It is not often that I have ever, or will ever, feel sorry for Fred the Shred but the desperation of politicians to try to claw back his pension is a tad disgraceful. Gordon Brown’s assertion that he will use legal means to recoup some of the pot if possible is a very dangerous game and one that should be countered by all pension holders. In a year's time Sir Fred will be forgotten but if a successful legal claim is made against a lawfully agreed pension then this will sit on the statute books forever.
Aside from anything else if Sir Fred can lose his pension for failure or incompetence then ‘Our Gordon’ and ‘Captain Darling’ should think very carefully indeed before going down this route!
Weakness throughout the late afternoon and evening sessions weighed heavily on the markets yesterday after a bright start and the FTSE is now back in the mid 3800’s once again. This being Friday traders will have to decide whether the market is short and wanting to cover before the weekend or long and not willing to risk further bad news in the weekend press. With last nights sell off fresh in the minds of dealers the initial impetus may be to the later but in truth there seems to be solid support between 3750 and 3850 and below here is still the twin bottoms of October and November at around 3675 from which we staged two 1000 point rallies to the roughly exact same point up at 4685 (yes we have had rallies and these were humdingers representing over 27pc from tip to toe).
Clients are very wary but do not seem to want to miss out if a similar move develops from here.
The rally in RBS and Lloyds stock managed to survive through yesterday’s session even though the end of the day started to look a bit fragile and equity holders might be tempted to think that the worst might be over. It is very difficult to foresee the eventual outcome of the banking saga but with the State now holding substantial portions of the equity the fear will be that the units will be used as instruments of state policy rather than authentic banking operations. Increasing lending at the current point in the cycle seems to be going against the FSA’s own recent remit on prudent use of the Tier one capital weighting. If on the one hand you can scream at banks for imprudent lending but on the other then force them to increase risk levels when they must know that unemployment and poor debt levels are increasing the authorities run the risk of making the same mistakes again in very short order. I know that there is the epigrammatic theory that history generally repeats itself but this is usually used over significant periods of time not from one year to the next.
Sterling seems to have acquired a rubber ball status with the market rallying, falling, rallying, falling on an almost daily basis. Yesterday was the turn of the bulls and today it is the bears. Yet again we are back down near to the 1.4150 heavy support region versus the dollar and punters (who absolutely coined it in on the bounce yesterday) are buying into the support once more. Playing the ranges can be a very lucrative activity just so long as traders are aware that, on a break, positions should have tight stops in place. Against the Euro the pound seems to have settled into a 1.1000 to 1.1500 range since the end of January after the attempts to get to parity were defeated. With the economic situation starting to affect even the most sound of States the arguments against the Pound, in particular, are starting to lose some of their power. With every nation state struggling to match budgets we all seem to be sitting in glass house tying to stop throwing stones. As more and more pressure is applied across the globe the historical safe haven status of the dollar might well reassert itself (even though the US has its own problems).
Gold slipped again yesterday briefly pushing at $930 before managing something of a rebound to the current $945. It is slightly worrying for gold bugs that the recent weakness in the indices has not resulted in further strengthening of Precious metals. With the $1000 level once again asserting its powers of repulsion and the dollar looking up bulls should be wary of putting too much into a gamble on higher prices. Yes the momentum is still to the upside but the arguments are possibly once again (as they did midway through last year) running out of strength.
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