Stock Market Report wk#37

You know how you say stuff that you know you shouldn’t. Well I said in last week’s stock market update with a high amount of glee that I ‘feel (and enjoy) a sense of smugness when I hear traders going on about what a difficult month August was and how some got creamed.’

Well, I got a little bit creamed this week as you will see below.

Just deserts?

Yep.

Yet again the stock market the best teacher/mentor that an aspiring trader can hope to have has taught me that I cannot allow ANY sort of emotion/ego spill over into my trading.

I am neither invincible nor a failure.

I am a trader who should follow my own style of trading translated into a written, coherent trading plan. Anything else is just noise.

Sometimes I really do think that I need to lose a little to learn A LOT. This week my small loss reminded me that the market does not care about my ego or that I made money in the month of August when the FTSE fell six and a half percent in the same month. Just because I put a position on, the market does not have to follow MY market direction.

Stock Markets This Week

This week saw Sir John Vickers’ independent commission on UK banks suggest that retail high street banking should be separated from investment high-risk banking to make it easier and less costly to resolve banks that get into trouble.

Obama has his plans to create jobs in the US met with defiance as Republicans object to the tax increases on the wealthy on the grounds that it would penalise job creators.

And Anglela Merkel stated this week that the collapse of Greece and its exit from the Euro would have a domino effect. Merkel went on to say that the top priority in Greece was to avoid an uncontrolled insolvency. Sparking debate that European finance ministers were preparing for an ‘orderly Greek default.’

By the end of the week, investors were waiting to see just exactly what Europe’s finance minsters were going to do NOW to restore confidence after the European commission said that economic growth in the Eurozone would “come to a virtual standstill” in the second half of this year.

What we got was a commitment from the Federal Reserve, the European Central Bank, the Bank of England, the Bank of Japan and the Swiss National Bank to supply banks in the Eurozone with dollar loans until the end of the year. My question is, what happens after the end of the year?

So what Europe has now is access to more debt for European states who are effectively insolvent. But only for another three and a half months.

This cycle of debt is truly staggering. And to think it was not a world war that caused this fiasco in the first place.

This latest plan does not fill me with confidence considering UBS allowed a rogue trader to rack up loses of $2 billion. Apparently Kweku Adoboli engaged in false accounting dating back to 2008 as well as fraud in January 2009 for which he has been charged for both.

Yet again the FSA will step in after the fact to ‘investigate the control failures which permitted the activity to remain undetected’. This case highlights the need for investment banks to be separated from high street operations as per the Vickers’s report. They clearly do not have the will to act responsibly.

It also highlights the fact that investment banks still do not know exactly what their traders are up to after all these years since the collapse of Barings Bank. If Investment banks want to gamble other people’s money in this way, let them, but don’t expect taxpayers to foot the bill. Only shareholders (who ought to know better by now) should foot the bill. Make their activities so remote from high street banking that the investment arms are allowed into insolvency without damage to the UK economy.

Why do you think Warren Buffett became a shareholder of Bank of America last month? He knows that the US taxpayer via the US treasury will bail out America’s banks to prevent another Lehman style collapse. I’m not passing judgement, nor do I want to be a doom sayer. I am just stating the cold hard facts.

My Trades

Well, I have one closed trade to report today together with a peculiarity of spread betting which resulted in a loss for the portfolio.

First to the trade.

Inmarsat (ISAT) entered at 505.57, exited at 453.79 for a loss. I’m not sure why I hung onto this short trade for as long as I did because ever since I sold Inmarsat short it just kept going up! How rude. The long term trend is still to the downside however much it has risen since its low on 4th August.

I also got pinged for being short of a share on the ex dividend date. When this happens, I am charged the dividend which is taken out of my trading account because I am a seller. Expect a more detailed post on this in the future.

I still have open positions in the portfolio and I already have my eye one one or two purchases that I would like to make this week.

Newsletter subscribers get additional commentary about my closed trades – its free.

Any trades listed above are closed trades as I do not make public open positions.

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