Final FTSE of 2010

The FTSE Index of 100 leading shares ended the year at 5899.9, call it 5900.  This is well into the top half of experts' forecast (January 2010, see tables above posts), between the 5850 and 5930 predicted by Simon Marsh and Robin Greffen.  You may wonder why these investment experts made predictions across such a wide range of FTSE values - and whether Mr. Goldstein-Jackson sold off his portfolio in anticipation of the big falls in the Index which he. . . er. . . anticipated.  My conlcusion?  There's no such thing as an "expert" in this game. In fact, you can make a case from the little game we've been playing here that their "expertise" is positively dangerous to your financial health.  

Predictions for end-2012 will emerge in the weekend press Business/Money sections, so I will start the game again.  Bet the experts at the lower end of the forecasts here are hoping no-one kept a note of their predictions, hee hee!

Happy and Prosperous New Year to all my readers.

NOTE  A new range of FTSE Index predictions for end of 2011 is now shown above.  I will leave the 2010 predictions for a few weeks for comparison.  The 2011 predictions include one made by "Mr.Fox" (See below the table of FTSE predicted values above.) Readers are invited to suggest other techniques and methods for predicting future values of the FTSE, outbreak ot World War III, or anything else. No goat entrails, please. That's very old hat.

Somewhat Lost Interest . .

in the blog, mainly because no one has been commenting much, so I assumed no one was reading it much. I have restored the Option Trader's Diary to report my full year result for 2010 and to check out the expert's predictions for the end-of-year FTSE value.  At the moment, the lads at the top of the Guesstimates Table (above) are doing best - but there's still 2 days trading to run.  My guesstimate, for what it's worth, is that the FTSE will end the year in the 5950 to 6050 range, but don't ask me even to guess where it will lie at close of business 2011.  If you push me, I'll hazard that the FTSE Index will be higher at end 2011 than it is just now. We shall see.  

Goldman-Sachs . . .

 . . . are to be prosecuted for fraud!  They devised a scheme linked to sub-prime mortgages, that could not but fail, then placed big bets on it failing.  Why can't I dream up fool-proof wheezes like that?

Some Geezer on BBC Radio . . .

. . .  this a.m was arguing that the whole of the world economy is a gigantic Ponzi Scheme.  All over the world, governments have borrowed so much money that the only way they can pay the interest due on the money is to borrow more money and the only way they can pay the interest on THAT money is to borrow  . . .  but I'm sure you get the idea.   So far, only Greece appears to be in serious trouble . . . and Thanks Be that UK is not in the eurozone, so UK taxpayers, for the time being, won't have to rescue the Greeks . . . . . But how long before the whole house of cards comes down?  BTW, made £1136.80 on the April FTSE 100 Index contracts. 

Rearranged . .

. . . my February FTSE contracts.  The Index has climbed quite a few points this week.  So I have rearranged my February contracts which were originally struck at 5900 Calls and 4900 Puts, 5 contracts each side.  I now have short contarcts as follows:- 7 x February 4950 Puts and 7 x February 5500 Calls.  These contracts expire of 29th. February at 10.30 a.m.  My potential profit now is £1323.00p

Hooray! Hooray!

BBC News tells me today that figures released by the National Office for Lies, Damned Lies and Statistics show that the economy of Great Britain plc is "out of recession."  First question.  How many of the words in that sentence do you understand?  Can you, for instance, explain what is meant by "the economy"?  In the context of this ill defined "economy", what is meant by "recession" and hence, what is meant by the economy being "out of it"  Remember that the same NODLS (see above) told us we were out of recession in the 3rd. quarter of 2009.  Then they decided we weren't.  Or some other quango using different figures told us we weren't. Later on, another expert on BBC TV News said words to the effect that "Until we get out there into the High Street and start spending again, the economy will continue to something-or-other"  So there's one definition.  "The economy" is you lot pouring your money into Marks and Spencer, etc. And I hope you can now see why I don't mind in the least using vague terms like something-or-other, since I don't believe the weasel words like "recession" mean anything much either.

Now, what about "recession"  Believe it or not, there is a definition of this!  It's something like "four consecutive quarters of negative growth."  "Four consecutive quarters" I understand, "negative growth" I'm not so sure.  Four?  Might be three.  I forget.  Who cares!  But accepting the definition, we are "out of recession" when the 5th quarter turns positive.  O.K. Now we are getting somewhere!  Let's see . . .  Q1 Growth minus 3%.  Q2  Growth minus 1.5%  Q3 Growth minus 2%. Q4 Growth minus 1.25%.  Now we are officially in recession.  So in Q5, NODLS now tells us, growth is PLUS 0.4%.  In terms of the definition of "recession" we are now "out" of it.  But does PLUS 0.4% after MINUS 6.75% in the previous 4 cheer you up?  Should it?

