This last week I have been traveling so missed most of the blow by blow action.  However the comments by the analysts I read plus other articles leave plenty to comment on.

The FTSE had a bank holiday on Monday so I didn’t miss anything there.  For the rest of the week it managed to gain of 46 points. You could say the market is going sideways or consolidating.  For all the hype that things are getting better and that the recovery will be underway by the end of the year, they overlook a few unpleasant facts.

As I have said many times before, no matter how much money the government pumps into the system, in reality it all comes back to the consumer.  In the US initial unemployed still comes in over 600,000 each week. Continuing unemployment is at record levels.

If you have not signed up for John Mauldin’s free weekly email you are missing out on some of the best analysis around. (Link on the right hand side of this site)  His letter this week is very sobering.  He gives three senarios as to the future of the economy.  Like the consumer is finding out the hard way, if you continue to spend more than you earn, you have to borrow the difference.  Sooner or later you have to pay back the “borrowed ” money. For governments the problem is many times bigger.  Governments borrow by “mortgaging” future tax income. Even now there is no possible way to meet all the promises and commitments made about retirement income and health care.

In the first scenerio the answer is to inflate the currency.  Then you and pay off the debt borrowed in “old dollars” with “new dollars” that are worth a tenth of the value.  When I was a boy a liquorice strap cost 2 cents, I saw the same thing in a shop the other day for 90 cents.  John Mauldin gives the inflation senario a 35% chance.

The second senario is to raise taxes.  No politician likes this option.  In the US they are starting to talk about a VAT tax.  This will not be popular, so they will sell it by saying it will replace a whole range of other taxes and stamp duties. But in the end it will be an additional tax.  John gives this senario a 60% chance.

The third option is to just go ahead and raise taxes on the rich, reduce spending programs, and don’t start spending money on anything until you can afford it. John gives this senario just a 5% chance.

The above is very much a condensed version.  The letter goes on to give a housing update.  All is not well in this area either.

The S&P500 gained 13 points on Friday and about 10 of those points came in the last 15 minutes.  What happened in those last minutes to make such a big move?  The answer is that it was the last 15 minutes of trading for the calendar month.  It is called “window dressing” by traders, where the funds, ( and governments), want to make things look better than they are.  This week will see the bankruptcy of GM.  It will be an interesting week.

On Monday I thought I had been premature again with calling the top of the rally.  For no good reason the markets had a strong up day.  The FTSE again made an intraday high of 4500 on Wednesday, (now a double top) and then had a big down day on Thursday because the Standard & Poors had lowered the UK debt rating below AAA.  The net result for the week was a gain of just 24 points.

In the US markets there are fears they may be next for a downgrade. (I am surprised the US has not already been downgraded).  Three more banks were taken over this week, one in Florida and two in Illinois, bringing the total for bank failures this year in the US to 36.

The last week has also seen a considerable weakening of the US$ against many currencies and a corresponding sharp increase in the price of gold.  Oil has posted modest gains.

The car makers saga is not getting any clearer.  Just another week before crunch day for GM.  The have now got the unions on side but it is unlikely that the bond holders will fall into line.  Would you accept 225 shares of GM stock for every $1,000 owed to you? GM’s share price closed today at $1.43  So you would be accepting $321.75 for every $1,000 owed.  Remember there are a lot of pension funds and small investors that hold these bonds.  Not pretty.

The US markets are closed on Monday for Memorial Day.

A week when all the markets showed a net loss with four down days to one up day, and the up day was pretty weak.

I must admit that this rally has gone up more that I expected. I said a few weeks back that I would be surprised if it went past 4200, but as you can see from the chart above it made an intraday high very close to 4500.  The green line is the 200 day moving average, the red line the 72 day moving average and the blue line the 12 day moving average.  What does the chart tell us about future direction?  Any thing you want.  That’s the trouble with charts, they are very good at telling you what has happened, but what will happen is up to the market.  If this is indeed the top of this rally it should be noted that it failed to reach the previous high of 4600.  This would suggest that the next test will be of the 4000 support.  If that fails to hold then the previous low of  3500 comes onto the radar.  But who knows, in this environment of massive government intervention – anything could happen, however I still think a new low below 3500 is on the cards in the next year or so.  Only time will tell.

Headlines from the US have been negative, here are a few I noted.

“Rising Credit Card Losses are the next challenge for Banks.” Credit card losses mirror the unemployment rate.  The recent stress test for banks put probable losses at $82.4 billion, but management consultant firm Oliver Wyman says losses could reach $141.5 billion by 2010, or if off balance sheet holdings are included, $186 billion. Ouch!

