Dow 10,000 & Full Steam Ahead

The large scale printing of money devalues a currency so it is no surprise that stocks are worth more of it.

Re JPMorgan. Quote below from MoneyWeek's John Stepak:

"Where did JPMorgan's money come from?

Let’s have a look. One reason for the market’s jubilation was third quarter results from JPMorgan Chase. The bank hammered analysts’ estimates by churning out $3.6bn in net income for the three months to 30 September.

Guess where the money came from. Was it the credit card unit? Of course not. Your average man and woman in the street are either paying off their credit cards, or have already defaulted. That particular unit made a $700m loss. Debt write-offs are rising, accounting for 10.3% of outstanding balances. And as Ian King points out in The Times, the picture is deteriorating, not improving. JPMorgan chief executive Jamie Dimon reckons credit card losses could be “north of $1bn the first and second quarter.”

What about other forms of consumer lending? Forget it. That division had a net loss of $1bn, worse than last year. It now expects write-offs to hit $3.8bn, compared to earlier provisions for around $2bn. Total retail loans outstanding fell by 3% - in other words, people repaid more than they borrowed. And corporate lending has fallen too.

No, the lion’s share of the money came from investment banking where profits more than doubled due to heavy trading in the fixed income markets and a flurry of corporate deals. And it’s little wonder – given that the third quarter was the best ever for many capital markets around the world – that it’s made a lot of money. The group made $1.3bn from trading on its own account – a figure which it warned will fall sharply “as markets normalise” in coming quarters. It also was able to “write up” various once-toxic securities by $400m."

So - given the above - any sane investor MUST see that the only direction in say three months - is DOWN.
Bruce's article seems to me well slanted in favour of bullishness, perhaps in order to tempt Fools to use The Motley Fool's Share Dealing Service?
Surely in these most unusual times, with money printing coming to an end, a prudent investor would take profits and wait - OR as I have, get into gold?

ftse 20,000?

What a very sage individual Sadiesage is. I suspect he has had many satisfied clients over the last 40+ years.
Well, for what it is worth, & not just because I am quoting someone who very clearly knows what he is talking about, I regret to say that I still see the markets plumeting & bottoming out next year. Up until now I have tended to believe in a target for the FTSE below 3,500. I am now partly persuaded that bad tho' things are (& worse tho' they will definitely become, once the reality check - ie the ending of QE - hits us all) they are significantly better than they were a year back when quite a lot of intelligent people were queing up to jump off the Humber Bridge. So I now confidently predict a dip to no worse than 3,900. This will occur in exactly 10 months ie post the election euphoria & the passing of 'gloomy Gordon' & after the Conservatives have started telling us exactly how high they will be taxing us over the next 25 years (which they will feel they can do with impunity because it was all Gordon's fault!)

Thank you, Chinga1 and LARFIELD for accepting my comments in the spirit in which they were meant. I am, as you rightly suspected, a 'virgin' at this posting lark, having undertaken my first one earlier this week on this site in response to a similar article.

I've been fascinated by the stock market since I started work with a stockbroking firm in 1959 and have, accordingly, gone through quite a few bull and bear markets in that time. I retired in 2002.

I am fortunate to be remembered by a good number of Clients I used to look after, with a degree of affection, I hope.

The worst bear market I endured was the 'Grand daddy' of them all, the 1972 - 1974 crash where the FT30 (no FTSE 100 in those days)fell some 75% between May '72 and November'74. Boy, was that bracing!

I think the most overlooked consideration when investing money is the importance of perception. It is almost impossible to gauge and being unmeasurable as a result,the so-called professionals often get tripped up by it as the principal cause of them getting it wrong, when they do.

That's what makes the market so fascinating - if you can rightly anticipate today, more often than not, what the World and his wife are likely to do tomorrow, then you'll do well, probably very well.

LARFIELD - I think you are on the right track here with your sentiments; they accord very much with mine,too, if I might say so.

Finally, in case you wondered how I arrived at my 'handle', I've just changed my car for a Cooper S which goes like stink and at my age that's a real thrill. I call her Sadie....You've got to be quick and decisive in this business!

Yes, of course; Alan Greenspan first said it in 1996 I think it was but it took a long time to sink in. It's part of the perception argument, in that people rush into the market when they think they're missing out on something and throw caution to the wind, just as they're doing now. The reverse occurs when they're scared like a short while ago. The 'Fear and Greed' syndrome.

Currently, I think there are two principal drivers of this market - the Institutions who need to show they're not so out of the market by the year end (performance figures and all that)and the private investor seeking income.

The former could well create a major wave as the year draws to a close and early in the New Year withdraw their support, if not reduce exposure quite a bit. The income seekers need to be mindful of this risk in early '10 and would be well advised to hold off their buying, too.

It's usually wrong to buy equities simply to generate income (bonds / gilts normally fulfill this function, of course) but current circumstances are unprecedented and they have nowhere else to go at the moment.

As LARFIELD rightly pointed out yesterday, once the QE programme stops, gilts will sustain a hammering and corporate bonds will be hit, too, as the rise in yields occurs. Share prices will suffer from such competitive returns becoming available to the income seekers and then we'll be addressing the aftermath of the election and we all know what that will entail.

'Growing cash' around December time shouldn't prove too ill-timed, methinks......

Asked recently what shares I would be loathe to relinquish and why, despite a significant correction next year which I anticipate, I came up with the following half a dozen. They are:-

Anglo Pacific
Mothercare
Petropavlosk
Bglobal
EcoAnimal Healthcare
Modern Water

The first two are extraordinarily well run concerns and a conservative management style in current conditions is a major plus, in my view. Neither has any borrowings but rather significant cash accruals on their balance sheets.

Anglo Pacific is run along the lines of the old Mining Finance companies ( multifarious interests in the industry) and buys in royalties to finance its dividend payments which are more than 2x covered, at least, I think. Sound value here.

Mums will not cut back on their spending for their youngsters unless matters are really dire and MTC is now developing its foreign interests with additional franchises in India and China, so much potential abroad adds to the appeal.

Petropavlovsk is now getting everything right, at last, it seems. Being cheap relative to its peers and with FTSE elevation in prospect, it looks capable of at least regaining its former high and then some.

The last three are potential 'multi baggers' if their technological advantages are sensibly exploited. All seem to be in 'must have' industries and with little competition to contend with (for now, at least)they look very exciting prospects to me. I only hope they don't suffer from growing too fast, in the event.

So, these are the ones I'd hang onto, almost regardless, timing the rest into cash for a while next year.

Just my own thoughts which might be of interest...