Lunchtime today . .  the actual figure came out.  WOW. Output however they measure it, is up by 0.1%. Nought point one percent! That's ONE part in ONE THOUSAND!  D'you really think economic data can be measured that accurately.  Goodbye.

It's a Funny Old World!

President Obama announces his intention to restrain the antics of American B(w)anks.  He wants this group of eternally greedy, self-regarding billionaires to recognise and start acting on a simple idea. "Wall Street exists for the benefit of the American economy."  And not "The American economy exists for the benefit of Wall Street." And what happens?  Wall Street (via the Dow Jones Share Index) immediately falls 2%. Does this mean Wall Street disagrees with him, or does it mean the US economy disagrees with him?   In my expert opinion, which of course, no one ever takes any notice of, it confirms something I have long suspected.  The Dow Index, like the FTSE in this country, has no real connection to "the economy."  These market indices are actually a measure of how confident the financial institutions are that they can rip the economy off.  The markets have fallen because the people who decide what its level should be (i.e the B(w)ankers) are suddenly worried that a couple of noughts might get chopped off their bonuses. But of course, I'm just a tired old cynic who makes loads a' munni by taking no notice at all of financial and business news, and in particular, of Financial Advisers, who, whether independent or not, know no more about finance than you and I can learn by reading a few books.  So here's a piece of financial advice, for which I won't charge you an arm and a leg.  At the moment, Premium Bonds represent a good CASH investment for small(ish) amounts of yer spare loot.  And I'll tell you when this ceases to be true.

Postman Prat Put in his Place

Overpromoted postman Alan Johnson, our inhumane Home Secretary who, obeying the dictats of his political masters in the Unmentionable States of America, sanctioned the extradition of Garry Mckinnon, has been given a bloody nose by the High Court.  Remember, this arrogant little cretin-posing-as-politician was once a postman, who, having outgrown his postman's boots, has grown far to big for the new ones given him by Gordon "Everyone's Booby" Brown.  Well, Mr. J . . . how will you go about setting yourself above the law now, which,  at least in your own opinion, you are, or should be.  I can imagine you raging in front of your shaving mirror, "If these silly bigwigs in the courts don't leave me alone to wreak havoc in peoples' lives, I'll make sure they never get any post ever again. I know where they all live!" Johnson is a disgrace to his Office.  Our best hope is that he is soon relieved of it in favour of someone who puts the interests and welfare of British subjects above the whinings of Americans whose feelings have been hurt, poor little dears.

February 2010 FTSE Index Options

I redeemed my January FTSE 100 Index options at a cost of £305.20, leaving me a profit for January of  £1769.60p. At the same time, I opened a position for February by selling 5 x 4900 Puts and 5 x 5900 Calls, for a potential profit of £1362.00p if the FTSE Index lies between 4900 and 5900 when these options expire on February 19th. at 10.30a.m.  The FTSE Index stood at about 5505 when I did these trades.

Leave It To The Experts!

15 of them have stuck their necks out and made predictions of where the FTSE Index of 100 Leading shares will be at close of business on the last trading day of 2010.  Note the range of affiliations. Investment Managers (IM), Investor Magazine Writers, brokers . .  to a man (where are the ladies, by the way?) they are all "financiers" or "financial experts", or something.  So how do they arrive at such widely diverging takes on that which they pretend they can predict? Clearly, the first thing to learn is DON'T TRUST THEM WITH YOUR MONEY - or if you must, trust only the one whose prediction is correct. (Er . .  er . . . there's a catch in that somewhere!)  You can chase the weblink above the table of predictions to the F.T webpage where these 15 sages "explain" why the FTSE Index will end up where they say it will even though it won't because they're all so different. Wake up, folks . . . NO ONE can guess the future. But I suppose these geezers have to do something to justify their telephone number salaries and bonuses-or-we'll-emigrate,-you-ungrateful-British-mugs.

Here are my thoughts on what the 2768 FTSE points minimum-to-maximum suggests.  First; whatever "economics" is, it is not a predictive science. For if it were, these predictions would surely be much closer together.  I suspect (but cannot prove) that economics would be a predictive science if it could distinguish "first order" from "second order" influences.  I suspect that the only influences that can be measured with any accuracy are "second order" ones, that have no real effect on economic outcomes.

How will I incorporate these all-over-the-place expert predictions into my option trading strategies during 2010?   Briefly, I shall ignore them. Taken as a bunch, they are meaningless. But I will leave them posted until next New Year, and we'll see who got closest.