“Experts say GM bankruptcy almost inevitable”.  “Chrysler bankruptcy may take up to two years” (What did I tell you.)

There are many more I could quote, but already this is getting too long.  The conclusion I draw from this is that the “green shoots” of recovery the pundits are talking about are weeds.

Yesterday Western Australia voted on whether to continue having daylight saving.  The answer was No.  So at least for the next 10 years or so WA will be free of having to change our clocks twice per year.  This is the fourth referendum on daylight saving and each time the answer has been No. 

The yes proponents even tried a dirty trick or two.  On the ballot paper you had to write YES or NO, simple enough, but the yes vote got the electoral commission to pass that a tick be counted as a yes vote but a cross would be invalid!!

As you may have gathered I voted No, purely for my own reasons.  As I trade on the FTSE when the UK is on daylight saving the market opens at 3:30pm our time and closes at 11pm. Even when the UK daylight saving ends opening at 4:30 and closing at midnight is OK.  But when we had daylight saving it became a 5:30 open and 1am close. Too late for me.

Voting caused me a problem.  I forgot to lodge an early vote as I was working yesterday driving my bus around the city.  Fortunately while driving empty between trips I passed a polling station, so I parked and ran in.  There was a long que, but I ran to the front ans asked if they would mind if I went before them as I had a very limited time available. Being in uniform helped and the people understanding. I was in and out of there in 5 minutes, and still managed to start my next trip on time.

It is Saturday and time to catch up on what has been happening on the markets.  All the markets advanced further, the rally continues, for now.  More and more investors are being pulled into this “suckers rally”, it is nearly time for the next leg down.  Lets look at some of the facts.

Non Farm payrolls came in less than expected and everyone seems to be saying the recession is all but over.  But wait, last months horrible 663K jobs lost was revised up to 699K.  Last nights figure of 539K jobs lost was indeed an improvment on the previous month, but try telling those 539K people that all is well now because less people lost their jobs.  Every week there have been over 600K initial unemployed for months now.  Yes we can say the rate of jobs lost is starting to slow but when are we going to see a positive number?  No matter what the talking heads say it is the consumer that drives the US market, and while the consumers are loosing jobs don’t expect any sustained pickup in the US economy.

The other item that has transfixed the matket is the stress test results on the 19 major financial institutions.  Relief that is not as bad as it could be still does not hide the fact that GMAC needs to raise $9.5 Billion, ailing banks need 75 Billion, Fanny Mae needs 19 Billion. Already we are talking over 100 Billion, where is it all coming from?

This headline story from Market Watch lighlights the madness in the market – “The stock market has for weeks been dogged by talk of trouble lurking in commercial real estate, yet an exchange-traded fund of commercial property companies has rallied 50% in the last two months — despite commercial mortgage delinquencies hitting 11-year highs in April.”

We have not heard much from the Chrysler bankruptcy court this week.  GM is looking like it too will be joining Chrysler in chapter 11 unless some miricles are forthcomming.  Toyota has taken its first loss in 60 years.  I have said before, when you have lost your job, or fear you might, the last thing you are going to do is go out and buy a new car.  At least it is the last thing I would do.

Quite a week one way or another.  The rally continued across the markets with the FTSE reaching the 4200 level. We are now in May which historically is a down month.  The UK has a holiday on Monday for May Day.

One of the things I keep track of is the difference between the Futures and the cash (index price).  In a normal market the futures trade at a premium (higher than the cash), but since the middle of October last year the futures have traded at a discount to the cash.  Until last October it was very unusual to trade at a discount, but since then the futures have been consistently lower.  The discount after Friday’s trading is 49.7 points, this just 6 weeks out from expiry, is large.  What does it mean?  Chances are the market will drop over the next 6 weeks, and it confirms in my mind that this rally is a bear market rally and should not be looked at as the start of a new long term rally.

The news from the US during the week was not good but was disregarded by the market.  Three more banks failed, bringing the total this year to 32 and 57 since the credit crunch began last year.  Then of course we have Chrysler going into chapter 11.  Much has been said that this will be a quick 60 day chapter 11.  Want to bet? 

Initial unemployed showed a slight improvement but it is still over 600,000.  Car sales are way down.  So I’ll wait and see if “Sell in May and go away” is a self fulfilling prophecy.

There are many many things to market through the internet, but you need to pick and choose carefully.  In order to make money for the long term you need to be able to offer value to your readers, things that work. It is easier to sell something to an existing customer who thinks you provided good value the first time than to find a new customer from scratch.

