WORLD LEADERS CONTINUE TO ACT LIKE RAVING LUNATICS STORING UP HYPER INFLATION. BUY YOUR WHEEL BARROWS NOW.

'I know from history that credit kills all great societies' 'Everything gets destroyed a hundred times faster than it is built' Paul Tudor Jones - 1989

Refer - Bear Sterns; Freddie Mac; Fannie Mae; Lehman; Merrill Lynch and all the others to emerge from the mire … and perhaps to follow even the USA itself?

Make sure it doesn't happen to you. I have to drag up some long lost memories from which the current market feels mighty like Britain in the 1970's, where I learnt a number of significant lessons. From this period I noted that the most important aspect for a comfortable and secure life was to be always in 'control'. This meant avoiding credit of any kind at all times. Since then, I personally, have never been in hock to banks or anyone else. I cleared my mortgage off in extra quick time and regained control of my future. My business over the past 30 years has never had to go to bankers for a single penny…we have been totally self funding by building up cash in the good times and using that cash to get through the bad times. Despite overtures from major and smaller institutions to buy us out, my 'control' insisted that I dismiss all such offers. The result a sound and highly satisfactory business environment allowing us to put our clients interests first at all times. Oh sure you say, but our service did cost £10,000 in the early '80's with little data, advice and narrow coverage. The cost now is a third of the 1980's cost with a vastly improved service … find anyone to beat that.

GEARING GIVETH & GEARING TAKETH AWAY. NOW'S THE TIME TO WATCH & WALLOW IN YOUR CASH PREPARE NOW & GET READY TO ACT.

Turmoil in markets continues with our techniques over the past month dictating that all positions be closed resulting in a 100% cash position. Going liquid has its costs but opens up big opportunities in the future. That is where we stand now…ready to highlight opportunities at bargain prices whether now or over the next few years.

Over the year our 2.5 gearing gave us an attractive profit but extreme daily overnight volatility in the markets has taken away this advantage. Despite these weak, highly volatile markets we are still just about holding our own in the multi-strategy area and are well up on the commodity and defensive strategies. This is particularly satisfactory in view of the trading ranges since the latter part of January. For instance, the FTSE 100 now stands at approx the same level today as it did on the January 16th. Our techniques, based upon short to medium term trading, work well in trending markets whether up or down. However, we do struggle in trading ranges where our primary aim, by following our Great Defence strategies reverts to protecting capital in anticipation of the next trend move. The cash we hold is now available for the next move which history tells us could be almost upon us due to September and October often being important pivotal months. It is helpful to hold a high cash position in order to be emotionally stabilised, to think clearly and act appropriately when the markets open up to the next period of opportunity. Very few managers, advisers or investors will have the experience, discipline and courage to compete with experienced old codgers who are still around. This is particularly true for those bull managers who thought they were investment geniuses during recent bull markets…stay well clear of those who lead in bull markets as they tend to be reckless and intractable.

Don't be afraid to be patient. Most fail to observe that markets only move 15% of the time. Not being in markets is often a wise move. Emotionally there is nothing more pleasurable than a fresh start with a low risk entry when all around are floundering in their sorrow and indecision. I write this as I watch my Koi carp meander in clear clean waters as the trees shimmer in the sunlight and a slight breeze. At the same time I am watching the carnage on the markets with the extremely clever headless chickens wondering why their heads fell off. I can tell them why…they scorned the genius of W. D. Gann and thought they could second guess the markets. Even in the foulest of times it is possible to be relaxed and contemplative if you have a profound Gann knowledge, for knowledge is both power and security. To add to my smug satisfaction my son arrived home last night after contemplating a pint of beer for two hours at the local pub. He thanked me for being my son after listening to the alarm of those around him whose knowledge of their own finances stand at zero. But this is not the time to be smug; this is a time to work harder than ever.

