Prof

http://www.bbc.co.uk/news/business-14387254

Debt collectors are counted under financial services. Stories from the quoted debt collectors have all been about the slowness with which businesses are going bust because of the forbearance of the banks and HMRC. Hard to believe I know and obviously more for political reasons than economic. This forbearance will not last and business distress will climb. The mass sackings in the public sector are only beginning so th consumer sector has the worst to come.

The stock market is now in real danger of free-falling becasue sentiment has become so negative and self-fulfilling. This would cripple investment in any sort of manufacturing and the services marketplace will be decimated.

In 2003 the FTSE was down at about 3200 before it recovered to 6500 in mid 2007. In 2008/2009 it dropped again from 6500 to 3500 when it fell over 40% in just 6 months during 2008. These cycles are repeating and growing in intensity.

The latest 10% drop has occurred in the last month alone. This is not good news for any company wishing to invest or manufacture products. We are in for a very hairy ride over the next year or so - but the real worry is that the markets are undamped and central banking resources cannot prevent lemming-like behaviour by the finance community.

Anonymous 1 needed this 'Off the Record'

Dr Jimbo
Please take great care with some of the suggestions made by Jeremy.
CFD's and shorting carry a high degree of risk.
It is possible to double or treble one's potential loss.

Prof Eman

Anonymous 1 needed this 'Off the Record'

Dear all
Another piece of very bad news, for UK manufacturing, as reported by Citywire.
The Observer
Rolls Royce embroiled in a new row over manufacturing jobs leaving the UK, after admitting that a new hi-tech facility is likely to be based in Germany or the US instead of Derby.
Will there be any manufacturing left at all soon?

Prof Eman

Prof and Dr Jimbo

The point of using any kind of derivative is to control risk. You can ramp it up and face the risk of catastrophic losses or you can reduce risk to zero. Just make the effort to understand what you are doing.

If I was absolutely convinced that the markets were going to keep going down by a very large percentage, I would buy an out of the money put covered warrant on FTSE or possibly on one of the constituents with a high beta. My potential loss would be limited to the amount I invested in the first place and would occur if the markets failed to go down to the anticipated level and I sat and watched it happen. Meanwhile I would be saved the expense of going liquid and then repurchasing everything when the panic was over, probably missing the best time to buy back my holdings, and I would still receive the dividends on the shares I held. The dividends received would exceed the cost of the covered warrant and also exceed the money saved by not buying the covered warrant plus the paltry interest from a deposit account.

If you don't understand what a covered warrant is, or beta is, then stay out of it and face the risks with no protection.

Since I am not convinced we are at Armageddon and have no view on the short term markets, I sit and wait for it all to blow over.

I don't bet on sports or play casino games, I don't stick a pin in the paper to pick what shares to buy. I do my research.