It is also important to me that I act with integrity, that people do get value.

For eight years or so I taught and sold a couple of programs for trading options on the stock market.  But the sad fact is that only about 20% of the population should try trading options, shares, or currencies.  To be sucessful over a period of time any trader needs to master timing.  If you are the type that always turns up for an appointment on time, arrives at a destination in the car on time, no matter what the traffic was like or even if it was the first time you were going to that destination, then you have a natural timing ability and maybe you will make a sucessful trader.  If you do not have that sense of timing I would strongly advise you look to make money in other ways. Find another way of making money on the internet.

The week ending 24th April was a mixed week for  the markets. The FTSE put on 67 points, the S&P500 futures lost 0.4 of a point and the DJIA lost 30 points for the week.  The gain on the FTSE was puzzling as the UK came out with bad GDP figures, yet the market went up for the week thanks to Fridays 132.5 point gain.

Headlines in the US do not give much reason for big moves up. There seems to be much interest in the stress test for banks, and whether they will need to raise more capital. The US government through treasury has devised a test which indicates how stressed a bank is and whether they are undercapitalised.  Gold has been climbing during the week as the US dollar has weakened against most currencies.  The world awaits to see what is going to happen to GM and Chrysler, and California is in deep trouble with its budget.

Now the latest thing to hit the world is the outbreak of swine fever in Mexico that seems to be spreading rapidly.  Will this have an effect on the market?  The last pandemic scare with the SAR virus (bird flu) a couple of years back did for a short time. It really depends just how virulent this is and how fast it spreads.  I heard on the radio this morning that there are suspected cases in New Zealand already.  Any place with an international airport is vunerable.  The next couple of weeks will tell if it going to be a big problem or not. It is probably already too late to buy your face masks.

The week ended 17th April saw all markets making modest gains. The chart below is of the FTSE Futures. The FTSE made 110 points for the shortened trading week  (Thursday 9th to Friday 17th – shortened because of the non-trading days and weekend over Easter). The S&P500 gained 14 points and the DJIA gained 68. On the FTSE  there are resistance levels at 4100, 4200 and 4300.  Should it make it above 4300 there is 4400 then 4600.  However I think it most unlikely it will breach 4200, but as usual it is wait and see.

President Obama and Ben Bernanke have been talking up the market with their comments. But is the worst over? Initial unemployed came in a bit better than expected, but still over 600,000, and the Michigan Consumer Sentiment also came in a bit better than expected.  Other than that nothing in the greater economic picture has changed.

I’m not getting excited yet, I’m waiting for the “other shoe to drop” by way of the next leg down.  Many commentators expect this rally to run out of steam by the end of April.  Two more US banks “bit the dust” over the last week bringing the total for this year to 25.  Banks are not out of the woods yet, though Citigroup came in with a better than expected first quarter profit. As the economy continues to weaken there are more people and companies that are defaulting on their loans. 

I definitely think those that have called the bottom are wrong, we still have a long way to go before the excesses of the housing and credit bubbles are expunged.

My wife and I have tried a number of times to work out how to make money on the internet. We’ve spent some reasonable money on internet marketing videos, books, and ebooks. My wife spent some big money on a mentor who promised the earth and then it turned out he was only able to teach his own tiny little niche. We could see how that type of marketing would work, but it wasn’t on the net and he didn’t have the skills to teach us what we wanted to know, despite the hype.

Would those on the course with me please be tolerant for a paragraph as I wax eloquently about the ease of learning with John Thornhill. Each week has been simple to follow, the instructions have been full and the amount expected of us is “do-able”. It is simply the best we have come across and I would recommend it to anyone. The only thing I would suggest to people is that they have some skill set already or some deep interest that is also an interest of lots of other people, so that you can develop product that will have a market. But even if you don’t John gives excellent training. I don’t know that I would feel quite as blase about the whole process if my wife didn’t have two products ready to go and working on a third. I am lucky that she can write for me. I do the computer stuff and she does the product.  

Many of my friends and acquaintances say they want to have an online business that can bring in some money after retirement. Some of them pay multiple thousands of dollars to be taken through the process of setting up a website and having content to put on the sites. But what we see when we hear what is going on is that the trainer is the one making the money and is setting up an ongoing income stream in the way they structure the trainee to have continuing dependency on them. One of the things I really like about John is that he sets us up to buy and manage our own site so that we are not dependent on him once this is over. Mind you the quality of what he offers is such that we’ll want to stay in touch with him as we grow in our internet expertise.