THE MAJOR ISSUE - REDUCE RISK

Very few managers and advisers follow as large a number of risk control disciplines as we do. From recent events it is painfully obvious that Financial Institutions have no concept of risk control at any level whatsoever. How Banks can have a leverage factor of over 40 is beyond my comprehension. I can only comment that they must be stark raving mad with their incompetence verging on the criminal. What makes things far worse is that when in the defence of such positions it is claimed they didn't fully understand what the risks were or even that the products they bought were not fully understood. I find this truly amazing being a manager who will not go anywhere near anything that is not fully understandable.

Here are our methods to almost exclude risk. Yes EXCLUDE risk. Can it be done? Yes it can for we have done it over the past decade during a period of dramatic volatility by applying our defensive strategies.

Our pension clients have experienced consistent growth between their 6 monthly pension valuations since 1997. They are now in cash benefiting from a 5-7%. This we see as one of our major achievements over the past decade.


















Who says risk cannot be almost eliminated…answer - those without knowledge of how the markets truly work. Incidentally we can provide a service to protect existing pension policies if the pension holder has the ability to switch within the policy…most have.

So how do we do it?

1 - We split our original capital into equal parts depending upon the size of the portfolio: Up to £10m 10 equal divisions: £10-20m 20 equal divisions: £100m up to a 100 equal parts etc.

2 - A vital ingredient is to ensure that investments have sufficient liquidity to ensure almost instant withdrawals. This is ensured by not purchasing or 'shorting' amounts that exceed 25% of the turnover on that day and preceding days.

3 - Gearing is a wonderful thing when prices go your way. When they don't it's a killer. Our procedure here is to increase gearing up to an absolute maximum of 5 times in good periods and reduce gradually down to zero when times get tougher. Times are tough now with astonishingly huge volatility so my traders have ceased using any gearing until the markets gradually settle down when gearing will be introduced again. Gearing should also be adjusted down if a trade is made against the medium term trend. (Using two week chart trend indicator)

4 - Cash should be considered an asset of considerable importance and should be at the top of the list especially when all around give it no credence at all, usually at tops of markets. When all try, usually unsuccessfully, to move into cash then you know cash is where you should not be. All successful investors have to be contrarians.

5 - We allow the market itself to dictate where we should be and will abandon positions quickly when the markets so command by the use of both time and price exit points. We endeavour to limit any losses on ungeared positions up to 1% of the total portfolio. Where portfolios are using geared positions then the 1% is increased by the amount of the gearing. In low risk areas such as bonds we usually use 0.5% rather than 1%.

6 - Every position held is subject to daily checks to ensure that all our trades are secure. It is assumed that each trade was a mistake and are checked to assess continued validity. A feature here is to ensure that profits do not run into losses.
7 - We always become cautious after winning streaks and at all times remain humble.

FEW KNOW HOW THE MARKETS REALLY WORK

Over the years my primary aim for subscribers was to simplify Gann's complex techniques as far as possible and still provide a sound basis for analysis. I came to the conclusion that there were only a small number of absolute requirements. Firstly we need to know, in advance, what price to pay and the day of the purchase. Once we have bought then we wish to know the price at which to sell in the future and on what date. To the vast majority these are impossible tasks…but we know better.

To illustrate, the Gold Bullion chart under was completed on the 26th August this year. The analysis suggested that the time to buy would be at 740 (See the horizontal support lines) and the date would be where the angle crosses the support lines being the 11th September.


















The 2nd chart confirms that the low was on the 11th September to the day with that days spread being 736.9/757.4…Gann Magic at its best.

AND YOU DON'T BELIEVE IN THE MARKETS NATURAL LAWS!!!

The most likely time to sell from current available information will be the 26th September at 859. There are no wishy washy approximations or on the one hand this or on the other hand that, with Gann Mgt you know exactly what we think.


















I will shortly be analysing the world's markets in an attempt to anticipate the areas where future opportunities are likely to emerge.

Fred Stafford