Hard work making money in the UK. Recipe: Insulin and Colcannon

Suddenly I remember how much easier it is to trade in the US than in the UK! My UK portfolio plods on sedately making me no money despite my best efforts.  That's not quite true. I have now completed the laborious backtesting exercise and have found  one, possibly two better unisearches.

But it's a week since I bought my shares and I'm still down 1.6% after costs. If I strip out costs and the ghastly THT I would be up 1.1% but those are unavoidable costs. I do not know whether, with a good stop loss strategy, I would have dumped THT before now. No Simulator, no proper backtestng, no decent strategy.

In the mean time in the US I got my buy signal on Thursday, I bought six shares that day and six more on Friday. (SOL, HSOL, III, UVE, GTN, EVC). Overall I have 7 winners and 5 losers after just 2 days. Profit after costs is 0.7%. There is no guarantee that this will continue but you must agree that it is a much better start.

I do have an idea for how to plug the gap left by the lack of the Simulator in the UK by concerted action by members of the user group. It would not solve the lack of a stop loss strategy but it would guide us to the best unisearches. Unfortunately I am not a natural organizer so someone else would have to drive the idea forward. Anyone interested in leading the exercise or participating should contact me.

Insulin and colcannon

I was first diagnosed with diabetes 15 years ago. That is what brought me into stock trading all that time ago. I retired with far too little money and had to make the most of what I had by driving my capital very hard. So far it has worked.

Since then I have collected a growing band of chronic autoimmune diseases. It seems that each time my blood is tested another one pops up. I am lucky in that, so far, none has significantly cramped my style, except in the range and number of pills that I pop every night and morning.

The progress of my diabetes is interesting. I started with dietary control which kept excessively high blood sugar at bay for  six or seven years. Then I started on pills. They worked for another eight or nine years. All of that time I had to be very careful about what I ate and, latterly, when I ate. The big risk then, as now, was falling blood sugar which carries the risk of a hypo which starts a little like drunkenness and can end in a coma. Being caught driving with a hypoglycemic attack loses you your licence so it's no joke. 

A few months ago my poor old pancreas, the organ that produces the insulin that manages blood glucose levels, finally gave up its efforts despite the help provided by pills. I was put onto an insulin injection regime. I tried two daily doses of mixed insulin which helps most people who can't be bothered with a more complicated system. With good advice I was steered onto an alternative system where I take one type of insulin at night and another with each meal. This keeps tighter control of blood glucose levels and gives me far more flexibility. But it is hard work. You have to calculate how much carbohydrate you are going to eat at each meal and adjust you insulin dose accordingly. On the plus side you can miss meals if you want to, and occasionally have big ones with lots of carbohydrates.

Which brings me to colcannon. I have always loved mashed potatoes, a big no, no when you are managing diabetes with diet. And colcannon is a fabulous Irish version of this dish. I was inspired by a visit to the Aveyron in France where we were given aligot, a local specialty where the mashed potato is mixed with cheese and garlic. It was a little bit bland for my taste but that might have been the versions we were served.

Net result I came home, took the appropriate dose of insulin  and made colcannon.

It's dead easy. You cook peeled potatoes so they are really soft. Don't ask me how many I used. I had a bag left over in the larder and I used what I had left. Cut up, I guess, there might have been a dozen small pieces. I also had some left over carrots which I steamed over the potatoes for about half of the cooking time. I had grown a cabbage, one of those pointy ones, and cut that up and steamed it along with some sliced industrial sized spring onions for the last couple of minutes. 

I then mashed the potato with lots of butter and salt (I confess to a liking for Aromat as a supplement to salt). It's a Knorr product favored on the Continent especially in Switzerland .)

I whizzed the cabbage and carrots in a blender for a few moments and then mixed them into the potatoes. I served it with sausages and gravy but it would go equally well with lots of other things, or by itself, or even cold. (I shall give you my gravy recipe one day.) Great plaudits.

