Banks, credit and fear, again - emailed to subscribers - Sun, 27 Nov 2005

someone ought to tell them it is much easier to own the bank and take the money, than to go in and rob one

or print their own notes
(I hope the links are still active)

for examining longer term investing in stocks, here is an example. This follows on from what I try to teach in class.

dividend cut, expense write downs; often signs of a low forming, and aet has done all that last year. Relate this info (from say the company annual report) then to the chart. Above 40 is a break of accumulation, (see your weekly chart) tho in this instance the pattern is not as good as it could be. Nothing cures high prices like high prices. aet is linked in with the commodities business, more particularly, supplying smelter technology. But its new higher tech stuff requires application to new smelting projects. Higher commodity prices will force this to happen eventually, when aet should win more contracts. (There is only one market where supply and demand to not equate and this is in the market for land and other government granted licenses.)

Smells of a low to me. aet price should recover as more projects seek to apply the aet technology. But of course this is an if, which is why we always use a stop loss, and if triggered, do not hang on to a losing trend. Please note also, this is not in any way an invitation to buy this stock. The example is given as an extension to my classes. You should do your own work and make your own decision, then be responsible for it.

To other matters, and for a bit of a rave...:
Ol' jug ears is taking the royal misstress, now wife, to the US. Last time he was there was in 1985 with Diana. Funny how the emotional pressure comes round in time...

Lots of behaviour, sadly, at present based on fear. So the public begins to hoard Roche's Tamiflin and Biota's relenza in the belief it will assist this birdflu thing. Seems one would do better buying the company than the drug itself. This Tamiflu is apparantly the only known drug to have activity against birdflu virus, but such tests were done in a test tube and on animals. There are no studies, as I understand it, proving the effectiveness in humans. More likely, any irrational use will help the virus turn resistant to the drug. And the current virus does not readily infect humans and cannot spread this way yet. The infection is only in those with very close contact to ill birds. Of course governments are doing the correct thing to prepare for the worst, it is the irrational fear based behaviour that interests me. Besides, it has been my observation that once something is prepared for, it almost never ever comes to fruition, which is why if the market ever gives you time to panic, its all over. (So since Bush is now spending $7 billion in preparation - oh the drug companies will love that one - I'd say it is practically certain nothing will come of this.) This is why most people cannot trade markets, but it would do everyone a whole heap of good if they were taught better to understand it. Decisions ruled by fear...

Same with these utterly absurd laws little Johnnie deigns to pass - all based on fear. Politicians who assume a society cannot fight threats whilst remaining under rules based on democracy and justice are the real threats to liberty and freedom. Alas we get the pollies we deserve. Same goes for both the religions presently in conflict, interpreted by their present leading scholars as religions ruled with fear. So we continue to go in circles and repeat our past crusading. Liberate me please...

Continuing the irrationality, I forecast plenty of books over the next two or three years forecasting doomsday, with all the alleged natural catastrophies happening at present. I point out again, see what is really there, not opinions. More of us than ever before are being forced to live in areas where we ought not, because the rest of the space is rented out, speculated in or just plain hoarded.

Global warming though is real. How do I know ? That's easy. Just watch what the issuers of those government granted licenses - that's governments themselves of course - are doing, not what they are saying. Watch therefore, the tiny speck of rock near the North Pole named Hans Island. The owner of this piece of dirt, currently in dispute, gets to claim what the meting ice cap will leave uncovered - a probable treasure chest of natural resources - you know, the rent... And if governments didn't think the ice was retreating, they wouldn't be fighting over it (currently the fighting is being conducted civily, but who knows what can happen if the rent turns valuable.) Denmark, Norway, Russia, US, Canada and China all making claims presently. The fact that the ice will retreat is not now being disputed by governments, though they will not officially tell us that for some time most likely. The only point of contention is whether this melting is a natural long term cycle or whether it is something we humans are creating. My view: the rent of the resources uncovered will blind us for sure and we will most likely end up fighting the wrong war, as we are doing now.

Call me a conspiracy theorist, call me cynical: the more you study the outing of cia agant Plame, married to Joseph Wilson the guy that blew the whistle on the Saddam chasing nukes Nigeria scam - the more you have to think that Rove plus a few others thought the whole thing up, the invasion, 'cause it looked good for a Republican / Bush re-election. Stage-managed. The reasons they used for the US to hit Iraq have definately been proved to have been fabricated, but were eminently more 'saleable' at the time to the public than the real reasons the US is there, namely resource security. I won't say anymore. All based on fear though, on shortages, on the US not having enough.

Meanwhile, the IHT reported (same issue as link above) that the US govt is now ordering hundreds of uni's, communications companies and cities around the country to overhaul their on-line networks to make it easier for their email systems and other networks to be monitored - to help catch terrorists and other criminals. (Whatever that means) Blessed are the whistle-blowers, for they shall be forever neutered.

To matters closer to hand:
We get a new Fed chairman soon. I'm excited, 'cause here is what Mr Bernanke co-authored in 1999 (you wouldn't believe it, but...) He wrote that central banks should not excessively worry about asset prices (like houses and stocks) rising unless this effects inflation. Good timing at 15 years into the real estate cycle. Ben's also a pure academic - no real world experience at all, which means he will tow the monetarist line, with absolutely no understanding of those govt granted licenses providing the reasons for credit to be provided by banks, to build the bubble and oh the excitement builds. The next land price downturn means Ben will do too little too late enabling history to comfortably repeat. But we will have to wait and see on this one.

First and foremost, watch the yield curve. Extrapolating a bit: if asset prices, ie land price continue to build and the conventional measure of inflation, the CPI, fails to reflect this overheating, then the Fed may conceivably stand by and watch, if you get my drift.

Looks promising for 2007/8 peak, if not before

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