Zak Mir – “Savers save the world”

The father of the editor of Spreadbet Magazine is a Doctor of Medicine, a former Eye Surgeon at Moorfields and Charing Cross, and also a substantial share trader and, these days, spread betting enthusiast. It is also likely that he could be a decent substitute for me on occasions when I felt like taking a holiday – currently once a decade!

The discussion over the weekend between the two generations was the effect on the economy of banks still charging 2-3% over base for mortgages, the usual historic margin, but yet providing savers with next to nothing. That savers were getting a slap was initially an emergency measure in the aftermath of the financial crisis – helping out those who had bet the farm and were in danger of losing their shirts on real estate / business in general.

This strategy has actually worked – sort of. We are now, finally, back in a growing economy some 5 years on from the GFC, and the housing market, certainly in the South East, is booming.  But, the issue remains – what about the savers? They have saved the banks (and the world) by foregoing interest on their money, and in a few years time all the upset surrounding the near collapse RBS (RBS), Lloyds (LLOY) / HBOS may be forgotten. However, the discussion at Mir Towers was as follows:  How do we get back to normal?

I suggested that the road to normality which we are walking down currently, with bond yields rising back towards 3% could actually burst the localised housing bubble. But, with an general election on the horizon next year, the increasing political influence in the BoE is likely to delay the inevitable reckoning by another 12-15 months. My thoughts – make hay while you can as the other side of that election will be the real “return to normality”.

Given that almost all my assets are locked up and evaporating in value day by day in the Eurozone, you could say that I have something of a vested interest in calling Sterling down. However, living as I do in the “bailout” zone where we wait daily for the ECB’s helicopters to drop wads of banknotes, it would be pleasant if a Sterling earner like myself could get more for his Tortilla.

This latter wish looks as though it could become a reality given the recent charting noises in the Pound / Euro cross. Here, it can be seen how this cross looks to be about to break back above the key 200 day moving average at €1.18 for the first time this year. Given that we are in the aftermath of a sharp August bear trap towards €1.14 and a rebound off the falling blue 50 day moving average last month as well, the upside argument looks to be the winner here. Indeed, the target as soon as the end of next month is seen as being the top of a January rising trend channel at €1.21.

Switching asset classes and as far as the Japanese stock market is concerned, we have another market whether I would also prefer it if this index remained in a 20 year plus bear market: if only to prove that an apocalyptic call made in the late 1980s remained correct! However, in the near term we have been treated to a rebound off the April rising trend channel and a June RSI uptrend line. The impression being given is that a new leg higher is on its way. While cautious traders may wish to wait on a break of RSI 50 and the 50 day moving average at 13,926, what can be seen here is that there has probably been enough done to lead the Japanese index towards the top of the 2013 price channel at 15,400 on a 4-6 week timeframe.