Decisions today, trading the FTSE again

I have reviewed some of my US trading. Although I still believe that this is best market in which to trade, US trading through my ISA attracts unacceptable costs. Put briefly, I am not allowed to hold foreign currency in my ISA (a tax shelter for investment which means that I pay no tax on capital gains). This means that I have to pay exchange rate costs on both buying and selling shares. This can reach 1-2% in each trade in each direction. It might be possible to justify this cost in a strong bull market but in a whippy market like this one I end up paying my broker too much to make a decent return. This means that from now on I will restrict my US trading to my SIPP (another tax shelter with different rules which allows me to hold foreign currency:  there are no exchange costs, and I enjoy the benefit of my returns).

This means that I have to switch back to trading in the UK. Unfortunately Vector Vest does not offer the same facilities to backtest strategies as they do in the US. I have no system which tells me when to enter or exit the market. I have to guess.

The FTSE broke an important resistance level on Monday.It continued upward and yesterday it passed my test criterion. If this move had occurred in the US it would have been a clear buy signal. So today I decide whether to buy in the UK. I've left my decision till late in the day. The market is pulling back, I feel bearish, the market is hovering on a resistance line, and the US market is showing weakness. I think I'll leave my decision till Monday.

The market is probably showing strength because the Bank of England announced that it is too early for interest rates to rise. This is interpreted as code for a continuation of the QE policy. A big deal for the market. It has certainly put the knife into the value of the £. I am thinking that in view of that news the market should have been even stronger. More information to make me negative.

Using Vector Vest UK to pick shares

But in the mean time I have been trawling some of the unisearches that I know work well in the UK. Even though I cannot test them with the same rigor that I can in the US tests give me enough information so I will know which searches to use when the time comes to buy.

Some are searches that I have developed myself, others are standard VV unisearches. I have tested them in good times and bad. To paraphrase Longfellow, in good times they are very very good, in bad times they are mostly horrid.

I have chosen time periods that include the good and the bad. The first table shows the return for the whole period and compares it to Vector Vest's own index the VVC/UK. The average shows how well these searches did overall in good times and in bad, weighted by the length of the time period. I have not fully identified the unisearches I have used but some of you can guess. They all do very well except when the market is in free fall as it was in three of my time periods (chosen deliberately to stress test the searches).

The second table shows the annual rate of return so performance in the different tests can be more easily compared. None of this shows how the picking systems would have performed if they had been subject to sensible stop loss criteria or had sensible entry and exit criteria. Hard to test without the simulator.

I think I know which unisearches I'm going to go with.

Didn't we do well

Last Friday's call on the market was beautifully timed. I am not one for patting myself on the back, I could so easily have got it wrong but not on Friday. The fireworks I had been looking for shot up into the sky. Dreadful metaphore because what happened was that the markets broke their support levels made a dive. I had shorts in place and bought more as the markets in London and New York opened, even though a large part of the move had already taken place overnight. I made half my profit for the year so far on Friday so those predictive volume spikes are doing their stuff for me.

My portfolio is now 64% short ETFs 10% gold and 26% cash. My profit for the year so far (from April) is 6% while the market has fallen by 8.1% (my benchmark is the FTSE and I measure in £s). A modestly good start to the year and just what I need after my disasterous performance last year. I am going to have my work cut out if I am going make up for last year's catastrophe and earn my salary for this year. The main thing is that I did not lose my courage and was ready to move on.

Friday's performance was not just shorts, it was also that gold I bought a few weeks ago. That shot up on Friday too. To my mind this is a worrying sign, for gold normally weakens when the $ strengthens which it did on Friday (at least it did when you factor out the effect of terrible jobless numbers in the US that were published before the US markets opened). And it shot up as markets tumbled, a return to the old relationship which has been absent since last Autumn. To me this suggests that fear has really returned to the market. We must see how this develops over the next few weeks.

FTSE closed for a couple of days now to celebrate the Queen's Jubilee. Could cause a problem if I need to sell UK holdings.

Big day today?

Those new support lines (I should say old support lines because they go back to February and April last year) have been working their socks off to hold the DOW up for 9 days now.  Then yesterday there was a spike in volume and an interesting candlestick shape. (I'm not too hot on candlestick shape analysis but it looked interesting with its long wicks and short body.) Main thing is that it was associated with a modest volume spike.

