a profit... in which currency etc. Doesn't this automatically entangle him in [macro] economics.... or at least in the fx market? If the trader bit the bullet here and insisted that what matters is only the numbers then wouldn't he then be susceptible to "money illusion", where money is [mathematically] identified with the units of a currency? I mean, isn't it possible for units to become more valuable relative to assets....and therefore less need to take risk in the market? Monetarism pretty much eradicated the idea of money illusion for investors/ traders, yet it was central to the depression economists Fisher and Keynes.

 

I can only see trading making sense if you have first a modicum of fundamentals/economics to give those trades some context.

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Interesting comment... and now I fear I'm going to derail this thread from trading to economics. :lol:

 

I kind of see what he means about trading being a distinct discipline from economics but I wonder if the two can be completely separated.

 

I mean, the trader wants to make a profit right? The trader is then forced to ask how he can make a profit... in which currency etc. Doesn't this automatically entangle him in [macro] economics.... or at least in the fx market? If the trader bit the bullet here and insisted that what matters is only the numbers then wouldn't he then be the victim of "money illusion", where money is identified with the units of a currency?

 

I can only see trading making sense if you have first a modicum of fundamentals/economics to give those trades some context.

 

Do you really think that all traders ask that question about what currency they want to make it in? I suspect that some do, but the vast majority that trade shares probably trade using the currency of the country they live in simply by default. I suspect that very few will get involved in the complexities of trying to move money in and out of various currencies unless they are currency traders. I think that what he is saying is that too much knowledge about economics can force you into a form of investment/trading paralysis, especially if you are prone to a bit of doom and gloom. You would never invest or trade in anything for fear of getting it wrong and thinking that you knew the potential downside because you know some economic theory. The interesting thing is that a trader like Robbie Burns has made a lot of money by not being that caught up in economics. He hasn't let it get in the way of his trading. Here's a very simple example. Let's say all the economic news is bad, but you find a company in a clear uptrend, but the general market is going down, what would most people do? I suspect that many wouldn't touch it because they would fear it reversing. Burns is the type of trader that would buy it as long as his reason for doing so is sound, i.e. the trend is up and fits in with his analysis. In that sense, screw economics, he backs another winner.

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End of the Bond market rally, shares to benefit?

 

Pimco sells US Treasuries ahead of QE2

 

Anticipation of more Fed stimulus to boost the world's biggest economy pushed the dollar to a 10-month low against a basket of currencies and the gold price to a new all-time high of $1,380.32 an ounce. Crude oil and grains also rose.

 

"There is practically no interest rate, so everyone is rushing into commodities and the stock market," Ronald Leung of Lee Cheong Gold Dealers in Hong Kong told Reuters.

 

Pimco believes developed economies will suffer slow growth and below average returns and is focusing on sovereign debt in emerging markets, such as India and China.

 

“Even if the QE [quantitative easing] process is large and rates decline further, in our view we’re approaching the end of the bond market rally,” Mr Hodge said.

 

“From where we sit, it’s very hard to suggest there’s going to be that kind of price appreciation that we’ve seen in bonds over the last 12 to 24 months.”

 

Mike Lenhoff, chief market strategist at Brewin Dolphin in London, agrees. In a strategy note titled, What Good Can QE Do?, he wrote: "If the Fed announces a QE program after the next meeting, how might the markets react? I suspect the Treasury market would sell off on the view that it was better to have travelled than arrived .. they are not likely to resist taking profits."

 

He said QE is likely to be seen as positive for economic growth and corporate earnings, which would benefit shares.

 

"Valuations have swung so far in favour of equities that, even with some rise in bond yields, the valuations are still likely to favour them strategically as the asset of choice - even if it led to higher yields on bonds," he said.

 

http://www.telegraph.co.uk/finance/economi...ead-of-QE2.html

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Burns is the type of trader that would buy it as long as his reason for doing so is sound, i.e. the trend is up and fits in with his analysis. In that sense, screw economics, he backs another winner.

 

And why not? Robbie studies shares more than markets, though as he has proved he goes both long and short on ftse calls.

 

No offence to R.H but I somehow doubt he will be taken by Robbie's style, yet he sets good guidelines and largely sticks to them, above all he proves it works.

 

To understand him you do need to read the books it's simple, honest and reminds me the virtues of tea and toast (pause for thought) if nothing else :D

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Mike Lenhoff, chief market strategist at Brewin Dolphin in London, agrees. In a strategy note titled, What Good Can QE Do?, he wrote: "If the Fed announces a QE program after the next meeting, how might the markets react? I suspect the Treasury market would sell off on the view that it was better to have travelled than arrived .. they are not likely to resist taking profits."

 

And what would happen to stocks then?

They usually rise, but not always. In fact, much of the rise may have occurred already.

 

Here's a chart showing TLT (the bond etf) versus SPX ... update

002ij.gif

 

The SPX-to-TNX ratio is already "strained" IMHO

 

TNX (10yr T-Note yields) versus SPX ... update

xx

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And why not? Robbie studies shares more than markets, though as he has proved he goes both long and short on ftse calls.

 

No offence to R.H but I somehow doubt he will be taken by Robbie's style, yet he sets good guidelines and largely sticks to them, above all he proves it works.

 

To understand him you do need to read the books it's simple, honest and reminds me the virtues of tea and toast (pause for thought) if nothing else :D

That's a good point. I'm convinced there is no one "correct" way to trade or invest. It really does come down to your own strategy and temperament. Though I would add that I don't see how anyone could avoid either a bearish or bullish "disposition"....that would be lurking in the background.

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Though I would add that I don't see how anyone could avoid either a bearish or bullish "disposition"....that would be lurking in the background.

 

Tend not to follow his website weekly, more an infrequent check, but would say that does come across to me at times, but as No6 states, if it's got potential to gain he will trade in either direction, even if the overall market is going the other way.