My own FTSE prediction - remembering that mine will be correct? eMail me if you really want to know. (dr.FTSE@googlemail.com)

May 2010 . . .

. . . be the prosperous New Year we all hope for!  I renew my annual resolution, which I kept throughout 2009, to resolutely ignore the advice of anyone described by the BBC or any other organ of the British media as an "expert."  That way I might just maintain the winning run I enjoyed this year.  This Sunday (3rd.Jan.) is the day when these self-regarding and magnificently overpaid gals and guys give us their wildly divergent predictions - in the Business/Money sections of the broadsheets - of where the FTSE Index will be on Dec 31st. 2010. There will be a big spread of predictions as usual. Many experts will be wildly wrong. One or two will be somewhere near the mark by the Laws of Probability

I ALONE, The All-Knowing Doctor FTSE, can tell where the FTSE Index will be at the end of 2010! And don't you forget it.  Post a comment - with YOUR guess, if you like - and I will reply via eMail with my prediction.

In the meantime, here's a weblink that tells you about things much more interesting than the FTSE Index or Option Trading . . .

Happy New Year!

Ponzi

One of my delightful daughters gave me "Ponzi" for Christmas.  This is the story of Charles Ponzi, Italian immigrant to the USA early in the 20th century, who ran probably the most audacious "pyramid" scheme of all time.  Most of Boston fell for "Deposit your dollars with Ponzi's 'Securities Exchange', and in 90 days time, he will return it with 50% (that's FIFTY percent) interest." The commodity he pretended to trade on his investors' behalf was international postal reply coupons.  His idea worked (in principle) and indeed, he checked it out using French, Italian and Spanish coupons(*) and made himself a few dollars profit before he opened the scheme to all comers.  Thereafter he forgot about trading the coupons, took in the investors money, handed them out their 45 or 90 day promissory notes and . . . well, read it for yerselves!  Available from A**z*n. Like any well thought out pyramid scheme, it hangs together as long as there's a queue of suckers outside the office eager to hand over their hard-earned life savings, which he used to pay off the lucky folk who had joined the pyramid earlier.  Or until the Boston Post got interested in this dapper, 5'4" smiling, charming Italian who seemed to produce money out of nothing. This was in the days before "If it sounds too good to be true, it IS" became the investor's watchword.  There's a picture of the little miscreant elsewhere on this blog.  Let Ponzi be a warning to all. He gave his name to  . . . "Ponzi" schemes. I'll stick to trading FTSE Index options . . .

(*)  Buy International Postal Reply Coupons in European countries using U.S dollars. Redeem the coupons in the US for US postage stamps.  In 1920, when Ponzi was operating, IPRC's could be exchanged for stamps at a favourable rate.  This was a concession, so that European immigrants in the US could write home cheaply.  In other words, Ponzi ended up with MORE stamps for his dollar than  he would have if he'd spent the dollar in the US.  The "extra" stamps were his profit.

Wonderful, Wonderful Copenhagen . . .

. . . way down this blog I modestly pointed out that some things are so predictable you can't pretend you're clever for predicting them.  So here's another.

OUTSIDE OF WEASEL WORDS the Copenhagen Climate Change Championship Conference will achieve precisely nothing beyond bland resolutions to "do something pretty damned quick about climate change and/or global warming" or whatever the latest "scare the pants off 'em is."  And before you all started nodding wisely and agreeing with this prediction . . think about this . . . how many folk do you know who are prepared to change their lifestyles (like stopping flying, giving up the Chelsea Tractor in favour of a pushbike, gagging Jeremy Clarkson and his demented Top Gear Petrolheads blah blah) in the interests of a future more than 48 hours away?

Oh and by-the-way . .  will someone please explain to me using real live numbers exactly how "hybrid" cars save CO2, emissions/energy/oil/pollution or anything else? (And PERLEEEASE don't say "Well, the charge on the battery comes from wind energy."  Wind turbines are a massively inefficient way of generating electricity, and a massive con perpetrated on the Government and the (largely) technically illiterate public by the turbine builders.  Almost any other method of generating "green" energy is better than capturing our balmy breezes.

And a further by-the-way . . . there are MUCH BETTER ways of saving energy/petrol or whatever it is you think petrol/battery hybrids do.  Better ways would use some form of regenerative transmission. Basically, these systems "brake" the vehicle by storing its kinetic energy in a potential energy reservoir.  For instance . .  couple the vehicle to an on-board flywheel which "spins up" as the vehicle slows down etc. (Question . . . spot the downsides!)  Or . .  connect the vehicle to an on-board pressure cylinder.  When the vehicle slows, its energy is stored in the hydraulic fluid.  When the lights go green, this energy is released back into the drive train.  This system can EASILY produce burning rubber levels of acceleration WITHOUT  ANY HELP FROM THE ENGINE.  Prototypes of this system were developed thirty years ago in Glasgow University Department of Mechanical Engineering. The performance of the protoype vehicle was gobsmacking! But the idea never caught on.  I suspect because of obvious vested interests, and because the engineering involved was not "exotic"  It was done with standard "off-the-shelf" hydraulic components.  How do admen glamourise a vehicle that's built out of fork-lift truck bits and bobs, and doesn't "vrrooommm" as you get away from the lights?  Car enthusiasts do not like silence.