Result is I'm looking for fireworks today, could be up, could be down. I'm guessing down. At the moment the futures markets are showing a fall for the DOW but rises for the FTSE and the DAX. Only time will tell if I'm right. Luckily I'm not a nail biter.

In the mean time my gold is going well but mainly because of the rise in the value of the dollar

Tortured on the rack

The news yesterday was full of it: GREEK CRISIS HITS STOCKS! But as you can see from the charts a fall was to be expected and, measured by recent market activity, it was not especially big. The lower support line almost held and we are left scratching our heads. Will it go lower or will it not? This morning's futures market says not:: a 40 point rise in the Dow, a FTSE that will open flat and a modest rise in the Dow.

The FTSE looks more like a down trend but even there you can see that yesterday's fall was not out of the ordinary. The fall in the DAX was even less dramatic.

Never trust what you hear on the news. Watch the charts and be afraid unless you get a clear signal. We have now been in limbo for six weeks. That's more than 10% of a year. It's the worst possible type of market for making money. It is impossible to be confident about short positions and holding stocks is mighty risky when there is the threat of a big decline. Woe, woe and thrice woe.

Are we there yet?

We have now had two days of heavy falls. Judging by the futures market and by the performance of Asian markets overnight we are due for another nasty day today. So has the slide that I have been waiting for, preparing for at such a high cost finally arrived?

My short positions are slowly returning to profit. I still have to recover the losses from my early short foray that I closed in mid April. I opened more positions on Friday. So I am backing my judgement big time - 28% of my portfolio. Whether or not I am right still remains to be seen. I have found that taking short positions is a risky business. But then you can't expect to make money without taking risks. The money you make in this game is a reward for taking risks. So I hold on tight and stick with the white knuckle ride.

Wrong

So I was wrong. Hasty reappraisal of tactics. Swift implementation of stop losses. Winding down of positions and then sitting back to tend to my bruises with an enhanced war chest. Wondering whether I should hedge with some short positions. Too early to tell.

And then this morning. One of the pleasures of holding some Hong Kong shares is that I can get up in the morning and see what has happened overnight. I could have gone to bed leaving sell orders but I decided not to. I don't have an automatic feed for Hong Kong so its a question of manually looking up each share.

First though I looked at the futures market which was expecting a 30 point rise on the Dow. Then the HSI - the Hong Kong index was only down 150 points. Not bad for an index that can easily fall several hundred points when its feeling peaky.And then I went to look at the individual shares I own. 6 out of 9 were up.

Futures are indicating a 17 point fall in the FTSE. Not massive. So here I am sitting on the fence. I think I'm going to do this: Wait for the open and see how black the clouds are looking. If they are dark I shall do a bit more pruning of the portfolio and throw in some small shorts (how do these puns find their way into my head?) and I shall do the same with the US market. The HK market has about an hour to go. If my position starts to deteriorate between now and then I'll take some profits.

Nil desperandum.

Taking profits. Stopping losses

Was I right? Was I wrong?

The theory is working. Just about. We've had two days of falls in the FTSE and the Dow too. The futures market indicates that Wall Street will open lower again. If there is no improvement the open will be inside the rising wedge I've been watching. So there's a big danger that I bought back into the market at just the wrong time.

But since I bought shares that were hitting lows in their wave pattern (see last post) my UK purchases are running with minimal losses. I have to say that the performance of SVS has made up for poorer results elsewhere but that is what spreading risk is all about. I always buy a range of shares because while my crystal ball can't tell me which share will rise by 5 or 50% in a week it can show me where I to look for shares that might. (For crystal ball read educated guess.) I have to buy a selection of shares to increase my chances of finding the bright star in a cluster that may shine less brightly but still glisten.

So what next? I have to guard against the real possibility that I have screwed up on timing and will have to beat a hasty retreat. The plan is to tighten stop losses - i.e. I pull out of shares more quickly if they go the wrong way and take profits more quickly - my finger is hovering over the sell button on SVS (6.7% after costs in a week is not bad - why should I be greedy and want more. Then I still have the option of buying shorts. You can see that it's far more fun when I am holding shares.