 

Bit like shouting buy U.S dollars when everyone around you is saying are you mad, you should be buying gold ;)

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Mike Lenhoff, chief market strategist at Brewin Dolphin in London, agrees. In a strategy note titled, What Good Can QE Do?, he wrote: "If the Fed announces a QE program after the next meeting, how might the markets react? I suspect the Treasury market would sell off on the view that it was better to have travelled than arrived .. they are not likely to resist taking profits."

 

And what would happen to stocks then?

They usually rise, but not always. In fact, much of the rise may have occurred already.

 

Here's a chart showing TLT (the bond etf) versus SPX ... update

002ij.gif

 

The SPX-to-TNX ratio is already "strained" IMHO

 

TNX (10yr T-Note yields) versus SPX ... update

xx

 

Unless those in the markets think that stocks are cheap? Money goes out of bonds and will need to find a home, the most likely home could well be stocks. Isn't this how the various money markets work, they simply shift money around from markets that looked stretched to the ones that may look cheap(er)? I don't think that stocks are unpopular in the sense that the money men are going to desert them as an asset of choice when it comes to the investment portfolios that they manage. They will surely just want to know if stocks offer value relative to other asset options?

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That's a good point. I'm convinced there is no one "correct" way to trade or invest. It really does come down to your own strategy and temperament. Though I would add that I don't see how anyone could avoid either a bearish or bullish "disposition"....that would be lurking in the background.

Or another way of looking at it is whether someone has an optimistic or pessimistic disposition. I think traders like Burns have a more balanced view about markets without letting too much in the way of economic theory or what might happen get in the way. Most of the time, the worst case scenario so much beloved by many uber-bears doesn't happen, or doesn't exactly pan out the way they expected.

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Or another way of looking at it is whether someone has an optimistic or pessimistic disposition. I think traders like Burns have a more balanced view about markets without letting too much in the way of economic theory or what might happen get in the way. Most of the time, the worst case scenario so much beloved by many uber-bears doesn't happen, or doesn't exactly pan out the way they expected.

Yes, the uber-bear often has just one large idea to the exclusion of everything else..... even time gets lost. Makes you wonder if there is an element of wish fulfilment here.

 

Hmmm... the ol' optimism/ pessimism thing, which is to bring it down to psychology. I'd say the ideal investor/trader should be realistic..... rational with a concern about reality..... and not emotional. This brings "fundamentals" back into play. But I take your point, emotions and psychology do play a part.... in both investors and markets.

 

Maybe the ideal investor/ trader needs a "Ptolemaic" outlook, where everything is held in balance, spheres within spheres, and epi-cycles on top of cycles. :lol:

 

 

Ptolemaic-System.jpg

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For those interested, Robbie Burns did an interview with the Motley Fool here. Short interview, but it gives you a general idea of how he trades.

 

http://www.fool.co.uk/money-talk/how-to-ma...hares-6270.aspx

 

 

Yes listened. Am not a big fan of the MF David Kuo and dont think he got as much from R Burns as maybe DFrisby might be able to. Still it gave a general idea and RH might find it interesting. A HOHO investor - hop on hop off !!! the latest Motley Food podcast with Ash of Bullionvault on gold was quite good.

 

This reminds me - No6 can you recommend any books on swing trading judging by Robbie and some of your posts this is quite a successful method ?

 

 

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Yes listened. Am not a big fan of the MF David Kuo and dont think he got as much from R Burns as maybe DFrisby might be able to. Still it gave a general idea and RH might find it interesting. A HOHO investor - hop on hop off !!! the latest Motley Food podcast with Ash of Bullionvault on gold was quite good.

 

This reminds me - No6 can you recommend any books on swing trading judging by Robbie and some of your posts this is quite a successful method ?

 

The MF podcast is ok but basic, occasionally they come up with a scoop like the Burns interview. It's a scoop because he doesn't normally do any interviews. Apparently, the seminars that Burns offers tend to go on all day and finish late into the evening, he says that he can't stop talking so a half hour MF interview isn't going to give much away. In this particular interview I liked his response to the question on inflation, when basically he said don't ask, it goes over his head, so he doesn't worry about it. Fair play, he's made the best part of a £million trading by not worrying about economics and concentrating on the fundamentals of shares, a little technical analysis and the way markets behave.

 

Can't really recommend any particular swing trading books, although NT's book is ok, but then you would have to follow his system exactly to benefit. There is plenty about swing and position trading on the web and rather than use a system devised by someone else it is always good to come up with your own or build on what someone else is doing. When it comes to the technical side my basic rule is to try and stay on the side of the trend, beginning with the daily chart and then using 4hr to 1hr charts for buy and sell signals. I do believe that you should let the trend be your friend, up or down. Trend and momentum is what I look for.

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Most important news today?

 

CPC Central Committee session opens to discuss nation's next five-year plan

 

BEIJING, Oct. 15 (Xinhua) -- The 17th Central Committee of the Communist Party of China (CPC) opened its fifth plenary session in Beijing Friday to discuss the nation's next five-year development plan.

 

The four-day meeting will review proposals for the country's 12th five-year program (2011-2015) on national economic and social development.

 

The period would be critical for building a moderately prosperous society, the Political Bureau of the CPC Central Committee announced last month.

 

It would be a time of difficult issues for deepening the reform and opening-up process while accelerating the transformation of the nation's economic development pattern, said the announcement.

 

Analysts say the fifth plenary session, which ends Monday, is of great importance as committee members are expected to analyze domestic and international situations and set the guidelines, goals, tasks and key measures for the next five years.

 

They will also review China's economic and social development over the past five years.

 

http://news.xinhuanet.com/english2010/chin.../c_13558505.htm

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