At present, all  exisiting types of road vehicle "brake" by converting their kinetic energy {largely) into heat in  the brakepads, discs or drums.  Amazing!  You heat things up to get your SUV going!  You heat things up to stop the bloody thing . . .  and forget-ye-not . . . the car engine is a HEAT ENGINE and cannot be better than about 35% efficient (Laws of Thermodynamics), but the pad/disc/atmosphere system is a HEAT EXCHANGER and so it efficiently wastes 100% of the vehicles kinetic energy when you use the brakes.  Get on yer bikes , ,  the fuel is a lot cheaper!

December 2009 and January 2010 FTSE Index Options

I redeemed my December FTSE 100 Index options 1 week before they expired, and opened 7 x 4800 Puts and 7 x 5800 Calls in the January 2010 series.  Fans and followers who study the option prices on the LIFFE pages will see that the NET of these transactions leaves me better off than if I had waited until the December options expired worthless on Friday 18th. December.  My December profit is £211.60 LESS than it would have been - but my take for the January series is more than it would otherwise have been at the end of next week  I pocket an unassaiable PROFIT of £1076.80 for December, and a potential profit of £2074.80p in January, provided that the FTSE 100 Index lies between 4800 and 5800 at 10.30a.m on January 15th, 2010. Only one slight hitch through the whole of 2009.  IT CAN'T LAST!  Happy New Year, folks!

Splashed Out . . .

. . . on 6000 shares in ARM Holdings.  They develop and license the technology for making the chips in yer actual mobile phones.  So do me a favour, followers and fans.  Throw that clapped out old Mobe in the recycle bin and buy yerselves a new one!  Boost the Doc's ARM dividends.  I paid 166.24p per share, net of expenses.  At the same time I sold 6 Call contracts in the June 2010 180p series on the shares.  This sale netted 8.987p per share. In effect I have paid only 157.25p for the shares.  The usual caveats apply.  I would be ill advised to sell the shares before next June, even if they are showing me a stonking profit, because I could be "called" for the shares at 180p and would have to buy them in the market at a stonking loss to meet the Call! Ideally, I'd like the shares to stay below 180p till next June, by which time I will have collected a dividend . .

I used to be a postman . .

Now I'm a jumped-up postman playing at being a Home Secretary. . . .

so when Washington tells me to deliver Gary McKinnon, I deliver him, geddit?
And if you disagree with that decision . . . observe my two fingers . . .

A Week is a Long Time . . .

 . . . in the stock markets.  The Dubai scare last weekend seems to have evaporated. And the week has been very quiet after Monday's fall.  No need to rearrange any open contracts.  Centrica dividend (£183.00p) has landed in my account. 'Night all!

Dubai.

Well, now . .  property prices in Dubai - if not the properties themselves - are collapsing, and with them, the world's stock markets.  Redbraced Experts are predicting the second stage of the Great Crash of 2008-09 and all is suddenly doom and gloom again with the FTSE down in the 5100's.  So here is a warning, with apologies to Percy Bysshe Shelley . . .

DUBAI, 2009

I met a traveller from an antique land
Who said: Two vast and trunkless legs of stone
Stand in the desert. Near them, on the sand,
Half sunk, a shatter'd visage lies, whose frown
And wrinkled lip, and sneer of cold command
Tell that its sculptor well those passions read
Which yet survive, stamp'd on these lifeless things,
The hand that mocked them and the heart that fed.
And on the pedestal these words appear:
"My name is Ozymandias, king of kings:
Look on my works, ye Mighty, and despair!"
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare,
The lone and level sands stretch far away.

In the words of John K. Galbraith . . .

. . . from  "The Great Crash, 1929", (p48 in the Penguin paperback edition, available from *m*z*n)

"Wall Street . . . is like a lovely and accomplished woman who must wear black cotton stockings, heavy woolen underwear, and parade her knowledge as a cook, because, unhappily, her supreme accomplishment is as a harlot."

Sell All Your Shares . . .

. . . as soon as you read, or some redbraced financial genius says "This time it's different" or "We're in a new paradigm" or words to that effect.  It means there's a crash, or at best a significant market reversal  coming . . .