Visitors for lunch today. I've made them a goulash , Czech style. It's a stew not the Hungarian soup.

I fried up three onions and several stalks of celery. Once they were soft I added tomato purée,a desert-spoonful each of  sweet paprika and caraway seeds and salt and pepper. In a separate pan I fried up cubed pork (I cut up a 1.5 lb tenderloin because that was the best outdoor bred cut I could find). I added a tablespoon and a half of flour to the onion mixture and then the browned pork. And then about a pint and a half of red wine mixed with a beef stock (I favour Touch of Taste). I then cooked it slowly for an hour. I left this overnight and to be heated up ready for lunch. I'm serving it with Czech dumplings. I buy a mix on the internet from Halusky . It is not possible to get the right sort of flour in the UK so a mix is the best bet.

Cash up

Dow blue, FTSE brown, DAX green

Today is one of those big days. Not for the market but for me. Seeing the weakness of Tuesday's break out and looking as the long term chart of the Dow which I posted yesterday I lost heart and sold almost everything I had.

I've lived through these moments of truth several times during my trading life. Mostly, I am happy to say, just before a major market crash. I have no way of telling whether a crash is coming but it is possible. A great weight has been lifted from my shoulders. The market with its massive daily movements is so hard to read at present. The fact that gold moves in the same direction as stocks as I described on December 8th. removes gold's value as a safe haven. So what I have done is given myself a breathing space.

• I can explore alternative strategies that may be helpful in these hard times. 
• I am ready for a crash if one comes
• I can watch gold and silver perform their peculiar antics without worry
• I have cash ready to jump on board any train that I see leaving the station

I made a small overall loss on my purchases of Tuesday. I made money on the US stocks, but I was too slow selling the UK ones. I would have made a lot had I sold them on Wednesday but the gains were quickly reversed. The Hong Kong shares never really went anywhere.

So now I wait to see whether any winning strategies come to mind. Whether I was right to worry. And whether gold and silver will be worth buying again.

Today's chart simply shows the relative movements of the DOW, the FTSE and DAX over the past year. It is surprising that the DAX has been hardest hit given that the German economy is doing so well. I guess it must be that investors are wary of Euro denominated assets. The Dow strength is probably due to a preference for dollar assets.

Jumping the gun?

The bouncing Dollar

Another nervy day with the markets looking strong. 'Did I jump the gun?' questions still rattling around in my head. And it stayed like that till the evening. Then the US market, which had made a high that was within 50 or so points of the resistance line, pulled back sharply. It ended, after some flutters, near to yesterday's close. And then I jumped the gun again. Or did I? I bought the first tranche of my planned short positions.

I went in slow. Remember those congestion areas I showed in the weekend post? Each reversal period lasted three days or so. If we count Wednesday's run up as day one, Tuesday will be day four so a fall today would not be a surprise. But that's thin evidence on which to dive in with shorts. So more nail biting in store. Should I have bought more or should I have bought less. The futures market suggests I should have been bolder. Will I gobble up some UK market shorts when the market opens? And then more US shorts in the afternoon? Knife edge decisions.

Today's chart shows the gyrations in the pound/dollar market (cable to the cognoscenti). It rose strongly all through October then fell through three quarters of November. Then a bounce back until the end of the month. And now we're on our way down again. Perhaps a spot of currency speculation is in order. Mmm/? I'll leave that for the moment.

Perhaps instead I should be more active on my precious metals positions. Profits and losses there make me queasy with their ups and downs. I think this will be the next project to tackle.

Yesterday I was inspired to make an eighteenth century dish: an onion and potato pie. It all started with the Antiques Road Show. A lady brought in a copy of Mrs.Hannah Glasse The Art of Cookery Made Plain and Easy, first edition. It was valued at £7-8000. My wife leapt up off the sofa. She had a copy of the very same she thought. Unfortunately it was a later edition, though still very old. We have not checked but it probably is not worth very much. Still, a recipe was worth a go and I tried the pie. My wife wrote out the recipe. The book was not allowed anywhere near the kitchen, later edition or not. 

