Helicopter Ben: Whirlybirds To Keep Flying

It is against my nature to make personal jibes against anyone, but the latest chapter in the QE tapering saga from Ben Bernanke makes it difficult to argue that the Chairman of the Federal Reserve has any more backbone than a jellyfish! True, he is in an almost impossible position in terms of the U.S. debt situation and the bubble having already burst as far as Treasury Bonds are concerned and which prop up the American fiscal house of cards.

There is also the matter of Bernanke having had an impossible act to follow in terms of his predecessor Alan Greenspan but then, in theory, he had the chance to be remembered as the man who brought the U.S. back from the abyss of the financial crisis. He is unlikely to get any medals in this respect however as the recovery has been pedestrian, and he now faces the added stress of being an effective “lame duck” until his tenure expires at the end of January next year.

In fact, the only way that Helicopter Ben could really salvage his track record in the home stretch would have been to show some true grit in terms of facing off the markets with the inevitable end of QE. So what does he do?

Last month he put his foot down regarding tapering , actually showing some mettle – albeit in the most understated of terms. But this month, having seen how the markets crumbled at the prospect of life without the easy money punchbowl, we have essentially had a U turn on this hollow threat and stocks in the U.S. in particular are now back near their all time highs. You can tell how much Bernanke has backtracked by the way there has been a $100 plus trough to peak in Gold – yes, even Gold and Gold mining stocks have bounced.

So what does all this tell us? Well, it is a story of chronic weakness by the man. Indeed, at this stage the best way forward would really be for Bernanke’s successor to ensure that the inevitable hangover the markets are going to suffer when easy money / low interest rates come its end (and it will) is taken before the end of the year so that a new approach can be started in 2014. On this basis and for other reasons described above, it would appear that Ben Bernanke is now pretty much set up to be the “Fall Guy” Fed Chairman.

G4S: The One That Didn’t Get Away

The former CEO of security specialist Nick Buckles is someone who I have kept an eye on for quite some time, and not only on the basis that he sported the best head of hair among FTSE 100 CEOs – male or female! The reason for the interest apart from follicular envy, was the aftermath of the Olympics fiasco and how, while other lesser management headed for the exit, our Nick clung to his position. This was until a couple of months ago – presumably a sufficiently extended period of time so that the resignation and the fiasco could not be linked. 

Of course, now G4S is back in the headlines with the allegation that it has overcharged  Government contracts by millions of pounds (what’s new there?). We, the people are supposed to be shocked by this, but as most of us will be aware, as a general rule, from Cameroon to Canada, from the United Kingdom to Uruguay.. that Government contracts of all shapes and sizes are a gravy train to a greater or lesser extent. They follow the principle of jobs for the boys (and girls) and given that it is the bottomless pit of taxpayers’ money which is involved, no one is too fussed about the odd zero or two on the right hand side of the figure involved. Indeed, this fatal flaw in terms of procurement is illustrated in the workings of the  EU / Brussels, where we have multiple countries involved in a variety of charades, and hence even less reason to worry about value for money.

But, as well as the rotten world of Government contracts, there is another aspect of the G4S affair. As we have seen from the examples of Messrs Assange and Snowden, hell hath no fury like a Government scorned, and there is little doubt that with regards to the flagship London Olympics, this hubristic event was damaged at least temporarily by G4S. Hey, even Mitt Romney thought so.

The expectation now would be that the “Justice” Secretary will call in the most scary organisation he could find – the SFO,  fresh from its er, “triumph” with the Tchenguiz Brothers. This is presumably the playground equivalent of snitching to the teacher, and suggests that we should be prepared for the full media witch hunt treatment of the FTSE 100 group.

Perhaps the most interesting aspect of G4S though in the near term is from the trading perspective, and I think that we have a stock which could be a first rate prospect for the bears. There are two reasons for saying this. The first is that the rally in the shares from the July low under 240p to the April high at 316p would have been enough to flush out even the most keen short seller and so there is a vacuum to the downside now.

Second, the unfilled gap to the downside on the daily chart in May ahead of the Buckles resignation was a technical signal which is usually the harbinger of fundamental doom. If you add to this the 50 day / 200 day moving average dead cross sell signal in June, you have a high grade charting sell prospect.

At this stage, the likelihood is that at least while below the 20 day moving average / May descending price channel top at 232p, the downside here could be towards the 2 month support line projection as low as 170p by the end of September.