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The markets suddenly seem to be feeling a tad cold as traders start to shut down for the holiday period. I understand that most trading floors have closed their books and are merely rolling over existing business with virtually no new position taking being contemplated.

It is to be hoped that this is just the usual year end shutting up shop and that come the New Year activity will rebound.

Unfortunately there is a slight feeling that the bright new era of massive State packages coupled with massive private indebtedness will prove to be not much different to the current dire situation but without one crucial element. Hope.

The next decade (and when I say decade that is what I mean) is likely to be blighted with high taxation and increasing State borrowing requirements. Even the Chancellor was unable to be more positive than ‘around 2014/15′ for a return to a more respectable annual debt level, but this will of course be on top of the huge obligation built up between now and then. If a politician is saying 2014/15 he probably means 2017/18.

This may well prove to be disastrous for anyone working over the next 20 to 30 years (ie nearly everyone) as the chances of putting away a little something for retirement and have that ‘little something’ actually increase in real value will be minimal.

Volumes are very weak today with no real impetuous for bulls or bears to grab on to. The weakness in the pound is contributing to the strength in the FTSE 100 versus other indices as most of the revenue earned by the constituent members and most of their business takes place in foreign currencies and on foreign soil.

Read more of today’s Spread Trading comment.

Good Luck!

DB

Normally the most popular spread bets are the FTSE 100, Wall St (Dow 30), Dax 30, Crude Oil, Gold etc. However it’s sometimes worth having a look at what else is on offer.

Most of the companies offer spread bets on everything from Coffee to Government Bonds to Natural Gas to…Interest Rates…

Thursday’s big Bank of England interest rate cut took many people by surprise. Clearly not one speculator.

Spreadex have reported that one Hertfordshire resident opened seven separate trades on the spread betting company’s Short Sterling Futures quotes.

The bets were on the cut being bigger than the expected 0.5%.

When the announcement of a 1.5% cut came in the client closed out his positions to make a profit of £102,480.

Spreadex spokesman Andy MacKenzie said, “Many people believe financial spread betting is limited to trading on indices, shares, commodities or currencies.

“But there are different ways speculators can use their economic expertise to try and make money and this customer’s shrewd execution of our Short Sterling prices was a perfect example of that.”

See more on >> Spreadex.

Good Luck

DB

After such a huge sell off yesterday we can expect the opening levels to be attracting buyers hunting for the ‘bottom’. Yesterday’s late evening action saw the FTSE being quoted down at 3855 at one point before the late, late, rally in the Dow Jones saved the day.

For all that, the FTSE 100 is called just about unchanged in pre-market action at around 4035. The price volatility over the past three weeks has been extreme even in comparison to previous months this year but (and it is a big but) the FTSE futures have now bounced violently off the mid 3800’s three times. Triple bottoms (tops) are a classic technical indicator of a possible turn in the markets fortunes and investors will be hoping that this time is no different.

Virtually every market sector has now been dragged into the extreme volatility with Bonds, Commodities, FX and Equities all experiencing a massive move every day. At some point (and it cannot be far away now) we will get some form of dealer exhaustion as the survivors retreat to lick their wounds and await easier times and the dead are carried out for burial. Trading volumes are in almost terminal decline with the exchanges indicating that turnover this month may be the lowest for many years. Private investors are seeing the opportunity for their day in the sun as small volumes are moving prices like never before. On the 3mth interest future markets there used to be thousands of contracts on the bid/offer spread. Nowadays you are quite likely to see just 20 to 50 on either side. Two years ago a sell of 3000 Eurodollar futures would have been immaterial, today you might actually move the ‘Global’ Libor fix for the day with such a sum.

The allocation of bank balance sheets to proprietary trading units has been decimated and with many units now having to justify their existence to unsympathetic Treasury civil servants (across the world) the days of the ‘big swinging dicks’ may final be over. Old fashioned Government Bond Sales and Trading desks (which I grew up on) will now be the place to be as Central banks start to issue huge tranches of debt. The retrenchment towards Vanilla products will probably be the story of the next few years.

Good Luck!

DB

As mentioned into day’s Daily Trading Comment “Markets in the Far East seem to have been rather more circumspect with the Hang Seng refusing to budge from Mondays closing levels at around 15,300 and this might give longs in the Dax and FTSE cause to take profits in early action and await events”.

In truth there is very little information to play with just at the moment with virtually no corporate announcements and precious little economic data either. Retailers are gearing up for the Christmas sales (I saw my first Xmas ad on TV last night, can’t remember who for) and for many of the smaller chains we may be seeing, literally, a do or die scenario. Even the big boys were kicking up a fuss over rent reviews in September so spare a thought for the struggling smaller retailers. The quarterly payments due in December may kill off quite a few ‘names’.

RBS seem to have bounced from the lows of last week when the share price seemed to indicate that it was touch or go whether the company would survive. With the stock closing last night at 85p and the Government underwriting the right issue at 65p this might attract a big private uptake and limit the state influence but the emphasis here is on the word ‘might’. It is tempting to suggest that the bank would welcome a bit of state holding as the government would then also be in hock and therefore likely to be ‘supportive’ in the event of any further problems. Unfortunately, in the back of everyone’s minds will be the disastrous £12bn issue just a few months ago back up at the 200p level. Anyone getting involved in this has seen a short sharp lesson in equity value destruction.

The announcement yesterday on the Governments finances will also be of concern to watchers from the sidelines. The finances of the UK are swiftly deteriorating and this is before the downturn really starts to bite. Government expenditures are rising by 6.1% even prior to any stimulus packages having been announced. And also prior to the huge dislocation from tax payers becoming tax recipients…and corporation tax receipts drive into the ground.

For all the opprobrium poured onto the banks they were huge contributors to the exchequer (billions a year) it will be many years before these revenues are replaced (if ever). The falling price of Oil will also not be welcomed by some in the Treasury.

The reason that this is a problem for investors is that the more the State needs from the private sector to balance its books the slower growth will be and the more profit margins will fall. The problems built up in Government finances over the last ten years will, I fear, be with us for decades to come. Boring items like keeping the funding going on current expenditure will run into the completely unfunded pension’s liability. Local Taxes will have to rise exponentially to pay for council employees final salary entitlements just as the economy looks to be struggling.

Good Luck!

DB

It is good to see the various spread betting companies improving their services. Invariably that means:

• Tighter spreads, and/or
• More markets, and/or
• Longer trading hours, and/or

And this week Financial Spreads are no exception. They have updated their service as follows:

• Extended opening hours on US and UK Crude Oil (now 7am to 9pm London time)
• The spread on the DAX Rolling Daily is now 1 point (previously 2 points)
• New index market: MDAX 50 Index
• New equities markets: MDAX Rolling Shares

Note that the MDAX 50 is the selection index of Deutsche Borse for mid-sized companies (mid caps). It starts directly below the DAX 30. As the name suggests it has 50 constituents.

See FinancialSpreads.com for full details.

Good Luck!

DB