A pound of potatoes from the garden (boiled, peeled and sliced), a pound of apples (peeled and sliced). They were still hanging on the tree and now quite sweet what with the ripening November sun!? Four hard boiled eggs (shelled and sliced), two large onions sliced in rings and lightly boiled to soften them.


I buttered a casserole dish and sprinkled spices and seasoning (a mixture of mace, nutmeg salt and pepper). Then I put in the other ingredients in a series of layers, with butter and the spice mixture between each collection of layers i.e. potato, onion, egg, apple, butter and spice and then start again. I added ten tablespoons of wine (perhaps cider would have been better suited) and then baked for an hour at 180 degrees. I added a few tablespoons of vegetable stock to keep the pie moist. I rolled out some pastry (I used puff but shortcrust would also have worked) and covered the pie. I then returned it to the oven at 200 degrees for twenty minutes. It was delicious. And here's the recipe as it appears in the book:


To make an onion pye. WASH and pare ſome potatoes, and cut them in ſlices, peel ſome onions, cut them in ſlices, pare ſome apples, and ſlice them, make a good cruſt, cover your diſh, lay a quarter of a pound of butter all over, take a quarter of an ounce of mace beat fine, a nutmeg grated, a tea-ſpoonful of beaten pepper, three tea-ſpoonfuls of ſalt, mix all together, ſtrew ſome over the butter, lay a layer of potatoes, a layer of onion, a layer of apples, and a layer of eggs. and ſo on till you have filled your pye, ſtrewing a little of the ſeaſoning between each layer, and a quarter of a pound of butter in bits, and ſix ſpoonfuls of water. Cloſe your pye, and bake it an hour and a half. A pound of potatoes, a pound of onions, a pound of apples, and twelve eggs will do.

Read more at Celtnet: http://www.celtnet.org.uk/recipes/glasse-lent-dinner-dishes-09.php
Copyright © celtnet

And now we wait

The big What next?

Yesterday was a nail-biting day. Just after I posted, the FTSE surged by 100 points. Had I blown it and sold too early? There were gyrations throughout the rest of the day and the FTSE ended up 63 points to make a fabulous run up for the week. Then in the evening the DOW, which managed a rise of 124 at its highest, faded to near enough no change by the close.

Dow fades during the day

We have yet to touch the 12200 resistance level. But there has been a volume spike, more pronounced on the S&P, which could signal that we are in for a fall. I have highlighted the areas of congestion, at my long running resistance levels. They are our only guides to what might happen next. Five favour a reversal and one a continuation.  It is amazing how well those support and resistance levels have held.

And so we wait.

Key moment

How those steps are formed

A friend asked me how I draw my lines of support and resistance. To be frank it is an art not a science. For the past four months I have been working with 3 lines which have contained two very broad channels inside which the market, as defined by the Dow Jones index, has moved in first one and then a second horizontal line. All fireworks and no progress.

I drew the lines as soon as they seemed to act as support and resistance. Their numerical value is a  arbitrary but is based on where the market seems to be turning round. (Think of them as bands around a number rather than the number itself.) I link these areas to price points which seemed to be important in the past: the end of a dramatic move; or a point where argument has caused a trend to pause.

The value of these support and resistance areas is that they mark the price point where I must pay special attention to what the market will do next. A bounce off support is a sign that buying shares should be profitable. A turn after hitting resistance is a sign that a short position should pay a dividend. Breaking through resistance can be even more profitable for buying shares. But it means that I must look for new potential resistance lines above the break out and should now see the previous area of resistance as a new area of support. Breaking of support is equally dangerous.

False breakouts can also represent a key moment. They can, on occasion, signal that the market is ready to break out of the opposite side of the channel.

The FTSE struggles to choose direction

The present moment is a difficult one. There has been a break out to the downside of the current area of support. I am working on the assumption that this is a false break out and have bought plenty of shares. I must be ready to change my position very fast if it turns out that I am wrong. The movement of the FTSE today, as we wait for Wall Street to open shows how finely balanced opinion is.

The arguement

Gold at a support level

It is a cliché to describe stock market movements as an argument between those who think shares are undervalued and those who think they are overpriced - the bulls and the bears. For the past few days the bears have been in the ascendant and there has been a 7% fall in the shares on the Dow Jones and a similar fall on the FTSE. Several important support  levels have been breached and there is little in the way of support until we reach 10800 on the Dow. This does not mean we will get there but the situation is worrying. Especially for me since I have bought shares in the UK and in the US. They are looking sickly to say the least.

I have jumped the gun and have the grizzly task of choosing between cutting my losses or holding on in hope. So far hope prevails. I have chosen good shares that have been beaten down in price and I feel confident that the UK ones will soar once the market perks up. The US ones have been picked on a rather less sound basis  and therefore should be replaced by better rebound candidates. So I must decide whether this break of support is real or false. If it is real I should cut my losses and wait for the rebound from a lower level. If it is a false breakout I should soon recoup my losses. My inclination is to hold on but not for much longer.

The continuing fall in gold and silver are also making my portfolio look sickly. But there again I feel confident that a rebound will occur. This is not a time when prediction is easy. The only price that is near a support level is gold. All the other prices are floating and could go either way.

Present portfolio position: Gold and Silver 24%, Commodity 5%, Equities 25%, Cash 46%.

Happy Thanksgiving

Too quick out of the gate

Now that's a trend! Gold for that last 5 years.

Have we found support for the Dow?

On Friday I bought some US shares in order to make a good start with the rally I was expecting. But I was too quick off the mark. It turned out that my analysis of the market was flawed. The interim support line that I guessed was the bottom of the channel did not hold. Nor did my original candidate for the task and the Dow ploughed straight trough both. But by the end of trading there had been a rally and the market ended some 20 points above the original support line. So the analysis looks sound for the moment.

I had an uncomfortable day watching my purchases tank. I held on nevertheless - foolish? maybe. Time will tell. With the FTSE rally this morning and encouraging futures for the DOW I moved further out onto the ice and bought some UK shares. This is playing a dangerous game but there is no point in doing these analyses and not acting on them. The big problem is deciding if and when I am wrong and need to throw in the towel. (The mixture of metaphors is deliberate).

Gold and silver are also a source of pain. This time I have in interest in holding gold because if the S hits the F I want to have this as my back up. I also believe that this pull back is part of a long term trend and I bough much of my present holdings towards the bottom of the pull back. I have shown a five year chart for gold to illustrate what a real trend looks like.

Patchy service this week

Missed opportunity on the Hang Seng

This week and into next we have house guests so the service is likely to be patchy. I will endeavour to ensure that any crucial developments will be covered promptly but there may be gaps.

I am writing this post on Tuesday morning, a day after the markets did very little. The Dow was modestly up. These days 83 points counts as a modest move! And the FTSE was modestly down. So the FTSE may play catch up when it opens, though its move may be subdued because the futures market is currently pointing to a 60 odd point fall in the Dow at the open. We continue to sit on the 200 day moving average. See Friday's chart.

Gold and silver look more interesting and, from a trading point of view, worrying. Gold had a good run yesterday and overnight has risen sharply to touch its next resistance level at 1793. So big decision: do I take profits or will it power through. My inclination is to take part profits as soon as London opens and then repurchase if the price moves on upward. On the other hand there are no volume signals to suggest that a reversal is about to take place, so I may just hold on. There is no good news on the Euro Zone crisis and gold is the only protection against an ugly end to that political saga. Silver has cleared the downward diagonal that I pointed out on Thursday's chart, and so it looks set to move on to the next resistance at 3570 2.5% up from here.

Today's chart is the Hong Kong index - the Hang Seng. I put it up to show how I missed an opportunity by watching the world with blinkers on. I was sitting fiddling about with gold and silver and fretting about movements on the Dow and the FTSE while the Hong Kong market moved up 25% in a month. I am set up to pick shares in Hong Kong and to buy and sell them easily. I have a stock of HK$ sitting idle in my brokerage account and I take my eye off the ball. This blog is doing its job in reminding me how stupid I can be. My guess is that the opportunity has passed since we have hit resistance. But I will keep my eye on this from now on. There remains a gap to be filled so another run up is possible. And there is a potential support line around 19050 which could provide a sensible entry point.

Dollar falls, Dow at top of two month old channel

A week later and we are still in the same neck of the woods. The FTSE looks as though it has broken out of its channel but an examination of the US markets shows that we are at the top of the DJI and S&P channels. A further rise this week would confirm a break out, a pull back would show that we are still sitting inside that nearly two month old channel. No amount of analysis will tell us which way the market will go. A toss of a coin would do just as well.

The fire has gone out of gold and silver and they plod gently onward. There is however, a new strong directional movement as I suggested on October 4th. I do not intend to spend a lot of my time patting myself on the back for making good predictions. Unfortunately at the moment I am losing money so a bit of a boost to my moral is required. I forecast that the $ was ready to move up ten days ago and this is exactly what has happened. (Remember the chart works upside down for the $. A strengthening of the £ is represented by an upward movement.)

Unfortunately I am not set up to make money out of this. Precisely the opposite. I have cash and assets in dollars which my broker make impossible to protect because of the high fees they charge for converting currency. So I have to bear the pain. If anyone has any ideas about how I can hedge I would be grateful.

Anyway net result is that I am losing on gold and silver since they are denominated in $ and the small gains translate into sterling losses.

Cow is the only bright spot in my portfolio at present: up 7.8% since I opened the position on 15 September and the second bight, purchased on 3rd October, is up 1.5%.

See you tomorrow at the start of a more profitable week, I hope.

What do they know that they're not telling us?

FTSE 6 October 2011

The Bank of England has handed another £75bn to those greedy banks in the form of quantitative easing. Is that good or bad? Frankly I don't know. But it is bloody frightening. What, I ask myself, does the Government know that it is not telling us. How weak are those banks' balance sheets?

Commentators will be attributing the FTSE's strength to this bold move by the BofE and will ignore the fact that the Dow rose 140 yesterday and another 95 today and that the DAX is up 172. The FTSE rise might be flattered by the announcement but the main pull is the tether.

Sterling did a big dive and then a sharp recovery against the $. Against the Euro it just sank.

For me there is a new worry. Where will all that new money go. In all likelihood it will find its way into the markets. So the odds on a fall in the indices have lengthened. I should no longer be so keen to take out shorts and should look instead for opportunities to buy the market. This is good because it is easier to make money in a rising market. But it requires a serious mental adjustment. I've closed part of my short FTSE position to get used to the idea.

In the mean time gold and silver have had a goodish day. Better in the morning than the afternoon.

Dull day?

US Cattle 30 September 2100

Today there is not much happening. I have to pinch myself as I write those words. At one point the FTSE was down 122 points and it ended almost 70 points down. And the Dow Jones has been 158 points down. In the days when the stock market made sense, movements like these would be rare and would have signalled something amiss. In the past few months they have become everyday events. I think that is a massive signal that something very bad is happening and we need to worry. In the mean time I can report that the markets continue to dither inside their trading range. But let's not forget that that range is almost 7% from top to bottom. It's almost 9% if you include the two intra day downward spikes to 10600, as a friend has reminded me. I speak of the DJI. The rather more untidy FTSE has a range of about 10.5%.

As gold and silver fall and I lick my wounds I think to myself this is what I am doing to assuage my growing fear about a calamity to come. Much is written about the dangers of buying exchange traded funds because they are poorly regulated and they rely on paper trades. Paper trades, by definition, have counter parties who may go bust and fail to divi up when the shit hits the fan. I agree it is a worry and I would not rely entirely on ETFs that are structured in that way. For my gold and silver the bulk of my holdings are in PHAU and PHAG. The producers of these ETFs swear that they hold actual gold and silver bars and a list of those bars is available on the internet. They are kept in vaults that belong to reputable banks. At times when I was feeling particularly paranoid I bought a version of their ETFs which held its gold in Swiss banks. The argument goes that there is a risk that when the S really hits the F solid western Governments will start to confiscate gold. I am not immune to paranoia but I don't I have the lightness of foot that I would need to cope if life became that bad. So it's best not to think about it.

To lighten the gloom of that last paragraph I can report that my friend the spider has had a good day. Two flies and a fair bit of exercise hauling them in and repairing her web. Also COW is starting to do its stuff and I have made 3.6% in about 10 trading days. Now that is a normal world. The fundamentals look good and the price is chasing after them. First area of resistance has been broken. We must now watch the second. That's my chart for the day.

Have a good weekend. Here in the West Country the weather has been beautiful. Lets hope it lasts a bit longer. I've always liked September.

An imperfect market

FTSE 210911

Today's post is a little different from normal. I notice that I have not put up a chart of the FTSE for some time and today I rectify that. The reason I pay it little attention is that at present  its movements are pushed and pulled by the American markets (but I have to admit it has a very pretty channel). Because the UK market opens earlier than the US and closes earlier too the relationship is obscured. I watch the US market futures through the morning and in the early afternoon to get an idea where those markets will open. But I cannot make any sensible  guesses about the future  based on the UK market. It's definitely the dog's tail and the dog is wagging it.

The same rules apply once the UK market closes. Let's say the UK market closes strongly up and then the US markets suffer a fall in their afternoon (our evening). You can be reasonably sure that the UK market will open sharply down. Unless the futures market indicates a US recovery, in which case the UK market will be pulled up at the open.

 At the moment this tether is very strong indeed and it means that there is little point in watching the UK market for any sort of guidance.

I believe that the markets are being moved by what used to be called hot money. This time that hot money has been supplied by governments through quantitative easing and is in the hands of speculators who look exclusively at price movements and no deeper. The banks and institutions in whose trading rooms these speculators work have deep pockets. And to make things worse they have no fear of failure. If they fail they believe that governments will step in to pick up the pieces. Some may lose their jobs but what do they care they've already stuffed their boots with loot.
In this febrile atmosphere there is no attempt to move the markets in the direction of an equilibrium based on its real value. I think we can reasonably say that what we have a frighteningly imperfect market that has lost touch with reality.

You may have noticed that I have not mentioned shares since I started this blog. At present there is no point in looking at shares since the scenario that I have described above leaves no opportunity to search for shares that are undervalued and therefore should rise in price. For me that's the only point in buying shares . I know I'm good at finding undervalued ones. The present market is a free for all and it is impossible to calculate the odds on being right.

I have two choices: to stand back; or to join in the melee by trying to understand its tos and fros.  The latter is what I am trying to do. Today I'm lucky. Most days not.

Never be afraid to cut and run

S&P 150911

A bleak day for me as gold dropped to its support line. I dumped my remaining market shorts (too late for the FTSE) and I weeded out more of my silver. But he who fights and runs away lives to fight another day. And I have not lost too much. Still only 5% down since April and I have loads of cash. My day will come.
So what's happening. The markets are rallying but they're all inside their channels. I should pay far more attention to those lines I draw on the charts because they do work. I could make more money and lose less if I watched them more carefully and did a bit less wishful thinking.
I've done it again today. Gold touched the support line and bounced off (see yesterday's chart) and then came back down again. As I write it's sitting on the line. And starting to pull back a bit. But I've sold a chunk of my holding because I don't have the nerve to wait for it to break down. And I've been listening to too many doomsayers.This evening and tomorrow will tell if I was a coward or if I was wise.
As for the indices:

• the FTSE is well inside its channel despite its strong rally
• Ditto the Dow Jones
• the S & P has broken one resistance line and is touching another (Today's chart)

Result: all bets off on what happens next. I've taken most of my money off the table.
A friend has brought the cattle situation to my attention and it does look promising. Since nothing else inspires confidence I have bought an ETF in live cattle in the US (COW). I might do a chart tomorrow to show the opportunity.

The dog had a hair cut yesterday. He hates the process but loves the effect. He is getting very old. We got him second hand from a rescue some eight years ago and at the time the vet gauged his age at six or seven so he could be fifteen or even sixteen. It seems he was ill treated before we got him and he tended to snap. But life with us has mellowed him. He is showing his age now and probably has not many months left. He is a mixture of various kinds of dog but no-one we know in the dog world can identify what goes into that mix. Tibetan Terrier is the best they can come up with, but he's long and sags in the middle.